The major indexes pulled back from their morning highs ahead of the weekend event risk. Fears of new headlines over the weekend and disappointing results from the big banks caused traders to take profits before the close. The Dow high was 163 but it fell to -239 just before the close. The U.S. did attack Syria at 9:PM on Friday.
Stop Loss Updates
Check the graphic below for any new stop losses in bright yellow.
We need to always be prepared for an unexpected decline.
Check the graphic below for any profit stops in green.
We need to always be prepared for a profit exit at resistance.
Lottery Ticket Plays - Updated only on Weekends
Current Position Changes
If you are looking for a different type of trading strategy, try these newsletters:
Short term Calls and Puts on equities = Option Investor Newsletter
Credit spreads and naked puts = OptionWriter
Long term option investments = LEAPS Investor
3-6 month Option Trades = Ultimate Investor
Iron Condors = Couch Potato Trader
Full updates on all plays on Wednesday and Saturday.
Only closed plays are updated on other days.
BULLISH Play Updates
ACHN - Achillion Pharmaceuticals - Company Profile
No specific news. Shares are moving slowly higher.
Original Trade Description: March 10th
Achillion Pharmaceuticals, Inc., a biopharmaceutical company, discovers, develops, and commercializes small molecule drug therapies for infectious diseases and immune system disorders in the United States and internationally. Its drug candidates for treating chronic hepatitis C virus (HCV) infection comprise Odalasvir, a NS5A inhibitor, which has completed Phase IIa clinical trials; ACH-3422, a NS5B nucleotide polymerase inhibitor; and Sovaprevir, a NS3 protease inhibitor that has completed Phase II clinical trial. The company is also developing ACH-4471, a complement factor D inhibitor, which is in Phase I clinical trial to treat patients with paroxysmal nocturnal hemoglobinuria and C3G, a disease resulting from alternative pathway over-activation; and other factor D inhibitors. It has a license and development agreement with Ora, Inc. for the development and commercialization of ACH-702, a drug candidate that is delivered topically or locally; and collaboration arrangement with Janssen Pharmaceuticals Inc. to develop and commercialize antiviral drug candidates for treating HCV infection. The company was founded in 1998 and is headquartered in New Haven, Connecticut. Company description from FinViz.com.
Expected earnings May 24th.
Achillion has multiple drugs under development but one could be a blockbuster. The rug ACH-4471 was just given a positive response by the European Medicines Agency Committee for Orphan Drugs. Designating a drug as an orphan gives it a 10-year patent clock where nobody can compete. The drug treats a rare kidney disorder known as C3G. The same drug is also being tested against multiple other diseases.
Achillion is different from other small drug companies because it has $330 million in cash in the bank. They received this in partnership with Johnson & Johnson on a Hep-C drug.
Shares spiked on the announcement to $3.50 and then rested for a week and now they have accelerated again. Resistance is $5.20 but with their drug news they could attract new buyers to overcome that level.
This is a cheap stock and that means the options are cheap as well. We can buy the June $5 call for 40 cents. That gives us the potential for a home run and we can hold over the next earnings with minimal risk.
I am going to profile this as a long-term option position. Given the strong gains in recent days there could be another pause just around the corner. If we do get a pullback then I would also recommend a stock position.
Remember, just because the option is cheap it does not mean you should buy 100 contracts. Sometimes cheap options expire worthless too.
Long June $5 call @ 55 cents, see portfolio graphic for stop loss.
BAC - Bank of America - Company Profile
No specific news. Shares down with earnings from WFC, JPM and Citi. BAC reports on Monday and with our option at 13 cents, there was no reason to exit.
Original Trade Description: February 17th
Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates through four segments: Consumer Banking, Global Wealth & Investment Management, Global Banking, and Global Markets. The Consumer Banking segment offers traditional and money market savings accounts, CDs and IRAs, noninterest- and interest-bearing checking accounts, and investment accounts and products, as well as credit and debit cards, residential mortgages and home equity loans, and direct and indirect loans. This segment provides its products and services through approximately 4,600 financial centers, 15,900 ATMs, call centers, and online and mobile platforms. The Global Wealth & Investment Management segment offers investment management, brokerage, banking, and retirement products, as well as wealth management and customized solutions. The Global Banking segment provides lending products and services, including commercial loans, leases, commitment facilities, trade finance, real estate lending, and asset-based lending; treasury solutions, such as treasury management, foreign exchange, and short-term investing options; working capital management solutions; and debt and equity underwriting and distribution, and merger-related and other advisory services. The Global Markets segment offers market-making, financing, securities clearing, settlement, and custody services, as well as risk management, foreign exchange, fixed-income, and mortgage-related products. Bank of America Corporation was founded in 1874 and is based in Charlotte, North Carolina. Company description from FinViz.com.
