Corbus Pharmaceuticals Is an Example of How I'm Playing an Uncertain Market

Over the past few columns, we have discussed some of the major worries for the markets, as well as some company specific opportunities using simple covered call strategies. These concerns included slowing job growth thanks to states pausing their reopening efforts, the expiration of federal unemployment benefits, and the narrowing breadth of the market. Today, we will give quick updates on each of those items and also provide another potentially lucrative covered call idea. I know, by now, Real Money Pro should have changed my byline to Bret 'Buy-Write' Jensen. Yesterday, weekly unemployment claims edged up for the first time in four months. Unfortunately, slowing or even rolling back reopening efforts back as California has done recently, is impacting job growth. I know many restaurants that survived the first lock down and then reopened under reduced capacity and other constraints. However, they will not survive this new round of mandates without additional governmental aid. Many have had to lay off employees and decide whether or not to declare bankruptcy. Massive Federal unemployment assistance is still set to expire at the end of the month. New legislation is being crafted but the sides are far, far apart on the total amount of stimulus funds that will be provided and on what should be prioritized. I expect some sort of compromise, but not before much discordant rhetoric that hardly will be good for the markets. Finally, we finally saw some weakness in the mega cap names that have led the market rally in trading Thursday. Amazon , Apple , Microsoft and Tesla Motors were all off between 3%-5% in yesterday's market selloff, while the Russell 2000 actually managed to end slightly in the black on the day. The newest worry investors should have is around insider activity. There was a massive surge in insider purchases during the Covid-19 meltdown that ended in late March. Unfortunately, that vote of confidence has turned into profit taking over the past month. According to a recent Bloomberg piece, only twice in the past three decades has the sell-buy ratio been higher than now. Thanks to some covered call positions that got assigned a few weeks early the other day, my cash position is now up to 20% in my personal portfolio and rising fast. I am making small bets using the buy-write strategies I have discussed frequently on these pages. Here is one idea I implemented this week. Corbus Pharmaceuticals has topline Phase 3 data for its primary compound Lenabasum for Systemic Sclerosis due out before the end of summer. This is one of four indications the compound is targeting. The stock has a market capitalization of just $500 million. Orphan Drug and Fast Track-tagged lenabasum could have blockbuster potential if trial data is positive. Topline data from a mid-stage study for Cystic Fibrosis are also due out this year. Analyst firms definitely are high on the stock which trades just under $7 currently. Since early June, three analyst firms have reissued Buy ratings on CRBP, including a massive upward price target revision by Nomura. Two other firms have assigned new Buy ratings on the stock. Price targets proffered have ranged from $22 to $40 a share. On Tuesday, I executed some covered calls using the January $7.50 calls for a net debit (stock price - option premium) of $3.50 a share. This transaction provided over 50% in downside protection. If data from either trial is perceived as positive, an investor is probably going to leave some 'cheddar' on the table. They will just have to be satisfied with 'only' a better than 110% return in under six months. And that is another example of how I am playing an increasingly uncertain market. (Amazon, Apple, and Microsoft are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

Corbus Pharmaceuticals Is an Example of How I'm Playing an Uncertain Market

CRBP has topline Phase 3 data for its primary compound Lenabasum for Systemic Sclerosis due out this summer.

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