TradingTips.com |
- Disruptor Stocks To Buy
- Insider Activity: Chewy Inc (CHWY)
- Buckingham Research Lowers Rating on Delta Airlines (DAL)
- Unusual Options Activity: The Howard Hughes Corporation (HHC)
- September ISM Data Shows Slowdown in Non-Manufacturing Growth
| Posted: 04 Oct 2019 05:44 AM PDT If you really want to become a better investor then you need look at where the smart money is heading. You need to understand what is truly driving the markets and how you can take advantage of these moves as – and before – they hit the mainstream. One of the best ways to do that is by investing in disruptive companies that are changing the world. Just like Henry Ford did when he disrupted the auto industry with the Model T. Or, when the telephone disrupted the telegraph, only to be disrupted years later by cellular networks and wireless Internet. Or, when Google changed the way the world shares information. Or, when Facebook altered the way we communicate. Or even when Amazon changed the face of retail. From an investing standpoint, there's nothing like disruptive technology. And if you can spot it early enough, you stand to make a fortune. For example, imagine if you were one of the few to catch shares of Amazon.com (AMZN) at less than $15 a share around 2001 before it changed the world. The stock is now up to $1,800 a share. Or, imagine if you bought Apple at less than $10 a share before it changed the world. Those are the game-changing opportunities you need to hunt for. The 5G boom is here. Cowen & Co. analysts say it's a "revolution." Others say 5G could usher in a $12 trillion market opportunity. President Trump tweeted, "I want 5G, and even 6G technology in the United States as soon as possible. It is far more powerful, faster, and smarter than the current standard." And whether you like it or not, it's coming – and it's coming fast. It's also creating opportunities investors just can't ignore. In 1998, when 3G hit the market, devices were to access broadband technology, which gave users access to entertainment, web browsing, and shopping all on a mobile device. Companies like Qualcomm saw their stocks explode more than 1,000%. When 4G hit the market, cell tower companies like Crown Castle (CCI) rocketed from $30 to more than $140 a share. American Tower Corporation (AMT) ran from $40 to $225. But that's nothing compared to what's coming. 5G will be even bigger, and potentially even more profitable. 4G has a top speed around 100 megabits per second. But with 5G, that ramps up to 10,000 megabits per second – 100x faster than 4G. That'll eliminate slow connection speeds, creating mobile supercomputers in the palm of our hands. It'll also help connect the world and many more devices. One of the top companies that'll see a profit windfall from 5G – Qualcomm, again. For decades, Qualcomm has shaken the mobile industry to its core. It holds the very chips that support major cellular standards. If a company wants to sell its wares around the world, it has no choice but to do business with QCOM. That alone makes this company a sizable industry disruptor. They remain a leader to this day. Plus, one of the most intriguing catalysts for QCOM is Apple and 5G. In fact, after Apple announced a settlement in early 2019, ending two years of litigation, Qualcomm will more than likely provide 5G modems for the coming 5G iPhones. In addition, what makes QCOM a game-changing company is its ownership of Code Division Multiple Access [CDMA] – the very technology that underpins wireless networks that allow you cell phones to send and receive data. At the moment, QCOM derives a chunk of revenue from a monopoly on 3G and 4G networks. Better, the company just announced that it is expanding 5G capability across its entire family of Snapdragon 8, 7 and 6 series mobile platforms for smartphones and other devices. It's also one of the biggest SoC, or System on Chip makers in the world with 40% market share. Without that, you can't power your phone. Better still, QCOM is one of the only companies that makes 5G modems and antennas. That alone makes QCOM one of the biggest disruptors in the world. It's one of the government's biggest cybersecurity experts. That alone makes this company a massive gamechanger. This is the very company that's helping to secure our U.S. government, and it's earning billions by doing so. In September 2019, the company landed a $49.5 million contact to support a Defense Information Systems Agency program that offers web conferencing and instant message servicing to DoD personnel and partners. They won a $152 million agreement to develop an enterprise technology platform for the U.S. Army to manage its accessioning process. In short, they've become the government's right-hand man in a scenario requiring a fix. In fact, when it comes to cybersecurity, it has its plate full. A few keystrokes are all it takes. All of a sudden, your most private information is in the hands of criminals. Your most personal information, banking details, social security numbers, your children’s information. Yet, we’re not prepared as it gets worse. Already, our digital over-dependence means that our risk is greater than ever before with new attacks surfacing all the time. Just in case you think hackers can't get to you, it's already happened. They've already been in your computer, accessing your most vital information. While you'd think companies were better prepared for such situations, they're not. In one of the biggest data breaches in history, more than 100 million Capital One customer accounts and credit card applications were hacked. In fact, according to CNN, Paige Thompson is accused of breaking into the company's server and accessing 140,000 social security numbers, a million Canadian insurance numbers, and 80,000 bank account numbers. Governments from around the world, even state governments have been hit. In short, cybersecurity is very big business – with very big consequences for the U.S government if BAH is not around. And while there are a sizable number of companies in the sector, BAH is an industry leader with a stranglehold on big government and defense sector contracts. Right now, BAH is poised to benefit from a directive to prioritize IT security and from the increased urgency regarding IT security in the wake of attacks. That won't change any time soon. That's what makes BAH a sizable industry disruptor. In your home, your car, your office are computers. All over the place. We can't hide from them. But we can profit from them. These small computers are called microcontrollers. And demand for them is through the roof. In fact, the global microcontroller market size was valued at $18.6 billion in 2018 and is expected to reach $35 billion, growing at a CAGR of 9.2%, according to Research and Markets. One of the top companies making these microcontrollers is Microchip Technology (MCHP). According to the company's business overview, it has 115,000 customers, with 60% of its revenue coming from the industrial and auto markets, which have long product life cycles. In addition, MCHP is