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Ahead of CES 2018, AT&T targets 5G in 2018. Another positive for NOK and AXTI shares

Ahead of CES 2018, AT&T targets 5G in 2018. Another positive for NOK and AXTI shares

Early this morning it was announced that AT&T (T) “will be providing 5G services in around 12 markets by late 2018” and “plans to add 3 million more locations to the AT&T Fiber network, for a total of 12.5 million locations across 82 metro areas by mid-2019.” This follows comments several weeks ago by T-Mobile USA’s (TMUS) CTO Neville Ray that it would look to deploy its own 5G network across the entire nation by 2020. At the time of the T-Mobile news, we shared the likelihood that AT&T and Verizon (VZ) would soon be putting their own 5G stakes in the ground, and that is what we are seeing today. Given the impact of 5G networks on our Disruptive Technologies and Connected Society investing themes, we are following these developments rather closely.

Whenever I heard of this big spending plans on networks, facilities or other forms of capital spending, my mind switches into detective mode and the first question tends to be: Who benefits?

In this case, it’s who benefits as AT&T opens the purse strings and spends on the network and as its competitors follow suit?

On the Tematica Investing Select List, we have existing positions in mobile infrastructure company Nokia (NOK), as well as AXT (AXTI) whose substrates are the core building block for wireless and fiber optic related semiconductors. Both stocks are trading up modestly today, but I’d note that given the winter storm that is pounding the Northeast today (believe me I know on this as I am huddled in a hotel room about 30 miles outside of Manhattan right now) trading volumes are rather lite.

As I shared in yesterday’s Tematica Investing, I expect to hear much more about 5G next week when CES 2018 is held. Heading into next week, I remain bullish on both Nokia and AXT shares, which have respective price targets of $11 and $8.50.

On the back of the AT&T news, we are eyeing bringing specialty contractor Dycom (DY) back into the Tematica Investing Select List fold. I say eyeing because as much as a positive as the 5G race will be for the company, the record low temperatures across the country and winter storm Grayson are likely to lead to some disruptions in the current quarter for Dycom and could thus push revenue from the first quarter into the second quarter. Once these probable disruptions are priced into DY shares, I’ll look to revisit them as well as other chip companies that are poised to benefit from incremental 5G demand, but must first contend with the seasonal slowdown in smartphone demand.

 

 

Weekly Issue: Tidying Up Our Desk as We Get Ready for the 250 Trading Days of 2018

Weekly Issue: Tidying Up Our Desk as We Get Ready for the 250 Trading Days of 2018

Key Points from this Week’s Issue:

  • Boosting our price target on International Flavors & Fragrances (IFF) shares to $165 from $160;
  • Increasing our price target on USA Technologies (USAT) to $11 from $9;
  • Raising our Alphabet (GOOGL) price target to $1,200 from $1,150.
  • Lifting our Costco Wholesale (COST) price target to $200 from $190.
  • Following a 21% move in United Parcel Service Shares (UPS), we are selling half the position at current levels. As we do this, we’ll set a $120 stop loss that should yield a minimum return of just over 17% for our remaining UPS shares.

 

Happy new year and welcome to 2018! As we begin the year, on behalf of team Tematica I’d like to wish you a healthy and profitable road ahead.

Before we look forward to the 250 trading days to be had in 2018, let’s take a quick moment to enjoy the successes we saw on the Tematica Investing Select List in 2017. To level set, the S&P 500 finished 2017 up 19.5%, one of its best moves in several years. Utilizing our thematic lens during 2017 the Select List had 9 positions that handily outperformed that benchmark with returns ranging between 31%-208%:

  • Alphabet (GOOGL)
  • Amazon (AMZN)
  • AXT Inc. (AXTI)
  • Applied Materials (AMAT)
  • Facebook (FB)
  • International Flavors & Fragrances (IFF)
  • United Parcel Service (UPS)
  • Universal Display (OLED)
  • USA Technologies (USAT)

 

I’d call out that several of those outperformers were added to the Select List back in 2016 and serve as an example of being patient investors provided we continue to receive confirming thematic data points. I’d also note, we identified several of these positions well ahead of the herd, which eventually came around to see what we did in these business and their corresponding shares.

As I look into 2018 with an eye on the Select List, I continue to see further upside for the vast majority of existing positions. Over the last few weeks, a number of supporting data points have come out including:

  • Apple (AAPL) devices accounted for 44 percent of smartphone and tablet activations over the holidays, with nearly a third of those coming from new devices including the iPhone 8, 8 Plus and X, according to new data from Flurry Analytics. We also see this as a positive for both our Universal Display (OLED) and Corning (GLW) shares.
  • According to news from CNBC, Amazon (AMZN) said customers shopped on its website at “record levels” throughout November and December. Over the course of one week, more than 4 million people became Prime members or started a free trial, sending its membership count to new highs. There is also growing chatter that Amazon is poised to disrupt the pharmaceutical industry in 2018 and murmurs beginning to point to Amazon entering the banking sector.
  • Universal Display (OLED): Monthly sales of organic light emitting diode TVs in the Japan market surpassed the 10,000-unit mark for the first time in November, according to data compiled by the Japan Electronics and Information Technology Industries Association. We see this as a precursor to the upcoming annual CES tradeshow, which has historically been a showcase for TVs hitting the market later in the year. We see the ramping demand for organic light emitting diode displays as a positive for display equipment demand at Applied Materials (AMAT).
  • AXT (AXTI), Applied Materials and Nokia (NOK): With the 3rd Generation Partnership Project (3GPP), a collaboration among groups of telecommunications associations, announcing its round of 5G specifications, DigiTimes is reporting that a number of Taiwan chip and optical component suppliers are pivoting their business not only toward 5G chipsets but also optical communication ones in light of the demand associated with 5G network base stations and backhauling data traffic.

 

Boosting IFF, USAT, GOOGL and COST price targets

There are a few Select List positions that are bumping up against their respective price targets, such as International Flavors & Fragrances (IFF), USA Technologies (USAT), Alphabet (GOOGL), United Parcel Service (UPS) and Costco Wholesale (COST), which climbed more than 17% for us in 2017. As you probably recall, over the last year, I’ve raised our price targets on IFF, USAT, and GOOGL shares several times, and over the holidays I’ve put fingers to spreadsheet to revisit. Today, I am making the following price target changes:

  • Boosting the price target on International Flavors & Fragrances (IFF) shares to $165 from $160;
  • Increasing the price target on USA Technologies (USAT) to $11 from $9;
  • Raising our Alphabet (GOOGL) price target to $1,200 from $1,150.
  • Lifting our Costco Wholesale (COST) price target to $200 from $190.

