Latest Stock Buy or Sell? Make More Informed Decisions!

Today, Richard Croft commented about whether HACK-N, AABA-Q, META-Q, NFLX-Q, ATH-T, BCE-T, ZPW-T, TLT-Q, FAS-N, FNG-N, BAC-N, HHL-T are stocks to buy or sell.

COMMENT

He just returned from the southern U.S. Trump loves to operate in chaos, but markets don't. His negotiating strategy is to throw a hand grenade into a room and walk away. Best to separate the bluster from the reality (i.e. trade tariffs which still overhang the market). Trump won't renogate NAFTA as badly as people fear. His bark isn't as bad as his bite. And this market could reach new highs. Option premiums have risen dramatically. The biggest theat is higher interest rates--and they are coming. Can consumers withstand a 4% rate on a US 10-year bond? At 3.5%, he'd sell more equities. In Canada, the debt ratio is a serious concern.

HOLD

An aging population is good for this sector, but this sector is under scrutiny, too. Trump is getting tough on drug prices. That said, healthcare is a good place to be. He wouldn't add to an existing position. Hold no more than 5% in a sector.

BUY

Likes it. BAS is one of the best of this group, behind only Wells Fargo as a mortgage orginator. Higher interest rates and deregulation are tailwinds. BAC may hit $40 by 2020, possibly.

BUY

He loves the FANG stocks, but they are pricey now (i.e. Amazon, Google). This ETF is fine.

SELL ON STRENGTH

Take your profit and run. U.S. banks are a good sector on a bull run. This ETF gives you three times the leverage, the closest you get to an option in an ETF. If you make a profit here, take it. This is a short-term play, buying the banks on margin, really.

PAST TOP PICK

(Past Top Pick on June 15, 2017, Up 6%) He'd assumed interest rates would rise. They didn't. Rates rise and the value of TLT goes down. He sold a $126 call and he wanted it to close below that. It closed at $128 instead. He made 6% on the trade because he got more premium when he sold the option than when he would've had to buy it back on the last day of trading (last June).

PAST TOP PICK

(Past Top Pick on June 15, 2017, Down 0.15%) Disappointing. Active management would've helped this ETF. The advantage of put-writing in the U.S. is that you're selling option premiums that have implied in the contract the dividend in the underlying security. The capital is flowing into the fund as capital gains whereas the dividend is ordinary (taxed) income. He'd rather get the former (dividend implicit in the option premium as a capital gain).

PAST TOP PICK

(Past Top Pick on June 15, 2017, Up 6%) Covered call. He bought at $59 and sold at $60. Sold a December option; in December it was trading at $61. In his last show, he was throwing income ideas out there, recognizing that interest rates would rise. BCE now at $53.50 with another dividend raise looks attractive. All the telecoms have taken a hit, but he thinks that will settle now and rebound.

COMMENT

How does the VIX work? It meaures volatility on options implied on the S&P 500 (in Canada: the iShares TSX 60 ETF). Basically, the VIX goes up when equities go down. Short volatility--inverse volatility ETFs which happened in February--is a very dangerous game. Those investors literally went backrupt overnight.

COMMENT

Options strategy in current volatility? Volatility has increased, though it's not dramatic right now. Premium levels are higher than 12 months ago. He would sell that premium, because it's worth more than it was before. If you're buiying options, the tend to cost you more. If you're bullish on a stock, either buy the stock or write a covered call. He'd write options in this environment.

COMMENT

He doesn't think oil is sustainable and is priced too high now. Alternative sources of energy will continue to grow in the future. Saudi Arabia is selling Saudi Aramco and so is keeping oil prices artificially high. He doesn't think Iranian oil will come off the market. (That's Trump's bluster.)

COMMENT

CAD vs. Euro and USD for the next 6 months? The CAD is closer to its low than its high--he sees upside in the next 6 months. Oil will stabilize or continue to rise, especially if the politics make it more favourable to business.

COMMENT

Bank stocks or ETFs? He prefers U.S. banks with their rising margins, while he doesn't see higher interest rates helping Europe's banks which also face tight margins. He likes both US and Canadian banks. If you trade options on banks, do the individual stocks for diversification to protect your downside.

DON'T BUY

He's simply not buying Athabasca (or CPG-T) [to answer a client whose question involves an inside joke].

COMMENT

Have you ever been assigned an option (approaching expiration) without your approval? No, they can't assign an option that you're long. You choose that. When you're short an option, the person who bought it has the right to exercise it--which means you're assigned. If you are long an option and go into expiration like the last day of trading, then the next day if your option is in the money you would want to get it assigned. If the option is in the money at any amount, it's settled automatically.