Banks make money by acquiring deposits and paying minimum interest rates while lending the money out at higher rates. When interest rates rise the rates on the loans match the jump in rates but the interest paid on deposits creeps up at a slower rate. The Fed is expected to hike rates at least 3 times in 2018 and possibly 4 times for a full 1% increase.
In the past the Fed has always believed that the ideal interest rate is 2% above the core rate of inflation. With the core rate approaching 2% that means a 4% Fed funds rate, which equates to a lending rate for banks at about 6%. Since the banks are coming off a Fed rate of less than 1% and doing well at those levels, a jump to 2.25% by the end of 2018 would double their interest income.
None of this is really important for a short term option trade but investors buy stocks for the future. JP Morgan projects that BAC will increase their dividend payout rate fro 30% to 40% in 2018. They are also predicting a 54% jump in earnings in 2018 and another 13% in 2019. JPM said BAC could show a greater sensitivity to Fed rate hikes than many rivals. BAC has gone from a troubled bank during the financial crisis to a highly profitable bank with billions in deposits. Bank of America is second only to JP Morgan on total deposits with $1.3 trillion compared to JPM at $1.35 trillion. Every quarter percent interest rate hike is a goldmine for BAC. A quarter point hike is worth $2.5 billion per year in additional revenue for BAC.
With Jay Powell providing testimony to the House on Feb 28th, the focus for the next week will be on what he might say about raising rates. Those expectations should cause bank stocks to rise. The next Fed meeting is March 20/21st and they are widely expected to hike at that meeting. That expectation should lift bank stocks ahead of that meeting.
Expected earnings April 18th.
I am using a longer-term option for some premium safety in case of additional volatility. Since the $30 level is normally my upper limit for stock positions, I am recommending an option only position.
Update 4/1: BAC said it was expanding its Merrill Edge division by opening another 600 investment locations around the country by 2020. That will raise their total to 2,800. They are also going to hire 300 new advisors to bring their total to 4,000 in the Merrill Edge division.
Long May $33 call @ $1.20, see portfolio graphic for stop loss.
DLTH - Duluth Holdings - Company Profile
No specific news. Down slightly with the market but rebounding from $19.
Original Trade Description: April 4th
Duluth Holdings Inc. markets clothing, tools, and accessories under the Duluth Trading brand via Website and catalogs for contractors and serious do-it-yourselfers in the United States. It offers shirts, pants, casual wear, workwear, underwear, outerwear, footwear, accessories, and hard goods for men and women. The company markets its products under the various trademarks, trade names, and service marks, including Alaskan Hardgear, Armachillo, Ballroom, Bucket Master, Buck Naked, Cab Commander, Crouch Gusset, Dry on the Fly, Duluth Trading Company, Duluthflex, Fire Hose, Longtail T, No Polo Shirt, and Wild Boar Mocs. It also operates six retail stores and an outlet store across Minnesota, Iowa, and southern Wisconsin. The company was formerly known as GEMPLER'S, Inc. and changed its name to Duluth Holdings Inc. Duluth Holdings Inc. was founded in 1989 and is headquartered in Belleville, Wisconsin. Duluth Holdings Inc. operates as a subsidiary of Gempler's Inc. Company description from FinViz.com.
Q4 was the 33rd consecutive quarter of increased sales. The company reported earnings of 55 cents that beat estimates by a penny. Revenue of $217.8 million also beat estimates for $208.7 million. They guided for the full year for earnings of 79-84 cents and revenue of $555-$575 million representing 20% growth. Analysts were expecting $588 million. Store sales doubled to $62.5 million while online sales rose 9% to $155 million. Full year revenue rose 25% to $471 million and above guidance. They opened 15 new stores to bring the total to 31 and they plan on opening 15 additional stores in 2018.
The CEO said they would continue to aggressively build out their retail stores to capture what they see as an open and uncompetitive market for their type of merchandise. Because of this their earnings growth would be slow until their construction phase has ended. They are using the Amazon model of do anything to increase market share and expect to be profitable when their growth spurt is over.
