Disney's Streaming Growth Driver - ESPN/Disney+/Hulu

Disney (DIS) just delivered a stellar quarter beating on both the top and bottom lines while continuing to roll out its growth initiatives. Disney’s growth rotation is still in its early stages with the remediation of its ESPN property and flurry of growth initiatives to meet modern-day media consumption trends via streaming with its Disney+ property. In the backdrop, the company continues to dominate the box office year after year with a long pipeline of blockbusters in the queue, notably Frozen 2 and Star Wars: The Rise of Skywalker. Additionally, its Parks and Resorts continue to be a growth avenue with tremendous pricing power. Disney is going all-in on the streaming front and will inevitably acquire full ownership of Hulu, and the company is launching its Disney branded streaming service that will compete directly with Netflix (NFLX). Disney+ launches on November 12th, and Disney is unleashing all of its content (Marvel, Star Wars, Disney, and Pixar), which will be a formidable competitor in the ever-expanding streaming wars. As a result of its strong Q4 numbers, Disney has hit near all-time highs of ~$140 per share. I’ve been behind Disney for a long time, especially through this transition back to growth when the stock traded below $100, and I still feel that the company offers a compelling long-term investment opportunity given its growth catalysts that will continue to bear fruit over the coming years.

Disney’s Stellar Q4 Earnings

Disney’s Q4 earnings easily beat analysts’ expectations with substantial gains in its television networks and film studio by way of its Fox acquisition. Disney beat on both the top-line revenue and bottom-line profit. EPS came in at $1.07, beating by $0.10 per share, and revenue came in at $19.1 billion, beating by $80 million. Revenue grew by 34% year-over-year, and for the fiscal year, revenue was up 17% at $69.57 billion.

Disney’s business across the board came in strong, posting growth in every category. Revenue by segment: Media Networks, $6.51 billion (up 22%); Parks, Experiences and Products, $6.7 billion (up 8%); Studio Entertainment, $3.3 billion (up 52%); Direct-to-Consumer and International, $3.4 billion (up 361%). Operating income by segment: Media Networks, $2.14B (up 7%); Parks, Experiences and Products, $1.7B (up 4%); Studio Entertainment, $792M (up 13%); Direct-to-Consumer and International, -$553M. Continue reading "Disney's Streaming Growth Driver - ESPN/Disney+/Hulu"

Options Trading And The Bull Market No One Saw Coming

2019 has ushered in one of the most surprising bull markets that nearly no one saw coming. The vast majority of Wall Street analysts underestimated the strength of this bull market as we enter into mid-November. Expectations for 2019 were largely muted when factoring in a slew of potentially negative economic issues such as the U.S./China trade war, Brexit, inverted yield curve, potential recession, Federal Reserve actions, and the presidential impeachment efforts. Despite all of these headwinds, the indices continue to post record highs with the Dow Jones and S&P 500 notching gains of 18% and 23%, respectively.

This market has been dubbed the “most hated bull market in history,” illustrating the point that the ability for anyone to predict market returns is a futile endeavor. Reiterating why 92% actively managed funds do not outperform their benchmark and why there’s only a 36% chance of picking a stock that will outperform the market. An options-based portfolio approach can offer a superior alternative to traditional stock picking and position your portfolio to thrive in any environment such as this surprise bull market. An option-based strategy mitigates risk and circumvents drastic market moves. Selling options and collecting premium income in a high-probability manner generates consistent income for steady portfolio appreciation in both bear and bull market conditions. This is all done without predicting which way the market will move. Options trading is a great way to generate superior returns with less volatility over the long-term regardless of market conditions such as this “most hated bull market in history.”

Options and the Most Hated Bull Market

Market headwinds aplenty coupled with coming off a tough 2018, Wall Street had a negative view of stocks for 2019, and as a result, the vast majority of analysts missed one of the best years of the longest bull market in history. This market continues to make new highs after new highs. Per CNBC, of 17 forecasters for S&P 500 price, just three have targets that are above where the broad market index traded as of November 4th, 2019 with still nearly two months left in the year. Furthermore, negative sentiment is seen in the put-call ratio (a measure of sentiment among options traders), has remained above one since mid-September, a contrarian indicator that the market could be headed higher due to overly negative sentiment. Continue reading "Options Trading And The Bull Market No One Saw Coming"

How To Trade Options In Small Accounts

How can you effectively run an options-based portfolio when trading with a small account? How can you trade options on stocks like Tesla (TSLA), Ulta Beauty (ULTA), Apple (AAPL), Disney (DIS), Facebook (FB), etc., that possess such a high price per share when account balances are limited? People often shy away from options trading due to low account balances. Limited capital doesn’t preclude you from trading, and in fact, you can run an effective options portfolio regardless of account size. Options enable you to leverage a minimal amount of capital, which opens the door to trading virtually any stock, all while defining your risk.

Over the past 13 months, ~315 trades have been made with a win rate of 86% and a premium capture of 57% across 69 different tickers. When stacked up against the S&P 500, an options strategy generated a return of 9.1% compared to the S&P 500 index which returned 3.7% over the same period. These returns demonstrate the resilience of this high probability options trading in both bear and bull markets. These results can be replicated irrespective of account size when following the fundamentals outlined below.

