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Cruise Lines have been Popping this Week and This Company has Insider Buying

Posted: 29 Apr 2020 04:30 AM PDT

The cruise line companies have been rallying this week as Norwegian Cruise Line (NCLH) released some information about its cost-cutting measures and its current monthly cash burn. This helps answer some of the questions about how much time these companies have to remain shuttered based on current cash levels. For NCLH, that means they have nearly a year of cash to pay for operating expenses, interest and capital expenditures.

The current no-sail order from the CDC expires on July 24 and so there will be at least three months before they hit the water. With a better understanding od the business and the prospect of reopening soon, traders and investors have been looking to board this industry so far this week.

One cruise line saw the highest number of shares purchased by insiders was Carnival Corp (CCL). So far in April there have been 1,250,000 shares bought, and the second-highest amount of buying value at $10,000,000. The buying was being done by a director, Randall Wisenberger, on April 6, 2020. His holdings went from 100,274 shares to 1,375,352 shares since March 12, 2020.

Action to Take: CCL is a long opportunity with a near-term target of $20 and an intermediate target of $30.

Speculators may want to consider a 17 JUL 20 $12.50 call for around $3.90 or less. If the price of the stock reaches $20 by expiration, the option will be worth at least $7.50 for over a 90% ROR. If the stock moves up $2.50, consider selling the $12.50 strike and rolling it out to the $15 strike for the same expiration.

3 Retail Stocks with High Short Interest to Buy

Posted: 29 Apr 2020 04:30 AM PDT

As many parts of the country look to partially reopen after May 1, the opportunity appears to be filtering down to the retail space that has been hit hard. Since April 3, 2020, the SPDR S&P Retail ETF (XRT) has underperformed the S&P 500 by nearly 15%.  That certainly makes sense given the fact that many stores are closed and may see earnings get hit hard if we enter a major recession. However, like many stocks, the market often times looks at the change in expectations as a reason to buy, and opening stores sooner rather than later may change near-term expectations.

As you consider the difficulty of evaluating the financial health of a company in the current climate, the question then becomes, what are important considerations. Looking at the balance sheet can provide an idea has to the health of a company as of the last earnings report, but a lot has changed since the fourth quart of 2019. There have been strong indications that companies have scrambled to tap credit lines and other measures to raise cash. The issue is that you're not going to get a clear picture of how impaired some companies have become for another quarter or two.

This is where more nontraditional means can be useful. Short interest measures the number of shares short and divides it by the float of a company. A short is when a company's stock is borrowed from a broker and sold, with the intent of buying it back at some point. The float of a company is the number of shares outstanding minus restricted shares held by insiders of the company. The short interest takes the number of shares short and divides it by the float. Levels above 20% are considered extreme.

High levels of short interest is actually a bullish indication as the shares will have to be bought back at some point. At times there is a rush to "cover" or buy back their shorts, which can cause significant rallies called a "short squeeze."

One way to gauge the potential impact of short covering on the price of a stock is by looking at the short ratio. The short ratio takes the number of shares shorted and divides it by the average volume. Stocks with higher short ratios would indicate a greater potential for a short squeeze. A short ratio above 5 days would be considered high.

The following stocks are companies that are in the retail industry and have at least 20% short interest.

Retail Short #1: Nordstrom Inc (JWN)

As of April 15, 2020, JWN has 27.13% of its float shorted with a short ratio of 4.84 days. This means that based on the average volume, it will take nearly 5 days to buy the shares back. These are both high levels that would indicate the potential for a short squeeze in the price.

JWN is currently testing it $22.50 resistance and has the potential to reach $28 in the coming weeks. If the shorts move quickly to cover, the price could retest its January high near $43.50.

Retail Short #2: Bed Bath & Beyond Inc (BBBY)

As of April 15, 2020, BBBY has 82.11% of its float shorted with a short ratio of 5.03 days. This means that based on the average volume, it will take over 5 days to buy the shares back. The short interest is extreme, and the short ratio is high, which would indicate the potential for a short squeeze in the price.

BBBY just broke above its $6.50 resistance before fading off its high intraday. The potential near-term target is $10.50.

