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Booking Big Option Gains, a New Mid-Cap Stock and Three Option Plays

Headquartered in Hoffman Estates, Illinois, CDK Global, Inc. (CDK) provides integrated information technology and digital marketing/advertising solutions to the automotive retail industry worldwide. The company serves approximately 27,000 automotive manufacturers, retailers and original equipment manufacturers. CDK recently announced a comprehensive streamlining of its organization that will enable it to implement a major transformation plan.

CDK Global Inc. vs. the S&P 500 YTD

Six Top Investment Strategies Betting on CDK Global Inc. (CDK)

1. IPO Index

Strategy tracks a market-cap-weighted index of the 100 largest U.S. initial public offerings (IPOs) over the first 1,000 trading days of each stock. Stocks must pass additional quantitative screens as well.

2. Spin Offs

The company has spun away from its parent firm in the last four years. Spin offs have a solid history of outperforming the broader market.

3. Insider Buying

Corporate officers, directors and shareholders who own more than 5% of each company’s stock are accumulating shares.

4. Float Shrink

Companies that shrink their float while growing free cash flow and not increasing their leverage.

5. Hedge Fund Gurus

One of the top U.S.-listed equity positions reported on Form 13F by a select hedge fund with concentrated holdings.

6. Mid-Cap Dividend Aristocrats

A mid-cap company that has increased its dividends for at least 15 consecutive years.

Recommendation

Buy CDK Global, Inc. (CDK) at market today. Place your initial stop at $47.

Options

With the stock technically overbought on the short term, I am holding off on recommending options this week.

Portfolio Update

There is lots to do on the option front this week.

Sell

Sell one half of your remaining STZ July $140 calls for a 114.37% gain.

Sell one half of your LOW July $75 calls for a 53.42% gain.

Buy

With some of your major blue-chip holdings pulling back over the past three weeks, several of them have become technically oversold and now are ripe for option recommendations.

Buy the FB August $120 calls (FB160819C00120000).
Buy the MCD August $125 calls (MCD160819C00125000).
Buy the HD August $135 calls (HD160819C00135000).

Sincerely,

Nicholas A. Vardy

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world. He was the Editor of The Global Guru, a free weekly e-newsletter, and also edited the trading services Momentum Trader Alert, which focused on making short-term profits in the hottest markets in the world, and The Alpha Algorithm, which was designed specifically to deliver big, fast triple-digit winners, month after month. He was also the editor of Smart Money Masters, a monthly service focused on longer term investments recommended by the brightest minds in the business. Mr. Vardy has been a regular commentator on CNN International and the Fox Business Network. He has also published articles in The New Republic, The World and I, and The Baker & McKenzie Legal Review. The Global Guru/Nicholas Vardy has been cited in The Wall Street Journal, Newsweek, Fox Business News, CBS MarketWatch, Yahoo! Finance, and MSN Money Central. Mr. Vardy graduated from Stanford with a B.A. — with honors and distinction — in both Economics and History, and he also earned an M.A in Modern European Intellectual History. After winning a Fulbright Scholarship, he earned a J.D. degree at Harvard Law School where he was an editor of the Harvard International Law Journal. When not uncovering investment opportunities for his subscribers and investors, Mr. Vardy is a keep-fit enthusiast and an avid student of classical music.