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Economy Hits 3.1 Percent Growth Rate in First Quarter

Posted: 28 Jun 2019 03:00 AM PDT

Revised numbers still show strong economy.

The U.S. economy grew at a 3.1 percent rate in the first quarter of 2019. That information is based on the latest recalculation to the gross domestic product (GDP) by the department of Commerce.

The rate of growth suggests a reasonably strong economy, but the final numbers coming in ended up revising earlier estimates downward on consumer spending. Although consumer spending still rose, it did so at a slower-than-expected rate.

This view is in line with more recent macroeconomic data that suggests that, while the economy is still growing, the rate of growth is slowing down. Some economists have gone as far to predict a recession, but it will take more months of consecutive declines in data to strongly support that case.

The first quarter of 2019 included the ongoing tariff issues with the U.S. and China, the partial government shutdown that led to a drop in government spending.

The final numbers had some upward revisions as well, such as non-residential fixed income, exports, and state and local tax spending. Overall, the picture remains complicated, as there is as much favorable data to suggest continued growth as unfavorable data to suggest a decline. For the moment, investors should expect the economy to continue growing, albeit at a slightly slower pace.

Unusual Options Activity: Altria (MO)

Posted: 28 Jun 2019 03:00 AM PDT

Trader bets on more downside for tobacco giant.

Tobacco companies have had a rough year, amidst long-term sales declines and a decision to pass on major investments in the growing cannabis industry.

One trader sees some more downside, with a large put option trade on Altria (MO). On Thursday, over 9,500 contracts of the July 12th $49 put options traded, a 57-fold increase in volume on the option.

This option, with shares at $48, is already in-the-money. So while it expires in 15 days, the option can be exercised as long as shares are under the $49 strike price.

Any big down day for the tobacco company in the meantime should have a dollar-for-dollar move in the option as well. In short, this $1.50 option could go to $2.50 if shares drop from $48 to $47, although with so little time left on the option, there will be some noticeable loss of the remaining time premium.

Action to take: For a short-term bet on a falling market, the tobacco stocks have been a good place for a trade. For those with a longer-term outlook, buying into the tobacco space at these prices can get a good entry point, and historically high dividend yields relative to where shares of companies like Altria usually trade.

Insider Activity: Biohaven Pharmaceutical Holding Company (BHVN)

Posted: 28 Jun 2019 03:00 AM PDT

Two insiders buy over $600,000 in shares.

Insiders still remain incredibly bullish across the biotech and pharmaceutical space.

On Wednesday, two insiders bought shares at Biohaven Pharmaceutical Holding Company (BHVN). CEO Vlad Coric bought 5,000 shares, shelling out just over $201,000. And director John Childs bought 10,000 shares, paying just over $403,000.

This marks the first insider buys at the company in over two years, following insider sales last year in the $50-60 range.

With shares in the low $40's, the insider buys look like a response to the steep selloff in shares since the start of June. Shares declined heavily as the company announced it would make a public offering of new shares in order to raise capital.

Analysts have a 1-year price target of $75 per share on the company. Biohaven develops late-stage products targeting neurological diseases such as Alzheimer and anxiety disorders.

Action to take: We agree with insiders throughout the industry that there's too much pessimism in the pharma and biotech space right now. The offering of new shares, while dilutive to existing shareholders, provides the company with capital without having to take on debt.

In a more favorable environment for pharma, shares should trade much higher. They look like an attractive buy up to $45 per share.
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