Retail Short #3: Dillard's Inc (DDS)

As of April 15, 2020, DDS has 122.64 % of its float shorted with a short ratio of 10.56 days. This means that based on the average volume, it will take over 10 days to buy the shares back. The short interest is extreme and is above 100% because of the significant number of restricted shares. The percentage of the shares outstanding is at 28.74%, which is also high.

DDS recently retested its $22.50 support and is bouncing off it. The near-term target is $38, with a breakout above that level indicating a potential move to $52.50.

Option Traders Make Rally Hats Out of Aluminum

Posted: 29 Apr 2020 04:30 AM PDT

Alcoa Corporation (AA) produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Brazil, Canada, and internationally. The company recently announced earnings that beat estimates, but during the presentation, the company highlighted cost-cutting measures that outlined a shrinking rather than growing business. However, if the market for their products rebounds modestly, it appears profitability is attainable.

Since the earnings, AA has seen a number of price target cuts by banks like Deutsche and JP Morgan, but their new targets indicate a price between $10 to $14. Since the price is trading around $8, that is over a 20% move to the lower target.

On Tuesday, Option traders began to wade into AA as they began selling puts on the January contract. The put volume was nearly 2 times the average with 62% of the put volume occurring at the bid price. Nearly half of the put volume occurred in one print as 2,000 contracts were traded on the 15 JAN 21 $7 put for $1.45 against 155 open interest.

Action to Take: the price target for AA in the coming months is $13.50, which is the 50% retracement level of the 2020 downtrend.

Speculators may want to consider mirroring the trade that was made and sell the 15 JAN 21 $7 put for around $1.45. That provides over a 25% ROR over the next 8 months and a breakeven price of $5.55. By selling more time, the additional premium provides the opportunity to make the money more quickly if the price advances and volatility falls, while still maintain the high probability nature of this trade. If the stock closes below $7 by expiration, you can buy 100 shares at $7 and a $5.55 net price.

Option Traders Turn Their Attention to Financials as Big Cap Tech Takes Center Stage this Week

Posted: 28 Apr 2020 04:30 AM PDT

On Monday, it was big names like Apple Inc (AAPL), Microsoft Corp (MSFT) and other mega cap stocks that lagged the market instead of leading it. In fact, 5 of the top 6 market cap stocks that make up nearly 20% of the S&P 500 market cap were flat to down on Monday. This was happening as the S&P 500 was over 1% higher on the session. Even the energy sector outperformed the technology sector as oil prices declined nearly 25%.

In the midst of this dichotomy is the resurgence in financial stocks and big banks in particular. The Financial Select Sector SPDR ETF (XLF) was the top-performing sector on the day with around a 3.75% advance on the session.

As the price of financial companies began to move, so did the option volume. The call option volume for Citigroup Inc (C) was nearly 1.5 times the average with over 93,000 contracts traded. Of the contracts traded, 43% were filled at the ask price and 32% between the market. As you look at the put side, 31% of the volume was filled at the bid and only 24% at the ask. That is indicative of put selling, which is bullish as well.

The 1 MAY 20 $47 call traded over 11,000 contracts against an open interest of only 1,030. With a fill price between $0.40 and $0.85, that gives a breakeven price by the end of the week near $70.80, with expected movement that is much higher.

Action to Take: The near-term target for C is a retest of its April 9 high near $49.22.

Speculators may want to consider buying the 29 MAY 20 $46/$47 long call vertical for $0.50 or less. If the price closes above $47 by expiration, the max gain of $50 per contract or 100% ROR will be achieved. Consider closing the vertical early if it can be sold for $0.80 or more.

5 Monster S&P 500 Stocks Announce Earnings this Week, Here’s What to Expect

Posted: 28 Apr 2020 04:30 AM PDT

The major market indices and the market generally isn't driven by as many companies as you think. In fact, the energy sectors influence has greatly diminished with the recent correction.

Looking at the S&P 500, it really comes down to five companies. Microsoft Corp (MSFT), Apple Inc (AAPL), Amazon.com Inc (AMZN), Facebook Inc (FB) and Alphabet Inc (GOOG & GOOGL). Here is a breakdown of their respective weights in the S&P 500 based on the holdings of the SPDR S&P 500 Trust ETF (SPY).