 

Trimming back our position in UPS shares

With UPS shares, we’ve enjoyed a 21% move over the last 11 months and while the company is well positioned to capitalize on the $90 billion in returns this holiday season as well as post-holiday sales according to research firm Optoro, we have roughly 5% upside to our $130 price target. Over the coming year I continue to see UPS’s business benefitting from the ongoing shift to digital commerce that is a cornerstone of our Connected Society investing theme, but in the coming weeks, we will see a seasonal slowdown as the impact of the holiday sales season is once again in the rearview mirror. Being prudent investors, we are trimming the position on the Tematica Select List back and reducing it by half at current levels.

  • We are trimming back the United Parcel Service (UPS) position by selling half the position at current levels.
  • As we do this, we’ll set a $120 stop loss that should yield a minimum return of just over 17% for our remaining UPS shares.

 

What’s ahead in the coming weeks?

Over the next several weeks there will be a number of catalysts to be had for both existing Select List positions as well as prospective ones. Several paragraphs above I mentioned the upcoming CES technology trade show, which runs Jan. 9-12. The week after we will see the earnings report spigot turn on and then near the end of January we have the State of the Union Address 2018 (Jan. 30). Ahead of that presidential address, President Trump is expected to release his rebuilding U.S. infrastructure framework, and I’m already looking at other candidates for the Select List now to join our LSI Industries (LYTS) shares.

As we get ready for this, I’ll also be assessing potential EPS upside to be had due to the impact of tax reform. As I shared in this week’s Monday Morning Kickoff, we’re already starting to see market strategists boost their price targets on the S&P 500. In scrutinizing those targets against their revised 2018 EPS expectations, the reality is they are not looking for much multiple expansion, which means those targets rest largely on EPS growth. The big question is will the benefits of tax reform be spent by consumers and businesses alike or will it be used by consumers to reduce debt while businesses fund buybacks and dividends due to skilled worker shortages that could deter property, plant equipment, and other investments?

The answer is we’ll see, and with the market trading at more than 20x 2017 EPS expectations for the S&P 500, any disappointment is bound to weigh on the overall market. That makes the upcoming earnings season and corporate outlooks more crucial than usual as investors look to not only assess the impact of tax cuts but also the health of their businesses in the 9th year of the current business cycle. While the holiday season and related spending is winding down, I’m assembling our shopping list should short-term investors get a bought of post-holiday indigestion in the coming weeks.

 

Holding steady with MGM shares after the December Macau gaming data

Holding steady with MGM shares after the December Macau gaming data

While today marks the start of the 2018 trading year, and as we shared in today’s Monday Morning Kickoff (MMKO) it means “back to work” and the resumption of both economic and industry data. Not to be overly repetitive, in that issue of MMKO I detailed the coming economic data I’ll be looking at this, but early this morning we received the December report from the Macau Gaming Inspection and Coordination Bureau. Per the report, December gross gaming revenue rose14.6% year over year, but viewed on a sequential basis the month’s gross gaming revenue fell 1.5% and more than 22.5% compared to November 2017. For 2017 in full, gross gaming revenue reported by the Macau Gaming Inspection and Coordination Bureau rose more than 19%.

Here’s the thing – expectations for December gaming revenue in Macau were looking for a near 20% figure on a year over year basis. Odds are we could see our share price pressure in our Guilty Pleasure holding that is MGM Resorts (MGM) shares given the relative miss. My most thoughts on MGM is we have are in the middle of a seasonally slow time of year for the gaming industry given the holiday season. Furthermore, MGM has several refurbishment projects underway that will last into 1Q 2018, which should improve their competitive position in both Las Vegas and Macau.

We will continue to be patient with the position, as we look for both a seasonal pick up in gaming industry and better-operating metrics for the company in the coming months.

  • Our price target on MGM shares remains $37; we would look to add to the position closer to $31.

 

Weekly Issue: As we get ready to enter 2018, more signs of disruption lie ahead

Weekly Issue: As we get ready to enter 2018, more signs of disruption lie ahead

 

As we have said before, Amazon is the poster child for thematic investing given the sheer number of our investment theme tailwinds it is current riding, and that has made the company a force when it comes to disrupting industries. Several weeks ago, I shared the chatter that Amazon is looking to gain entry into the pharmaceutical market and it is now reportedly meeting with generic drug makers, which would enhance its position in our Aging of the Population investing theme.

This is not exactly brand new territory for Amazon, given its 1999 investment in drugstore.com, which was scooped up in 2011 by Walgreen Boots Alliance (WBA) in 2011 and shut down in 2016. The question we’re pondering here at Tematica is whether Amazon’s potential interest in pharmaceuticals was one of the catalysts that prompted CVS to go after Aetna? Given the potential impact, it does make sense that CVS would look to preserve its business by tying up its 9,700 stores with Aetna’s 44 million customers. It also makes a new CVS a far bigger player in our Aging of the Population investment theme.

We’re also seeing a contender for our Disruptive Technologies investing theme, Synaptics (SYNA), announce a new fingerprint scanning technology called “Clear ID”, which delivers what the company calls “one-touch high-resolution scanning through full cover glass.” Synaptics claims that its Clear ID technology is twice as fast as 3D facial recognition and requires only one touch to access a smartphone. We see this as a clear shot to Apple’s (AAPL) new FaceID, and as much as we love Apple and our Apple products, we are a bit confounded that Apple has done away with TouchID all together with its new flagship iPhone X model. Synaptics is a supplier to Apple for its iPhone touch screen, and this could signal something for the next iPhone iteration, but when we step back we here at Tematica can envision Clear ID moving beyond just smartphones into other markets that are looking for solutions that are in sync with our Safety & Security investing theme.

 

Perhaps one of if not the biggest disruptor to watch for in 2018 will be progress on 5G wireless technology.

Mobile connectivity, a cornerstone of our Connected Society investing theme, has been an evolving disruptor that has rocked some industries hard and is busy reshaping others even as I type these words. Given the data speeds associated with 5G networks that will make downloading an HD quality movie in seconds a snap, help power the networks and communications behind autonomous cars and enable the industrial internet, better known as IoT, it’s safe to say we are in for another phase of Connected Society disruption with 5G. In 2018, it means watching companies like Verizon (VZ), AT&T (T) and T-Mobile USA (TMUS) moving from launching test networks to being construction nationwide networks. To keep tabs on that and what it means for the Nokia (NOK) and AXT Inc (AXTI) shares on the Tematica Investing Select List, we’ll be watching signs and progress at specialty contractors like Dycom Industries (DY) that are the ones that actually construct the network.

