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Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster 158

January was another good month for the Cabot Profit Booster portfolio as we closed our two positions for profits:

Cabot Profit Booster 158

January was another good month for the Cabot Profit Booster portfolio as we closed our two positions for profits:

UBER January 55 covered call – Profit of $450 per covered call, or a yield of 8.9%.

ADNT January 36 covered call – Profit of $210 per covered call, or a yield of 6.33%

With the stock market chopping around a bit recently as money appears to be rotating among sectors, we will continue to maintain a diversified portfolio, which leads me to this week’s Cabot Profit Booster recommendation. Here is the stock, and our covered call trade:

The Stock – Sonos (SONO)

Why the Strength

If you have a home theater (or just a really nice TV room setup), you’re probably familiar with Sonos, which makes some of the highest quality (and highest priced) speaker systems out there, giving it the top share in the industry. While producing the clearest, crispest sound possible is important, there’s a lot more to the story than that; the firm’s home audio products play into the smart home movement (the company calls it Whole House Audio), where users can stream audio from any device to a variety of speakers or zones in the house so you’re hearing what you want no matter where you are in your abode.

It also has a subscription offering for its HD radio, with some exclusive content and no ads. Together, this means that Sonos isn’t just a one-off seller of speakers—instead, it has some recurring-type revenue as users continually expand the number of Sonos products they have (35% to 40% of items sold are to existing customers).

Attracting new users has never been a problem, as 2020 marked the 15th straight year that the number of homes with Sonos items grew at least 20%! The outlook is bright, too, punctuated by a multi-year agreement with Legrand, a big (~$8 billion in revenue) French outfit that will pay fees to Sonos after licensing its patents. All told, it’s not changing the world, but this company is doing good business and should grow nicely in 2021 and beyond—analysts see the bottom line rising 25% this year, bolstered in part by a solid share buyback program.

Technical Analysis

SONO came public in late 2018 and immediately hit the skids, eventually hitting a lifetime low near 7 during the March crash. The rebound from that low was solid, with the stock eventually building a good-looking base from August through mid-November. The Q3 report was the game changer, with a gap to new highs on 10x average volume, and while SONO hasn’t been straight up since then, it’s made solid progress. We’re OK nibbling on dips. Stop — 22

The Covered Call Trade

Buy Sonos (SONO) Stock at 28.00, Sell to Open March 30 Strike Calls (exp. 3/19/21) for $2.00, or a Net Price of 26.00 or less

Static Return: $200 per covered call (7.69%)

Breakeven: 26.00

Covered Call Return (if assigned): $400 per covered call (15.38%)

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, of 26 or less. (In this case 28 minus 2 = 26. Or another example is you could pay 27.75 for the stock and sell the call for 1.75, which also equals 26)

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 January 26, 2020.