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Insider Activity: Eli Lilly and Company (LLY)

Posted: 29 Oct 2019 03:00 AM PDT

CEO and director buy shares.

David Ricks, CEO and President of Eli Lilly and Company (LLY), recently picked up 4,615 shares. At a cost of $500,000, the buy increased his stake by nearly 3 percent.

On the same day, Director Jackson Tai bought 1,861 shares at a slightly lower price, shelling out $200,000 in total. These buys are the first following a series of sales in September by a number of officers and an endowment that is also a major holder of shares.

Eli Lilly is a developer and manufacturer of pharmaceutical products worldwide, with various products and vaccines for human and animal use. As part of the out-of-favor healthcare sector where insiders keep buying, shares have lagged the S&P 500 by 12 points in the past year.

Action to take: With shares trading at 17 times forward earnings, they're a bit cheaper than the overall market even as the share price has moved higher in recent months. With 9 percent earnings growth in the past year, it's definitely more of a value play, but the company has fat 31 percent profit margins and is likely to continue to deliver for investors. Shares look attractive up to $115.00.

Traders may want to consider the January 2021 $115 calls, which currently trade for around $10.00, or $1,000 per contract. It's a leveraged way to control 100 shares, and are near-the-money. A move to the old 52-week high of $132 would increase these options by 70 percent to $17 at expiration.

 

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Three Companies That Treat Their Employees the Best

Posted: 29 Oct 2019 03:00 AM PDT

These firms show their employees the love—and deliver great results to shareholders.

There are many ways to value potential investment opportunities. A more off-the-radar approach is to look for companies that get high ratings from employees.

The logic is simple. When employees are happy, they're likely to be more productive. Happy work environments are conducive to open communication about policies or projects that are (or aren't) working. It makes hiring and retaining top talent easier, and that factor can have a significant impact on a company's bottom line.

That's why one way to screen for potential investments may be to look at publicly-traded companies that are highly regarded by the folks that work there. We've identified the top three:

Employee Pick #1: Cigna (CI)

A major player in the health service organization space, Cigna (CI) receives top ratings for its employees.

The company offers the usual suite of products for employees—from health insurance and paid-time-off, but the company also has over 3,000 work-at-home jobs for nurses and claims workers, providing some much-needed 21st century flexibility. The company also cites that many of its traditional roles also have some opportunity to work from home a few days per week, a policy that gives employees the flexibility they need to be happy.

With most things healthcare out of favor with the market right now, however, shares of the company have slid 17 percent in the past year.

But with a large contingent of happy employees in a sector that may have some changes but isn't fundamentally going away, it's no surprise that the company remains profitable and trades at just 9 times forward earnings. And with revenue up over 238 percent in the recent quarter and earnings up over 75 percent, there's no sign of any economic slowdown here… and eventually shares will follow them higher.

Shares are a buy up to $180.00. Traders may want to consider the January 2021 $220 call options to bet on a move higher in the space. With a prior 52-week high of $226, this old price point is an achievable goal in the next 14 months. The $220 call options trade for around $10.50, or $1,050 per contract, far less than the purchase price of 100 shares.

Employee Pick #2: Intel (INTC)

With a suite of berks that includes support for advanced education, free flu shots, discounts on pet foods, as well as on-site car washes and dry cleaning services, it's no wonder employees at Intel (INTC) are generally happy.

That may also explain why the technology giant continues to innovate—it creates a workplace for employees where they can focus on their jobs without the distractions of everyday life—without going as overboard as some small tech startups do once they get some capital.

That may also explain why the tech giant has beaten the S&P 500 Index by 10 percent this year. And despite the spending on employee perks, the company has profit margins of 27 percent, a healthy amount for a company of Intel's size.

With a balance sheet light on debt overall, this is one company likely to continue heading higher than the overall market. Investors should consider starting a small stake here, and up to $57.50, with an eye towards buying more on the next drop in the tech names. Speculators could also consider the January 2021 $60 call, which can provide leveraged upside for just $425.

Employee Pick #3: Salesforce (CRM)

With 24-hour travel assistance, free shuttles to the company's headquarters, various discounts on spa and fitness services, educational reimbursement, and help with refinancing student debt, Salesforce (CRM) knows how to keep its employees happy, making another top name on the list.

One of the leaders of the software-as-a-service model, the company has done a tremendous job of adapting to today's digital economy with cloud services and platforms. Over the past 8 years, it's managed to grow revenue over 20 percent annually—a challenge for all but the best companies. It also makes the company look less pricey than its PE ratio of 128 would suggest.

With over $3.5 billion cash on hand, the company isn't going away anytime soon, even if cloud software companies have traded a bit weakly lately. As with other tech and growth names right now, they're a bit out of favor with the market while trade issues remain unresolved—but that will change, in time.

Investors should look at buying shares up to $160, slightly below the company's high of $167. Speculators may want to consider the June 2020 $190 calls, which trade for $330 per contract, but could double or triple on a move higher in shares in the next few months.

Unusual Options Activity: Pan American Silver Corp (PAAS)

Posted: 29 Oct 2019 03:00 AM PDT

Bet on drop in silver through year's end.

A spike in put option buying on the Pan American Silver Corp (PAAS) December 20th $15 put options resulted in over 6,000 options trading hands against an open interest of 176—a 34-fold surge in volume.

With shares trading at $16.30, the option bet will move in-the-money if shares drop just $1.30, or about 8 percent. Given the volatility in metals markets, such a swing is easily achievable within the next 52 days before expiration.

At a price of $0.55, the option buyer needs shares to move to about $14.50 before profiting. Based on the company's 52-week range, shares could drop as low as $10 on a bearish outlook for silver.

Action to take: Precious metals look set to drop against a strong earnings season and a potential trade deal that could revive slowing growth. Even if you own shares of the company, buying the put option (or selling a covered call on your shares), looks like a decent year-end hedge trade to make here.

Depending on the speed and severity of a drop in precious metals, this December option looks like it could give investors up to $2 in total, quadrupling the original stake. Traders have a fairly good record with swings in this company.

However, investors who expect a slower and longer overall drop may want to make an options trade such as the April 2020 $15 puts, which could go from their current $1.50 to $5 if shares drop to their old 52-week low near $10.

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