  • MSFT—5.66%
  • AAPL—5.02%
  • AMZN—4.27%
  • FB—1.94%
  • GOOG—1.63%
  • GOOGL—1.63%

If you add all of those up, that amounts to just over 20% of the S&P 500 market cap that is announcing earnings this week! These select few have literally de facto become the market.

As we turn our attention to expectations for their reports this week, the following is a breakdown of analyst and options market expectations for their reports.

S&P 500 Monster #1: MSFT

MSFT was in the news on Monday as their online collaboration tool, Microsoft Teams, landed a 5-year deal with Coca-Cola Co (KO). These types of developments are positive for MSFT, but is disproportionately more negative for companies like Slack Technologies Inc (WORK).

Over the past 60 days, the EPS estimates for MSFT have come down a little, as you would expect. The average analyst estimate is now $1.28 a share, down from $1.33 a share. That's only a decline of nearly 3.8% and a 12.3% increase from last year. The COVID-19 closures aren't likely to hit as strongly for 1Q, and right now Q2 is pricing in more of a flat trend year-over-year.

The option market for MSFT right now is pricing in a $6.50 to $8.70 move on the earnings. The first number is the market maker move and is based on the difference in average implied volatility from the front week to the next week's expiration. The expected move for this week's expiration of $8.70 is based on the average implied volatility for that expiration. That means the market is pricing in a +/- 3.7% to 5% move this week.

S&P 500 Monster #2: AAPL

In this bizarro world that we live in, AAPL delaying production on its flagship iPhones coming out later this year would be a huge negative. The reason? Weakened consumer demand and disrupted manufacturing in Asia. In our current world, this is just another opportunity to buy, for now.

Over the past 60 days, analyst estimates for Q1 earnings for AAPL has fallen from $2.72 to $2.27. that's a decline of 16.5%. The declines extend into next quarter, current year and next year. We're seeing substantially lower earnings expectations across the board and yet the stock is only 14% off of its all-time highs. While the price is trading near the price it finished 2019, earnings expectation are significantly lower.

The option market is currently pricing in a market maker move of $10 and an expected move of $14. That is a 3.6% and 5% move respectively.

S&P 500 Monster #3: AMZN

Over the past 60 days, AMZN EPS estimates for the current quarter have dropped from $6.43 to $6.32. That's not a significant change, and likely reflects some of the demand for online shopping holding up. Estimates for next quarter are a bit higher and are down for the current year and next year. With the parabolic run it's had recently, it make you wonder how much it can "surprise" the market.

The option market is currently pricing in a market maker move of $122 and an expected move of $154. That is a 5.1% and 6.4% move respectively.

S&P 500 Monster #4: FB

Over the past 60 days, AMZN EPS estimates for the current quarter have dropped from $1.94 to $1.75. With most of their earnings coming from ad revenue this company appears more vulnerable. The estimates for next quarter have even been more greatly impacted as earnings have been cut from $2.09 to $1.44. Current year and next year have also been significantly reduced.

The option market is currently pricing in a market maker move of $11.50 and an expected move of $13.50. That is a 6.1% and 7.1% move respectively.

S&P 500 Monster #5: GOOG, GOOGL

Over the past 60 days, AMZN EPS estimates for the current quarter have dropped from $12.20 to $10.90. Like FB, their estimates for next quarter have even been more greatly impacted as earnings have been cut from $13.37 to $9.41. Current year and next year have also been significantly reduced.

The option market is currently pricing in a market maker move of $60.50 and an expected move of $71.00. That is a 4.7% and 5.5% move respectively.

As you consider the potential movement and the impact on the broader market, this could be a big week. However, the potential for mixed response to the earnings may lead to a negating of their impact and may allow the financial sector to set the tone as it did on Monday.

