Cabot Profit Booster 176

This week’s covered call idea is a company that is growing fast, and is doing the good work of helping families overcome a problem.

Cabot Profit Booster 176

** A reminder that the market is closed for the Memorial Day holiday next Monday so we’ll publish our next issue on Wednesday, June 2.

Despite the market trading down/sideways the past month the Cabot Profit Booster portfolio has had a fairly strong May. While not all of the trades were closed for full profit, given the market conditions I am pleased with these returns:

CLF – Loss of $45 on the stock, collected $140 per call sold – Net a profit of $95 per covered call trade, or a yield of 5.53%.

GT – Profit of $130 per covered call, or a yield of 7.78%.

LEVI – Loss of $100 on the stock, collected $0.75 per call sold – Net a loss of $25 per covered call trade, or a loss of 0.009%.

HOG – Loss of $135 on the stock, collected $1.80 per call sold – Net a gain of $45 per covered call trade, or a gain of 0.009%.

MTDR – Profit of $240 per covered call, or a yield of 9.56%

Moving on …

This week’s covered call idea is a company that is growing fast, and is doing the good work of helping families overcome a problem.

The Stock – Progyny (PGNY)
Why the Strength
The average age of a first-time mother in the U.S. is 26, up from 21 in 1970, and of course many working professionals don’t start families until much later in life than that. Delayed motherhood is closely associated with education as college graduates put off becoming parents to establish their careers and establish financial stability.

Younger, talented people are also the same folks employers want to attract and retain, but fertility issues are expensive: treatments are a $7 billion market and associated problems, like pre-term births, cost employers another $40 billion annually. That’s where Progeny comes in, for both couples trying to conceive and for firms wanting a productive workforce: It’s the solutions provider for employers seeking to provide fertility benefits.

Founded five years ago, Progyny now has a network of 600 fertility clinics across the U.S., including 46 of the top 50 by volume. The company is growing fast because it provides a demonstrably superior set of patient outcomes – a 25% higher live birth rate from each treatment round and a 72% decrease in multiple births, an event that often comes with additional medical costs and time off.

The company produces this through a comprehensive set of treatment services and using data from all its patients to drive treatment improvements. That Progyny has near 100% client retention demonstrates the approach works for its 180 corporate customers, and that’s just the tip of the iceberg—in a year or so 75% of large U.S. employers are expected to offer fertility benefits, up from about 50% today.

Progyny sales should rise 54% this year to about $525 million with earnings reaching 46 cents, a 171% increase over 2020, and we think there’ll be years of growth beyond that. It’s a great story.

Technical Analysis
PGNY broke out of a post-IPO base last November and enjoyed a great run into late February, when Q4 earnings and a weak market brought it down. The action since then has been choppy, but importantly, the stock has etched a series of higher lows (39 in March, 42 later in March, 47 two weeks ago) and is now racing back toward its high. Stop — 48

The Covered Call Trade
Buy Progyny (PGNY) Stock at 60, Sell to Open June 60 Strike Calls (exp. 6/18) for $2, or a Net Price of 58 or lessStatic Return: $200 per covered call (3.44%)Breakeven: 58

Covered Call Return (if assigned): $200 per covered call (3.44%)

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 58 or less. (In this case 60 minus 2 = 58. Or another example is you could pay 59.5 for the stock and sell the call for 1.50, which also equals 58)

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.

The next Cabot Profit Booster issue will be published on June 2, 2021.