 

Infrastructure to be a hot topic in January

Finally, there has been much talk in 2016 and 2017 over the need to rebuild the U.S.’s aging and falling apart infrastructure. We agree, which is why we created the Rebuilding America index that identifies those companies that in our view are best positioned to prosper as President Trump looks to tackle this campaign pledge in 2018. Last week it was revealed that President Trump will unveil his long-awaited framework to rebuild the U.S. crumbling infrastructure in January. This week the World Cement Association shared its view that global cement demand will rise 1.5% in 2018. Digging into the report, we find a far greater rate of demand increase in the U.S. — 6% year over year, up from 2% growth in 2017 — given not only the potential for President Trump’s pending infrastructure rebuilding framework, but also post-hurricane rebuilding efforts. Over the coming weeks, I’ll be looking to migrate one or two companies from the Rebuilding Index to the Tematica Investing Select List to sit alongside our current position in LSI Industries (LYTS).

That’s quite a bit of stock positions to have covered over those 900 or so words, so here’s a quick reminder for those corresponding price targets:

  • Heading into its seasonally strongest time of year and with more disruption expected in 2018 as well as further wallet share gains, we continue to rate Amazon (AMZN) shares a Buy, and our current price target is $1,400;
  • Disney shares remain a Buy at current levels and our price target for the House of Mouse, Marvel and Star Wars remains $125;
  • With a ramping iPhone X cycle that bodes well for revenue and margins at Apple (AAPL), we continue to rate the shares a Buy with a $200 price target;
  • We continue to see a bright outlook for both Nokia (NOK) and AXT Inc. (AXTI) as 5G deployments get underway, driving demand for their infrastructure equipment and compound semiconductor products, respectively. Our price targets for these two companies are $8.50 and $11.
  • Our price target on LSI Industries (LYTS) still sits at $10, which keeps the shares in the Buy zone.

 

January also brings the Consumer Electronics Show

Early January also brings the annual geek-fest that is the Consumer Electronics Show, which for investors like us is a must watch event for new gadgets and devices that are slated to hit shelves in 2018. It’s also a time when companies show how they are incorporating new technologies. I expect the upcoming show will feature quite a bit of press around organic light emitting diode displays in smartphones and TVs, and perhaps even automotive lighting. As we saw with this year’s show, seeing as how they are one of the next connected platforms, automobiles are now a part of the show. In addition to display technology, we’ll be watching for new developments and announcements on the Connected Car and 5G.

From a Tematica Investing Select List, the upcoming show should bode rather well for not only Universal Display (OLED) shares but also Applied Materials (AMAT) and Corning (GLW).Heading into 2018, we continue to have Buy ratings on all three of these companies and our respective price targets remain $225, $65 and $37.

 

Housekeeping

It’s that time of year again folks when even we here at Tematica are hit by year-end travel plans during the holiday season, which means we’ll be suspending the regular weekly issue next week and expect to return on January 3rd. When we formally return, we’ll recap 2017 in full and share more of my thoughts on what we’re likely to see in 2018.

I know that should the need arise I’ll be sharing thoughts on Select List positions and odds are more than a few Thematic Signals will make their way onto TematicaResearch.com. We’d never leave you hanging here at Tematica, and like the mailmen of yore, we aim to deliver no matter what is going on.

On behalf of myself and the rest of Team Tematica, Merry Christmas, Happy Holidays and have some Guilty Pleasure fun along the way as you ring in 2018!

The November retail sales report is great news for the Tematica Investing Select List

The November retail sales report is great news for the Tematica Investing Select List

Today we received a better than expected print for the November Retail Sales report, which rose 0.8% month over month compared to the 0.3% expected increase. Viewed on a year over year basis, the headline November figure, which includes retail and food sales, climbed 5.8%. Backing out food, motor vehicles and parts, retail sales in the month soared 6.3% year over year. While we’re going to focus on the retail aspect of the report, we’d note the downtick in food sales bodes rather well for our position in McCormick & Co. (MKC) shares.

In a nutshell, the overall November report was rather bullish for a number of Connected Society and Cash-Strapped Consumer positions on the Tematica Investing Select List as well as several others. With that said, let’s get to the nitty-gritty…

The three standouts in the November retail data were:

  • Gasoline Stations (up 12.2%)
  • Building Materials (up 10.7% year over year)
  • Nonstore Retailers (up10.4% year over year)

The fact that Building Materials and Nonstore Retailers were stalwarts was not a surprise, given post-hurricane building efforts and the digital shopping data for the Thanksgiving – Cyber Monday holiday shopping period. We see these data points as rather confirming and positive for our positions in LSI Industries (LYTS), Amazon (AMZN), and United Parcel Service (UPS) and to a lesser extent Alphabet (GOOGL) shares.

The 3.6% year over year increase in general merchandise stores is, in our view, another reason to expect an upbeat earnings report from Costco Wholesale (COST) after today’s market close. As a reminder, with the shares bumping up against our $190 price target, we are in the process of reviewing additional upside. Today’s earnings report will be a factor in that analysis.

Despite the favorable November results for Sporting good, book and music stores (up 2.9% year over year), it wasn’t enough to bring the trailing 3-month total into the black. We continue to see a tough road ahead for these categories in the traditional brick & mortar environment as they feel the one-two punch of not only our Connected Society investment theme, but also Amazon flexing its muscles in an effort into private label products such as exercise and sports apparel.

Finally, electronics & appliance stores experienced a 6.4% bump year over year, clearly the strongest period in the trailing three-month period. While some of this is likely due to post-hurricane rebuilding efforts, we would note Apple’s (AAPL) iPhone X went on sale early in November and electronics was a big contributor to the holiday shopping spend.

  • Our price target on McCormick & Co.  (MKC) shares is $110
  • Our price target on LSI Industries (LYTS) shares is $10
  • Our price target on Amazon (AMZN) shares is $1,400
  • Our price target on United Parcel Service (UPS) shares is $130
  • Our price target on Alphabet (GOOGL) shares is $1,150
  • Our $190 price target for Costco Wholesale (COST) shares is under review.
  • Our price target on Apple (AAPL) shares is $200.
The stock market wasn’t sold on Yellen’s final FOMC press conference

The stock market wasn’t sold on Yellen’s final FOMC press conference

Yesterday the Federal Reserve, as expected, boosted interest rates by 0.25% and updated their economic projections, which included boosting its view on 2018 GDP to 2.5% from 2.1%. For 2019 and 2020, the Fed left its GDP forecast unchanged at 2.1% and 2.0%, and also signaled that it continues to expect to boost interest rates three more times in 2018.

