Current Market View: Corporate earnings performances during the third quarter period will depend heavily on trade war effects and the economic trends that began during the second quarter.
For the second consecutive quarter, EPS growth in the S&P 500 dropped and the word “tariff” was used in the Q2 conference calls of 142 different companies in the S&P 500. As a result, expectations for earnings growth have steadily deteriorated amongst analysts.
However, this leaves open the potential for upside surprises. In Q2, roughly 3/4 of all companies in the S&P 500, and this trend could continue during the next reporting periods.
Our Predictions for Q3 2019: The S&P 500 finished the Q2 reporting period trading at 2,940 and market valuations have since risen by just 1.63%. Despite the continued concerns over global growth, a steady EPS performance for the S&P 500 in Q3 should help the index vault key psychological levels at 3,000 for the majority of the coming quarterly period.
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Options markets have quickly risen in prominence over the last several years, and there are many reasons to explain why these trends have been seen. Global markets are quickly adding many different trading instrument types in order to meet the needs of everyday investors.
For those most focused on Australian companies, this will often mean establishing positions in the ASX optionscontract. These option types allow investors to gain market exposure to the stocks listed on the Australian Stock Exchange, which is one of the most interesting and dynamic stock collections in the world.
Just like bonds and mutual funds, trading options is a kind of investment portfolio strategy for sophisticated investors. Options are a derivative security type, with a price derived from (or dependent upon) one or more underlying assets. Working as a contractual agreement, options grant the rights of buying and selling those assets on or before a certain date and at a set price – known as the strike price.
CALL Options and PUT Options
There are two basic types of options: CALLS and PUTS. With CALL options, the investor gets the right to buy a particular stock at a fixed price on a fixed timeline, but it is not an obligation to make the purchase. CALL options work like a future deposit. Within the expiry time, the stock can be bought at a fixed price (the strike price), and it does not matter if the market value of that stock has doubled during the timeline. This can help investors make big gains. CALL options are exercised when the market value of stocks seems to be going up in a bullish fashion.
With PUT options, investors have the right to sell a particular stock at a fixed price within an expiration timeline. Again, making the sale is not an obligation. This can be profitable in cases where the market value of the stock goes down while the investor can still sell it at the higher strike price. But for both CALL and PUT options, there is a set expiration date. After that, the right expires and all purchases and sales must be made at the actual market rate.
Options Premiums
A premium is the price/value of an option in options trading. It is the amount paid by the investor at the time the options trade is selected. Technically, the only potential risk for the buyer is to lose the initial premium amount paid for the option (in cases where the trader does not utilize his/her buying or selling right before expiration timeline). These premiums can range from narrow to wide bid/ask spreads, and are often quoted by market makers who build market activity in that specific option.
Expiration Date
Every option contract comes with an expiration date, which is the total life span of that contract. The right to buy/sell a stock is valid until that period of time. Expiration deadlines vary for different stocks and products. The premium is lost if the purchase/sale is not made within the specific time period.
Stock markets continue to post major bull rallies but one sector that has been largely missed by investors is the technology space. This can be seen in professional indices trading trends, which have recently shown that assets tied to the NASDAQ have underperformed those tied to the value of the S&P 500.
But we are starting to see some of these trends change, as tech stocks have been able to post better rallies in recent weeks. One of the best examples here can be seen in Oracle Corp. (NYSE: ORCL) which is now trading at long-term highs.
Stock Price Chart: Oracle Corp.(NYSE: ORCL)
Stock prices in ORCL have surged above prior resistance levels en route to new highs above $45 per share. “Information driven,” Oracle is one of the most prominent names in tech development and marketing of business software products, database technology software and cloud engineered systems. Based in the USA and established in 1977, the company is a public multinational entity having more than 136,000 employees currently with head office in California’s Silicon Valley.
Key products among others related to Oracle are storage, servers, oracle applications and oracle enterprise manager. Enterprise resource planning, supply chain management, and customer relationship management soft wares are also specialized names which are associated with Oracle. It reported annual revenue of $37.04 US billion Dollars (2016) and net income worth 8.90 US billion Dollars (2016).
Tech Manufacturing Companies
In addition to manufacturing and marketing of business software products Oracle also offers other services which comprise consultancy, training and financing which is also a unique element in relation to Oracle. Since its inception Oracle has gone through a comprehensive process of acquisition of entities both corporate and individuals. In 1995, IRI software was acquired by it under consideration of $100 million US Dollars.
