Please ensure Javascript is enabled for purposes of website accessibility
Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster Issue: July 30, 2024

Going into last week we knew it had the potential to be a wild five-day stretch, and the market didn’t disappoint as the indexes swung violently, and sector rotation was intense. By week’s end, the S&P 500 had fallen 1.55%, the Dow had rallied 0.5%, and the Nasdaq had lost 3.8%.

Going into last week we knew it had the potential to be a wild five-day stretch, and the market didn’t disappoint as the indexes swung violently, and sector rotation was intense. By week’s end, the S&P 500 had fallen 1.55%, the Dow had rallied 0.5%, and the Nasdaq had lost 3.8%.

The Stock – Guardant Health (GH)

Guardant Health has had a great business for the past few years in liquid biopsies—the firm’s Guardant 360 test is non-invasive, requiring just a couple of vials of blood, and can help guide treatment options (either new treatments or adjustments to current regimens) for a wide variety of stage III or IV cancers; obviously, it’s a boon for those individuals for whom traditional tissue biopsies aren’t an option. (Turns out that tumors release trace amounts of information into the bloodstream, and Guardant’s technology picks up on it.) That business remains solid and growth has been in the 20% to 30% range.

But the story just got a lot better: Guardant has a new product, dubbed Shield, which just received FDA approval on Monday (it got a very strong recommendation from an FDA advisory panel a few weeks back) as a colorectal cancer screening test that, again, requires just a vial or two of blood. Results are similar to other methods, which means it’s poised to grab huge share compared to stool-based tests (think Cologuard) and even from colonoscopies, as Shield will clearly have a much higher compliance rate. (The current screening rate for those 45 years and older is just 59%, well below where it should be.)

Of course, there are still some ducks to line up here, such as Medicare reimbursement, but that looks like a sure thing given Shield was approved as a primary screening option by the FDA, so it should be able to compete on a level playing field. Combined with still-strong growth from 360, it’s a good bet that Guardant’s business could take a step function leap higher in the quarters and years ahead. The Q2 report is still coming up (August 7), but the focus is on the future and what Shield can deliver going ahead.

Technical Analysis

We recommended GH a few weeks back after a strong off-the-bottom rally that appeared to be the real deal—and so far we think things are shaping up nicely. Initially, the stock had a tedious retreat, but it found support where it was supposed to (just above the 50-day line) and quickly snapped back to new recovery highs. Shares then wiggled around for a few days, refusing to give up ground, followed by Monday’s approval-induced pop. Stop — 28

1.png

The Covered Call Trade

Buy Guardant Health (GH) Stock at 36, Sell to Open August 35 Strike Calls (exp. 8/16) for $2.85, or a Net Price of 33.15 or less

Static Return: $185 per covered call (5.58%)

Breakeven: 33.15

Covered Call Return (if assigned): $185 per covered call (5.58%)

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 33.15 or less. (In this case 36 minus 2.85 = 33.15. Or another example is you could pay 36.20 for the stock and sell the call for 3.05, which also equals 33.15)

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

Stock Name and SymbolPrice BoughtCurrent Stock PriceStopOption - Price of Call SoldCurrent Option Price
Carnival (CCL)17.7517.516August 18 -- $0.85$0.40
Pan American Silver (PAAS)21.62219August 22 -- $1.05$1.00
Urban Outfitters (URBN)46.74742.5August 47 -- $1.70$1.50
Halozyme (HALO)55.25646.5August 55 - $2.45$2.50


The next Cabot Profit Booster issue will be published on August 6, 2024.


Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.

Jacob Mintz is a professional options trader and editor of Cabot Options Trader. Using his proprietary options scans, Jacob creates and manages positions in equities based on unusual option activity and risk/reward.