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- Insider Activity: Keurig Dr Pepper (KDP)
- Three Oversold Healthcare and Pharmaceutical Plays Likely to Beat the Market
- Unusual Options Activity: Netflix (NFLX)
| Insider Activity: Keurig Dr Pepper (KDP) Posted: 18 Oct 2019 03:00 AM PDT
HR Chief makes third six-figure buy this month. Mary DeNooyer, Chief Human Resources officer at Keurig Dr Pepper (KDP) recently bought 6,000 shares, adding onto two other buys this month. This most recent buy increased her stake by 11 percent to an even 60,000 shares, and cost just over $165,000. Overall, insiders have been buyers of shares this year, with only two sales by insiders, both of which were by a major fund holder and not a company executive. Keurig Dr Pepper is an international beverage company with major operations in soft drinks, mineral water, coffee, tea, and other offerings. As a defensive company in the food space, shares have beaten the overall market this year with a 15 percent gain. The company trades at 20 times forward earnings, a bit pricey for most defensive food plays. But the company has been growing revenue and earnings at a triple-digit pace, making for more of a growth story than a value one. And insiders, including some large fund holdings, own 85 percent of the company, ensuring long-term interest in continued growth. Action to take: We like the defensive/offensive nature of a fast-growing food company in today's sluggish economic environment. Shares are a buy up to $28.00, where investors can also get a modest 2.1 percent dividend yield. Speculators should look at the April 2020 $30 call option, for a leveraged bet on a continued move higher in shares.  |
| Three Oversold Healthcare and Pharmaceutical Plays Likely to Beat the Market Posted: 18 Oct 2019 03:00 AM PDT
Beaten-down sector showing positive signs that could lead to a rally. Investing is about looking forward. Most folks think that simply means taking a company's existing trend and extrapolating it indefinitely into the future. But it's not that simple. A company that's been on a big growth swing could suddenly stall out. Or a company that's been having a few rough quarters could finally succeed in turning it around. This happens in everything from individual stocks to sectors, to the market as a whole. One sector that looks terrible right now, but could likely beat the market going forward, is the healthcare space. A perfect storm is weighing on prices, but the sector is doing fine—and is even shaping up to beat the market going forward. Here are three top picks in this oversold space: Pick #1: Johnson & Johnson (JNJ) A manufacturer of everything from baby powder to mouthwash to band-aids, Johnson & Johnson has been in some difficulty due to a number of high-profile lawsuits stemming from products containing opioids and asbestos. That's weighed on shares, which have under-performed the stock market by 10 percent in the past year. However, the company has been working to settle the lawsuits and bundle many of them up to avoid years of potentially costly litigation, akin to the settlements the tobacco companies made with the government in the 1990's. Although the company's revenues are down, earnings are up substantially, and the company's total profit margins have increased to over 20 percent. With shares trading around 15 times forward earnings, they're not at a bargain-basement price, but they're cheaper than the average S&P 500 stock and have room to head higher, with a 20-25 percent gain to just move in line with the current average valuation. In the meantime, the company just increased its dividend to $3.80 annually, for a 2.8 percent yield right now. The company's long-term dividend growth is perfect for investors still looking to buy and hold. Consider shares up to $140.00. Pick #2: Teva Pharmaceuticals (TEVA) Teva is another company with some heavy exposure to opioid lawsuits. Unlike Johnson & Johnson, however, the company's less diversified holdings have impacted the share price far more thanks to a string of lawsuits. Shares are down 67 percent in the past year. While the company still faces plenty of litigation over opioid products, Teva is also working on settling cases and combining them for one large action. Doing so will allow the company to continue in business and provide its other life-saving products to customers. The sharp drop in price has brought shares down to 3 times forward earnings. More interestingly, the company trades for a price-to-sales ratio of 0.5, and a price-to-book value of 0.6 percent. Those numbers suggest that the company's shares are worth nearly twice as much as what they're currently trading for if the company simply went out of business, sold its assets in an orderly manner, and distributed the proceeds to shareholders. Although the company doesn't pay a dividend, the prospect for high capital gains as the litigation settles down makes for a huge potential winner here. Shares are a buy up to $8.00, and speculators may even want to look at buying call options given the low price of shares. Pick #3: Gilead Sciences (GILD) Far from the opioid litigation crowd is Gilead Sciences (GILD), a bio-pharmaceutical company focusing on various products to treat liver disease, auto-immune disease, and others. It's the market leader in the auto-immune disease space. The company has had some struggles as some of its major drugs have gone off-patent, but the company has been capable of replacing those with their own generic versions and through some strategic acquisitions, including an investment in Galapagos (GLPG) earlier in the year. Traders expect more deals ahead, as the company just shuffled up its executive lineup with a new CEO. The biotech company has seen flat revenue growth in the past year, but with a 26 percent profit margin, the company isn't suffering. And while shares have declined 13 percent, they trade at 9 times forward earnings, and shares yield 3.8 percent here, a nice yield given the upside potential in shares. More importantly for a biotech company that needs to spend massive sums of cash on research, the company has $28 billion in debt, or $2 billion more than its entire load of debt. This is a company in a great position with a bright long-term future coming off a few weak quarters and being in an out-of-favor sector. Shares of the biotech company are a buy up to $67.50 per share.  |
| Unusual Options Activity: Netflix (NFLX) Posted: 18 Oct 2019 03:00 AM PDT
Traders up bearish bets after subscriber miss. Put option trading in streaming giant Netflix (NFLX) saw a surge after reporting earnings Wednesday after the bell. Although the company missed on its total subscriber count for another quarter, and although the company has burned through nearly $10 billion in cash in the past few quarters, shares still managed to gain nearly 3 percent in trading, sending some traders to make bearish bets. One interesting bet is the October 25th $297.50 put. With shares just under $296, the trade is slightly in-the-money ahead of expiration next week, and should move dollar-for-dollar with shares if they decline following their earnings. With shares of Netflix closer to their 52-week lows rather than highs, however, it's a tough bet to make. Action to take: Skip the short-term bearish bets. With a number of companies getting into the streaming space this year, shares of Netflix also have limited upside. Investors should skip the shares until the company's cash flow isn't so negative. Traders looking to go short would be better off with the June 2020 $250 puts. They're a bit pricier than the October options, as they trade at $15.50, or $1,550 per contract. However, they're a better bet on 100 shares of the company continuing to decline in the months ahead rather than a roll of the dice on the next few trading days.  |
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