Keeping an Eye on FireEye, Chiasma and the Market

Friday was options expiration day, so the cash allocation within my personal portfolio got a nice boost as several of my covered call positions expired in the money. If the market stays close to current levels, I should see the same type of increase to cash in July and August. September will bring a deluge to my cash position as much of my dry powder I put into the market in March during the massive Covid-19 meltdown via covered calls will expire with big gains. Last week we saw substantial selloffs on Wednesday and Friday as fears surged along with confirmed Covid-19 cases in reopening states and dragged the market down. Monday, Tuesday and Thursday saw solid gains as equities continue to be a roller coaster ride. Businesses most dependent on the economic restart were hit the hardest, including travel-related concerns and amusement park operators. The energy sector also fell by more than 7% on the week. My ammo will continue to be hoarded for stocks that become oversold due to company-specific news such as the situation I highlighted last Friday in gene therapy company Uniqure and I will add to existing holdings on hiccups in the market like we had Friday. I continue to view the market as fairly valued at best until we get more confidence around the economic restart. Most of my new buying will be via covered calls just as it has been for several quarters now. Here are a couple names on my shopping list this week. Let's start with Chiasma Inc. . On Friday, Chiasma's compound Mycapssa got the green light as a long-term maintenance treatment for adult patients with acromegaly. This is a disorder where the pituitary gland produces excessive amounts of growth hormone, which causes bones in the hands, feet and face to increase in size. The stock sold off 7% on the day, partly due to the decline in the overall market and partly on buy the rumor, sell the news trading action. Chiasma believes Mycapssa will become the standard of the care in the acromegaly market, which it estimates is $400 million annually in the U.S. and $800 million globally. About 90% of Mycapssa clinical trial patients voluntarily chose to continue with Mycapssa after various trials ended, which seems to support that view. Chiasma currently has a market cap of about $250 million. The company's balance sheet is in good shape to support the rollout of Mycapssa, which should commence in the fourth quarter of this year. Then there is FireEye Inc. . I started to build a new position in this internet security firm in June. The shares are up nicely from their late March lows but are still far below where they began the year. FireEye's high-growth cloud subscription and professional services businesses will likely account for close to 60% of its 2020 top line. Investors are assigning a sub peer group price-to-sales multiple (roughly 5x) to those units with zero value to its appliance-based product business. This past February, Cisco Systems was rumored to be interested in acquiring FireEye to fill out its product offerings. This is a holding I prefer to add to via new covered call orders. I don't see much downside to this name at current levels. However, outside a buyout this stock is likely to be a single or a double at best as well. If the shares trade sideways, one can still make decent profits employing this options strategy.

Keeping an Eye on FireEye, Chiasma and the Market

The Internet security firm and gene therapy company are on my shopping list as equities continue their recent roller coaster ride.

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