I'm Eyeing One Big, One Little Biotech for a Repeat Trade
Despite the recent surge in the sector, some companies are still worth buying.
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Some shine came off the AI narrative late last week. Both Oracle (ORCL) and Broadcom, Inc. (AVGO) fell over 10% after reporting quarterly results/guidance that disappointed investors. Given the AI story has driven most of the gains in equities over the past three years, I will be watching closely to see if this was just a hiccup or the start of some overdue skepticism around the AI revolution.
The other thing I will be doing is going through my portfolio closely to identify covered-call trades I can repeat. Friday will be quadruple witching day. I have a boatload of covered-call positions that will be expiring on the 19th. Thanks to the recent surge in the biotech sector, which has taken up the State Street SPDR S&P Biotech ETF (XBI) by more than 30% over the past three months, I have a whole lot of holdings that will be expiring deep in the money.
This will boost the cash balance in my portfolio from around a quarter to just over 40%, with another slug of covered-call holdings likely converting to cash at January’s expiration date. Even given my pessimistic view of the overall market, that is way too much cash to have sitting on the sidelines. Many of my expiring holdings in the likes of Collegium Pharmaceutical, Inc. (COLL) , Praxis Precision Medicines (PRAX) and TransMedics Group, Inc. (TMDX) have seen huge rallies from where I established covered-call positions. Frankly, I left a lot of money on the table by using covered-call orders instead of taking straight equity. But no one ever went broke taking profits.
The rallies in these stocks put them far above my buy range on these names. I will not be establishing new positions in these equities. Other positions, however, are expiring in the money Friday that I will be re-upping for and establishing new covered-call holdings within.
These include Pfizer (PFE) , which faces some significant patent expirations in coming years. Pfizer, however, spent the huge surge of revenue following Covid to finance a large acquisition spree that should continue to build out the giant drugmaker’s pipeline in the years ahead. Right now, the shares look quite range-bound. But selling at just over eight-times earnings and with a 6.6% dividend yield, I am more than happy to continue to clip coupons in this name.
Amicus Therapeutics, Inc. (FOLD) is a much smaller biopharma name. The stock has made a big move since early summer. The shares are not that much higher than where they began 2025. Most of my stake in Amicus will expire in the money over the next five weeks. I will slowly build that position back up via covered-call orders. The company continues to see sales growth in the low- to mid-teens from its long-time franchise Galafold. Overall revenue growth is being goosed by a more recently launched combination therapy consisting of Pombiliti (cipaglucosidase alfa) and Opfolda (miglustat) that treats the rare genetic, and sometimes fatal, muscle wasting condition, Pompe disease. The company also has one promising candidate that is slowly moving into late-stage development.
Amicus Therapeutics should become significantly more profitable in coming years on steady sales growth in the high teens. Options against the equity are nicely lucrative and have solid liquidity.
At the time of publication, Jensen was long COLL, FOLD, PFE, PRAX, TMDX, and XBI