This Big Bank has Highest Dollar Value of Insider Buying than Any other Financial Stock

Posted: 28 Apr 2020 04:30 AM PDT

Wells Fargo & Co (WFC) has been an underperformer in the financial sector since March 23, 2020. Since that point in time there has been a couple of larger insider transactions that may show the potential value in WFC at its current price, and unlike many other stocks, it is trading near its lows currently, but bounced with the financial sector on Monday. However, it has had a number of upgrades from analysts from sell to hold of underweight to neutral in March.

There have been some concerns over the company's earnings, and they're being sued over their application of PPP funding, but if the sector is looking to move higher, it is as likely a candidate to participate as any.

Since March 1, 2020 WFC has had the most traded value done by insiders of any financial sector company with over a $10 billion market cap. Over that time, there have been two insider transactions, tied for second highest, who bought a total of 193,000 shares. The dollar value of those trades total over $5.55 million.

From a valuation standpoint, the company is trading near 10-year lows for its P/E ratio, P/B ratio, P/S ratio and P/CF ratio. Despite some of the earnings concerns that have held it back, it's at a good point for some strong near-term potential returns.

Action to Take: WFC is a long opportunity with a near-term target of $34 and an intermediate term target of $43.

3 Big Names That You Can Buy at a Discount Right Now

Posted: 27 Apr 2020 04:30 AM PDT

The S&P 500 is around 35% higher since it hit bottom in March near $2200. You might think that entering here for a longer-term hold may be risky and you're likely right. However, you don't want to sit idly by and watch the market continue to motor higher on Fed-driven liquidity and then panic buy. There are ways to pick the price that you want to pay for the stock, and with the higher volatility, you can still make some money to the upside.

The strategy is done through put selling. Put buyers purchase the right to sell the stock by paying a premium. If you're comfortable with the amount your getting paid and the price you are buying the stock, selling puts can be a good way to pick your own buy price.

The caveat here is that you're not necessarily entitled to buy the stock. You'll make the premium you were paid initially if the stock goes up or down a little. Generally, the only time you'll end up buying the stock is if the price is below your strike price at expiration. This is where you have to be a little careful on which types of stocks you sell puts on.

As you consider names to use this new-found strategy, a big consideration is whether the company pays a dividend, the market cap size, is it an established brand, and does it have consistent earnings, even during a recession.

The following four companies are household names with the ability to get a dividend yield over 3%, and are all in the consumer staples sector.

Big Name #1: Coca-Cola Company (KO)

KO is a Dividend Aristocrat that pays a 3.6% dividend yield. It's status as a Dividend Aristocrat is that it is part of the S&P 500, and has paid and grown its dividend for 25 consecutive years. You may like the stock right now and the company has already had its earnings announcement, but there is a way to get a better price/yield combination if you're able to buy the stock at a lower price.

As you consider which strike and expiration to sell, you need to consider the end price you may end up buying the stock and how much you can make if the stock suddenly rises quickly. In order to balance these objectives, it will require you to sell a little further in time.

For KO, you can sell the 17 JUL 20 $42.50 put for around $2 or more. With the stock around $45 and a breakeven on the trade near $40.50, the ROR is nearly 5%. If the stock does nothing, it'll take time to bleed out through time decay. If the stock rallies, it will allow you to make more money than selling less time because of the bigger upfront credit. If you end up buying the company at a net price of $40.50, it will provide you with a 4.0% dividend yield. Consider buying the put back to close the trade for $0.50 or less.

Big Name #2: Pepsico Inc (PEP)

As part of today's post, you'll notice that we're doing a little challenge between competing brands. You may be a Coke person or a Pepsi person, but either way, you're buying Dividend Aristocrats that have a solid track record. PEP currently pays just under a 3% dividend yield. PEP announces earnings on April 28.

The 17 JUL 20 $120 put can be sold for around $4.10 or more. That gives a breakeven price of just under $121 and a 3.3% ROR by expiration. If you end up buying the stock at a net price of $121, it will provide you with nearly a 3.2% dividend yield. Consider buying the put back to close the trade for $1.00 or less.

Big Name #3: Phillip Morris International Inc (PM)

PM has both paid and grown their dividend since the beginning of 2008. They currently pay a 6.4% dividend yield and have grown their dividend at a 3.5% growth rate. PM already announced earnings and withdrew full-year guidance this week.