While none of this news was a surprise, the stock market and the dollar sold-off during outgoing Fed Chair Janet Yellen’s final FOMC press conference. Perhaps it had something to do with the recent economic data that has several regional Fed banks cutting their GDP forecasts for 2017, raising questions over the Fed’s 2018 forecast?

Or it could be Yellen’s comments for continued growth past 2018, even though the Fed’s own economic projections see the economy slowing in 2019 and again in 2020?

Or it could be the fact the even though the Fed is usually an economic cheerleader, it only increased its 2018 GDP forecast by roughly half a percentage point based on FOMC members incorporating tax reform into their forecast. That’s far less of an economic bump than President Trump and others are expecting from tax reform.

Or it could be investors doing the calculus of potentially higher interest rates on ballooning consumer debt levels without any major uptick in wages. That means shrinking disposable income as consumers devote more after-tax dollars to interest payments. Not a good thing for an economy that relies on consumer spending, but from our thematic perspective it means our Cash-Strapped Consumer investing theme has legs into 2018 and beyond.

The other indicator that was rather revealing was despite the Fed’s view it could boost interest rates three times in 2018, financial stocks including the Financial Select Sector SPDR Fund (XLF) sold off, while gold ticked higher. Looking at the flattening yield curve helps explain the why behind this move lower in financials, and in our view the natural hedge offered by gold, a Scarce Resource theme contender if there ever was one, was welcomed given not only Yellen’s mixed comments but the market’s sky-high valuation of more than 20x expected 2017 earnings.

And with that, we bid adieu to Janet Yellen and get ready to welcome in new Fed chair Jerome Powell, who is likely to be more of the same – a consensus builder that is not likely to rock the Fed’s dovish bent. Yellen didn’t have a recession to contend with during her tenure, but given the length of the current business cycle, odds are Powell will have to deal with one. To us here at Tematica that means we are likely to see at least a few interest rate hikes in the coming year.

 

WEEKLY ISSUE: Some Unfinished Business for 2017

WEEKLY ISSUE: Some Unfinished Business for 2017

 

In a relatively short time, we’ll close the books on December and for all of 2017 as well. Next week we plan to share some of our thoughts looking ahead to 2018, but first, it always pays to maintain some perspective on the ground we’ve covered these past 12 months.

Looking back, like most years, there were a number of notable events, and more than a few unexpected ones. Some of the former include Whole Foods being acquired by Amazon (AMZN), CVS Health (CVS) angling for Aetna (ATNA), Disney (DIS) pursuing assets of Twenty-First Century Fox Inc (FOXA) and one-time mobile stalwart Qualcomm (QCOM) being the recipient of a takeover bid. That activity and more serves as a reminder that the stock market, much like our investing themes here at Tematica, is a living thing that changes over time and the ripple effects of these changes can have profound reverberations that can reward certain stocks and punish others.

We’ve seen this happen in 2017 given the sharp drop we expected in shares of Blue Apron (APRN) given the potential fall out to be had from the Amazon-Whole Foods tie up, and we could see some at Netflix (NFLX) should a Disney-Fox deal go through. Imagine finally being able to see all of Marvel’s characters on the same screen, at the same time in a movie developed by Marvel. For us comic-book nerds, it would be a dream come true.

 

The stock market and the Tematica Investing Select List

While the last few weeks have seen some ups and downs, the down and dirty for the Select List is we had a number of strong performers over the last year as well as a good number of market-beating ones. That’s even after the recent pressure in both technology stocks and small-cap stocks, which we see as the market being fussy.

As we look at those and other positions on the Tematica Investing Select List, we continue to see thematic tailwinds powering them ahead in the coming months and quarters. It can be frustrating at times as we wait for the investing herd to catch up to what we are thematically seeing, but as we have seen with shares of Costco Wholesale (COST), International Flavors & Fragrances (IFF) and USA Technologies (USAT) it pays to listen to the data and be patient. Amid all the buzz of Bitcoin, we’ll continue to that knitting, which has served us so well. That doesn’t mean we’ll be sitting on our laurels, clipping dividends from those Dividend Dynamo companies on the Select List – far from it! We’ll be mining for new data sources and nuggets, stress testing our investment themes and turning rocks over for new candidates and new positions to build on the returns the Select List has generated this year.

With the prospects for tax reform improving, odds are we will see another Santa Claus rally occur even though it means the stock market’s already stretched market is likely to become even more so. That could make finding thematically well-positioned stocks at favorable prices a bit more challenging than it was in 2017, but we’re up to the task and we’ll be sure to add a new position only as the thematics and valuation warrant doing so.

  • Our price target on International Flavors & Fragrances remains $160, but we plan on revisiting that target based on what we learn from competitor Givaudan SA’s Middle East non-deal roadshow later this week.
  • With shares of USA Technologies (USAT) trading above our $8 price target, we are once again assessing additional upside to be had at current levels. We would not commit fresh capital to the position at current levels.
  • As for Costco (COST) shares…

 

Here Comes the Fed

Later today as the Fed concludes its last FOMC policy meeting for 2017 expectations have baked a rate hike of 0.25% into the market cake. As we’ve said, we see the Fed doing what they can to get their monetary policy tools back in the toolbox given how long in the tooth the current recovery is. What I’ll be taking a harder look at it is the Fed’s economic outlook for 2018 and 2019, which heading into the two-day meeting called for GDP of 2.1% and 2.0%, respectively. Not quite the upswing that President Trump is calling for. During the subsequent press conference, the last for current Fed Chair Janet Yellen, I’ll be once again parsing the Fed speak to determine what might influence monetary policy in the coming months as new Fed Chair Jerome Powell takes the helm as well as items that could lead the Fed to not only accelerate its rate hike timetable.

With Yellen leaving her post and holding her last press conference, it will be interesting to see if breaks form to talk tax reform, infrastructure spending, Bitcoin or the evolving role of the Fed. If the past is indicative of how she will communicate her thoughts today, odds are it will all be less than crystal clear. But again, with one foot out the door wouldn’t it be refreshing for Yellen to be far clearer than usual. We’ll have more on what is and isn’t said today in this week’s Weekly Wrap.