Other notable acquisitions include:
PeopleSoft in 2005 $10.3 billion US Dollars
Seibel Systems in 2006 for $5.85 billion US Dollars
Hyperion Corporation in 2007 for $3.3 billion US Dollars
Sun Microsystems in 2010 for $7.4 billion US dollars
Micros Systems in 2014 for $5.3 billion US Dollars
NetSuite in 2016 for $9.3 billion US Dollars
Apiary in 2017 for which the valuation of purchase consideration is yet to be agreed
According to reports in 2015 Oracle after Microsoft was second-largest software maker revenue wise which is indeed an impressive and substantial outlook internationally. Since the beginning company has introduced multiple technological dimensions like UNIX-based Oracle applications in 1987, PL/SQL in 1988, 64 bit RDBMS in 1995.
This was followed by its free database to qualify industry standard security evaluations in 2002, smart scans that enhance software query response in HP Oracle Database machine in 2008 and in particular initiative in the shape of Oracle 12c which can facilitate cloud services along with Oracle Database in 2015. Conclusively, despite facing multiple challenges since the beginning, Oracle has proved itself among preferred and highly recommended global tech entities.
Gilead Sciences: Sluggish After Healthcare Reform Debate
Gilead Sciences is an American biopharmaceutical company that discovers, develops and commercially sells a range of therapeutics including antiviral drugs for the treatment of Hepatitis, HIV, and influenza.
The company was founded in 1987 by Michael Riordan, a medical doctor. He served as CEO till 1996. A venture capital firm Menlo Ventures made the first investment of $2 million dollars in Gilead. In 1996, it entered a collaborative research agreement with Glaxo for the development of genetic code blockers or antisense. This was terminated in 1998 and its antisense intellectual property portfolio was sold to Isis Pharmaceuticals.
Gilead IPO
Its Initial Public Offering raised $86.25 million. It launched Vistide for the treatment of CMV in patients with AIDS. It collaborated with Pharmacia & Upjohn to reach more markets outside the United States. In 2010, it acquired CGI Pharmaceuticals for $120 million which expanded its research into kinase biology and chemistry. It also acquired Arresto Biosciences for $225 million and their research for treating fibrotic diseases and cancer. It acquired Pharmasset Inc. for $10.4 billion dollars.
Drug Pipelines
This gave it control over the HCV treatment market by holding Sofosbuvir (medicine for Hepatitis C). It was the first firm to manufacture a pill which is known to reduce the risk of HIV infection. It had a market capitalization of US $113 billion and its stock doubled its value after the acquisition. It was ranked the 4th best drug company by Forbes. It attributed its success to FDA approval and potentially revolutionary drug Sovaldi.
The drug has faced its fair share of criticism for its high price. The committee of finance of the United States Senate investigated wherein it sent letters to the CEO of the company as to how it derived its price. It has recently also acquired PhenexPharmaceuticals, EpiTherapeutics and Nimbus Apollo. This has given access to treat liver diseases such as non-alcoholic steatohepatitis, inhibitors of histone demethylases which regulates gene transcription in cancer and potentially treating hepatocellular carcinoma and an anti-inflammatory drug filgotinib which may be used to treat arthritis and Crohn’s disease. It’s current president and chief executive officer is John F. Milligan.
General Electric is an American multinational conglomerate incorporated in New York. It offers a range of services from power and oil, gas and aviation to financial services and even software development. It is one of the original 12 companies listed on the Dow jones index and while it may have not been listed on the index continuously it currently features in the index. It was one of the earliest companies incidentally funded Thomas Edison’s electricity projects.
General Electric was one of the earliest companies incidentally funded Thomas Edison’s electricity projects.The Radio Corporation of America was founded through GE in 1919. It was also used as the retail arm for radio sales until their separation in 1930. GE has been involved in power generation and its history working with turbines, it introduced the first superchargers. These were incorporated into flights during World War I. It reacquired RCA in 1986 and by that NBC.
Changing Company Focus
In the 1960s, GE was considered one of the major computer companies. It had a line of both general and special purpose computers such as GE200, GE400 etc. IN 1970, GE sold most of its computer division to Honeywell, though it did retain its timesharing options for a while after. GE’s current business divisions include GE Power, GE Oil & Gas, GE Renewable Energy, GE Energy Connections, GE Aviation, GE Healthcare, GE Transportation, GE Capital and GE digital.
Through these GE participates in various markets ranging from generation and distribution of electricity, medical imaging equipment, automation, motors and aviation. It also offers financial services through GE Commercial Finance, GE Consumer Finance etc. GE has a history of large scale water and air pollution. IT heavily contaminated the Hudson river with PCBs between 1947 and 1977. It also polluted the Housatonic River with PCB discharges from 1932 till 1977. Recently GE has shifted its efforts towards using clean renewabl
Recently GE has shifted its efforts towards using clean renewable energy. It unveiled its EV solar Carport which has solar panels on its roof with electric vehicle charging stations under its cover. It has a renewable energy programme ‘Ecomagination’ which has resulted in over 70 green products such as halogen lamps, biogas engines being introduced into the market. It invested nearly $25 billion dollars into the project due to popular market response.