Shares dropped $3 after the guidance miss but have recovered that loss and closed at a 4-month high on Wednesday. They are breaking out of a very well defined consolidation period.
Long DLTH shares @ $19.52, see portfolio graphic for stop loss.
Alternate position: Long May $20 call @ 75 cents, see portfolio graphic for stop loss.
IWM - Russell 2000 ETF - ETF Profile
Lookinf good Friday morning but the Dow's -239 afternoon drop killed the Russell gains.
Original Trade Description: February 21st
The iShares Russell 2000 ETF seeks to track the investment results of an index composed of small-capitalization U.S. equities.
The Russell 2000 spiked over resistance at 1,550 intraday but then cratered with a -24 point drop at the close. However, it was the only major index to end in positive territory. This suggests any market rebound could be led by the Russell or at least it will be a major participant.
With the S&P futures down sharply overnight, we could have a sharp decline at the open. I am recommending we buy a call on the IWM and hang on for the expected March rally. This is a risky position because we are trying to pick a market bottom.
Long April $155 call @ $2.96. see portfolio graphic for stop loss.
SNCR - Synchronoss Tech - Company Profile
No specific news. Shares closed at a new 4-month high in an ugly market.
Original Trade Description: March 3rd.
Synchronoss Technologies, Inc. provides cloud solutions and software-based activation for connected devices worldwide. The company's products and services include cloud-based sync, backup, storage and content engagement capabilities, broadband connectivity solutions, analytics, white label messaging, and identity/access management that enable communications service providers, cable operators/multi-services operators, original equipment manufacturers with embedded connectivity, and multi-channel retailers, as well as other customers to accelerate and monetize value-add services for secure and broadband networks and connected devices. It also provides Synchronoss Enterprise solutions, such as secure mobility management, data and analytics, and identity and access management solutions for the financial, telecommunications, healthcare, life sciences, and government sectors; and Synchronoss Personal Cloud platform that delivers an operator-branded experience for subscribers to backup, restore, synchronize, and share their personal content across smartphones, tablets, computers, and other connected devices. In addition, the company offers software as a service for the organizations to securely manage, control, track, search, exchange, and collaborate on sensitive information inside and outside the firewall. Its products and platforms are designed to enable multiple converged communication services to manage across a range of distribution channels, such as e-commerce, m-commerce, telesales, customer stores, indirect, and other retail outlets. The company markets and sells its services through direct sales force and strategic partners. Synchronoss Technologies, Inc. was founded in 2000 and is headquartered in Bridgewater, New Jersey. Company description from FinViz.com.
Expected earnings May 15th.
SNCR just completed the sale of $185 million in newly created preferred stock to Siris Capital Group. SNCR exchanged 185,000 shares of series A convertible preferred stock for $97.7 million and 5,994,667 shares of common stock, which represented 12.6% of the outstanding shares. Basically Siris exchanged their 12.6% stake in the company and $98 million for the right to put two members on the board and reap a profit if SNCR shares hit $18 and their shares convert.
SNCR gets to use the $98 million to expand their business. Within days both AT&T and Sprint announced they were partnering with SNCR to exploit their IoT cloud technology on their respective networks. These are not small companies. This is a major breakthrough for SNCR.
The stock surged to $9 on the convertible news then spiked to $10 on the AT&T and Sprint news. Shares pulled back slightly in the weak market but are likely to move higher when the market recovers. Resistance is $9.65.
Update 4/4: Shares rallied after the company spoke to investors about their upcoming May 10th restatement event. They have gone through a long restructuring process and restating financials. Those restated numbers will be released on the 10th. Throughout this process, they signed new contracts to be the cloud provider for Verizon and Sprint for the next five years. This will be a period of huge growth as the networks convert to 5G. Shares closed at a 4-month high.
Long SNCR shares @ $9.89, see portfolio graphic for stop loss.
Alternate position: Long June $10 call @ $1.40, see portfolio graphic for stop loss.
TEVA - Teva Pharmaceuticals - Company Description
No specific news. No material movement.