The 19 JUN 20 $67.50 put can be sold for around $2.70 or more. That gives a breakeven price $64.80 and a 4.2% ROR by expiration. If you end up buying the stock at a net price of $64.80, it will provide you with over a 7.2% dividend yield. Consider buying the put back to close the trade for $0.65 or less.

This CRM Company Saw the Most Amount of CEO Selling this Week

Posted: 27 Apr 2020 04:30 AM PDT

Salesforce.com Inc (CRM) was in the news a couple weeks ago as the company announced plans to issue 500 COVID-19 recovery grants for small businesses across the U.S. That amount represents nearly 1/3 of the small businesses that use the Salesforce platform. Those gifts are also part of a bigger effort they are a part of to gives millions of dollars in direct grants for small businesses.

As you consider the performance and fundamentals of the company, CRM has a long-term debt-to-equity of 13.6%, which is among the lowest of comparable tech companies. They also boast an interest coverage ratio of 13.62 and a cash-to-debt ratio of 1.35.

While the company's debt and liquidity seem to be in a good position, the CEO, Marc Benioff, sold 50,000 shares this week in three separate transactions with a value of over $7.8 million. Given that he owns over 30 million shares still, that isn't a huge amount, but he's been accompanied by several other insiders in the months of April to sell. The last insider buy was on March 24, 2020 and the one prior was on February 12, 2020. Out of 109 insider transactions this year, only three have a been buy transactions.

Action to Take: CRM has pulled back to a near term support near $150 and has been holding it through the end of last week. The down day last Tuesday came with higher selling indicating a significant area of resistance near $165. The selling isn't a strong indication to sell the stock but to temper expectations. The stock is a near-term bullish opportunity to the $165 target level.

Option Market Pricing this Car Rental Stock as a Compact Instead of a Mid-Size

Posted: 27 Apr 2020 04:30 AM PDT

With the COVID-19 closures hitting travel companies hard, Hertz Global Holdings, Inc (HTZ) is looking to advisors to help them restructure their debt as opposed to declaring bankruptcy. Management is looking to Moelis & Co to help them to be able to raise cash and boost liquidity. However, this strategy requires an amendment to a secured debt facility.

In addition to restructuring their debt, announced that they had laid off 10,0000 employees in order to cut nearly $30 million in costs.

As HTZ is testing their March 18 low before their upcoming earnings on May 4, the option market is is pricing in more downside as we approach the end of the year. That type of selling may be reignited by that announcement and it doesn't appear they want to miss out.

While Friday's price action was fairly neutral on extraordinary volume, that dynamic is reflective of just how balanced the market is on this stock. A break in either direction may find the other side exhausted and a large move may be a result.

On Friday, there was significant interest in the 15 JAN 21 $3 put for around $1.50. Over 25,000 contracts were traded. The put volume was over six times the average and 69% of the volume occurred at the ask price. The volume on that strike amounted to over 50% of the total put volume traded on Friday.

Action to Take: The near-term bearish expectation is to test the lower end of the expected move for the week of the earnings, which is $2.25.

Speculators may want to match the unusual volume trade and look for a potentially larger move by the end of the year. The 15 JAN 21 $3 call can be bought for around $1.50. If the stock drops $1, the objective would be to roll the put down to the $2 strike price in order to reduce risk.

CEO or Alchemist? Top Executive Buying Shares of this Petrochemical Company as Analysts Cut Estimates

Posted: 24 Apr 2020 04:30 AM PDT

Lyondell Basell Industries N.V. (LYB) is a Houston, TX petrochemical company that produces olefins and polyethylene products. The company is scheduled to release its earnings on May 1, 2020.

As energy prices tumble, LYB is in a position to lower its input costs for its products. They even engage in refining of crude oil into gasoline, diesel and jet fuel. These types of companies are generally pretty cyclical and will likely be hurt by the closures. Analysts have cut their 1Q 2020 EPS estimates from $2.42 to $1.50 in the past 90 days. They have similarly cut for the current quarter and the fiscal year. The even halted the production of an additional petrochemical facility amidst concerns of infection.

