This morning, I’m recommending a bullish call option on Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI), the sustainable energy real estate investment trust (REIT).
We have just entered a new month. Historically, the first few trading days of a new month are bullish about 70% of the time during bull markets, as this is when fund managers typically put new capital to work in their portfolios.
November and December also tend to be two of the best months for stocks. The market tends to bottom in October and then rise into the end of the year. That’s certainly been the case so far, as the S&P has jumped about 6% since its recent low on Oct. 3.
It’s also possible that we could see some tax-loss selling as we get close to the new year. It likely won’t be too noticeable this month, but as we get into December, I would expect to see the stocks that have been weak this year continue to fall.
HASI has everything we need for a bullish trade in this market.
High Dividends in a Time of low Interest Rates
The Federal Open Market Committee (FOMC) lowered the target rate for overnight loans last Wednesday. While the target overnight rate doesn’t directly control longer-term interest rates, it does affect them.
If you look at the chart of the 10-year Treasury note yield, as represented by the CBOE Interest Rate 10 Year T Note (INDEXCBOE:TNX), you can see a drop in recent months as the FOMC has continued to cut the overnight rate.
Daily Chart of CBOE Interest Rate 10 Year T Note (TNX) — Chart Source: TradingView
The 10-year Treasury note yield is directly tied to long-term interest rates, so its decline means interest rates are falling. As long-term interest rates fall, investors start to look elsewhere for safe investments with decent returns.
What stocks can they look to for high dividends? Strong REITs like HASI.
And if you have any doubts about HASI’s performance in 2019, take a look at its technical performance.
HASI Posted Strong Earnings
I mentioned that we’re approaching the season for tax-loss selling. If traders are going to dump underperforming stocks, HASI won’t be one of them. As you can see in the chart below, its performance over 2019 has been consistently strong.
Daily Chart of Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI) — Chart Source: TradingView
It’s also important to mention that HASI beat both earnings and revenue expectations in its third quarter earnings report. It is trading above both its 50-day and 200-day moving averages, and though it may pullback briefly, I think it will head higher through the end of the year.
Buy to open the Hannon Armstrong Sustainable Infrastructure Capital, Inc. (HASI) Dec. 20th $30 Calls (HASI191220C00030000) at $0.90 or lower.
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