Original Trade Description: December 10th
Teva Pharmaceutical Industries Limited develops, manufactures, markets, and distributes generic medicines and a portfolio of specialty medicines worldwide. It operates through two segments, Generic Medicines and Specialty Medicines. The Generic Medicines segment offers sterile products, hormones, narcotics, high-potency drugs, and cytotoxic substances in various dosage forms, including tablets, capsules, injectables, inhalants, liquids, ointments, and creams. This segment also develops, manufactures, and sells active pharmaceutical ingredients. The Specialty Medicines segment provides branded specialty medicines for use in central nervous system and respiratory indications, as well as the women's health, oncology, and other specialty businesses. Its products in the central nervous system area comprise Copaxone for multiple sclerosis; Azilect for the treatment of Parkinson's disease; and Nuvigil for the treatment of excessive sleepiness associated with narcolepsy and certain other disorders. This segment's products in the respiratory market include ProAir, ProAir Respiclick, QVAR, Duoresp Spiromax, Qnasl, Braltus, Cinqair/Cinqaero, and Aerivio Spiromax for the treatment of asthma and chronic obstructive pulmonary disease, as well as Treanda/Bendeka, Granix, Trisenox, Lonquex, and Tevagrastim/Ratiograstim products in the oncology market. This segment also offers a portfolio of products in the women's health category, which includes ParaGard, Plan B One-Step, and OTC/Rx, as well as other products. The company has collaboration arrangements with Attenukine, Procter & Gamble Company, and Regeneron Pharmaceuticals, Inc. Teva Pharmaceutical Industries Limited was founded in 1901 and is headquartered in Petach Tikva, Israel. Company description from FinViz.com
Teva is the largest generic drug manufacturer in the world. Unfortunately, that market place is becoming very competitive and the company has to reinvent itself to return to a profitable growth profile.
Fortunately, the company is taking action. They have been selling off noncore assets to pay down debt. They just installed a new CEO,Kare Schultz, and he took immediate action. On his second day on the job, he restructured the management team and said he would present a major restructuring plan in mid December. The stock jumped to a two-month high after news broke they were considering cutting 10,000 of their 57,000 workers in an effort to save $1.5-$2.0 billion a year.
Shares fell in early November after the company cut full year guidance for the third time and said they may sell shares to reduce their debt. In early December, they pulled back on the share sale idea saying they have no plans for a secondary offering in the near future.
In December, Teva announced they were cutting 14,000 workers from their 56,000-person workforce. They expect to reduce costs by $3 billion by the end of 2019, with $1.5 billion in cost reductions in 2018. The company also suspended its dividend for ordinary shares and will eliminate bonuses for 2017. They are planning on closing a "significant number" of R&D facilities, offices and other locations around the world. They are going to consolidate offices in the US from 7 locations to only one campus. Teva incurred a lot of debt when they purchased the Allergan generic pharmaceuticals business for $40 billion last year. That was poorly timed just as generic prices were crashing. The company is also reviewing its asset base in order to sell noncore assets. Apparently, the new CEO, Kare Schultz, is determined to turn the company around sooner rather than later. Shares are bouncing back from a 17-year low in November. Shares were upgraded by Morgan Stanley, Goldman Sachs and Credit Suisse on Friday.
Teva said its BLA application for Fremanexumab as a preventive for migraine headaches had been granted a priority review designation by the FDA. There were two successful Phase III studies under the HALO program with patients with episodic migraine and chronic migraines.
In February Teva shares exploded higher after Warren Buffet reported a new stake of 18,875,721 shares or roughly 2% of the company. Teva is now making a generic Viagra that is going to be a cash cow for the next several years and should help raise their stock price.
I believe the worst is over. Shares rebounded from the November low to test $22 and then faded again on new competition for one of their generic drugs. This week shares are rebounding again after the company announced they were closing their plant in Israel because they could not find a buyer. This will help reduce the monthly expenses and will not hurt their drug plans. The majority of the revenue from the Israeli plant came from non-core activities and production of IV bags. Last week the company said it was selling a division in Overland Park, KS to AssistRX as Teva further reduces overhead.
Earnings are May 10th.
I am recommending we buy the June $19 call rather than tie up $18 in what could be a slow moving stock.
Long June $19 call @ $1.06, see portfolio graphic for stop loss.
ZUMZ - Zumiez - Company Profile
Thursday's new 52-week high faded in a sell the news trade as investors move on to other stocks after Zumiez reported strong March sales on Wednesday.