As earnings loom and economic uncertainty abounds, the CEO of LYB is stepping in a buying shares in April. On April 6, 2020 Bhavesh Patel purchased 4,654 shares at $49.35. His purchase has a value of over $229,000.

LYB is currently trading at historically low valuations for many ratios like P/E and EV-EBITDA. The company currently pays around an 8.5% dividend yield.

Action to Take: LYB has a near-term projection of $60, but with earnings there is some risks of a downside move.

Using options, you could consider buying the stock and buying a put together. This is called a covered stock or married put strategy. The intent would be to buy enough time on the put to carry through the earnings as an insurance policy. The 1 MAY 20 $44 put can be bought for around $1 or less. This provides you with the ability to sell 100 shares at $45, for a max loss of a little over $5.25 a share. The $1.05 dividend will cover the cost of the put.

Option Traders Not Fearing the Radiation of Uranium Stocks Amid COVID-19 Closures

Posted: 24 Apr 2020 04:30 AM PDT

Cameco Corporation is a Canadian uranium producer whose primary operation is their property at Cigar Lake in Saskatchewan, Canada. The company's mine, the only uranium mine in Canada is currently closed due to COVID-19 fears. However, that hasn't stopped the price of the stock moving higher and has helped create an environment where uranium has been the best-performing commodity. CCJ announces earnings on May 1, 2020 before the market open.

On Thursday, the option market began to heat up for uranium stocks as CCJ and Energy Fuels Inc (UUUU) over 15 times and 31 times the average call volume, respectively. For CCJ, 43% of the call volume occurred at the ask price and 34% between the market. The option trading action was decidedly lopsided toward the call buying side of the equation and implied volatility increased significantly from Wednesday.

Nearly 60% of the call option volume occurred on the 1 MAY 20 $10 call option for $0.30 to $0.50. That gives a breakeven price of $10.50 and a likely expected move near $12 minimum. With the expiration occurring the day of the earnings announcement, clearly, there is an expectation of positive movement in the price.

Action to Take: The near-term target of CCJ is $12 if held through the earnings.

Speculators may want to consider the 18 SEP 20 $12 call option for around $0.70 a share or less. The implied volatility is less that far out and won't drop as much on the earnings. Also, it gives time for a potentially bigger move. If the implied volatility doesn't drop a lot on the earnings and the price moves to $12, the option could potentially be sold for over $2.

3 COVID-19 Vaccination and Treatment Stocks to Watch

Posted: 24 Apr 2020 04:30 AM PDT

As the U.S. starts to emerge from the quarantine, the grasp that state authorities are holding on the economy is having trouble letting go. The goal posts keep shifting and the move toward contact tracing, testing and an eventual vaccine is the direction they are heading.

As a result, many companies that have positioned themselves in the area of testing and vaccination have been surging the past couple weeks. Certainly, there is potential for wild swings and the possibility of missing as they go through trials.

The timeline for a vaccine will likely be a year away, but much of the opportunity is occurring now as investors try to weigh the possibility of a viable vaccine. The potential for companies to get acquired and other possibilities abound. The three companies being presented represent two clinical-stage companies and one established biotech name.

COVID-19 Stock #1: Regeneron Pharmaceuticals (REGN)

REGN is a U.S. biotechnology company that has been in the news regarding the clinical trial of their Kevzara drug as a therapy for COVID-19. The treatment is being conducted with Sanofi SA (SNY). Dr. John Reed, Sanofi's global head of R&D said the following regarding the trials of the arthritis drug:

"These trials will provide important data to determine whether Kevzara ameliorates the life-threatening complications of COVID-19 infections by counteracting the overactive inflammatory immune responses in the lungs when damaged by the virus."

Regeneron President and Chief Scientific Officer Dr. George Yancopoulos discussed a potential timeline for a pre-vaccine using an antibody cocktail:

"By June we could be testing it and, once again, within a month or two, we might know, at least for certain patients, if it’s safe and effective. So, by the end of the summer, we could be treating hundreds of thousands, if not millions of people."