The Goldman Sachs Group is an American multinational financial company that provides financial services such as investment management, securities and is involved in investment banking. Investment banking accounts for about 21% of the group’s revenue. It gained a reputation as a white knight against hostile takeovers. It is one of the leading M&A forms and frequently tops the Thomson Financial league tables in size of transactions.
Goldman’s Business
It performs various activities such as financial advisory, underwriting etcetera. Investing and lending activities included 16% of its revenue while Institutional client services such as currency and commodities, equities trading accounts for 45% of its total revenue. It is a primary dealer in U.S Treasury securities market. It was founded in 1869 and is headquartered at New York City.
In August 2012, Goldman Sachs created the first social impact bond to support therapy for 16-18 year olds incarcerated on Rikers Island.It has implemented internal policies to address global warming and climate change. It has given around $119 million in grants since 1999 to promote youth education. It was ranked as one of the best places to work for by Fortune magazine and it supports employee philanthropic efforts. As a result the employees are highly loyal to the organisation.
Mortgage Market Criticism
As a result, the employees are highly loyal to the organization. Goldman Sachs has also been criticised as being responsible for the collapse of the mortgage market. It faced investigations from the Congress, the Justice Department and the SEC which it had to settle. It was alleged to have misled investors. Goldman Sachs has denied the allegations and stated that its customers were aware of the bets. It has been accused of various other ethical violations including insider trader based on information obtained from the U.S government and working to
Goldman Sachs has denied the allegations and stated that its customers were aware of the bets. It has been accused of various other ethical violations including insider trader based on information obtained from the U.S government and working together with dictatorial regimes and increasing prices of commodities through futures speculation. It was accused of helping Greece hide its debt by creating a special credit default swap to cover the high risk of Greece’s national debt.
Goldman Sachs has donated money to both major American political parties during election cycles as well as the candidates and the super PACs of both parties. In 2016, Goldman employees donated $371,245 to the Republican National Committee and $301,119 to the Hilary Clinton presidential campaign but top employees were forbidden from donating to Donald Trump.
Stocks Strategies: Brookfield Real Assets (RA) Offers Value in Elevated Markets
In December, Brookfield Investment Management (NYSE: RA) announced its decision to merge three legacy funds (Brookfield Mortgage Opportunity Income Fund Inc, Brookfield High Income Fund Inc., and the Brookfield Total Return Fund Inc.) These funds became the Brookfield Real Assets Income Fund (the Fund) on Dec 5th, 2016. The Fund has an annualized distribution rate of 10.3% as of March 2, 2017.
In the chart above, we can see that the recent strategy changes at Brookfield have been viewed positively by the market, with significant rallies already posted this year. This means that stocks like RA should be on the radar for any investor looking for sustainable value in an environment where stock benchmarks like the S&P 500 and the Dow Jones Industrials are trading at overextended levels.
Recent Updates
In the Q4 update, Brookfield stated that the objectives of the reorganization were threefold. Merging the fund would provide a larger scale through trading liquidity for shareholders and broaden market interest. In this way, it is clear that Brookfield still sees opportunities for greater income and growth. Additionally, merging the funds has allowed income levels to stabilize and this should lead to less volatility during market cycles.
Strategically, this closed-end investment instrument looks to provide high total return using two approaches. Primarily, the Fund looks for high current income opportunities and, secondly, it looks for growth of capital. As its name suggests, the Fund looks to invest in so-called “real assets” such as real estate securities, infrastructure, and natural resources.
Those three industries comprise more than 97% of the Fund’s total investments.The Fund’s NAV is currently more than $25 and this number has increased by more than 3% since its December inception. The stock trades at a NAV discount that is something of a rarity when we look at the elevated nature of stock prices in general.
Stock Market Optimism
So far in 2017, the Trump victory has supported analyst expectations for higher economic growth within this US-focused fund. The stock has clear potential for growth as Trump’s pro-business agenda will likely lead to continued improvement in the nation’s housing market fundamentals.
As a whole, investors have in bullish fashion as Brookfield is already well-positioned in a somewhat overlooked industry that still has potential to grow over the next few years. Notably, the Fund’s investment in hotels, health, telecom, and oil and gas transportation has been positively received as an added volatility safeguard. But even with the significant price rallies already seen this year, the stock still trades at a NAV discount of nearly 10%:
As 2017 continues, the outlook remains favorable. Streamlining regulations, tax reforms, and growing infrastructure spending policies should continue to support the assets that make up Brookfield’s portfolio. Of course, as U.S. policy becomes more clear over the next few months it should be noted that there is some inherent risk if broader market surprises are seen.
