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- Unusual Options Activity: Beyond Meat (BYND)
- Insider Activity: Universal Insurance Holdings (UVE)
- Chinese Economy is “Crumbling” Says White House Economic Advisor
- Despite Rally, Technical Indicators Suggest Bigger Market Correction
| Unusual Options Activity: Beyond Meat (BYND) Posted: 07 Aug 2019 03:00 AM PDT
Big bet on rally in August. Shares of Beyond Meat (BYND) may rally over 50 percent between now and August 30th. That's the bet behind the surge in August 30th $250 calls on the plant-based meat alternative company, whose shares currently trade around $160. On Tuesday, over 2,100 of the options traded against an open interest just under 200, for an 11-fold increase in volume.
Last week, the company reported that it quadrupled its sales as part of its earnings report. Despite those numbers, shares lagged on news that the company was issuing more shares, diluting existing shareholders. As a recent IPO, shares have done well, but the gain from the IPO price has gone to other shareholders, not the company itself. The move to issue new shares gives the company more capital. Action to take: We like company and the space it is in. While we don't like to buy IPOs, shares have been beaten down far more than they should have been with other market factors at play. However, we prefer a longer trade, such as the January 2020 or even January 2021 calls, also with a $250 strike price. That gives the trade ample time to play out, even if it means a higher entry cost going in, and is a smart bet on a rebound in either the company specifically or the stock market in general.  |
| Insider Activity: Universal Insurance Holdings (UVE) Posted: 07 Aug 2019 03:00 AM PDT
Key director adds to stake. On Monday, August 5th, Sean Downes bought another 1,100 shares of Universal Insurance Holdings (UVE), where he has served as CEO in the past and now serves as director. The total cost of the additional shares came to just over $29,000, and increases his total holdings in the company to 1,431,833 shares. Downes has been a buyer in shares in mid-June as well as back in May at higher prices. Universal develops, markets, and underwrites insurance with a focus on residential homeowner's insurance and other related products. The company is one of the few firms that ensure for hurricane protection in Gulf states, but the company operates nationwide. Action to take: With shares down 40 percent in the past year, and with the company trading at less than nine times forward earnings, there's a good potential value. And the company's balance sheet has sufficient cash to weather most events that could cause a high number of insurance claims. We see some potential weakness in shares should a hurricane develop in the next few months, and that could create a buying opportunity. Typically, shares drop sharply as a named storm appears to be heading towards landfall, but will rally if the storm weakens or moves away from populated areas. So there's a good chance of buying shares under $25 in the near future.  |
| Chinese Economy is “Crumbling” Says White House Economic Advisor Posted: 07 Aug 2019 03:00 AM PDT
U.S. in better position on trade right now. "The Chinese economy is crumbling. It's just not the powerhouse it was 20 years ago," said White House Economic Advisor Larry Kudlow on Tuesday. With China's economy growing at the slowest rate in 27 years, there is some merit to the claim. However, China, the world's second-largest economy in the world, did show growth of 6.2 percent in the past quarter, far outpacing the United States. This latest dig follows China's decision to devalue its currency against the U.S. dollar on Monday as part of the broader trade war. The implication is that the United States is in the best position it will likely ever be in to get China to change its trading practices and get its economic growth increasing again. Kudlow also cited the Chinese stock market, which is down about 15 percent year-to-date. In contrast, the U.S. markets are still up about 15 percent year-to-date even after the recent market decline. The United States also labeled China a "currency manipulator," a term that has some legal power in terms of actions that can be taken, but is largely a slap on the wrist. Investors looking for cooling tensions are unlikely to find them anytime soon as both rhetoric and actions heat up.  |
| Despite Rally, Technical Indicators Suggest Bigger Market Correction Posted: 07 Aug 2019 03:00 AM PDT
Market rally damaged by recent events. The sharp drop in stocks over the past few weeks have sent markets down about six percent from all-time highs. While that perspective is helpful for fearful traders, chart analysts warn that markets will likely decline a bit more before rallying again. That's because technical support levels—prices where traders are willing to buy in—have been breached, and lower levels likely have to be hit before markets bottom and rally again. Specifically, the S&P 500 index has broken down against its 50-day and 100-day moving average. Typically, the market is bullish when stocks are trading above that price. The next indicator, the 200-day moving average, is a longer-term indicator. When these indicators are broken, it can take months for the market to recover and get back to hold highs before heading higher. Data indicates that the average pullback of at least 5 percent since the 2009 market rally started lasts 28 days, and the average decline is 8.36 percent. The last market decline, at the end of 2018, was much higher, and took stocks until June 2019 to hit new all-time highs again. Action to take: We are not too worried about pullbacks, as they're a healthy part of investing. However, it would be a good time to scale back from speculative positions and look at potential buys at lower prices to re-trench your portfolio into stronger positions going forward.  |
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