Clearly, we're not close to a vaccine, but the price is trading, in part, based on the prospect. REGN has a potential target of $670 in the coming weeks to months, which becomes increasingly more likely if breaks above $600.

COVID-19 Stock #2: Inovio Pharmaceuticals, Inc (INO)

INO is a U.S. biotechnology company that is more of a clinical-stage company with very little revenue. For example, in the trailing twelve months (TTM), the company had only $4.11 million in revenue, which was down from $30.5 million in the 2018 fiscal year. To put the lack of revenue in perspective, the company generated negative operating cash flow of $97.83 million in 2019. They are a company that has also received funding from the Bill & Melinda gates Foundation.

That being said, the stock price has significant upside if a major breakthrough is achieved. On April 7, 2020, it was announced that they have been approved by the U.S. Food and Drug Administration (FDA) to begin a Phase 1 clinical trial of their COVID-19 vaccine candidate INO-4800. The trial will include up to 40 healthy adults and will be conducted at the University of Pennsylvania.

This week, INO broke out of a symmetrical triangle formation and is pushing toward its March high. The price has a near-term target of $16, but would provide a better entry on a pull-back to around $10.

COVID-19 Stock #3: Vaxart, Inc (VXRT)

VXRT is a U.S. clinical-stage company that works on the discovery and development of oral recombinant protein vaccines based on its oral vaccine platform. Their pipeline includes tablets vaccines for norovirus, influenza, and respiratory viruses. The company generated $9.86 million in revenue in the TTM.

This week, news came out regarding the positive pre-clinical results for its COVID-19 oral vaccine. In a statement from Vaxart's chief scientific officer, Sean Tucker, he said:

"Additional data will inform us on which candidate we will move forward into clinical trials.  We are particularly interested in vaccine candidates that can generate mucosal immune responses in addition to serum antibody responses.  That is a key feature of our oral vaccines and potentially significant for protection against SARS CoV-2, the virus that causes COVID-19,"

This week the price retested its high from late February and has fallen back on lighter volume on Wednesday and Thursday. If the price holds the $2.50 level, the near-term target would be a retest of $3.5. A breakout to a new high would give a longer-term target of $5.50.

Investing Great Reveals #1 TaaS Stock

Posted: 23 Apr 2020 12:13 PM PDT

 

Investing Great Reveals #1 TaaS Stock

Dear Reader,

Hi, Whitney Tilson here.

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  • Netflix when it was $7.78 a share (today it’s worth 4,800% more)
  • Apple at $1.42 (it’s up 18,000% since then)
  • Amazon at $48 (it’s up 4,000% since then)

I’m writing today because my team and I have found what we believe will be the next big tech trend that will make investors rich.

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Along the way, it could make you a small fortune.

Look, this is going to be the biggest trend affecting you and your money over the next few years—yet most Americans don’t have a clue.

And that’s why I’m going public today with the full story. I’ve traveled around America and the world in recent months (more than a dozen trips in the past six months), talking to every expert I can find.

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Best regards,

Whitney Tilson
CEO and Founder, Empire Financial Research

P.S. It’s not all good news, however. TaaS is going to cause a lot of people to lose money too. Dozens of well-known businesses will go bankrupt. But the truth is, the positive effects of this radical development far outweigh the negatives. Get the facts for yourself. Make sure you’re not on the wrong side of this trend. Click here to see my brand-new analysis…

Option Traders are Smiling Today as Call Volumes Surge and the Price Rises

Posted: 23 Apr 2020 04:30 AM PDT

SmileDirectClub, Inc (SDC) operates a teledentistry platform and provides members with customized clear aligners that the company manufactures using 3-D printing technology. In March, the company announced that they would be using some of their 3-D printing capacity to produce medical supplies to be used in the COVID-19 effort. As you consider the potential of virtual dentistry and the ability to quickly produce products from imaging, you can see where this company might fit in a post-COVID world.

While the company hasn't gotten the lift that other "virtual" companies have gotten in the past month, the company has very high short interest. As of March 31, 2020, nearly 40% of the float is shorted. That is significant, and a sharp rising in price may cause a rush to cover and a higher share price.