For example, inflation may continue to rise as energy prices stabilize. The Fund management believes the general improvement of the US economy should tighten credit spreads and increase equity prices, however. If this turns out to be the case, RA should be able to extend in its rallies and gain more of the market’s attention in the process.
For more information, visit Pristine Advisers for a free investor relations consultation.
Apple, Inc. is an American technology company that is based in California, USA. It is renowned for designing, developing and distributing consumer electronics, computer software, and online services. It was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne to make and sell personal computers (PC’s).
It is known for its flagship products, which include the revolutionary iPhone, iPod, iPad and the Mac personal computer. The Mac also links the computer’s operating system to Apple’s online products and its own web browser, Safari. To this,the company hasadded features such as iTunes, iLife and iWork creativity and productivity suites. Its online services include the App store, Apple music, iCloud and the iTunes store.
Increasing Stores
Apple nearly 500 stores across 17 nations, further it has online stores in 40 countries. These are customized to cater to their location. Their store in Reagent street in London is the most profitable shop in London. Apple has nearly 50,000 employees in the U.S alone with 30,000 working at Apple stores.
It is the largest IT company in the world by revenue and it is the world’s second largest mobile phone manufacturer. It is also the largest publicly traded corporation in the world by market capitalization. It was also the first U.S corporation to be valued at over $750 billion.
Apple’s Corporate Culture
Apple is best known for its corporate culture and image in the public eye. The company’s stock trades as part of the tech-heavy NASDAQ Composite, which can be accessed when trading indices in the financial markets.
It was one of the earliest firms to embrace the individuality of its employees and propagated an informal culture. It is said the Steve Jobs used to walk barefoot in the office even after Apple became a Fortune 500 company.
This broke the perception of a traditional corporate culture. Apple also has fellowship programs to reward employees who make extraordinary technical or leadership contributions to the company. Apple has an efficient division of labor where all employees are technical experts in their field and they are not involved in functions outside their area of specialty. Apple has also turned towards green practices.
In 2008, apple became the first electronics corporation to fully eliminate PVC (polyvinyl chloride) and BFRs (brominated flame retardants) in its products. In 2007, they manufactured mercury-free LED-backlit and LCD displays and arsenic free glass. It issued a $1.5 billion-dollar climate bond to the government in 2016. It has also removed its heavy reliance on coal to alternative and renewable sources of energy. Apple stated that as of 2016, 100% of its U.S operations run on renewable energy.
The S&P 500 is arguably the most important benchmark in the financial markets. Over the last few months, we have seen some amazing trends that have confirmed a bullish end to 2016. But now that a lot of the initial optimism in stock markets has fully run its course, investors will be looking for new ways of profiting on a dynamic market that has been defined by bullish sentiment and low interest rates.
For the S&P 500, this has meant new record highs at a fairly regular clip, as investors start to price in the possibility of renewed economic optimism under the administration of President Donald Trump. When trading this type of event in the market, traders can use the SPDR S&P 500 ETF (NYSEARCA:SPY), which can be traded using the MT4 platform that is made available by easyMarkets.
Stock Market Trends
When looking to make the best investments in the S&P 500, it is essential to understand the cyclical nature of the ways that stock market trends unfold. If, for example, we were to look at the Elliott Wave Theory, then many would suggest that the markets unfold in a series of wave structures that can be forecasted in advance.
On the other hand, practitioners of fundamental analysis will need to look at factors like price-to-earnings ratios and industry competition in order to determine which stock investment strategy is best. So there does not necessarily need to be a one-size-fits-all strategy when looking to gain stock investment exposure in assets that are tied to the S&P 500.
The world-famous stock benchmark is currently trading at record highs and when we think about the fact that the Federal Reserve has left the economy at relatively low-interest rate levels there is still clear scope that we could see stock market rallies in the S&P 500 index.
S&P 500 Trading Systems
When we are looking at the potential trading systems that can be used to trade the S&P 500, it is important to consider possibilities like options and contrarian strategies that are able to take advantage of stalling momentum or even complete reversals in major benchmarks like the S&P 500. This is not always something that is considered by traditional stock market investors, but this is an investment strategy that can be used to profit from investments in the other direction when stock markets are trading near their all-time highs.
Stock Price Chart: GOOG
In other cases, it makes sense to look at other stock market benchmarks like the Dow Jones Industrials and the NASDAQ. These instruments have their own characteristics when we are looking at the ways stock market investors can implement a stance on the economic outlook. But now that we have seen some more evidence with respect to the ways the Federal Reserve will probably proceed with interest rate policy over the next two quarters, there are ways for investors to capitalize on these trends as they unfold.
