This stock idea is totally out of range for TheMoneyMadam except for one metric and that is call option potential; that potential allows you to generate income on a non dividend stock.   If you believe in your pick you can concentrate on reaping gains from a growth stock while you work the calls.

This stock is in my portfolio because Alfred Ferol alerted me to the science behind their products.  It is my own analysis of the stock’s potential for growth and income that makes me agree that this stock is worth the risk for me.

Let’s begin with the underlying stock and then I will present several call options that make sense to me.

NOVOCURE, symbol NVCR

Novocure is actually a medical device company operating as a bio technology stock.  The company describes it this way.

treating cancer
with electric fields

Tumor Treating Fields uses alternating electric fields specifically tuned to target cancer cells. Once the electric fields enter the cancer cell, they attract and repel charged proteins during cancer cell division.

By using physics to influence biology, Novocure discovered another way to treat cancer.  Their mechanism of action is broadly applicable across a variety of solid tumors.  As you read through their clinical studies, you can see their therapy is used in conjunction with chemotherapy to extend survival.

REVENUE GROWTH Catalyst

Large market growth catalyst from improving life expectancy when used in common with chemotherapy is real.  Optune is the brand name of their tumor treating fields device for glioblastoma.  Use of tumor treating fields with Optune for Glioblastoma and mesothelioma is  FDA approved.  

Sales of FDA approved products are growing.  And, Medicare will start paying for the treatment effective September 1, 2019.  That alone should be a catalyst for growth.

FUTURE Growth Opportunities

From Novocure’s website:

The science of Tumor Treating Fields extends beyond glioblastoma. Novocure has ongoing or completed clinical trials investigating Tumor Treating Fields in mesothelioma, brain metastases, non-small cell lung cancer, pancreatic cancer, ovarian cancer and liver cancer.

2018 New Diagnoses that Novocure may be able to help treat.

If this treatment is successful, it is truly a gift for these patients. 

Novocure Fundamentals 

Novocure, like many biotech companies is in the developmental stage and that requires money.   Novocure raised money through their public offering and they have used debt.    

Novocure, unlike many biotech companies has a product approved by the FDA (Federal Drug Administration) and is approved by Medicare.  That means they have revenues.   

Novocure continues to burn cash but is improving cash flow.  With Medicare payment approval cash flow should increase.  The table below clearly presents revenue growth over the past 2 and 1/2 years.  This is without the benefit of Medicare payment approval.

Revenue / EPS Summary *      Fiscal Quarter 2019 (Fiscal Year) 2018 (Fiscal Year) 2017 (Fiscal Year) March          Revenue $73,309(t) $52,125(t) $34,880(t)    EPS -0.13 (3/31/2019) -0.23 (3/31/2018) -0.21 (3/31/2017)    Dividends N/A N/A N/A June          Revenue $86,713(t) $61,514(t) $38,376(t)    EPS -0.01 (6/30/2019) -0.17 (6/30/2018) -0.24 (6/30/2017)    Dividends N/A N/A N/A September          Revenue   $64,756(t) $50,109(t)    EPS   -0.12 (9/30/2018) -0.12 (9/30/2017)    Dividends   N/A N/A December  (FYE)          Revenue   $69,674(t) $53,661(t)    EPS   -0.17 (12/31/2018) -0.13 (12/31/2017)    Dividends   N/A N/A Totals          Revenue $160,022(t) $248,069(t) $177,026(t)    EPS -0.14 -0.69 -0.7    Dividends N/A N/A N/A    Previous 3 Years
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Novocure is a developing biotechnology company and medical device manufacturer that has revenues but is burning cash as it continues the clinical trials to measure the effectiveness of their science in more cancers. 

This table presents Novocure's current fundamentals.

NVCR raised capital when they went public and have financed operations with debt.  If I have one concern it is the high D/E (debt to equity ratio.)  Even with established companies, I like to see D/E ratios of 1 or under.   Some argue that debt is cheap and there is some validity to that.  

I am forgiving that concern as I roll through the options calendar and take advantage of calls to create income.  See below

INCOME Potential through call options. 

I bought NVCR on Tuesday during the overall market swoon at $81.05.  Wednesday while NVCR was rebounding in sympathy with the overall market, I sold a September 20, $90 for $2.75.  That call options is presented first.  Today NVCR has even better calls and the second call option shows a call available today. 

August 7, 2019 Call

August 8, 2019 Call

If you bought today here is what a $95.00 call would look like.

But consider a more patient trade.  Buy last Tuesday at $81.05 and sell the $95 today and look at the gain.

Over time, we have worked this stock.  You can see below a list of buys, sells, and calls.  Out of 3,400 shares we have 1,100 left.   So far we have invested around $134,000 and the value of that investment is about $187,000 of which about $92,000 is in the bank.   Call premiums represent a 3.58% yield.  