Original Trade Description: April 7th
Zumiez Inc., together with its subsidiaries, operates as a specialty retailer of apparel, footwear, accessories, and hardgoods for young men and women. Its hardgoods include skateboards, snowboards, bindings, components, and other equipment. As of February 3, 2018, the company operated 698 stores, including 607 stores in the United States, 50 stores in Canada, 34 stores in Europe, and 7 stores in Australia under the names of Zumiez, Blue Tomato, and Fast Times. It also operates zumiez.com, blue-tomato.com, and fasttimes.com.au e-commerce Websites. The company was founded in 1978 and is headquartered in Lynnwood, Washington. Company description from FinViz.com.
Zumiez missed on earnings for Q4 but shares shot higher on strong sales. The company reported earnings of 82 cents that rose 10.8% but missed estimates for 90 cents. Revenue rose 16.9% to $308.2 million and beat estimates for $302 million. They added 13 new stores since Q4-2017. Same store sales rose 7.5% and beat estimates for 7.0%. However, in February comps rose another 9.2% compared to a -3.1% decline in Feb 2017. Actual sales growth rose 23.2% in February to $63.4 million.
In Q4 earnings rose 22% to $114.7 million. Gross margin rose 150 basis points to 37.2%. Operating income rose 32.4%. Cash on hand rose 54.7% to $121.9 million.
Earnings June 14th.
Shares rose post earnings to $24 and have been edging up slightly to $25 despite the ugly market. They appear ready for an imminent breakout.
Because the stock closed at $24.95 we are limited on options. We can go with the short term May $25 for $1.60 but if we reach out to a longer date we have to go with the next strike at $30 and the prices do not make sense. I am recommending the May because any breakout should be over the next couple weeks.
Update 4/11: The company announced sales for the 5-week period ended April 7th after the bell. Sales rose 14.7% to $82.3 million. Comparable sales rose 12.6% compared to the same period in 2017 at 1.1%. Shares spiked $1 in afterhours after closing at a 52-week high in the regular session.
Buy ZUMZ shares, currently $24.95, initial stop loss $23.75.
Alternate position: Buy May $25 call, currently $1.60, initial stop loss $23.75.
BEARISH Play Updates
VXX - Volatility Index Futures - ETF Description
The VXX actually declined nearly $2 despite the -239 intraday drop by the Dow. This should be a sign the market is going higher next week.
Previously: On Feb-5th a reader emailed me saying a friend was short 1,000 shares. When the $21 spike came in afterhours, Ameritrade closed that position for a $35,000 loss. They did not have a protective stop loss.
I wrote in the prior newsletter that we were not using a profit stop in this position because it could be hard to re-short the shares after a volatility event. That is just trade management for a profitable position. In ANY SHORT POSITION, you should have a catastrophe stop loss to avoid the position turning into a major loss. Had this person had a stop loss at their entry point, they would have been closed for a breakeven and they would be sleeping a lot better tonight.
Readers should always assume the potential for the worst possible outcome of a short position. Trade smart!
Original Trade Description: September 18th.
The VXX is a short-term volatility ETF based on the VIX futures. As a futures product it has the rollover curse. Every time they roll to a new futures contract, they have to pay a premium and that lowers the price of the ETF. It is a flawed product with a perpetual decline built in from the monthly roll over in the futures contracts.
As evidence of this flaw, they have now done four 1:4 reverse stock splits. The last five reverse splits occurred at $13.11 (11/2010), $8.77 (10/2012), $12.84 (11/2013), $9.52 (8/8/16), $12.77 (8/22/17). The prospectus says it can reverse split anytime it trades under $25 for a prolonged period and the splits will always be 1:4.
We know from experience that the VXX always declines. The last two times we shorted this ETF we had a $7.23 and $5.98 gain.
Unfortunately, put options are expensive with a volatility instrument at this price level. The only recommendation is to short the ETF and forget it. If we do get a prolonged rally into year-end we could see a sharp decline in the VXX over the next 2-3 months. This will be a long-term position. This is not a 2-3 week play. I can guarantee you, if history holds, we can play this until it splits 1:4 again at $10. Once we are in the position and profitable I will put a trailing stop loss on it. We will take profits and then look for a bounce to get back in.
The VXX is hard to short. Shortsqueeze.com says there are 19.9 million shares short out of 26.7 million shares outstanding. The shares are out there and being traded because the volume on Monday was 29.6 million. You have to tell your broker you really want to short it and make them find the shares. Sometimes it takes days or even a week before your broker will find you the shares. Trust me, be persistent and it will be worth the effort.
