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Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster 122

The stock is strong today thanks to a solid quarterly report last week; earnings came in at $0.15 per share, beating analyst estimates by a penny (the third time in the last four quarter it’s topped expectations) and up 36% over last year. Revenues were $97.3 million, though results there were mixed; the consumer segment saw revenues plunge 24% from a year ago (partly due to the virus), but communications/computing was up 8% (including far faster growth in 5G-related products) and the industrial and auto markets saw sales leap 14%.

Cabot Profit Booster 122

The Cabot Profit Booster portfolio continues to do very well, though with earnings season ramping up there will almost certainly be some volatility in the days/weeks to come. However, with a diversified portfolio and collecting call premiums to reduce our risk, I like where we stand with our holdings.

This week’s pick is a company that reported earnings last week and saw a nice stock reaction.

The Stock – Lattice Semiconductor (LSCC)

Lattice Semiconductor makes low power programmable semiconductor chips for the communications, computing, industrial, automotive and consumer markets.

The stock is strong today thanks to a solid quarterly report last week; earnings came in at $0.15 per share, beating analyst estimates by a penny (the third time in the last four quarter it’s topped expectations) and up 36% over last year. Revenues were $97.3 million, though results there were mixed; the consumer segment saw revenues plunge 24% from a year ago (partly due to the virus), but communications/computing was up 8% (including far faster growth in 5G-related products) and the industrial and auto markets saw sales leap 14%.

More important, management has squeezed out costs, lifting margins and allowing it to post healthy earnings growth. The virus shut-in will continue to have an impact in the near-term (sales are expected to be flat-ish this year), but investors are betting on a pickup as the world goes back to normal.

Technical Analysis

cpb stock

LSCC effectively topped out around 21 last July, though it did briefly sneak out to 24 before falling with the market in February/March. Since the low, shares have done a nice job of rounding out, and LSCC reacted nicely after earnings last Wednesday. It’s backed off some since, but we’re fine snagging some here with a relatively tight stop just under 19, and adding to the position if the stock heads higher. Stop - 18

The Covered Call Trade

Buy Lattice Semiconductor (LSCC) Stock at 21.80, Sell to Open June 22.5 Calls (exp. 6/19/2020) for $1.10, or a Net Price of 20.70 or less

Static Return: $110 per covered call (5.31%)

Breakeven: 20.70

Covered Call Return (if assigned): $180 per covered call (8.69%)

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 20.7 or less. (In this case 21.8 minus 1.10 = 20.70. Or another example is you could pay 21.5 for the stock and sell the call for $0.80, which also equals 20.70)

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

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