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- Insider Activity: Safehold Inc. (SAFE)
- Stocks Await New Fed Comments
- Cisco Acquires Supplier Acacia for $2.6 Billion
- Unusual Options Activity: Hess Corporation (HES)
| Insider Activity: Safehold Inc. (SAFE) Posted: 10 Jul 2019 03:00 AM PDT
Majority owner and manager adds to stake. On Monday, iStar, the majority owner of Safehold (SAFE), added to their stake. As the majority owner of the company already, and the manager of Safehold, the move is an indication that shares of the company remain undervalued. iStar picked up an additional 15,000 shares, representing a cost of about $468,000. This buy leaves iStar with over 20.6 million shares of Safehold. The buys occurred with shares at a 52-week high, another unusual sign but another vote of confidence in shares heading even higher. Safehold is a unique company. It provides ground lease solutions, allowing property owners to generate higher returns on their property by selling ground leases. The company is structured as a real estate investment trust (REIT) for tax purposes. Typically, REITs are income oriented, but the company has been growing revenue substantially in the past year. Action to take: While the REIT space can provide investors with above-average income, the dividend yield on Safehold is about 2 percent at current prices. There are better income opportunities. However, the unique position the company is in for ground space leasing allows for more growth potential than the average REIT. Investors interested in that combination of growth and some income should look at shares up to $32.00.  |
| Posted: 10 Jul 2019 03:00 AM PDT
Change in stance likely after solid economic data. Stocks have been moving slightly and on low volume so far this week as traders awaited a speech by Federal Reserve Chairman Jerome Powell on Tuesday at the Boston Fed. Following strong job data last week, with over 244,000 jobs created against expectations of 160,000, the Fed is expected to move from "acting as appropriate" to "patient" regarding changes in interest rates. While a slight change in wording may not sound like much, traders make bets in part on interest rates and expectations of where interest rates will go. If economic data is good enough, it's a sign that the Fed may hold off on its announced plan to cut interest rates next. Traders, somewhat ironically, thus treat good economic news as bad, because it means interest rates won't be cut as quickly. Some traders were even betting on an interest rate cut of 50 basis points, or 0.5 percent. Typically in the past decade, the Fed has moved in 25 basis point moves, or 0.25 percent. Those expectations collapsed with the jobs data last week. Whatever the Fed does or doesn't announce, such changes in the market will only prove temporary at best— but can provide short-term trading opportunities for investors.  |
| Cisco Acquires Supplier Acacia for $2.6 Billion Posted: 10 Jul 2019 03:00 AM PDT
Supplier merger creates arbitrage opportunity. Router company Cisco (CSCO), one of the key manufactures of equipment needed to access the Internet and otherwise transfer data, is acquiring one of its suppliers, Acacia Communications (ACIA). The deal was announced at $70 per share on Acacia, or about $2.6 billion overall. Acacia creates optical interconnect technologies that allow for speedy, high-bandwidth transfers of data. Cisco has been building out its optical interconnect module business for some time, to take advantage of growth in the cloud storage and other space. With a growing need for users to access data quickly from a variety of sources, the merger looks like a solid operational fit. Action to take: As the deal is highly likely to go through, shares of Acacia look attractive here. Shares jumped 35 percent on Tuesday to $65, below the offer of $70 per share. Investors can buy shares here, and look to get $70 in cash in a matter of months. This is a type of trade known as "merger arbitrage." While the percentage returns aren't huge, the high likelihood of making a profit makes deals like this attractive to investors. In this case, $5 per share on a $65 stake works out to about a 7.6 percent return. If the deal doesn't go through, however, shares may decline. If a higher offer comes along, the returns may be even better.  |
| Unusual Options Activity: Hess Corporation (HES) Posted: 10 Jul 2019 03:00 AM PDT
Big bet on massive rally in energy company. While the summer is typically a slow season for stocks, one trader is betting on a big move in shares of Hess (HES). With shares currently around $61, there's been a surge in trading on the January 2020 $80 calls, indicating a 30 percent upside in shares between now and January. Over 16,000 of those contracts traded on Tuesday, about a 20-fold increase in volume for prior trading. Hess is an explorer and producer of oil and natural gas, with over 1,192 million barrels of oil equivalent in reserves. Action to take: With energy prices looking lackluster lately, this is an interesting bet now. Even if oil and natural gas prices don't head much higher, Hess, with its $19 billion market cap, could be a potential acquisition by an even larger energy firm. That means there's a lot to like with this trade. While shares look okay right now, the company pays a low dividend. That means the January 2020 $80 calls, trading around $1.13, allow investors to make a bet for as little as $113 per contract—and could pay out very well in the coming months in the event of a buyout offer, possibly doubling or better should an offer emerge in the coming weeks.  |
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