 

Costco Earnings later this week

After Thursday’s market close, Cash-Strapped Consumer company Costco Wholesale (COST) will report its quarterly earnings. Based on the company’s string of stellar same-store sales reports over the last few months that shows Costco is not suffering from the Amazon-effect, we expect an upbeat report. We will, of course, be closely watching new warehouse figures and outlook for more given their role in generating profits and EPS for the company. Consensus expectations call for EPS of $1.34 on revenue of $31.38 million for the quarter, up 14.5% and 11.7% year over year, respectively.

If we had one concern, it’s the speed at which COST shares have climbed – more than 18% since we scaled into the position on the Select List in early September – and what it could mean for what the market expects Costco to not only report on Thursday, but also forecast for the current quarter and beyond. Over the last several quarters, we’ve seen the damage that can be done when a company delivers either a modest miss for its earnings or offers up a somewhat softer than expected outlook.

While it may not be probable, all things are possible and we’re inclined to remain, patient investors, as Costco continues to expand its warehouse footprint in 2018. That said, with COST shares bumping up against our $190 price target, vs. the Wall Street consensus of $185, we’ll be mining the results to determine incremental upside to be had in the shares.

 

Housekeeping

PS – I almost forgot to mention this, but given how I am fond of saying that our investing themes are recognizable in the real world, Tematica has finally taken to Instagram. Follow us there ( @TematicaResearch ) as we share visual examples (better known as pictures) of our various investment themes in action as well as some other fun stuff. And for those wondering, we can also be found on Twitter (@TematicaGroup ) and Facebook. Now go finish that holiday shopping already!

Weekly Issue: Insights on Apple, Cutting Trade Desk and a look at eGaming and Body Cameras

Weekly Issue: Insights on Apple, Cutting Trade Desk and a look at eGaming and Body Cameras

 

KEY POINTS FROM THIS WEEK’S ISSUE:

  • Raging fires in So-Cal has us cutting Trade Desk shares loose
  • Here’s why we’re avoiding body camera stocks
  • Speaking of Apple…
  • Some mobile gaming stocks go under the microscope

 

It’s been a wild ride in the market this past week, as investors shift their view from “will tax reform pass” to “with tax reform likely, which sectors will benefit?” Candidly we find this to be the wrong question to ask, not just because we believe sector investing is dead (it is!) but because we see a better question being which thematically well-positioned companies are poised to benefit from lower tax rates in 2018?

We’re rolling up our sleeves, proceeding with that analysis and we’ll have some answers in the coming days. In the meantime, we’ve got another full weekly issue of Tematica Investing to share with you. Here goes…

 

Raging fires in So-Cal has us cutting Trade Desk shares loose

Shares of digital advertising platform company Trade Desk have been under renewed pressure this week, in part due to weakness in the Nasdaq Composite Index, but also to the fires raging in southern California. As a reminder, Trade Desk is headquartered in Ventura, California and despite the prospects for half of all global advertising to be spent online by 2020, odds are Trade Desk will experience either some disruption or distraction in the current quarter that could lead to the company missing quarterly expectations. We’ve seen how share prices react to such misses, and we’d rather get out ahead of any potenital miss to expectations and minimize the impact to Select List.

As such, we are cutting Trade Desk shares loose at market today, which will generate a blended loss of more than 17% across the two tranches on the Tematica Investing Select List. We’ll look to revisit the shares once the full extent of the damage has been priced into the shares.

  • We are issuing a Sell on Trade Desk (TTD) shares.

 

 

Here’s why we’re avoiding body camera stocks

One of the key investment themes that we talk quite a bit about here at Tematica is the Connected Society investment theme and the impact it is having on industries and companies. It’s not to take anything away from our other themes, it’s just the Connected Society has been a disruptive force across a growing number of industries. We’re seeing its impact stretch across how we shop, bank, communicate and consume content ranging from video and audio to news and even stock information.

We’re also seeing the impact outside of consumer-facing opportunities in part with the Internet of Things, but also with our Safety & Security investing theme. As a quick reminder, this theme spans defense, homeland security, personal security, and cybersecurity, but also law enforcement. When it comes to law enforcement we have seen a number of new items ranging from rubber bullets to bean bag guns come to market, but with the Connected Society, we are seeing a shift from reactive to proactive monitoring via body cameras. It’s a razor to razor blade business model, with the body cameras serving as the razor and the data management the ongoing spend, a model that is similar to buying new blades every month.

Interestingly enough, I received a subscriber email that was asking about a company that falls into this category – Digital Ally (DGLY). Trading at just under $3 per share the past month, DGLY shares are well off their 52-week high of $6 per share, and yet have a consensus price target of $5. That along with the underlying fundamentals of the body camera market were more than enough to get me to look at the shares.

Not to be all Debbie Downer, but in reviewing the company’s financials, I have a few cautionairy observations to share:

  • The company’s business model has been and looks to be currently upside down. In that I mean it’s operating expenses vastly outweigh its revenue stream. Over the last 12 months, Digital Ally’s revenues totaled a whopping $15.2 million, while its operating expenses over the same period hit $26.6 million
  • It should come as little surprise the company is bleeding on its bottom line and hemorrhaging cash, which it doesn’t have much of. Exiting the September quarter Digital Ally had $0.3 million in cash and short-term equivalents. In the same quarter, its net loss was $3.5 million.

 

As the saying goes, the numbers don’t lie and simply put, DGLY shares are not a pretty picture. This lack of balance sheet strength in the face of ongoing losses was one of the flag’s I identified with Blue Apron (APRN) shares and I see it here with Digital Ally as well. And for those keeping score, Blue Apron shares are down 27% since my initial bearish comments on October 24th.

Aside from the financial statements, there are other concerns that also have me steering away from DGLY shares — namely back and forth patent infringement cases with competitors WatchGuard and Axon Enterprise (AXON), the company formerly known as Taser. These cases are always messy, with companies throwing resources at legal fees and that’s going to hurt a company with Digital Ally’s balance sheet. Based on what is seen here, it’s quite possible that Digital Ally could be one of those companies that vanishes unless it were to undergo what would likely be a painful and dilutive secondary offering that injects capital onto the balance sheet.

Is it possible that Digital Ally could be a takeout candidate? Perhaps, but as one Chief Financial Officer once shared with me when I asked him why not buy out a struggling company to improve his company’s competitive position – “why buy it now when in a few months I can probably buy it for cents on the dollar?” It was a great point, and besides what acquirer would want to step into the current lawsuit mess?

