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- Insider Activity: Arch Coal (ARCH)
- Unusual Options Activity: Nvidia (NVDA)
- China Escalates Trade War With Yuan Devaluation
- Business Expectations Hit Record Low on Trade Uncertainty
- Top 5G Stocks to Buy in 2019 List
| Insider Activity: Arch Coal (ARCH) Posted: 06 Aug 2019 03:00 AM PDT
Three directors make buys. On Friday, August 2nd, director Robert Hamill bought 1,000 shares of Arch Coal (ARCH), shelling out over $78,000 for the stake. He was joined by director James Chapman, who also bought 1,000 shares the same day at a slightly higher price. Both buys came a day after director Holly Koeppel bought 2,200 shares, paying over $195,000—and about 15 percent higher than where shares currently trade. These insider buys mark the first insider activity at the company since 2017, when prior insiders were sellers of shares. Arch Coal produces and sells thermal and metallurgical coal globally, primarily with the use of long-term land leases in states such as Ohio, Maryland, Illinois, Kentucky, Montana, New Mexico, Colorado, and others. The company sells to utility, steel, and industrial clients worldwide. Action to take: There's a lot to like here, as the company is bucking the energy sector at large with a very low level of debt—less than its net cash. The company could theoretically pay all its debts and still have cash on hand, unlike many other names in the space. Even with the insider buys here, and even with shares priced at just five times earnings, we continue to see headwinds for the coal space, however. Without international buyers who don't mind the environmental costs, coal will likely remain out of favor for some time. Investors would be better off in any other energy source, fossil-fueled or not, that don't face the industry challenges of coal.  |
| Unusual Options Activity: Nvidia (NVDA) Posted: 06 Aug 2019 03:00 AM PDT
Traders bet on share rally in the next month. Many tech names took a steep dive on Monday on trade war fears. But traders were betting those would be short lived. One name that saw multiple options with unusual activity was Nvidia (NVDA), maker of advanced graphic processors. The August 30th $155 call was one of several options on the company that saw unusual trading, with over 1,580 shares trade against an open interest of 114, making for a 14-fold surge in volume. With shares of the company trading around $151 on Monday following a brutal 6 percent decline, the $155 calls would go in-the-money if shares rose just 2.6 percent. From there, the option should move dollar-for-dollar with shares. Like many tech names, Nvidia is well off its highs, down about 37 percent in the past year against a small gain for the S&P 500 over the same time (including the Monday selloff). Action to take: We like the August 30th calls on a bounce in oversold tech names like Nvidia, although if shares don't rally traders could lose all the money they put into the options, which traded around $7.55, or $755 per contract on Monday. Traders beware, however: Nvidia will report earnings on August 15th, so the company will have additional volatility before this trade expires. A trade going out to January 2020 may cost more, but would give traders more time for shares to move higher from here.  |
| China Escalates Trade War With Yuan Devaluation Posted: 06 Aug 2019 03:00 AM PDT
Weaker yuan makes U.S. dollar relatively stronger. Stocks posted their worst trading day of 2019 on Monday, as China allowed its currency, the yuan, to devalue under 7.05 per U.S. dollar, its lowest level in more than a decade. The move is to make the country's currency weaker relative to the dollar, which gives it an advantage over other currencies in international trade. That makes the move a preemptive retaliatory strike against the increased tariffs proposed by President Trump scheduled to go into effect September 1st, and may even be a sign that China has given up on a trade deal with the United States for the foreseeable future. In addition to the devaluation, China has instructed its agents to stop purchasing U.S. agricultural goods. China has been a large buyer of commodities such as corn and soybeans to feed its growing population. The U.S. is looking at a weak crop season this year thanks to heavy rains and flooding, but the lack of foreign buyers still sent the price of these commodities down. Action to take: We have seen multiple escalations and de-escalations of trade fears in the past few years. Given the size of the market selloff, we would look for buying opportunities in great companies with little to no exposure to trade with China to buy on a large enough pullback—say at least 10 percent off of all-time highs.  |
| Business Expectations Hit Record Low on Trade Uncertainty Posted: 06 Aug 2019 03:00 AM PDT
Business growth continues to slow on rising uncertainty. Purchasing Managers' Index (PMI) data for June showed a surprise rise, hitting 53, against a 51.5 read in June. This is the second month in a row that the data has shown economic growth. However, even as the hard numbers have shown a rise, business expectations hit a record low. This is the sixth month in a row for sliding confidence, reflecting the rising uncertainty in the economy throughout the year. Digging into the data, there's still some growth, albeit slowing growth. Business activity fell to 53.1 against a read of 58.2 last month. New orders dropped from 55.8 to 54.1. Backlog fell from 56 to 53.5. Prices paid fell from 58.9 to 56.5. PMI data uses a scale where 50 represents zero growth, and any number over 50 represents growth. Any number under 50 represents a decline. So, the overall data shows that business continues to grow, albeit at a weaker pace, and with more uncertainty weighing on markets. The current data suggests that GDP growth has slowed to an annualized rate of under 2 percent, which would be the weakest level of GDP growth in three years. The drop in future expectations could also be an early indicator that the slowdown could accelerate, possibly to a recession, as trade war fears accelerate.  |
| Top 5G Stocks to Buy in 2019 List Posted: 06 Aug 2019 12:41 AM PDT  |
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