SPECIAL ALERT: Adding new calls ahead of the holiday shipping rush
KEY POINTS FROM THIS ALERT
- We’ll continue to keep the Amazon (AMZN) January 2018 1150 calls (AMZN180119C01150000), and if we see the calls move lower near-term we’ll look to scale into the position given the expected consumer wallet share gain to be had this year.
- We are issuing a Buy on the United Parcel Service (UPS) January 2018 120 calls (UPS180119C00120000) that closed last night at 0.81. There is no recommended stop loss at this time, and our strategy will be to use any weakness to improve our cost basis as we head into the company’s seasonally strongest time of the year. We would be buyers up to 1.20.
- We continue to have a Buy rating on the Applied Materials (AMAT) January 2018 60 calls (AMAT180119C00060000) that closed last night at 1.71. Our stop loss remains at 1.30
Note: We’re bringing the weekly Tematica Options+ issue to you a few days earlier than usual given the likelihood that a significant number of subscribers will, like many, many other folks, be traveling tomorrow ahead of the Thanksgiving holiday. Usually the day before and after Thanksgiving see lower than usual trading volumes as investors and traders look to turn the holiday into an unofficial four-day weekend. As we digest our turkey, trimmings and that extra piece of pie, Team Tematica will be analyzing the Black Friday data, reporting our findings on Monday.
I would suggest reading today’s Options+ issue after you’ve read today’s earlier than usual weekly issue of Tematica Investing. Trust me on this, as it will set the stage for what you will read below, and don’t worry I’ve linked to the Investing issue where appropriate to make it easy peasy.
From all of us here at Team Tematica, we wish you and yours a very Happy Thanksgiving!
2017 holiday shopping to officially start, and it’s likely Amazon’s time of year
As we brace for the official start of the 2017 holiday shopping season, the Amazon (AMZN) January 2018 1150 calls (AMZN180119C01150000) traded off modestly over the last week. The proof in the seasonal trade pudding so to speak won’t really begin until this coming weekend that spans Black Friday to Cyber Monday. We’re already seeing a growing number of retailers advertise Black Friday sales, some of which look rather promising provided you can actually get those deals – as we all know, they tend to few and far between, and are used to entice would-be shoppers. These include online offerings as well in-store ones ranging from Best Buy (BBY) and Target (TGT) to Walmart (WMT) and Kohl’s (KSS), and many more – here’s a handy guide for those that are willing to willing to partake.
- We’ll continue to keep the Amazon (AMZN) January 2018 1150 calls (AMZN180119C01150000), and if we see the calls move lower near-term we’ll look to scale into the position given the expected consumer wallet share gain to be had this year.
Adding UPS calls to the mix for the holidays
With more retailers targeting digital commerce this holiday season, it likely means, even more, packages being shipped to and fro, and we see that as a boon to United Parcel Service. I’ve held off adding a call position thus far, but now that we are at the proverbial mouth to the holiday shopping season kicking into gear, I am adding the United Parcel Service (UPS) January 2018 120 calls (UPS180119C00120000) that closed last night at 1.20.
Much like the Amazon calls, we expect favorable data points to emerge over the Black Friday to Cyber Monday time frame, but we also know the closer we get to Christmas the more deals retailers tend to trot out. Therefore, our strategy over the coming weeks will be to leverage any modest weakness in the UPS calls to improve our cost basis during what is the seasonally strongest time of the year for the company’s business. Also like the Amazon position, the timing of the calls will ensure that we capture not only the pre-holiday selling season but post-holiday sales as well. Given what we’re seeing as part of our Cash-strapped Consumer investing theme, and a recent report from Capital Economics showing Americans are having increasing trouble paying their credit card bills, the post-holiday sales rush could be as busy if not more so than pre-holiday shopping.
- We are issuing a Buy on the United Parcel Service (UPS) January 2018 120 calls (UPS180119C00120000) that closed last night at 0.81.
- There is no recommended stop loss at this time, and our strategy will be to use any weakness to improve our cost basis as we head into the company’s seasonally strongest time of the year.
- We would be buyers up to 1.20.
Applied Materials calls give back gains, but we remain bullish
Last week, following what was another beat and raise quarterly earnings report, shares of Applied Materials traded off and that weighed on our call position, which despite the pullback remains profitable. As I shared in today’s issue of Tematica Investing, Last Friday, Applied Materials (AMAT) President and CEO Gary Dickerson appeared on CNBC’s Mad Money and discussed several aspects of our Connected Society and Disruptive Technologies investing themes and how they are powering the company’s semiconductor capital equipment business. Dickerson also role in artificial intelligence and big data. I see Dickerson’s comments echoing our multi-faceted and multi-year thesis on Applied shares.
Looking at the array of must-have holiday presents this year, I see smartphones, tablets, smart speakers, wearables and other similar products, all of which are fueling demand for chips. Cisco Systems continues to stick by its forecast that total data center traffic will triple over the 2014-2019 period, and what I’m seeing outside the DC area in terms of new data center construction is rather confirming as acres of land is turned into data center buildings for Amazon, Facebook (FB), Alphabet (GOOGL) and others. On Cisco’s recent earnings calls, it shared it is seeing a migration by its customers to continue to move toward 10, 40 and 100-gigabit architectures in data centers, which is fostering demand for high-speed chips as well. And of course, there is the ramping in-country demand in China as the country looks to build out its own semiconductor capacity.
Turning to Applied’s display business, the next proof point to watch for ramping organic light emitting diode display demand will be the next iteration the global consumer electronics and consumer technology tradeshow that is CES 2018, which runs from January 8-12, 2018. In the coming weeks, we’ll begin to hear more about the various consumer electronic items that will be previewed and debuted at the show, and we expect a smattering of organic light emitting diode display TVs. Already we’re hearing LG will launch a full line up of OLED TVs in 2018, and that OLED TVs are expected to see a meaningful price reduction, which could foster greater consumer adoption. I see both as positives for not only AMAT shares but also Universal Display (OLED) shares.
- We continue to have a Buy rating on the Applied Materials (AMAT) January 2018 60 calls (AMAT180119C00060000) that closed last night at 1.71.
- Our stop loss remains at 1.30
