Genetic testing makes it easier for medical professionals to understand and diagnose diseases since a big portion of health problems have genetic origins. Today’s recommendation specializes in gathering genetic info across every stage of a person’s lifespan, working to consolidate testing into a single low-cost, rapid turnaround service, and it’s making good progress on that front—its efforts have led to test costs dropping from thousands of dollars to as low as $250 today.
Cabot Profit Booster 130
Despite the market hitting some potholes in the last week the Cabot Profit Booster portfolio continues to perform spectacularly as all of our Covered Call positions are in great shape, including last week’s buy BigLots (BIG) which rose $7 following a guidance raise.
At some point, we will run into a market decline or a stock pick gone bad, but until then we will continue to collect our profits/yields, which brings us to this week’s pick ...
The Stock – Invitae (NVTA)
Genetic testing makes it easier for medical professionals to understand and diagnose diseases since a big portion of health problems have genetic origins. Invitae specializes in gathering genetic info across every stage of a person’s lifespan, working to consolidate testing into a single low-cost, rapid turnaround service, and it’s making good progress on that front—its efforts have led to test costs dropping from thousands of dollars to as low as $250 today.
Through its expanding genome network, the eventual aim is to increase the availability of genetic data to support healthcare decisions (one facet will be what it calls “precision oncology”) and the potential is huge, with the genetic testing sector expected to reach tens of billions of dollars a year for cancer alone.
The company had been doing well on its own—Q1 testing volume was up 64% from a year ago despite a virus-related slump in March—but the stock is strong today because last week’s buyout of ArcherDX has changed perception for the better: Archer provides labs with solutions to produce high-quality genetic data and has partnerships with 50 biopharma outfits, which together with Invitae’s offerings, will provide a one-stop shop for patients and providers (baseline risk/diagnosis, therapy optimization, monitoring, etc.).
While it didn’t offer official guidance, the company thinks 50%-plus annual growth for the next three to five years is possible for the combined entity. Genetic testing is a big idea, and Invitae’s latest move cements its position as an emerging leader in the area.
Technical Analysis
NVTA has had some big moves up and down during the past couple of years, but last week may have changed the stock’s character in a big way. The bounce off the March bottom was decent, and the tightness in April, May and early June was also a plus. But the Archer buyout was the key, with the stock exploding higher for two straight days on massive volume and, so far, holding those gains despite some indigestion among growth stocks. Stop - 22.5
The Covered Call Trade
Buy Invitae (NVTA) Stock at 28.5, Sell to Open August 30 Strike Calls (exp. 8/21) for $2.25, or a Net Price of 26.25 or less
Static Return: $2.25 per covered call (8.57%)
Breakeven: 26.25
Covered Call Return (if assigned): $375 per covered call (14.28%)
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 26.25 or less. (In this case 28.5 minus 2.25 = 26.25. Or another example is you could pay 29 for the stock and sell the call for 2.75, which also equals 26.25).
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