In summary, we have a company that has created a technology that helps patients on chemotherapy live longer.  They have growing revenues. It appears Novocure has been discovered by the investing community.    

M* MoneyMadam

Disclosure:  Long NVCR with calls

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Options expiration on September 21, 2018 claimed one of the stocks in the 2018 Covered Call Portfolio.   Qualcomm, symbol QCOM, was "called away" also known as assigned.  I am very happy with the income produced from this little portfolio but as with all covered call strategies, when your underlying stock is called away, you have to find another stock in which to invest.

In addition to QCOM being called away, Gilead's call expired.  I sold another call on Gilead today.  This call is presented in the table below.  And, I have posted the updated 2018 Covered Call Portfolio as well.

GILEAD - December $82.50 call















Options expiration is always a challenging time for income investors.  Usually 90% of options expire but this time I had 20% of my calls exercised.  That means I have to move some money into another income instrument.

I like value and am intrigued with Las Vegas Sands, symbol LVS. At a close to a 52 week low, LVS and sporting a yield north of 4.5%, it is worth a close look.

2018 COVERED CALL PORTFOLIO

Last week I did add Novocure, symbol NVCR.  This stock has no dividend so be ware.  However, I like a lot of what the company has to offer and will write up more about NVCR later.

I am not selling any stocks in this portfolio.  That "dog" RIOT is still there.  I do create cash from calls that are assigned.   Currently I have about $30,000 to invest.   The point of this little portfolio is income so I will not be buying a CD (certificate of deposit) with this money.

Stay tuned.   The next 10 years of this blog will be a little different.  But we can always measure how the $750,000 invested since 2011 has done.

M* MoneyMadam

Disclosure:   Long all positions/short all calls

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Implications of June 15, 2018 Call expirations

Readers of this blog know I use calls, mostly on dividend stocks, to boost my income.  I have summarized the calls expected to expire and those expected to be assigned.  Every call expiration date comes with some uncertainty yet these ten calls are pretty straight forward.

• Call premiums can be booked as income or as reduction of cost basis but not both.
• When current price is greater than the strike price, you have lost opportunity.
• Sell calls on only part of your position to preserve upside potential
• Carefully selected strike prices makes selling covered calls an income strategy that works for income investors.

Let's first look at those calls that are outside my comfort zone.  

I wrote about taking a flyer on RIOT a block chain stock.   This trade is totally outside of my comfort zone.  I am an income investor.  I like dividends plus call premium income.  If my stock gets called away (assigned,) I expect to receive a capital gain.

Yet, even a disciplined investor like me occasionally makes stupid mistakes.   I was so successful with Twitter (TWTR) and Nvidia (NVDA) that I thought I could pull a fast one and make money on RIOT.

This did not work out well.  I still hold RIOT.  I have not lost everything.  I have received two call premiums and that helps salve some of my pain.   I want to make a point here about using call premiums for income.  You cannot both use the premium for income that you spend to pay your expenses and consider it a reduction of your basis.  Either you keep the money from your call premium in your account or you invest it in another security, but you cannot book the income twice once for spending and the second for cost reduction.  

The table below show how my RIOT trade has worked out so far.  Since I spend my income, I do not lower the cost basis.

Note that in the next section, I have included another trade on a stock that does not pay a dividend.  That stock is Novocure, symbol NVCR.   This stock was picked by my husband who is my biotech analyst.  You will notice, this trade worked out so far.

Calls I expect to be assigned.

Three calls should be assigned; they are CVX, NTR, and the above mentioned NVCR.  CVX is a bit iffy as the current price is just a bit above the strike price.  When you add in the call premium of $1.64 per share paid to me by the call buyer, they are not in the money if they take the CVX shares.

In my experience, they usually take these stocks.  Energy demand continues to grow with the overall economy and I would expect CVX's price to increase.   If they take these shares, I will be happy to book the gain and I have more shares on which I did not sell calls.

Nutrient symbol NTR is the successor to Potash.  This call and the NVCR call are examples of lost opportunity by selling calls.    If I really wanted to sell these two stocks, I would make more money selling in the open market rather than writing (selling) calls with a defined strike price.  This is because their current price is higher than the strike.  

The lesson here is to sell calls on only part of your position.  You get the call premium, dividends during the holding periods, and capital gain when the stock is called away.  If you continue to hold additional shares, you can participate in upside potential as well.

Calls I expect to expire.

These are the stocks I love.  They pay good dividends and those dividends tend to go up.  I sell calls above my basis so if they are called away (exercised or assigned,) I get a capital gain as well.  If they expire, I just keep working the calls to boost my income.

The table below illustrates the results of my favorite strategy for covered calls.  I love it when calls expire.  I just keep working them over and over again.

It is difficult to sell new calls right around the upcoming expiration date.  Wait until next week and start working those calls again.   This is an excellent strategy for income investors.

M* MoneyMadam
Disclosure:  Long all names with calls

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