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Unusual Options Activity: Mastercard (MA)

Posted: 30 Oct 2019 03:00 AM PDT

Near-the-money bet on share rally through June.

The June 2020 $280 call options on Mastercard (MA), saw a surge in volume from 345 open contracts to over 4,000 trade. With shares around $277, the option is near-the-money, and could start moving dollar-for-dollar higher with shares between now and June if the company rallies.

At a price of $21.10 per option, or $2,110 per contract, it's not for every trader, but it's far cheaper than the price of buying 100 shares and hoping for a move higher.

Shares of the payment processing company have had a great run in the past year, nearly tripling the return of the S&P 500 in the same time. While shares sound conventionally expensive based on a forward price-to-earnings ratio of 30, the company's fat 42 percent profit margins and double-digit revenue growth of 12 percent make this a surprising growth play in a large-cap package right now.

Action to take: Shares could be a decent buy, up to $280, given the company's 52-week high of $290, there's still some room to run there, and the payment processing companies are a great place for long-term investors.

The June options contracts could do well for investors, but at a price of $21.10, shares of Mastercard would need to surge to $301 by expiration to retain their current value, if not increase. It's possible, and given the run, we see high double-digit return potential here.

Three Plays on Real Estate for Income and Upside Potential

Posted: 30 Oct 2019 03:00 AM PDT

Enjoy steady returns with some extra upside with these real estate picks.

There are many investment opportunities out there. For where the markets are at right now, many investors are looking for defensive plays—places where they feel safe, and get some income along the way to offset any uncertainty.

They're mostly overlooking real estate, however, given lingering fears from the last recession over a decade ago. That's too bad, because there are some great opportunities today, which can give investors above-average income compared to the average stock.

That lingering fear in the market also means that there's plenty of upside potential for many names in the space as well. This combination of high current income and capital gains, irrespective of what the stock market is doing, makes for an attractive opportunity right now.

We're looking at three REITS—real estate investment trusts—that can deliver. REITS are the perfect real estate play for investors. Unlike owning actual property, all issues and problems go to management. And REITS offer instant liquidity because they trade like stocks, meaning you can get in and out. Real estate transactions can take months, which can be devastating for someone who needs to raise cash fast!

Real Estate Play #1: Vereit (VER). This REIT specializes on triple-net leases, where the tenants pay the taxes, insurance, and property maintenance, and the company receives the remaining income, which it then passes on to its shareholders.

It has a focus on small commercial properties, with over 4,000 of them in 49 states, making up 90 million square feet of space. With tenants including Red Lobster, Walgreen's, and Dollar General, the company has a variety of tenants likely to perform well in any economic environment. Commercial real estate players focusing on higher-end markets right now may suffer in a recession as their tenants stop being able to make the rent.

With $10 billion in equity and $15 billion in debt, the company has some leverage, but not as much as other companies in the real estate space. Shares of Vereit yield near the high end of the triple-net space, with a 5.6 percent current yield.

Shares are a buy up to $10.00 per share.

Real Estate Play #2: Public Storage (PSA). This owner and developer of self-storage spaces is a great play on rising consumerism around the world. With over 166 million square feet of rentable space just in the United States, another 13 million in Europe, and with other international stakes, this is the industry leader for the self-storage space.

That's a great position to be in for the long haul, but recent fears of an economic slowdown have caused shares of this company to lag most real estate names, and it's trailing the S&P 500 Index by 3 points in the past year.

That said, the company has huge 59 percent profit margins, as it offers bare storage spaces without having to fully build out places that people would otherwise live or work in. The company pays out $8 per share, working out to a 3.4 percent dividend yield here.

Shares of Public Storage are a buy up to $245, well below their 52-week high of $266.

Real Estate Play #3: Prologis (PLD). With a focus on the industrial and logistics space, a REIT like this one may look like it's suffering right now. But it isn't. They have over 800 million square feet of properties, and have 5,000 customers. They also operate in 19 countries, making them a stealth play on global trade and growth. That's a nice combination!

Prologis shares have more than doubled the return of the S&P 500 index in the past year, and that outperformance is likely to continue, thanks to its fat 49 percent profit margins, 33 percent revenue growth, and 30 percent earnings growth.

The one downside to shares? The dividend is a bit skimpy here, with a 2.5 percent yield. On the plus side, the company did just raise its annual payout from $2.07 to $2.12. Having some yield growth is great for investors with a long-term outlook.

Shares of Prologis are a buy up to $88.00 per share.

Final Thoughts:

With a small addition of real estate to your portfolio, you can help increase your overall income and lower the volatility that just comes from owning all stocks, or a combination of stocks and bonds. Many wealthy individuals hold a significant proportion of their wealth in real estate, even if they made it elsewhere. It's an asset class that shouldn't be overlooked.

Insider Activity: American Airlines (AAL)

Posted: 30 Oct 2019 03:00 AM PDT

Director increases stake by nearly 40 percent.

James Albaugh, a director at American Airlines (AAL), bought an additional 10,000 shares, increasing his stake by over 38.8 percent to 36,091 shares. The total cost for this purchase cost just over $314,000.

Aside from one small sale by a director in August, corporate insiders have been buyers of shares, with massive purchases in particular back in June at prices 5-10 percent lower than where shares trade right now.

Insider data also shows that insiders tend to sell shares when prices are north of $40, about $10 or 33 percent higher than current prices near $30.

Action to take: Given the insider trend of buying shares in the high $20 and low $30 range, then selling shares in the high $40 range or better, we have an interesting swing trade that can be made time and again as shares move back and forth across this range.

Investors should consider shares under $31.50, with an eye towards taking a profit when shares get into the $40's. Shares are cheaply valued at 9 times earnings, and shares yield 1.3 percent.

The June 2020 $35 call looks interesting for an inexpensive bet on shares moving higher from here. At a price of about $1.90, or $190 per contract, this option could soar to $5 if shares get back into the $40 range.
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