Analysis: CBOE NUE URI

After you receive this alert, we will make the following trades:

  • Buy 105 shares of Cboe Global Markets (CBOE)  at or near $107.25. Following the trade, the portfolio will own 925 CBOE shares, roughly 3.0% of the portfolio.
  • Buy 110 shares of Nucor (NUE) at or near $127.25. Following the trade, the portfolio will own 325 NUE shares, roughly 1.25% of the portfolio.

With market volatility remaining at elevated levels and prospects for that continuing into June and July as we navigate the Fed's telegraphed interest rate hikes, we are adding to CBOE. This is because of the prospects for continued use by individual and professional investors to use options and related products to protect their portfolios. We see that setting up another banner month for options contract volume in May, much the way it did in March and April, and we expect to have confirmation when Cboe reports its May metrics.

Turning to Nucor, we've sat on the sidelines with this name after selling the last slug of shares at $173, roughly a month ago. Since then, the shares have fallen considerably, leaving them to trade at less than 5-times expected 2022 earnings of $26.49. As we shared with members in the recent past, we would look to allocate capital to NUE shares as funds associated with the Biden Infrastructure Law started to flow. Several months after the signing of President Joe Biden's $1 trillion infrastructure package, the government very recently shared there are 4,300 projects underway with more than $110 billion in funding announced. Of the $110 billion announced so far, $52.5 billion is for federal highway funding this fiscal year and $20.5 billion for public transit. There is another $27 billion over five years for bridges, as well as money for safety, rural highways, airports, ports, drought resilience and other programs.

We see that setting up a stronger second half of the year for 2022 with even more in 2023 and beyond as the full impact of infrastructure spending is felt. The addition also increases the portfolio's dividend exposure given Nucor's current quarterly dividend of $0.50 per share. Typically, the company has announced its next quarterly dividend in early June, which suggests as soon as next week, and has typically paid it in early August.

While headline news over steel prices could make NUE shares volatile in the near-term we expect that volatility to fade as the infrastructure spending spigot opens further in the coming months. We would also note those infrastructure comments are also positive for the portfolio's position in United Rentals (URI)  as well.

(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)

NUE, CBOE, URI are among the AAP's holdings.