I had held off after the 1:4 reverse split because the options were expensive and I was expecting volatility in September from the budget battle and debt ceiling hurdle. With those issues pushed out into December, the volatility is dropping like the proverbial rock. Several readers have already emailed me asking when I was going to put this position back in the portfolio.
Short VXX shares @ $40.95, see portfolio graphic for stop loss.
Short VXX shares @ $54.27, see portfolio graphic for stop loss.
Average cost = $47.61.
Left Over Lottery Tickets
These positions were left over from prior plays where we had an optional option with no stop after the stock position was closed. Rather than close these for a few cents they are left open as a "Lottery Ticket" play. With months before expiration, anything is possible. A strong move in a single stock can be well worth the additional patience.
These positions are only updated on the weekend.
BB - Blackberry Ltd - Company Profile
No specific news. Shares appear to have found support at $10.20.
Original Trade Description: January 8th.
BlackBerry Limited operates as security software and services company in securing, connecting, and mobilizing enterprises worldwide. The company operates in three segments: Software & Services, Mobility Solutions, and Service Access Fees (SAF). The Software & Services segment offers enterprise software and services, including mobile-first security, productivity, collaboration, and end-point management solutions for the Enterprise of Things through the BlackBerry Secure platform; BlackBerry technology solutions, such as BlackBerry QNX, Certicom, Paratek, BlackBerry Radar, and intellectual property and licensing; AtHoc, which provides secure, networked crisis communications solutions; SecuSmart that offers secure voice and text messaging solutions with encryption and anti-eavesdropping facilities; licensing and services related to BlackBerry Messenger; and cybersecurity consulting services and tools. The Mobility Solutions segment engages in the development and licensing of secure device software and the outsourcing to partners of design, manufacturing, sales, and customer support for BlackBerry-branded handsets. This segment also develops software updates for its legacy BlackBerry 10 platform, and delivers BlackBerry productivity applications to Android smartphone users via the Google Play store; and sells its DTEK60, DTEK50, Priv, Leap, and Passport smartphones and smartphone accessories, as well as offers non-warranty repair services. The SAF segment consists of operations related to subscribers using mobile devices with its legacy BlackBerry 7 and prior operating systems. The company was formerly known as Research In Motion Limited and changed its name to BlackBerry Limited in July 2013. BlackBerry Limited was founded in 1984 and is headquartered in Waterloo, Canada. Company description from FinViz.com
Expected earnings March 21st.
BlackBerry started out as a smartphone manufacturer under the name Research in Motion (RIMM). Over the years they failed to keep pace with Apple and Android and the BlackBerry phones are now just a niche market and they contract with another company to have them made.
BlackBerry has evolved into a software and services company with security software, mobility solutions, and dozens of other categories. The company is now the largest provider of automobile operating systems with tens of millions of cars using their QNX software.
They are using their experience in auto OS to build the next generation of autonomous vehicles. They announced last week that Baidu had chosen them to help develop self-driving technology. Baidu said "by integrating the QNX OS with the Apollo platform, we will enable carmakers to leap from prototype to production systems." BlackBerry radar, an asset tracking solution, is already available at more than 2,800 heavy-duty truck dealerships across North America. This software and equipment tracks trucks, loads, trailers, containers, heavy machinery and other transportation assets. Trucking companies and shippers can track the location of their cargo and vehicles in real time all the time.
Last week they reported earnings of 3 cents that beat estimates for a breakeven quarter. Revenues of $226 million beat estimates for $212 million. The company guided for the full year for revenue of $920-$950 million with software revenue up as much as 15%. This was the second quarter of positive earnings surprises after a long drought of weak results. The company promised positive EPS and cash flow for the future.
There are rumors in the market that BlackBerry could suddenly become an acquisition target because of their small size of $8 billion market cap and vast array of growing software services. Shares spiked to a new 4-year high on the earnings and guidance and the stock is suddenly hot once again. This is not some new fad company. There is history and there is a remarkable turnaround in progress.
I am going out to June with the option to get past the March earnings. There is likely to be some profit taking from the recent gains, so we need to buy some time.
I am going to recommend the stock but I am adding a March put, just in case the rebound fails. I fully expect the stock to be significantly higher a couple months from now but I am recommending a 50 cent insurance policy.
Update 1/16: BlackBerry launched a product called BlackBerry Jarvis. This is anti hacking software for self driving cars. Manufacturers can use it to scan their product before they are released to look for weak points that could be hacked. Tata Motors said the product allowed them to cut the analysis time down from 30 days to 7 minutes.
