A Deep Dive Into Our Oil, Technology and Healthcare Names

Below, we provide focus into a few names in our portfolio, highlighting their recent trading patterns and recent announcements. 

Oil

The price of crude is dipping slightly today, but West Texas Intermediate remains above $50 a barrel. Yesterday's positive price action, which saw the price per barrel drift towards $51, created a significant up movement in our two exploration and production stocks, Cimarex Energy  (XEC) and Apache Corp (APA) . And despite a minor decline in early trading today, these two stocks were both nudging higher at the time this bulletin was written. 

Looking back at yesterday's session, APA traded over 3% higher while XEC increased by about 2%. Both of these stocks have been benefiting from the higher range-bound oil trends, and we like how they both have been moving in the face of macro uncertainty. Also, it is encouraging to see these two names edge higher today, despite a decline in the commodity. Lastly, it seems we are moving well past the mid-summer weakness, and we are still long-term positive on the outlook of both these two companies. 

Now focusing back on today, Magellan Midstream Partners (MMP) received an analyst upgrade this morning from Citi. While trading has been slightly negative this week due to rising yields of the 10-years (remember, this is a yield play), we believe its safe, well-covered dividend, yielding slightly above 5%, remains attractive. Also, the company's recent string of pipeline expansion announcements should all be additive, as the company looks for more ways to increase its transportation services in the Texas region. 

There have not been many new developments surrounding Schlumberger (SLB) recently, but we think that the stock's 5% rise since the beginning of the month could be attributed to improved macro sentiment, as well as investors realizing that the stock's selloff was overdone -- as shares traded at the same level as they did when crude was in the lower $30s. We continue to like CEO Paal Kibsgaard's leadership of the company, and we believe that his forward-thinking strategies keep the company proactive in the industry compared to being reactive to macro pressures. 

With crude's floor raising from about the $43 mark, which we saw in the early summer months, to about $47, we think this outcome has benefitted our stocks. Overall, we are very encouraged with how our oil stocks have traded over the last few weeks, supporting our view that it would have been an injustice to sell at such a cheap and reduced level. We'll continue to look for relief through the last quarter of the year and beyond, but the recent trends support that some of the uglier days may be in the rear-view mirror. 

Activision Blizzard

Activision Blizzard (ATVI) announced yesterday that it had finalized sales of three more Overwatch League franchises. The new teams will be based in Philadelphia, Dallas, and Houston. With the three new franchises confirmed, the league announced that it will carry 12 franchises into its inaugural season, and preseason play is set to start on December 6, with the regular season kicking off on January 10.

We are greatly encouraged that the league is beginning play at the end of this year with the regular season starting in early 2018. One of the biggest concerns with the Overwatch League was that it would not launch by the end of this year, and given the "startup" nature of this new business venture, we felt that the concerns were valid. However, we are enthused that games are slated for December, and we view that the regular season beginning in early January does not create any material shift in the company's original timeline. 

With Overwatch on schedule, we expect the league to contribute an incremental revenue boost to ATVI's figures beginning in the first half of next year. While we anticipate the beginning impacts to be modest, the potential expansion of the league is what has us most enamored. We believe that this inaugural season represents just the beginning for ATVI' eSports business, creating an expansive and relatively uncharted growth opportunity for a company that already has expanding margins and mobile monetization opportunities. 

Nvidia

Nvidia Corporation  (NVDA) is moving lower as the stock is being pressured by yesterday's report that Tesla, Inc  (TSLA) is partnering with Advanced Micro Devices, Inc  (AMD) to create its own artificial intelligence chip for their self-driving cars. Building an internal AI chip fits Tesla's strategy of being vertically integrated and lessens its reliance on other companies for its cars. Of note, heading this chip initiative for Tesla is Jim Keller, a former employee of AMD.

This report was a blow to Nvidia because it was previously thought that the company had locked this business up, due to its cheap and superior chips that set the standard in the industry. That being said, Tesla is still partnering with NVDA by using its Drive PX2 for the company's autopilot system, so their business relationship it not all lost. 

Although NVDA is experiencing some headline risk from this report, our long-term view of the company's story remains unchanged. For starters, NVDA is still working with other major automakers -- such as Toyota, Audi and Mercedes Benz -- so there is little concern about losing this business, as NVDA's presence in this industry is still strong.

Looking further into the potential lost revenue, an analyst from Citi estimates that Tesla accounts for less than 1% of NVDA's sales, so the impact to the company's top and bottom line is minimal. With this news causing little fundamental change to the company's earnings, we believe the report is driving some people to take some profits, given the stock's monstrous run over the last week.

As we have told members before, despite the increasing earnings power the company has, the stock's lofty valuations make it subject to swoons. To reiterate from previous posts, NVDA is not a crypto story (although it provides a nice boost). We still are very confident that the company's prowess in the artificial intelligence industry is a key driver for future growth. We feel that developments in artificial intelligence is where the landscape of technology is heading, and NVDA's best-in-class chips represent a key contributor to this industry.  

Apple and Broadcom

Both Apple (AAPL) and Broadcom (AVGO) are picking up their selling from yesterday. While the price movement from Apple is creating a rotation out of technology and weighing down the broader markets, our view of these two companies has not changed. We encourage members to re-read our analysis bulletins from yesterday here and here for our views of the selloffs and where opportunities lie.   

Allergan

Allergan (AGN)  is sliding again during today's session, but we reiterate our view from yesterday. We are anticipating some near-term negative sentiment in the name, but again, we must be patient here. This is still a very high-quality name that trades at a very cheap multiple compared to its peers. Although there is the potential of a future guide down, as we said during last week's members-only call, the stock does not belong this low, and we will be staying close to the company's products and management's guidance as we wait for the rebound that we fully expect to occur.

We believe future earnings will be driven by the company's growth in the medical aesthetics landscape, as well as key data points from its six "star" pipeline, and the potential here alone justifies the stock to trade at a higher multiple than the 12x earnings it is currently at.   

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long AGN, ATVI, XEC, APA, MMP, SLB, NVDA, AVGO and AAPL.