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Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster 164

Fears of rising inflation, and what that would mean for interest rates, weighed on the market last week, especially growth stocks, which were crushed. Fortunately, the Cabot Profit Booster portfolio is well diversified, and our stocks held up spectacularly for the most part, and some even made new all-time highs.

Cabot Profit Booster 164

Fears of rising inflation, and what that would mean for interest rates, weighed on the market last week, especially growth stocks, which were crushed.

Fortunately, the Cabot Profit Booster portfolio is well diversified, and our stocks held up spectacularly for the most part, and some even made new all-time highs.

And despite the market’s ups and downs, we will continue to keep the portfolio as diversified as possible, and own the best stocks with great covered call opportunities, which brings me to this week’s idea …

The Stock – Amkor Technology (AMKR)

Why the Strength

Semiconductors are critical for today’s electronics-driven world, but so are the ceramic, metal or plastic cases which house these delicate devices.

One of the largest providers of outsourced semiconductor packaging is Amkor, a strategic manufacturing partner for the world’s leading semiconductor companies, foundries and electronics OEMs. It delivers solutions in four end markets—communications, automotive, computing and consumer products—and its chips are everywhere in the smartphone ecosystem, supporting all major functions (chances are there are several Amkor-packaged chips in your phone).

With overall chip demand strong, Amkor’s offerings are selling well—the company produced record quarterly revenue in Q4, with the communications segment leading the way. The fourth quarter top line rose 16% and was above the high end of guidance, while 2020 revenue increased a mouth-watering 25% and was above $5 billion for the first time in Amkor’s history.
High factory utilization and cost control initiatives pushed profitability above expectations as well, with per-share earnings up 27% from a year ago while full-year earnings shot up 180%.

In the wake of the stellar report, Amkor received an upgrade from a major Wall Street firm (another reason for the strength) while the stock was added to the S&P MidCap 400 index, which doesn’t hurt. More importantly, though, is that business should remain solid: Management expects that higher semiconductor content in 5G phones will drive the firm’s growth during the next few years (the 5G penetration rate is forecast to increase from 20% in 2020 to around 35% this year and higher beyond that). Wall Street sees 12% sales growth in 2021 and 29% higher earnings, both of which could prove conservative given the momentum in the business.

Technical Analysis

AMKR rose from a low of 5 during last year’s crash to 15 by last July, as chip demand soared on the back of the stay-at-home trend. A seven-month digestion phase followed, but then the stock’s character changed for the better as shares broke above resistance at 15 in January. The late-January shakeout was fierce, but AMKR went bananas after its Q4 report and has consolidated normally since. We’re OK starting a position around here. Stop — 19

The Covered Call Trade

Buy Amkor (AMKR) Stock at 25, Sell to Open April 25 Strike Calls (exp. 4/16/2021) for $1.75, or a Net Price of 23.25 or less

Static Return: $175 per covered call (7.52%)

Breakeven: 23.25

Covered Call Return (if assigned): $175 per covered call (7.52%)

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 23.25 or less. (In this case 25 minus 1.75 = 23.25. Or another example is you could pay 24.5 for the stock and sell the call for 1.25, which also equals 23.25)

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

If our stop is hit, I will send an alert giving detailed instructions on how to exit the trade. But don’t get too worried about setting the stop. I will manage that for you.

CPB_Weekly-Update_3-2-21_Chart

The next Cabot Profit Booster issue will be published on March 9, 2021.