Update 2/17: We closed the long March $13 put on Monday and that was good timing since the market rallied for the week. We netted 90 cents on the put which makes our cost on the remaining long term June $15 call only 40 cents. Now we can afford to sit back and wait for lightning to strike. The company has $2.5 billion in cash and growing it rapidly. Somebody is either going to buy BlackBerry or they are going to make a game changing acquisition of their own.
Update 3/14: BlackBerry is suing Facebook on patent violations after years of negotiations on the topic. BlackBerry contends that the WhatsApp and other Facebook features violate their patents from the early days when Research in Motion was the biggest maker of smartphones. Negotiations broke down because of the monetary size of the problem. This could be a real windfall for BlackBerry but it could be years from now before the case will be settled.
Update 3/31: BlackBerry reported adjusted earnings of 5 cents that beat analyst estimates for a breakeven. Revenue fell 18.5% to $233 million. Revenue from software and services rose 19% to $108 million. Gross margins rose from 60.1% to 76%. The company has about 3,500 enterprise customers and expects software and services billings to grow by double digits. The stock was slammed on the lack of concrete guidance. BlackBerry is transitioning customers to a subscription model and that depresses earnings for the first 18 months of a transition but provides more stable earnings in the future.
Update 4/7: BlackBerry filed suit against Snap Inc for patent violations on proprietary messaging methods used by the company when it was the leading smartphone market under the Research in Motion name. They filed suit on six patents. They recently filed suit against Facebook on seven similar patents. They have already reached settlement agreements with Cisco, Avaya and phone maker BLU Products. The odds are pretty good they will win these suits as well because they pioneered smart phone messaging applications with the first BlackBerry phones nearly two decades ago. The first BlackBerry model 850 was released in 1999 as a pocket email device with internet browsing and a monochrome screen. The first iPhone was not released until June 29th, 2007.
Long June $15 call @ $1.30, see portfolio graphic for stop loss.
Previously Closed 1/16: Long BB shares @ $14.22, exit $13.10, -1.12 loss.
PreviouslyClosed 2/12: Long Mar $13 put @ 50 cents, exit $1.40, +90 cent gain.
CORT - Corcept Therapeutics - Company Profile
No specific news. Minor rebound in a weak market.
Original Trade Description: March 17th
Corcept Therapeutics Incorporated, a pharmaceutical company, discovers, develops, and commercializes drugs for the treatment of severe metabolic, oncologic, and psychiatric disorders in the United States. It offers Korlym (mifepristone) tablets as a once-daily oral medication for the treatment of hyperglycemia secondary to hypercortisolism in adult patients with endogenous Cushing syndrome, who have type 2 diabetes mellitus or glucose intolerance, and have failed surgery or are not candidates for surgery. The company is also developing Korlym in combination with eribulin, which is in Phase I/II clinical trial to treat patients with metastatic triple-negative breast cancer; Korlym in combination with drug Abraxane that is in Phase II clinical trial to treat patients with triple-negative breast cancer; and Korlym combined with the androgen deprivation agent enzalutamide, which is in Phase II clinical trial to treat patients with metastatic castration-resistant prostate cancer. In addition, it develops CORT125134 for the treatment of patients with Cushing's syndrome and solid-tumor cancers; and CLIA-validated assay to measure expression of the gene FKBP5, which is stimulated by cortisol activity at glucocorticoid receptor. Corcept Therapeutics Incorporated was founded in 1998 and is headquartered in Menlo Park, California. Company description from FinViz.com.
Earnings May 24th.
The company reported Q4 earnings of 17 cents that missed estimates for 19 cents. However, revenue rose to 53.3 million to bring 2017 total revenue up to $159.2 million. They guided for the full year for revenue ot $275-$300 million, up from $158.2 million in 2017 with profits of $129.1 million. That is a really strong ratio. If thye can hit their target for 2018 the profits are also going to double.
This is a real simple position. The company is guiding for a 100% growth in revenue and the shares are breaking out of a double bottom over the last month.
Long May $20 call @ $1.10, see portfolio graphic for stop loss.
Previously Closed 3/22: Long CORT shares @ $18.01, exit $17.00, -1.01 loss.
If you like the trade setups you have been receiving and you are on a free trial then now is the time to subscribe. Do not wait until you miss a newsletter to decide you want to take the plunge.