Better to move along and examine other potential candidates than take a flyer on a stock that is cheap for a reason. And for those wondering, that same set of lawsuits, as well as another factor, has me on the sidelines with Axon Enterprise shares as well. That other factor I mentioned is the current pilot program being run by the Jersey City Police Department that is testing a new smartphone app called CopCast that would allow police officers to turn an everyday smartphone into a body camera. While this is the first test in country, the JCPD has already expanded its pilot program to 250 officers from an initial ten. We’ll continue to monitor both this program, as well as those body camera company lawsuits. On the one hand, the outcome of that monitoring program could be a positive for the Apple (AAPL) shares on the Tematica Investing Select List, on the other it could mean revising DGLY and AXON shares. Time will tell.

 

 

Speaking of Apple…

Over the last week as part of the move lower in the Nasdaq, shares of smartphone company Apple (AAPL) moved lower by 2% — a hair better than the 2.2% decline in the Nasdaq. We here at Tematica remain upbeat on this recent addition to the Tematica Investing Select List with our confidence in Apple buoyed by two recent findings. First, a new report from Barclays’ surveyed 1,000 people and found that 62% will upgrade their smartphone in the next year, while 72% plan on doing so in the next 18 months. Of those upgrading, 54% are planning on choosing an iPhone with 35% choosing the iPhone X. It’s worth noting this iPhone X percentage is significantly higher than the August Barclays’ survey that found just 18% of would be Apple buyers would be willing to spend $1,000+ on the iPhone X.

The second report comes from IHS Markit, which forecasts that Apple will sell 88.8 million iPhones in the current quarter – its biggest quarter ever. As robust as that might be, the item that caught our analytical eye was the notion that Apple needs to ship just 31 million iPhone X units for its overall iPhone average selling price to crack $700 – another new record for the company. IHS’s forecast hinges on the collapsed shipping times for the iPhone X, which have fallen from 5-6 week initially, to roughly one week as Apple ramped production.

We expect additional forecasts to follow, but with the iPhone X making a number of “best of” lists, it appears this latest iPhone could once again be the holiday gift to get.

  • Our price target on Apple (AAPL) shares remains $200.

 

 

Some mobile gaming stocks go under the microscope

One of the key themes that caught investor attention over the last few quarters is the accelerating shift to digital consumption, especially mobile consumption that is part of our Connected Society investing theme. We saw this over the recent Thanksgiving-to-Cyber-Monday holiday shopping period, as digital sales over the five-day period hit a new record of $19.6 billion. Based on reports from Adobe (ADBE), Shopify (SHOP) and others, it appears that mobile sales rose to equal 40%-45% of all digital shopping sales this year.

We would also point out this shift to digital shopping is not occurring just inside the U.S. This year, Alibaba’s Singles Day hit $25.3 billion in sales, with over 90% of Alibaba’s sales made on mobile devices compared to 82% in 2016 and 69% in 2015.

I believe we can all agree that there is a pronounced shift underway favoring mobile consumption.

A few weeks’ back, we shared some thoughts on e-sports, which tie into how gaming is becoming a new kind of content that people consume not only by themselves or in small groups, but also in communal experiences. And in size… such size that corporate advertisers are sitting up and taking notice when such events are selling out Madison Square Garden for instance. It’s safe to say that eSports and video games fall well within the scope of our Content is King investing theme, on top of the Connected Society theme given the demands the games place on connectivity over the internet as well as viewing and playing over mobile devices.

Put these two tailwinds together, and it means looking at mobile gaming, and as luck would have it another subscriber asked about shares of Glu Mobile (GLUU) and Zynga (ZNGA). In the case of Glu — aside from the fact that they count companies like Activision and Hasbro (HAS) as strategic partners, and which game titles they have (if the dog doesn’t like the dog food, what’s the point in owning the company) — the key investor concern entails wrapping our head around 2018 expectations compared to 2017. We are essentially at that time of year when we make the transition to relying more on 2018 metrics and valuations, and it makes sense as we are inclined to own new positions into at least the first half of 2018.

In the case of Glu, the answer to the question set we’ll be asking is how does the company intend to meet (or beat) consensus expectations that have it delivering EPS of $0.09 in 2018, up from a -$0.08 loss this year? It’s a hefty swing, especially when 2018 revenue is expected to grow a tad more than 5% year over year.

The question for Zynga (ZNGA) is a bit different. It is expected to deliver EPS of $0.13 next year, up from $0.10 this year, which is 30% EPS growth, but why the sharp drop compared to year over year EPS growth this year, especially when 2018 revenue is slated to rise by more than 9%?

If you ask a carpenter how they look to minimize mistakes, the answer you usually get is “measure twice and cut once.” Essentially, that’s what we’ll be doing as we get to the bottom of those questions as well as others over the coming days.

As we do that, I’m going to offer a disclaimer of sorts. While we’ve smartly added companies like USA Technologies (USAT) and AXT Inc. (AXTI) to the Tematica Choice List, we generally stick with larger capitalization stocks, which tend to be more liquid and have better established business models, a track record of earnings and cash flow, better capitalized balance sheets and in some cases dividends.

All things being equal, those kinds of companies are less risky and less volatile than micro-cap stocks like Digital Ally or small-cap ones such as Glu Mobile, which often lack institutional investors and whose shareholders tend to be littered with speculators, not investors. In some cases, those stocks are nothing but glorified option plays, and we leave that kind of trading to our Tematica Options+ service, which focuses on trading options and other aggressive trading tactics, while here at Tematica Investing we are long-term and patient investors.

That’s not to say we won’t take advantage of a mismatch between a company’s stock price and the opportunity to be had, rather we’re going to examine each thematic contender on its own individual merits from a thematic and financial perspective. That being said, as we examine GLUU and ZNGA shares, I’ll be doing the same with Activision Blizzard (ATVI), Electronic Arts (EA) and Take-Two Interactive (TTWO) as well.

Before we close out this week’s issue, I’d like to hammer home that the answers to the questions we asked above and ones like them are what we consider to be the basic building block of analyzing and understanding a company and now its business is performing. For those subscribers that are looking for a more detailed set of primer questions, we – that’s Tematica Chief Macro Strategist Lenore Hawkins and myself – included them in Chapter 10 of our book, Cocktail Investing – Distilling Everyday Noise into Clear Investing Signals. And yes, that book inspired our weekly podcast and it would make a great holiday present to a burgeoning investor.