On Wednesday, it traded nearly 100,000 call options, which is over three times the average. One-third of the volume occurred at the ask price and 40% occurred between the market. While the activity wasn't exclusively buy-side, it was mostly on the buy side.

For example, 3,000 call contracts were bought early in the session on the 22 MAY 20 $6 strike price for around $0.75 a share. That gives a breakeven of $6.75 in 30 days.

Action to Take: The near-term target for SDC is $7.50.

Speculators may consider buying a 17 JUL 20 $5 call for around $1.50. The option has about a 0.70 delta, which means it will be a good proxy for the stock's movement. Consider closing the $5 call and buying the $6 call option if the stock trades above $6.50 in the next couple weeks. This process is called a roll.

3 Low Debt, High Cash Mid Cap Value Stocks to Buy

Posted: 23 Apr 2020 04:30 AM PDT

As you look at the major market indices, the movement is being dominated by a handful of stocks. You can probably reel off their names by heart because you probably use their devices, software, shopping platform or social media app. These behemoths are the market, and so when the market goes down, these stocks will likely lead it lower.

As a result, trying to look behind the scenes at companies that don't drive the market can be significant. Since indices typically use market capitalization as a measure to weight the individual stock weight, you can use market cap to find smaller companies with less market impact. Mid cap companies are defined as having a market cap between $1 billion to $10 billion.

As you consider a company's solvency in a crisis, corporate earnings start to take a back seat. Especially when so many companies are withdrawing earnings guidance. For example, AT&T (T) and Kimberly-Clark (KMB) announced earnings Wednesday morning and withdrew their guidance. As a result, the balance sheet becomes more preeminent. Two things stand out on a balance sheet in the current climate: cash and debt. All the companies in our list have little to no debt with the highest debt-to-equity of 0.07.

As you look at a company's cash, it generally includes cash and short-term investments. A consideration to make is how much cash they have to cover their current liabilities, but also how much cash they have to cover their existing debt as measured by the cash-to-debt ratio. If a company has operations significantly impaired, the operating expenses could be evaluated to see how many months of cash they have to run the company.

The final measure that was considered when compiling the list is valuation. Earnings-based measures like P/E are problematic if earnings are impaired and since most companies haven't reported earnings, that valuation measure will likely increase from current levels. The price-to-book (P/B) ratio compares the price being paid per share against the book value per share. The book value of a company is derived when subtracting the assets minus the liabilities. All of these companies have a P/B value ratio of less than 2.

Mid Cap Value Stock #1: Alamos Gold Inc (AGI)

AGI is a Canadian gold mining company with a $2.47 billion market cap. With the Fed and other foreign central banks printing money at levels we've never seen, gold has been performing well. Bank of America recently raised their price target for gold to $3000.

AGI currently has no debt other than capital lease obligations with $182.8 million in cash. This gives a cash-to-debt ratio of 257. The company is trading at the best P/B of all the companies on the list at 1.04. This means the current price almost perfectly reflects the liquidation value of the company.

The target for AGI is the 2016 high near $10.

Mid Cap Value Stock #2: Green Dot Corp (GDOT)

GDOT is a financial technology and bank holding company with a $1.44 billion market cap. The company got a boost in price in late March as analysts upgraded GDOT when they changed the CEO of the company.

GDOT currently has $35 million in short-term debt and no long-term debt other than capital leases. They maintain $1.063 billion in cash, which gives a cash-to-debt ratio of 15.65. The P/B ratio is 1.48, which is near the lowest level in the past 10 years.

The target for GDOT is the February high near $40.

Mid Cap Value Stock #3: Noah Holdings Ltd (NOAH)

NOAH is a Chinese asset management company with a market cap of $1.43 billion. Being a Chinese company, there are some risks there and the previous earnings weren't great, but the large surge in price on high volume is an indication of the potential movement.

NOAH currently has no short-term debt and no long-term debt other than capital leases. They maintain $625.5 million in cash, which gives a cash-to-debt ratio of 13.95. The P/B ratio is 1.33, which is near the lowest level in the past 10 years.

The target for NOAH is the 161.8% projection of the March bullish move near $15.
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