Air Transport (NSDQ: ATSG) Helps Amazon Fly, AbbVie (NSDQ: ABBV) Suffers a Hit and More…
In what is becoming a regular event, the market failed to hold any gains last week. Despite strong economic news, confusion surrounding the U.S./China trade talks weighed down investor sentiment. The arrest of a top executive at China’s tech giant, Huawei, made investors nervous that this trade war may get even more nasty.
I continue to work on new long ideas but am hesitant to issue bullish trade alerts during this tumultuous period. Outside of biotech, there are few safe havens for bulls. The S&P ended the week down 4% and is now down 1.5% for the year. Hopes for a Santa Claus rally are melting faster than a snowman in Florida.
This sloppy action takes me to the bearish options trade suggestion I issued this morning. As I noted in the alert, I believe it’s best to be patient for a fill and perhaps spread your trade over several days to capture the best price.
I am working feverishly to deliver more profitable trades in this increasingly hectic trading environment. I’ve got several that I think are timely and will issue them soon. As always, please let me know if you filled the trade.
I do expect we will see some bullish action in 2019 once the trade issues become more settled. I incorrectly anticipated the tariff war would be a short-lived scare but instead, it has become a brake to economic growth.
Around the Portfolio:
AbbVie (NSDQ: ABBV) suffered some bad news when it stopped enrolling patients in its TAHOE trial following a recommendation from Independent Data Monitoring Committee.
The Phase 3 study was evaluating Rovalpituzumab Tesirine (Rova-T) as second-line therapy for advanced small-cell lung cancer (SCLC). This is a decent blow to the company’s pipeline as Phase 3 is the final human leg of study required before submitting data to the FDA. The drug failed to show any benefit in median survival time. In fact, those in the control arm showed better survival time, which is why the committee required the halt of the trial.
However, it is not a fatal blow as the drug was not expected to start producing revenue for several years out. My bullish stance on the company is based primarily on the success of its hepatitis C drug.
Interestingly enough the news that Amazon Air (NSDQ: AMZN) might take share from FedEx (NYSE: FDX) and United Parcel Service (NYSE: UPS) that drove down the entire transport sector is quite bullish for Air Transport Services Group (NSDQ: ATSG). Not only does ATSG supply Amazon with many of the planes it uses for its own delivery, but it announced the delivery of seven leased freighters by its Cargo Aircraft Management and ATSG West Leasing subsidiaries during the 4Q18, pointing to continued strong demand for its converted Boeing (BA) 767 freighter aircraft.
PayPal (NSDQ: PYPL) has been trading soft with the Nasdaq but should rise if investors are paying attention to its fundamentals. Barron’s magazine highlighted the stock this week noting that PayPal has become “an essential arms merchant” in the war for e-commerce dollars and is a “neutral, trusted digital intermediary for payments.”
UBS analyst Eric Wasserstrom gave the stock a thumbs up saying his firm conducted a survey to determine institutional investors’ views about PayPal and found that 81% of investors are bullish or very bullish on the stock. The jury is out on how well his sentiment surveys correlate to bullish stock movement.
Canaccord analyst Camilo Lyon commented on a Steve Madden (NSDQ: SHOO) showroom tour, stating that he was impressed by its level of on-trend fashion newness for Spring deliveries. He said the company is seeing strength in boots, which is a category that was down double digits in Q3 and thinks Q4 sales could be better than expected.
Systemax Inc. (NYSE: SYX) rose on the news that it will pay a special one-time dividend of $6.50 a share after the sale of its French operations earlier this year. The provider of industrial products said the dividend will be paid Jan. 3 to shareholders of record as of Dec. 24.