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- Insider Activity: Air Products & Chemicals (APD)
- Unusual Options Activity: Anheuser-Busch Inbev (BUD)
- Traders Eye Fed Rate Cut This Week
- Trade War Hits Ethanol Industry
| Insider Activity: Air Products & Chemicals (APD) Posted: 30 Jul 2019 03:00 AM PDT
CEO makes $4.5 million buy. On Friday July 26th, Air Products & Chemicals (APD) CEO Seifi Ghasemi picked up 20,000 shares of the company. At $227 per share, the total cost came to a whopping $4.5 million bet on the company. The new buy brings his total share count to nearly 454,000 shares. This marks the first insider buy at the company for 2019, and only one insider has sold shares at the industrial giant this year. Air Products & Chemicals provides atmospheric gases, process and specialty gases, and related equipment and services worldwide. That includes products like oxygen, nitrogen, argon, helium, rare gases, and other gases for industries such as refining, electronics, manufacturing, and others. Although earnings growth has barely nudged at 3 percent and revenue growth has slightly declined—indicating lower profit margins—in the past year, the company remains highly profitable with a 19 percent profit margin thanks to its niche space. The company's $1 billion in net debt against a $50 billion market cap is also a great sign of financial strength to handle the next economic downturn. Action to take: This insider buy has come after shares have run up 43 percent in the past year—and as shares have hit a new all-time high. Trading close to 30 times earnings, investors may want to hold off on following this trade until shares pull back a bit, say to under $195 per share.  |
| Unusual Options Activity: Anheuser-Busch Inbev (BUD) Posted: 30 Jul 2019 03:00 AM PDT
Big bet on shares rallying through January. On Monday, a bullish bet was made on Anheuser-Busch Inbev (BUD), maker of Budweiser and other beverages and spirits. The bet was on the January 2020 $90 call options on the stock, expiring 171 days from now. Over 15,000 of these contracts traded, against an open interest of 1,233, making for a 12-fold surge in volume on the option. Even more unusual is the fact that shares currently trade around $101, making the option about $11 in-the-money. It should move higher penny-for-penny with shares. At a current price around $14.00, there's only about $3 per contract in time premium, which seems like a small amount for the time involved relative to other options expiring that are also in-the-money. Action to take: Shares of the company are near a 52-week high and seem a bit bubbly around 27 times earnings. However, the company's high-profile brands and earnings power make it a potentially good investment over the next few months. Shares may rise on general bullishness from an interest rate cut as early as this week, or shares may hold up as a defensive play should the rest of the market pull back. Investors could buy shares and get a 2 percent dividend, or speculate on the January $90 calls as well.
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| Traders Eye Fed Rate Cut This Week Posted: 30 Jul 2019 03:00 AM PDT
Survey shows most traders expect quarter-point cut. After hitting new all-time highs last week, the market moved to a wait-and-see mode on Monday. With little market-specific trade to start the week, traders awaited other events, particularly a potential cut in interest rates by the Federal Reserve later in the week. Data on prior Federal Reserve cuts have shown that the Fed has gone through 19 easing cycles of interest rate cuts since the 1950's. Nine of these, or nearly half, saw the economy slip into a recession anyway, the exact situation the rate cuts try to avoid. The last three rate cut cycles also have the dubious record of seeing signs of a recession within three months of the first cut in interest rates. Despite that record, some hope that the Fed's moves will create a mini-easing cycle. Such cycles tend to result in an uptick in growth within 2-3 months following the first cut. With economic growth slowing but still well into positive territory, this monetary juicing could lead to faster inflation or other dangers down the road. Some investors, such as Deutsche Bank, see the bigger issue as factors such as the trade war rather than monetary easing to move the economy to faster growth rates from here. In any event, markets are primed for a quarter point rate cut this week—and anything less could lead to a quick, but recoverable drop in the stock market.  |
| Trade War Hits Ethanol Industry Posted: 30 Jul 2019 03:00 AM PDT
China a big buyer of corn-based biofuel. As the trade war between the United States and China continues to unfold, another industry stateside is feeling the brunt—possibly to the point of bankruptcy. That industry is ethanol, the biofuel blend that's used as an additive to gasoline, often created from corn. Before the trade war started, the industry was preparing for growth, thanks to government mandates for the biofuel's use. But between the trade war and the number of small refineries being exempted from biofuel laws and mandates, producers of corn and other biofuels are starting to feel the financial pressure. Currently, the United States produces 1.1 million barrels per day of ethanol, the highest on record, but profit margins are at their lowest since 2015. Industry insiders point out that many producers are continuing to create record amounts during periods of declining demand, which will only push prices lower. Action to take: While biofuels are a good concept, their haphazard production and host of government mandates—which can be waived—are making for a disastrous place to invest now that countries like China have vastly scaled back their demand. Investors in energy would be better off in alternatives like solar or wind, or even conventional fuels like natural gas at these prices.
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