 

 

 

Weekly Issue: Black Friday, Tax Reform and Boosted Dividends in Time for the Holidays

Weekly Issue: Black Friday, Tax Reform and Boosted Dividends in Time for the Holidays

Black Friday Through Cyber Monday Provide Confirming Data Points for Amazon (AMZN) and UPS Positions

Earlier this week, we not only issued our Tematica Investing thoughts on the holiday shopping weekend, which was very confirming for our Connected Society investment theme thesis on both Amazon (AMZN) and United Parcel Service (UPS), it was also the topic of conversation between Tematica’ Chief Macro Strategist Lenore Hawkins and myself on this week’s earlier than usual Cocktail Investing Podcast. As a reminder, we see United Parcel Service as the sleeper second derivative play on the shift to digital shopping this holiday season and beyond.

Per data published by GBH Insights, on Black Friday alone, Amazon garnered close to half of all online sales, which set new record levels on Thanksgiving as well as Black Friday and Cyber Monday. As we learned yesterday, this year’s Cyber Monday was the biggest sales day for online and mobile ever in the US as online sales hit $6.59 billion, up 16.8% year over year. As Lenore and I discussed on the podcast, spending on mobile devices continued to take share from desktop and in-store spending during Thanksgiving and Black Friday, and that also happened on Cyber Monday as mobile sales broke a new record by reaching $2 billion.

Yesterday, Amazon issued a press release sharing it was the “’best-ever’ holiday shopping weekend for devices sold between Thanksgiving and Cyber Monday. After reviewing the data and prospects for Amazon’s business this holiday season as it benefits in part from its expanding private label brand business as well as the even greater than expected shift to digital commerce this holiday shopping season, we are boosting our price target on AMZN shares to $1,400 from $1,250. While some may focus on the implied P/E of 175x expected 2018 EPS of $7.98 for our new price target, it equates to a price to earnings growth (PEG) rate of roughly 1.0% as Amazon is set to grow its EPS by a compound annual growth rate of just over 184% over the 2015-2018 period. Even if 2018 expectations are a tad aggressive, after taking a more conservative 2018 view our new $1,400 price target equates to a PEG ratio between 1.1-1.3x, which we find more than acceptable from a risk to reward perspective.

  • We are boosting our price target on Amazon (AMZN) shares to $1,400 from $1,250.
  • Our price target on United Parcel Service (UPS) remains $130.

 

Market Moves Higher Ahead of Senate Vote on Tax Reform

The major market indices continued to move higher as the Senate Budget Committee approved the Senate’s tax plan yesterday, which brings it to an expected floor vote tomorrow. This inches the prospects for potential tax reform happening by the end of 2017 a bit higher, although while we remain optimistic we here at Tematica continue to see far greater odds of tax reform happening in 2018 as the House and Senate bills close their respective gap. While both bills cut taxes on businesses and individuals, they differ in the scope and timing of those cuts.

As enthusiasm has gained for tax reform, smaller cap stocks have rallied, as small-caps tend to have greater U.S. exposure in revenue and profit mix compared to bigger, multi-national stocks. The small-cap laden Russel 2000 is up more than 1% this week alone and has risen roughly 2.8% over the last month beating out the Dow Jones Industrial Average, the S&P 500 and even the Nasdaq Composite Index. That small-cap climb, combined with the influence of our thematic tailwinds led the USA Technologies (USAT), AXT Inc. (AXTI) and LSI Industries (LYTS) to rise even faster than the Russell. Over the last month, they’ve risen more than 30%, 18%, and 5% respectively and over the last few weeks, we’ve trimmed back USAT and AXTI shares, booking meaningful wins, while offsetting those gains by closing out positions that have been lagging.

As tax reform lumbers forward, we’ll continue to monitor developments and what they mean for both the market and the Tematica Investing Select List.

 

 

Dividend Dynamo Company McCormick Does it Again

Call me old-fashioned, but I love dividends and I love companies that have the ability to raise their dividends even more. When a company boosts its dividend, it tends to result in a step function move higher in its stock price. If it’s a serial dividend raiser, or as I like to call them a dividend dynamo company, we tend to get a hefty 1-2 combination punch of a step higher in the stock price as well as higher dividend payments. Boom!

We’ve got several such companies on the Tematica Investing Select List, and this week McCormick & Co. (MKC) once again boosted its quarterly dividend. This new 10% increase to $0.52 per share marks the 32nd consecutive year that McCormick has increased its quarterly dividend and offers us even greater comfort with our $110 price target. With regard to this new dividend, it is payable on January 16 to shareholders of record on December 29 – mark your calendars!

  • Our price target on McCormick & Co. (MKC) shares remains $110

 

What We’re Watching For Over the Coming Days

During the next several days, as we exit November a number of economic data points will start to roll in, as well as other key data points such as retailer monthly same-store sales figures. Amid the number of economic reports to be had, we’ll be parsing the October construction spending report and what it means for both non-residential construction activity and shares of LSI Industries (LYTS). The shares have been an “under the radar” mover on a week to week basis, but since adding the position to the Tematica Investing Select List in mid-September are up more than 5%. As August-September hurricane-related construction rebounds, we continue to see further upside ahead for LYTS shares.

  • Our price target on LSI Industries (LYTS) remains $10.

 

While we are understandably bearish on the vast majority of brick & mortar retailers, we remain upbeat with Costco Wholesale (COST) given its higher-margin membership fee income stream. Over the last several months, Costco’s monthly same-store sales reports have shown it is not suffering at the hands of Amazon at all, but rather in keeping with our Cash-Strapped Consumer investing theme, it continues to take consumer wallet share. As Costco shares it November data, we’ll be sure to break it down and assess what it means for our $190 price target.

  • Our price target on Costco Wholesale (COST) remains $190.

 

With Guilty Pleasure MGM Resorts (MGM) shares on the Select List, we’ll also be on the lookout for November gaming data pertaining to Nevada as well as Macau. As we mentioned recently, we are heading into one of the slower seasons for the Las Vegas strip and MGM continues to renovate several choice properties with expectations of reopening them in 1Q 2018. We’ll continue to be patient, and if the opportunity presents itself opportunistic as well given our $37 price target. On the housekeeping font, MGM’s next quarterly dividend of $0.11 per share should arrive in mid-December.

  • Our price target on MGM Resorts (MGM) shares remains $37.

 

 

Special Alert: Recapping bullish signals for our Connected Society theme as holiday shopping goes increasingly digital this year

Special Alert: Recapping bullish signals for our Connected Society theme as holiday shopping goes increasingly digital this year

 

KEY POINTS FROM THIS SPECIAL ALERT:

  • Tematica Options+ Subscribers: We are selling half the Amazon (AMZN) January 2018 1150 calls (AMZN180119C01150000) that broke $76.62 this morning, generating a gain of more than 135% over the last 7 trading days. We are also boosting our stop loss to $55 from $32.50.*
  • With today being Cyber Monday, we will be revisiting our Amazon (AMZN) price target as the day’s sales tallies are published.
  • We continue to see Amazon (AMZN), Alphabet (GOOGL), and United Parcel Services (UPS) as beneficiaries of the accelerating shift toward digital commerce.