the only commercial silicon and software supplier supporting the Hitless Adjustment of ODUflex (HAO) specifications. It's doing so through its Microsemi subsidiary, and is providing a standard solutions on the basis of DIGI OTN processor family that can enable China Mobile for competing multi-vendor interoperability tests, according to Engineers Garage. With this, China Mobile can launch the world’s first bandwidth-on-demand leased-line services offering, providing government and enterprise customers the flexibility to adjust their required network bandwidth in real-time as workloads continue to move to the cloud. What also makes MCHP even more disruptive is LORA. Just a few years ago, MCHP announced it had a new wireless networking technology that allowed for long-range, low-power communication for data services, which also allows for Internet of Things and machine to machine wireless communication with a range of more than 10 miles, a battery life greater than 10 years and the ability to connect millions of wireless sensor nodes, according to the company. The company is thriving with tiny computers – and sizable growth.  |
| Insider Activity: Chewy Inc (CHWY) Posted: 04 Oct 2019 03:00 AM PDT
Director makes million-dollar buy. Director James Star of Chewy Inc (CHWY) bought 41,521 shares recently, increasing his stake by 83 percent. At a cost just under $24 per share, the buy came to $994,000. This is the second insider buy at the company since it went public from PetSmart back in June. Since the IPO, no insiders have sold shares, and the insider who did sell shares at the IPO was a fund, not a member of the corporate staff or board. Chewy shares went public this year at $35, traded as high as $41, but have since slid into the low $20 range, with shares starting to make an upward move in the past few days. The company is growing its revenue by over 43 percent per year, but is still a long way from profitability. Action to take: Chewy has been building up its business as a pure-play e-commerce business on pet related products, and still has ties to its founding company, PetSmart. We advised readers to avoid the IPO, and think investors should wait a few more months before buying, as corporate insiders typically have a "lock up" period for the first six months of trading where they're not allowed to sell shares. Traders may want to take advantage of the selloff in shares by buying the April 2020 $30 calls, which have the time and upside to double or triple if shares continue to head higher from here.
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| Buckingham Research Lowers Rating on Delta Airlines (DAL) Posted: 04 Oct 2019 03:00 AM PDT
Airline shares likely to struggle on higher costs. After Delta Airlines (DAL) provided an update on costs, relating largely to macroeconomic concerns, Buckingham Research lowered their rating on shares from a buy to a hold. The downgrade comes as the firm expects the airliner to see is consensus estimates lowered by other analysts, given that Wall Street firms have an average buy rating on the stock. Delta pointed out that wage increases and rising maintenance costs are likely to weigh on profitability. While costs are rising, there are some factors working in favor of Delta. Its fleet has no 737 Max planes that have been grounded, and which seem grounded for the foreseeable future. And declining oil prices tend to result in lower fuel costs, no matter how well airlines hedge them. Shares of the airline are flat over the past year. Action to take: The airline industry has attracted interest elsewhere at current prices. With shares trading at 8 times earnings and paying a 3 percent dividend yield, shares look attractive at current prices. Investors should consider buying up to $55 and take advantage of the current drop that has brought shares in line with market performance. Speculators should look at the March 2020 $55 calls, which could double if shares shrug off the steep drop of the past few days and head higher in the coming weeks.
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| Unusual Options Activity: The Howard Hughes Corporation (HHC) Posted: 04 Oct 2019 03:00 AM PDT
Put buying suggests drop ahead. Over 2,600 contracts traded on the January $120 put options on The Howard Hughes Corporation (HHC), up from a volume of 100. That's a 27-fold increase in volume, a very unusual move in a name that typically has little options activity. With shares at $126, shares need to drop nearly 5 percent for this option to move in-the-money. With 105 trading days to go, it's a bet that could play out. The company, an owner, manager, and developer of various properties throughout the United States, seems like an unlikely candidate for a bearish trade. However, shares trade at over 50 times earnings, and the company has a high amount of debt, although that tends to be typical of real estate development. Action to take: With a slowing economy, a development-heavy real estate operation is the most prone to a pullback. With a high price relative to valuation, and with no dividend to cushion volatility, investors have far better opportunities in the real estate space. With the possibility of a further pullback on slowing economic conditions, and with the company reporting earnings in the first week of November, speculators may want to consider buying the January $120 put, provided they don't pay more than $5.50, or $550 per contract.
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| September ISM Data Shows Slowdown in Non-Manufacturing Growth Posted: 04 Oct 2019 03:00 AM PDT
Data shows economy slowing, near contraction point. The Non-Manufacturing ISM report for September read at 52.6, indicating that the non-manufacturing sector of the economy continued to grow for the 116th month in a row, however the read is the lowest since August 2016. That number came in well below a 55.5 consensus, and, combined with the manufacturing data indicating two consecutive quarters of decline this week, led to some volatile moves in markets as traders re-evaluated the economy. New orders came in with a read of 53.7 against an expectation for 60.0. And employment read 50.4 percent against an expectation of 50.1. The index uses 50 as a neutral rating, with any read over that as growth, and any reading under that as a decline. The market suffered a steep drop as the data was released, however, stocks rallied on the belief that the slowing economy would lead to an interest rate cut by the Federal Reserve in October. Action to take: The data continues to suggest that the overall economy is slowing. While the stock market isn't synonymous with the economy, it does indicate that some of the recent steep drops in the market are likely to only increase in intensity and strength, given that this data compliments other data showing a slowing economy. Investors should pare back extremely bullish trades, and traders should consider more trades that involve going short on various companies with the use of put options.
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