Myth Busting Small Account Limitations

Options can be used in a leveraged manner hence using small amounts of capital to trade what otherwise would require much greater capital requirements. How is this possible? It’s possible because options can be traded in a risk defined manner. Therefore, entering any options trade, the required capital is equal to the maximum loss while the maximum gain is equal to the option premium income received. Since the risk-defined approach has a max loss, the required capital is equivalent to the max loss. The maximum loss value only needs to be covered by the available account balance. The aggregate price of the underlying shares within an option contract (contracts trade in 100 share blocks) is irrelevant.

The overall options-based portfolio strategy is to sell options that enable you to collect premium income in a high-probability manner while generating consistent income for steady portfolio appreciation regardless of market conditions. This is all done without predicting which way the market will move since options are a bet on where stocks won’t go, not where they will go. This options-based approach provides a margin of safety, mitigates drastic market moves and contains portfolio volatility. This strategy is agnostic to account balance and applies to accounts of all sizes. Continue reading "How To Trade Options In Small Accounts"

Hasbro Sinks 17% - Tariffs Negatively Impact Q3 Results

So much for Hasbro (HAS) allegedly having a diverse, flexible format supply chain and migrating its legacy supply chain out of China. Per Brian Goldner, “the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail.” Needless to say, the stock sank 17% after reporting its Q3 results. I feel that management was remiss when they forecasted their ability to circumvent the tariffs and then used the tariffs as a scapegoat to justify the company missing its numbers on both top-line revenue and bottom-line profit.

With that being said, the company is in a solid-state moving into the holiday season, historically their biggest quarter, with blockbusters and the holidays coming into fold. Hasbro has its Disney toy licensing deal (Marvel, Star Wars, and Disney Princess lines) that should have a strong showing with Frozen 2 and the new Star Wars film debuting in Q4. Hasbro Studios (Transformers’ Bumblebee, My Little Pony, Power Rangers), E-Sports (Dungeons and Dragons and Magic: The Gathering), it's legacy games (Monopoly and Nerf) and acquisition of Entertainment One earlier this year places the company in a position of strength. Hasbro is fully committed to returning value to shareholders via a combination of share buybacks and dividend payouts. Hasbro has a compelling future across its portfolio with many catalysts in the near and long-term time horizons. The Toys 'R' Us fallout is now in the rearview while the company continues to layer-in growth initiatives.

Q3 2019 Earnings – Disappointing

Hasbro missed on both EPS and revenue coming in at $1.84 (missing by $0.36) and $1.58 billion (missing by $130 million), respectively. The previous two-quarters Hasbro beat estimates handily, and the stock broke through the $120 per share threshold as a result. This quarter, the company lost momentum and is attempting to attribute this to the tariffs.

“Hasbro remains on track to deliver profitable revenue growth in 2019, behind innovation in gaming, toys, and around Hasbro's Brand Blueprint. However, as we've communicated, the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail," said Brian Goldner, Hasbro’s chairman and chief executive officer. "The team drove continued growth in the Wizards of the Coast gaming brands, MAGIC: THE GATHERING and DUNGEONS & DRAGONS, and delivered significant new holiday initiatives. To start the fourth quarter, we are seeing a strong consumer response to the global launch of Hasbro's line for Disney's Frozen 2 and Star Wars: The Rise of Skywalker as well as the U.S. launch of the new NERF Ultra." Continue reading "Hasbro Sinks 17% - Tariffs Negatively Impact Q3 Results"

Options Based Portfolio Outperformance - Keys To Success

A year-long case study running an options-based portfolio was conducted in an effort to demonstrate the effectiveness of this strategy against the traditional stock-picking approach. Options are a great way to manage and mitigate risk while circumventing market swings. Selling options allows you to collect premium income in a high-probability manner while generating consistent income for steady portfolio appreciation regardless of market conditions. This is all done without predicting which way the market will move since options are a bet on where stocks won’t go, not where they will go.

Primarily sticking with dividend-paying large-cap stocks across a diversity of tickers that are liquid in the options market is a great way to generate superior returns with less volatility over the long-term. Over the past 12 months, 298 trades have been made with a win rate of 86% and premium capture of 57% across 69 different tickers. When stacked up against the S&P 500, an options strategy generated a return of 6.9% compared to the S&P 500 index which returned 2.2% over the same period. These returns demonstrate the resilience of this high probability options trading in both bear and bull markets.

This outperformance and high win rate was achieved by following a set of options based fundamentals. Specifically, position-sizing, sector allocation, maximizing the number of trade occurrences, and risk-defined strategies are some notable areas that traders need to heed for long-term successful options trading.

Essential Options Trading Fundamentals

In order to effectively and successfully run an options-based portfolio over the long-term, the following options trading fundamentals must be exercised in each and every trade. Violating any of these fundamentals will jeopardize this strategy and possibly negate the effectiveness of this approach on the whole. Continue reading "Options Based Portfolio Outperformance - Keys To Success"