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Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster 175

Despite the market coming under pressure in the last several weeks, the Cabot Profit Booster portfolio continues to perform spectacularly! And heading into expiration this Friday, our five May covered calls are all in terrific shape, and potentially on track to their full profits. As is always the case, I will update you where we stand with these positions on Friday morning.

Cabot Profit Booster 175

Despite the market coming under pressure in the last several weeks, the Cabot Profit Booster portfolio continues to perform spectacularly! And heading into expiration this Friday, our five May covered calls are all in terrific shape, and potentially on track to their full profits. As is always the case, I will update you where we stand with these positions on Friday morning.

The “secret” to our success continues to be buying the best stocks, and keeping the portfolio as diversified as possible. This brings me to this week’s idea, which is a recent earnings winner that is breaking out to new recent highs.

The Stock – International Game Technology (IGT)
Why the Strength

A provider of casino games and lottery technology, International Game Technology’s story is of opening doors: Physical casino reopenings are drawing people back inside while the opening of markets in sports betting and iGaming (online casinos) has set IGT on the path to strong growth following a difficult 2020.

The company thrilled investors last week by reporting Q1 sales and net income that trounced expectations, generating more than $1 billion in revenue and 38 cents of earnings when most anticipated a breakeven result.

It’s no surprise business was hurt in 2020 by the shutdowns of casinos, where IGT supplies game management software and hardware, like slot machine cabinets. The surprise was that physical casino reopenings have not hurt digital products at all, with high-margin lottery same-store sales surging 32% even as more than three-fourths of its casino client base was back in operation.

After losing $1.63 a share last year, analysts see the company earning 77 cents this year and $1.31 in 2022, though after the Q1 beat, it’s hard not to think these figures will prove extremely conservative. It also cut its debt levels, which has sparked speculation that the company will begin share buybacks or dividends in the not-so-distant future.

Rounding out its strong hand is that mobile lottery (legal in six states) and sports betting (digital is legal in 14) are expected to expand greatly as governments look for sources of new tax revenue. At least one-third of people in the U.S. and Canada have no access to sports betting at all, physical or digital, but legalization is advancing for the vast majority of that group, which should be a boon for International Game—it’s the casino leader in sports betting tech.

Technical Analysis

IGT looked like most turnaround stocks, with lackluster performance into last fall and a blastoff in November that took the stock to multi-year highs. However, shares stalled out soon after the calendar flipped, beginning what morphed into a four-month launching pad that featured some encouraging tightness in April. Last week appears decisive, with IGT not just breaking out on earnings, but doing so on its heaviest weekly volume since last June. Stop — 17.5

CPB_Weekly-Issue_05-18-21_IGT

The Covered Call Trade

Buy International Game Technology (IGT) Stock at 23, Sell to Open June 23 Strike Calls (exp. 6/18) for $1.25, or a Net Price of 21.75 or less

Static Return: $125 per covered call (5.74%)

Breakeven: 21.75

Covered Call Return (if assigned): $125 per covered call (5.74%)

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 21.75 or less. (In this case 23 minus 1.25 = 21.75. Or another example is you could pay 23.25 for the stock and sell the call for 1.50, which also equals 21.75.)

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
Cleveland-Cliffs (CLF)18.5520.9016.0May 20-- $1.40$1.10
Goodyear Tire & Rubber (GT)17.4020.2414.5May 18 -- $0.70$2.12
Levi Strauss (LEVI)28.3029.5023.5May 29 -- $0.75$0.95
Harley-Davidson (HOG)48.8551.8840.5May 49 -- $1.80$2.75
Matador Resources (MTDR)26.0030.4222.0May 27.5 -- $0.90$3.00
Funko (FNKO)22.0826.4519.0June 22.5 -- $1.98$4.50

The next Cabot Profit Booster issue will be published on May 25, 2021.