This is a busy week for the Alpha Algorithm.
First, here’s the Alpha Algorithm’s top pick for the week.
Founded in 1955 and based in Columbus, Georgia, Aflac Incorporated (AFL) provides supplemental insurance for individuals and groups to help pay benefits that major medical insurance doesn’t cover. Aflac underwrites a wide range of insurance policies, but is better known for its payroll deduction insurance coverage, which pays cash benefits when a policyholder has a covered accident or illness. Aflac provides financial protection to more than 50 million people worldwide.
Aflac Incorporated (AFL) versus the S&P 500 Year to Date
Five Top Investment Strategies Betting on Aflac Incorporated (AFL)
- High Quality Stocks
U.S. stock that exhibits positive fundamentals, including high return on equity, stable year-over-year earnings growth and low financial leverage.
- Shareholder Yield
Companies (a) paying cash dividends, (b) engaging in net share repurchases, and (c) paying down debt on their balance sheets.
- Dividend Aristocrats
Companies that have increased dividends for at least a consecutive 25 years.
- Share Buybacks
U.S. stocks that have reduced their shares outstanding by at least 5% in the previous year through share repurchases.
- Insider and Analyst Sentiment
One of 100 top stocks out of 5,000 U.S stocks where a corporate insider (a director or senior officer of a company, or any person or entity that owns more than 10% of the company’s stock) is buying the stock and Wall Street analysts have recently increased earnings estimates.
Recommendation
Buy Aflac Incorporated (AFL) at market today and place your stop at $58.00.
Options
With the stock currently technically overbought, I am holding off in recommending options on the stock today.
Portfolio Update
Next, we have good news on your very first Alpha Algorithm recommendation.
Constellation Brands (STZ) jumped 5.93% yesterday and set a new all-time high after the company announced surprisingly strong quarterly earnings results. Sales rose 9% for the fiscal year to $6.5 billion and profitability expanded by two full percentage points to 28.5% of sales. That translated into $5.18 per share of profit, which was 24% higher than the prior year and ahead of management’s January forecast of $5.10 per share.
With your STZ July $140 calls (STZ160715C00140000) up over 100%, sell half of your remaining options to lock in these solid triple-digit percentage gains. Hold on to the rest as we still have several months to go before they expire.
Raise your stop to $152.75 to lock in at least a 10% gain in the stock.
New Options Recommendations
Finally, I have a pair of new options recommendations.
Barclay’s recently upgraded price targets on both your automotive-related positions. O’Reilly Automotive (ORLY) stock was initiated with an “overweight” rating and a$300 per share price target. The same “overweight” rating was given to Autozone (AZO) with a $870 per share price target.
That represents an upside of 10.41% and 10.3%, respectively, in each stock.
With both stocks pulling back slightly this past week, I am recommending that you enter options positions on each.
1) Buy the ORLY August $270 call options (ORLY160819C00270000), which expire on Aug. 19 and last traded at $18.00.
2) Buy the AZO $790 June call options (AZO160617C00790000), which expire on June 17 and last traded at $28.00.
Sincerely,
Nicholas A. Vardy
