TRADE INSTRUCTIONS
Date: July 25, 2017
Name: Bank of New York Mellon
Symbol: BK (NYSE)
Type: Open
Limit: Buy below $55

TRADE TARGETS
Holding Period: 3 months
Target Return: 10.9%
Annualized Return: 43.6%
Target Price: $61
Stop Loss Level: $49

COMPANY DESCRIPTION
The Bank of New York Mellon Corporation provides financial products and services to institutions, corporations, and high net worth individuals in the United States and internationally. It operates through two segments: Investment Management and Investment Services. The company offers investment management; trust and custody; foreign exchange; fund administration; global collateral services; securities lending; depositary receipts; corporate trust; global payment/cash management; banking services; and clearing services. It also provides mutual funds, separate accounts, wealth management, and private banking services; and broker-dealer services and registered investment advisory services. Link to company website.

TRADE RATIONALE        
This is another momentum trade that our Rapid Profits Matrix likes due to its yield-adjusted PEG ratio of less than 1.0 and high equity/assets ratio. That means BK is able to generate positive earnings growth without diluting the value of its equity. Although BK has appreciated 35% during the past year, it is still priced at less than 14 times forward earnings.

And you don’t have to worry about a nasty earnings surprise anytime soon, as the company released its second quarter results last week which were quite solid. In addition, the company announced a 26% hike in its dividend payment and raised the cap on its share repurchase program by $3.1 billion over the next year.

That should keep a floor under its share price while allowing current stock market enthusiasm for financial institutions that generate a lot of investment-related fee income to push it higher. Its recent breakout above $50 removes what had been stubbornly persistent resistance level.

What could go wrong? Since BK earns most of its income off of investment products and services, a major stock market correction would temporarily hurt its revenue stream. But unless the Fed does something totally unexpected this week regarding future interest rate hikes, I don’t think the impetus for a correction is lurking around the corner. So long as the stock market doesn’t lose faith in the “Trump bump”, it appears BK should be able to maintain its above-average earnings growth.

NOTE: This stock is optionable, with huge Open Interest in the 9/15/2017 $55 call option.