 

* Note: Following the Thanksgiving holiday, we are in a thankful mood and as such we are sharing this latest Tematica Options+ call option trade with all Tematica Investing subscribers. If you would like to upgrade your subscription to include Tematica Options+, please contact us at (571) 293-1977 or email us at customerservice@TematicaResearch.com

 

Holiday shopping data is confirming Our Connected Society Investment Theme on several fronts

We hope you had an enjoyable Thanksgiving holiday, and where appropriate you took advantage of retail sales, both in-store and on digital platforms. Over the coming paragraphs, we’re going to review the weekend spending data that was bullish for our Connected Society investing theme as well as several Tematica Investing Select List positions and preview what’s expected today, Cyber Monday, but the quick takeaway is it confirmed the accelerating shift toward digital commerce that is fueling our positions in Amazon (AMZN) and United Parcel Service (UPS), and to a lesser degree Alphabet (GOOGL) given its search and shopping businesses.

According to Adobe Systems (ADBE), U.S. shoppers splurged more than $1.52 billion online by 5 PM ET on Thanksgiving and went on to part with more than $2.85 billion for the day in full. By comparison, that compares to $1.93 billion in online Thanksgiving sales in 2016. What we found even more incredible was the percentage derived from smartphones – a record 46% according to Adobe.

Turning to Black Friday, per e-commerce platform company Shopify, customers spent as much as $1 million per minute on the internet. Adobe reports that shoppers spent a record-high of $5 billion for the day, up from $3.34 billion in 2016. Another interesting data point, marketing firm Criteo reports that roughly 40 percent of Black Friday online sales were made on mobile devices Pairing Thanksgiving and Black Friday sales at the 100 largest U.S. Web retailers, Adobe found $7.9 billion was spent, marking an 18% increase compared to 2016.

Reports for Black Friday were less favorable for brick & mortar retailers, with many shoppers flocking to stores; however many of them were there only to “showroom” the merchandise. For those unfamiliar with that term, “showrooming” means eying items in person while waiting to complete the actual transaction online, while continuing to bargain hunt online or via mobile. Estimates from ShopperTrak said foot traffic “decreased less than one percent when compared to Black Friday 2016.” Looking at both Thanksgiving Day and Black Friday, however, ShopperTrak found in-store foot traffic was actually down nearly 2% compared to the same two days last year. Not good for brick & mortar at all, but with some context, we see it is simply more of the same given disappointing same-store sales reported by retailers of late.

What we found most interesting in retailer comments was the growing verbiage toward digital commerce . . . 

While some may call it pandering, we see it as more confirmation of the shift we’ve been describing. Case in point, Kohl’s (KSS) CEO Kevin Mansell shared that while the retailer delivered a “record-breaking” Thanksgiving, more than 16 million visits were made to kohls.com, Kohl’s said, outpacing any prior traffic or sales precedents. Mansell went on to say the company fulfilled roughly 40% more orders that were bought online and picked up in stores when compared with Black Friday of last year. Another example was had at J.C. Penney (JCP), which shared that traffic at jcp.com increased at a double-digit pace throughout the week, with most shoppers visiting the site from their mobile devices. And on Thanksgiving Day, Penney’s website received the most visits of any day so far this year.

Rounding out the holiday shopping weekend, today is Cyber Monday and it is expected to become the largest online shopping day in history, generating $6.6 billion in sales, up  16.5% compared to last year’s $5.6 billion according to Adobe. Here’s the thing — if this Cyber Monday sets a new online record, it will be the sixth year in a row the day has done so.

Stepping back, we see all the weekend’s data confirming the shift to digital commerce that has been at the heart of our position in Amazon. The same shift towards online is also driving the search and shopping business at Alphabet and fueling the season surge at United Parcel Service.

As this shopping shift is occurring, we are also seeing Amazon build its own private-label offerings across a growing number of categories, including sportswear, electronics, and accessories to kitchenware. This is placing additional pressure on bricks-and-mortar names such as J.C. Penney and Sears (SHLD). Of course, there is more than enough reason to think there will be even more pain on the way, as traditional retail businesses are pumping up the use of discounts to win business, which should further pressure margins.

In a survey conducted by the Berkley Research Group of more than 100 high-level retail executives in October, 64% of the respondents said they expected promotions to play a more significant role in overall sales during the 2017 holidays. This tells us is there is more trouble ahead for brick & mortar retailers as these companies sacrifice profits to win revenue. That isn’t exactly a sustainable business model and one that tends to lead to declining earnings per share. In our view, those that lack a competitive weapon in its back pocket — weapons like Amazon’s Amazon Web Services or Costco Wholesale’s (COST) higher margin membership fee business — are stocks to be avoided as retailer pain continues.

  • Our price target on Amazon is $1,250 but based on the online shopping strength thus far and what’s expected today we are reviewing that target.
  • As we review our AMZN price target, we are doing the same for Alphabet (GOOGL) shares. Currently, that price target sits at $1,150.
  • Our price target on United Parcel Service (UPS) shares remains $130.
  • Our price target on Costco Wholesale (COST) shares remains $185.

 

Tematica Options+ Subscribers: Trimming back our Amazon call position

* Note: Following the Thanksgiving holiday, we are in a thankful mood and as such we are sharing this latest Tematica Options+ call option trade with all Tematica Investing subscribers. If you would like to upgrade your subscription to include Tematica Options+, please contact us at (571) 293-1977 or email us at customerservice@TematicaResearch.com

As the confirming holiday shopping data is coming in, we’re seeing Amazon shares respond accordingly and that is propelling the Amazon (AMZN) January 2018 1150 calls (AMZN180119C01150000) higher this morning. As we share today’s thoughts with you the AMZN calls are trading past $76.62, which equates to a gain of more than 135% since we added the position just 7 days ago to the Tematica Options+ Select List. As much as we like quick gains, we also like to be prudent and in this case, that means trimming the position back, while leaving a portion intact to capture additional gains to be had this holiday shopping season.

  • We are selling half of the Amazon (AMZN) January 2018 1150 calls (AMZN180119C01150000) that broke $76.62 this morning, generating a gain of more than 135% over the last 7 trading days.
  • As we make this trade, we are also boosting our stop loss on those calls to $55 from $32.50, which should ensure a profit of at least 69% on the remaining call position.