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- Oil Hits Seven Month Low
- Insider Activity: Archer-Daniels Midland Co (ADM)
- Safe Havens Surge as Stocks Skid
- Unusual Options Activity: The Walt Disney Company (DIS)
| Posted: 08 Aug 2019 03:00 AM PDT
Trade fears, supply rise, fuel drop in prices. Oil prices have slid further in recent days thanks to rising fears that trade war tensions between the U.S. and China will significantly cut back on global trade. Less trade means less energy use, which in turn has sent oil prices lower. Adding to these short-term fears as weekly data indicates an inventory build after a few weeks of sharp declines. Finally, geopolitical events, like high Middle East tensions in the Strait of Hormuz, are adding a wild card to prices—but one that is quickly losing its luster as the region has gotten quiet in recent days. Brent crude, the global measure for oil prices, have plunged more than 10 percent in the past week as these factors have combined to create a perfect storm to impact oil prices. WTI is down to $51 per barrel. Looking at all these factors, oil prices are unlikely to see a substantial rise in the coming months, and fears about a slowdown may become reality as people prepare for an economic slowdown by cutting back on their spending, including on energy usage. Action to take: Start a buy list of great energy companies worth holding for the long term, like Chevron (CVX) or ExxonMobil (XOM), and look to start building a position if oil prices drop under $50 per barrel.  |
| Insider Activity: Archer-Daniels Midland Co (ADM) Posted: 08 Aug 2019 03:00 AM PDT
CFO makes six-figure buy. On Tuesday, August 6th, Ray Young, CFO at Archer-Daniels Midland (ADM), picked up 3,400 shares. His total cost came to just under $125,000. The buy increases his holdings at the company to over 353,000 shares. As the head of finance at a company, a CFO buy is a strong buy signal for investors, as the company may have more room to run ahead, or is otherwise undervalued on a fundamental basis. Trading at 16 times earnings and 11 times forward earnings, the agricultural commodity producer and provider certainly looks like a value play here. Shares are down 25 percent in the past year, and this insider buy comes near a 52-week low. Meanwhile, the low share price has pushed up the dividend to 3.5 percent here. Action to take: Archer-Daniels Midland looks attractively priced here, and traders should consider buying shares under $38.00. Although the company is growing slowly and agricultural products are having a poor year, the company's continued long-term success makes for an attractive buy during this market pullback. Speculators may want to consider a leap—a long-dated option such as the January 2021 $50 calls, which can give you a chance to bet on a rally in shares for less than $50 per contract right now.  |
| Safe Havens Surge as Stocks Skid Posted: 08 Aug 2019 03:00 AM PDT
Treasuries, gold, and cryptocurrencies rally as stocks fall. U.S. 10-year Treasury bonds fell below a 1.6 percent yield on Wednesday, as investors continued to pile into the safe haven of government bonds. As bonds are quoted by their yields, not their price, a falling yield indicates a rising price. Other assets seeing a rise in prices right now include gold. The metal popped over $1,500 per ounce on Wednesday, still at a six-year high. Gold prices last peaked in 2011 at $1,900 per ounce, and last bottomed in 2016 at $1,050 per ounce. Finally, cryptocurrencies like Bitcoin are also seen as a safe haven during the recent trade fear. Bitcoin prices rose over 5 percent on Wednesday to over $12,100 per coin. Bitcoin has traded as low as $3,200 this year, and is still well below its all-time high of $19,000 per coin set in late 2017. Action to take: Investors are moving into these various safe-haven trades on rising fear in the market. We suggest all investors have some stake in all these assets, as they have different correlations to traditional stocks. Start with bonds, but don't overlook a small stake to both gold and cryptocurrencies here. All three assets could move much higher before the latest trade war tantrum is finished—and bonds could surprise even more if U.S. interest rates go negative in the near future.  |
| Unusual Options Activity: The Walt Disney Company (DIS) Posted: 08 Aug 2019 03:00 AM PDT
Bet on shares hitting new highs in next 13 months. Shares of The Walt Disney Company (DIS) sold off on Wednesday, following an earnings miss. Although shares are still up for the year, one trader is making an unusual bet that shares will head back to new all-time highs by September 2020. That's based on the surge in trading on the September 2020 $170 calls—about 26 percent higher than where shares traded around $135 following their earnings miss. There's a lot to like about the media giant, which is dominating the box office this year. In fact, the company set a record for highest revenue by a movie studio ever in one year on the strength of its film offerings, just through July 2019. Meanwhile, the company is also rolling out a streaming service that will combine its family-friendly movies and cartoons with sports and superheroes. Action to take: This is a company that investors may want to hold for the long-term, especially as the current market weakness makes it an attractive buy-and-hold investment. The dividend yield, while a modest 2 percent, certainly offers investors more income than government bonds right now, with the prospect of long-term capital gains to boot. But at just $415 per contract, those September 2020 $170 calls could offer a better percentage return, particularly in the coming weeks as the market rebounds from its recent weakness.  |
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