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- Existing Home Sales Slow for 16th Straight Month
- Unusual Options Activity: BJ’s Wholesale Club (BJ)
- Insider Activity: Fastenal (FAST)
- IMF Cuts Global Economic Outlook, but Upgrades U.S.
| Existing Home Sales Slow for 16th Straight Month Posted: 24 Jul 2019 03:00 AM PDT
Strong sign of a slowing economy. After rebounding in May, existing home sales were expected to slow in June, but they dropped more than expected. With an expectation of a 0.4 percent decline, existing home sales instead fell by 1.7 percent month over month. With many economic indications such as job creation, rising wages, and record-high levels of wealth in the stock market, this 16th straight month of existing home sales declines indicates numerous challenges for the economy.
This decline comes as interest rates have started to come down already in anticipation of an official cut in rates by the Federal Reserve by the end of the year. Lower interest rates make it easier to afford housing, as the same payment can cover a more expensive home, or could lower the cost of an existing home. With the median home price up 4.3 percent from last year, however, it's likely that any decline in rates will simply encourage buyers to go into more expensive homes rather than into a more modest abode with lower payments. The largest region of decline came in the South, to the slowest rate since January. Sales hit a three-month low in the West. However, existing home sales rose in the Midwest and Northeast, bucking the overall trend.  |
| Unusual Options Activity: BJ’s Wholesale Club (BJ) Posted: 24 Jul 2019 03:00 AM PDT
Big bet on massive share rally by February. Shares of BJ's Wholesale Club (BJ) may be heading higher between now and February, 2020, 212 days away. On Tuesday, over 2,000 contracts of the February $30 calls on the warehouse retailer were bought, against an open interest of 138, a 15-fold surge in volume. With shares around $24, it's a bet that shares will rally by $6, or 25 percent from here. Shares of the company have traded as high as $33 in the past year, so while the percentage gain from here looks high, it's not implausible. The retailer operates 217 of its clubs, and 138 gasoline stations where it sells a variety of grocery, general goods, outdoor and sporting goods, as well as products like beauty products and jewelry. The company currently trades around 15 times forward earnings, but has been growing slowly in recent quarters. Action to take: The size of the bet, both in total options contracts as well as how high shares could move, looks interesting here. With the option trading around $0.83, or $83 per contract, it's a cheap bet that consumers will continue to consume and shares will trend back to their old 52-week high. As shares don't pay a dividend right now, the option looks like the best play here.  |
| Insider Activity: Fastenal (FAST) Posted: 24 Jul 2019 03:00 AM PDT
Director adds to stake of industrial giant. Last week, director Michael Ancius picked up another 1,104 shares of Fastenal (FAST). The buy cost over $33,000 and increased his total stake by just over 5 percent. This marks the first insider buy at the industrial company so far this year, after a number of sales by insiders at higher prices.
Fastenal engages in the distribution of industrial and construction supplies around the world. Products include fasteners such as bolts, nuts, screws, studs, and washers, typically used for construction but also for the maintenance of machines. It also provides other miscellaneous supplies and hardware, with both wholesale and retail customers, including a network of 2,227 company stores. Action to take: While the company isn't cheap at 20 times earnings, it's a solid bet under just about any economic condition. Shares have lagged the S&P 500 buy a mere 1 percent in the past year, but the company's 2.9 percent dividend makes up for that performance. The dividend was just raised to $0.88 per year from $0.83, making for a nice dividend growth play. The company's high return on equity and low amounts of debt make it look particularly attractive as a long-term holding. Shares are a buy up to $32.00.  |
| IMF Cuts Global Economic Outlook, but Upgrades U.S. Posted: 24 Jul 2019 03:00 AM PDT
Global economy likely to see slow, if any, growth, outside pockets like U.S. The International Monetary Fund cut its global growth outlook even further on Tuesday. The IMF already had global growth rates at their lowest level since the financial crisis. This is the fourth time in a row that such expectations have been cut. The IMF suggested that policy issues on trade and Brexit could weigh on a potential economic rebound, in line with suggestions from other key players in the global financial markets. Overall, the IMF expects the global economy to expand by a mere 3.2 percent in 2019, down from 3.6 percent in 2018. Its most recent growth forecast was 3.3 percent. Looking at specific countries, the IMF forecasts a 6.2 percent growth rate for China, the lowest rate since 1990 when China faced international sanctions following the Tiananmen Square massacre. The IMF boosted the expected growth rate for the U.S., based on the expectations of interest rate cuts later in the year. Action to take: Investors should review their international allocations and rebalance away from riskier markets that may see slower growth. The strong U.S. dollar, and weak market action abroad have already suggested the U.S. as one of the safer parts of the world to invest in for the foreseeable future, rate cuts or not.  |
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