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Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster 182

There’s no doubt it has been an incredible year for the market. The S&P 500 has witnessed five straight months of gains while simultaneously carving out new all-time highs in the process. And last week was no different. The market continued to forge higher, with all three major market benchmarks closing the week near or at all-time highs. The S&P 500 added 1.67%, the Dow gained 1.02%, and the Nasdaq advanced by 1.94%.

Cabot Profit Booster 182

There’s no doubt it has been an incredible year for the market. The S&P 500 has witnessed five straight months of gains while simultaneously carving out new all-time highs in the process.

And last week was no different.

The market continued to forge higher, with all three major market benchmarks closing the week near or at all-time highs. The S&P 500 added 1.67%, the Dow gained 1.02%, and the Nasdaq advanced by 1.94%.

The S&P closed out the first half of the year up 14.4%. The first-half performance is the best for the major market index since 1998. The advance has also helped to push volatility (VIX) to a low of 15.07, a level not seen since February 19, 2020.

But, while the gains continue to pile up, fewer and fewer companies are participating in the advance. In fact, only 30% of stocks that reside in the S&P 500 have outperformed the index over the past month. To put this in perspective, since 1928, the S&P 500 has only seen this type of breadth 2% of the time.

Could we be seeing a bit of froth here? Maybe. I don’t have a crystal ball and calling a top is a guessing game I never participate in. We are always going to have unknowns in the market and that’s okay. Just remember, unknowns are why we maintain diversification in the portfolio. And so far, our approach has led to outstanding gains during all types of market environments.

This week we will diversify our portfolio even further by adding a stalwart in the auto sector, Ford (F). We are now up to five open positions in the portfolio.

The Stock – Ford (F)
Why the Strength
Legacy automakers are moving more production to the electric vehicle (EV) market, and Ford has a big lead on many of its rivals.

Ford’s gas-fueled F-150 is currently one of America’s top-selling vehicles, but its soon-to-be-released electric F-150 Lightning has just secured over 100,000 reservations from interested customers. And it recently introduced the Mustang Mach-E all-electric crossover SUV to great fanfare, earning an award for the best utility vehicle of 2021 from a panel of U.S. and Canadian journalists.

As Ford pivots toward greater EV production (it plans to make EVs account for 40% of its global sales by 2030), it’s already making good progress in this new field: Ford’s electric auto sales surged 184% in May to a record 10,364 vehicles, with the F-150 PowerBoost and Escape hybrid models boasting sales of 2,852 and 3,617, respectively. Mustang Mach-E sales totaled 1,945 for the month, while Explorer hybrid sales increased 132% to 1,156 SUVs.

It’s not all rosy, though, as Ford is battling the chip shortage along with its peers; the just-finished Q2 probably will produce sour numbers due to limited supply. But the firm also believes the second quarter will prove to be the trough for this year and is “seeing improvement” since late April despite the chip supply concerns.

After a big dip last year, Wall Street sees earnings rebounding back above 2019 levels despite the headwinds, with another 44% boom in 2022.

Technical Analysis
After last year’s post-crash turnaround, F has had a solid year so far. Beginning with a big-volume surge in January, it consolidated in March and April before taking off again in May and hitting record highs into early June. We missed our entry price a month ago, but as cyclical stocks have consolidated, F has done the same, but this four-week retreat looks reasonable and sets up what looks to be a solid risk-reward situation. Stop — 12.60

CPB_Weekly-Issue_07-07-21_Ford

The Covered Call Trade
Buy Ford (F) Stock at 14.60, Sell to Open August 15 Strike Calls (exp. 8/20) for $0.55, or a Net Price of 14.05 or less

Static Return: $55 per covered call (3.91%)

Breakeven: 14.05

Covered Call Return (if assigned): $95 per covered call (6.76%)

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 14.05 or less. (In this case 14.60 minus 0.55 = 14.05. Or another example is you could pay 14.80 for the stock and sell the call for 0.75 which also equals 14.05)

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.

Stock Name and SymbolPrice BoughtCurrent Stock PriceStopOption - Price of Call SoldCurrent Option Price
Marathon Oil (MRO)13.6013.2111.5July 14 -- $0.69$0.19
GoPro (GPRO)12.1810.8810.5July 13 -- $0.55$0.05
Scientific Games (SGMS)76.5574.5062July 75 -- $4.80$2.70
Nutanix (NTNX)39.1538.5032.5August 40 -- $2$1.57

The next Cabot Profit Booster issue will be published on July 13, 2021.

Cabot Wealth Network
Publishing independent investment advice since 1970.

President & CEO: Ed Coburn
Chief Investment Strategist: Timothy Lutts
Cabot Heritage Corporation, doing business as Cabot Wealth Network
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