After Steep Market Selloff, I'm Going to Dublin for Value
This solid ‘sum of the parts’ biopharma is the latest addition to my portfolio.
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Some economic reality hit the markets on Friday. A dismal July BLS report came out before the opening bell that showed only 73,000 positions being created last month. This was far below expectations. As importantly, May and June jobs numbers were revised down sharply.
Some new tariffs also took effect on Friday. In addition, the U.S. Manufacturing Purchasing Managers’ Index had a recessionary print for the first time in 2025 and June Construction Spending unexpectedly fell from the previous month.
The result from these negative economic readings was a steep selloff across the markets. The Nasdaq led the decline, dropping just around 2.2%, its worst daily performance in 10 weeks.
The market was long overdue for some sort of pullback after hitting one all-time high after another in recent weeks. Indeed, the big decline was a welcome development for those investors with plenty of dry powder to deploy.
I love using covered call orders to establish new positions in the few names in this market that, in my view, still sport reasonable valuations. This situation allows me to either get a solid return on the trade if the stock is flat over the option duration or to pick up shares in a name I already like at lower entry points.
Alkermes plc ALKS is a recent addition to my portfolio. This mid-cap biopharma concern, based in Dublin, Ireland, has several FDA-approved products on the market, including treatments for schizophrenia, bipolar I disorder, and alcohol and opioid dependence. The company also garners royalty income and provides manufacturing services. Lastly, Alkermes has a promising candidate for narcolepsy that recently entered Phase 2 development.
The company posted second-quarter numbers last week. Its three propriety products all showed solid revenue growth in the quarter. Alkermes should have revenues of approximately $1.4 billion this fiscal year, of which just over $1.1 billion should come from its three key assets on the market. In addition, the company has just over $1 billion in net cash on its balance sheet and a $200 million stock buyback authorization in place.
Alkermes is solidly profitable and saw the cash on its balance sheet increase by nearly $90 million in the second quarter. EBITDA rose just over $100 million.
With a current market capitalization of around $4.4 billion, Alkermes is an unexciting but solid ‘sum of the parts’ value in an overbought market.
Option Strategy
This is how one can initiate a holding in ALKS with covered call orders. As a reminder, covered-call orders involve buying an equity and simultaneously selling just out of the money call strikes against the new position.
Using the February $26 call strikes, fashion a covered call order with a net debit in the $22.00 to $22.50 a share range (net stock price - option premium).
This strategy provides downside protection of 16% with upside potential of roughly 17% if the stock trades down slightly over the option duration.
At the time of publication, Jensen was long ALKS.
