Despite some troubling signs under the surface of the market, mega-cap tech once again led the indexes’ charge higher. And because of the heavy weighting of these tech stocks in the S&P 500 and Nasdaq, those indexes gained 1.8% and 3.75%, respectively, while the Dow fell 0.4% on the week.
The Stock – Guardant Health (GH)
Guardant Health bills itself as an oncology company, but instead of developing cures, it’s a testing outfit: The firm’s Guardant 360 offering is a blood test (the company calls them tissue-free biopsies) that can detect certain forms of cancer, help doctors and patients decide on therapies and even give early indications on how successful immunotherapies or targeted treatments are.
Big picture, it’s part of the (in our opinion, revolutionary) trend toward more accurate and insightful non-invasive tests, and while the bottom line is deep in the red, demand for the offering has been strong for years: Revenues have grown nicely every year (from $287 million in 2020 to an estimated $681 million this year), are actually accelerating a bit of late (its 31% growth in Q1 was the fastest in five quarters) and with Guardant estimating the market is worth $20 billion in the U.S. alone, analysts see growth continuing for a long time to come.
That’s all to the good, but much of the excitement now revolves around the firm’s new blood test for colorectal cancer, which has had very solid detection results for stage II/III patients (including 99% true negatives); an FDA advisory panel recently backed the firm’s offering (dubbed Shield), and it could be a huge seller with obvious advantages vs. stool-based tests (like Cologuard from Exact Sciences), never mind colonoscopies, with early signs pointing toward a massive increase in compliance rates (which obviously saves lives). Long term, lung and other cancers could be next up, but even with what’s happening now, Guardant looks like a big idea.
Technical Analysis
GH’s chart has been a classic horror show for years, falling from a pandemic-era high near 180 all the way to 16—and that low didn’t occur until this April, a year and a half after the indexes hit their nadir! However, it’s in Top Ten today because the last couple of months look like a big character change, with eight weeks up in a row, four of which came on big volume, and with the stock easily surpassing its 40-week line, too. There will almost surely be dips and shakeouts, but the trend looks to be turning up. Stop — 24
The Covered Call Trade
Buy Guardant Health (GH) Stock at 31, Sell to Open July 30 Strike Calls (exp. 7/19) for $2.50, or a Net Price of 28.5 or less
Static Return: $150 per covered call (5.26%)
Breakeven: 28.5
Covered Call Return (if assigned): $150 per covered call (5.26%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the Net Price, or 28.5 or less. (In this case 31 minus 2.50 = 28.5. Or another example is you could pay 30.7 for the stock and sell the call for 2.20, which also equals 28.5)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| Pan American Silver (PAAS) | 18.75 | 20 | 15.8 | June 19 -- $1.10 | $1.00 |
| Pinterest (PINS) | 41.5 | 44.5 | 35 | July 41 -- $2.75 | $4.00 |
| Oscar Health (OSCR) | 22.5 | 19.25 | 17 | July 22.5 -- $2.30 | $1 |
| Dutch Bros (BROS) | 36.35 | 40 | 31 | July 37.5 -- $1.65 | $3.50 |
| Robinhood (HOOD) | 20.85 | 22 | 16.8 | June 20.5 -- $1.60 | $1.50 |
| Sweetgreen (SG) | 30.45 | 30 | 25 | July 32 -- $2.10 | $1.50 |
The next Cabot Profit Booster issue will be published on June 25, 2024.
Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.
