Liz here! They made me take a different headshot because I’ve apparently forgotten how to look professional after a year and a half of Covid. I bet you have, too, Gemma from Corporate.

Speaking of the Rona, Garrett Baldwin is all about diagnostic companies going into this fall. Specifically, he’s been looking at Quest Diagnostics (NYSE: DGX) and Co-Diagnostics Inc. (NASDAQ: CODX).

For one pretty simple reason: no one likes having “that thing” stuck up their nose.

(Particularly not my four-year-old, who was also, somehow, the ONLY person in our house who didn’t get Covid earlier this year. Geez, Mikey, can you please just….stop jumping for a minute?)

I’d rather have a spit test, wouldn’t you?

As the Delta variant surges going into the autumn, with only about 50% of the population currently vaccinated, more and more companies and schools require rapid testing…and quick diagnostics is the name of the game.

According to Garrett (and his convincing numbers) it’s also a great way to score a double as the weather cools down.

Pick Up Garrett’s First Fundamentals Winner At A Deep Bargain

Garrett is a difficult man to pin down because he has multiple emails and Slack accounts, any one of which may or may not be “him” at the moment, and may or may not respond to a meeting. After some difficulty, I managed to connect with the version of him with the ceiling fan profile picture (??) and hop on for a quick call.

Ceiling Fan Garrett wants you to buy a speculative spit play, but first, he wants you to pick up Quest Diagnostics (NYSE: DGX) because, in his words, it’s “one of the safest diagnostics companies out there.”

Quest draws on the world’s largest clinical lab results database and offers, in their words, “the most extensive clinical testing network in the US,” with 47,000 employees and laboratories all over the world. If you had a medical test, there’s a one in three chance you’ve used Quest.

Quest makes the standard COVID tests where you stick the thing up your nose, and we all know those aren’t going away anytime soon. (They also make the blood tests for antibodies, also not going away.)

DGX has been on a tear lately — reaching 52-week highs on August 10 – but also registering long-term earnings growth of 18.8% over the past 5 years. It’s got a long-term expected growth rate of 26.5%, over against the broader diagnostics industry’s 20.5%.
This is a big, deep, solid fundamentals play – tailor made for depth traders. For those of you who play conservative “Nickel Slots,” this might even be more like “Penny Slots,” but with really good odds.

Almost perfect odds, in fact.

DGX has a perfect F score of 9 (hitting every profitability, balance sheet health, and operating efficiency benchmark) and a phenomenal Z score of 4.45 (anything over a 3 means very unlikely to go bankrupt).

My very first major project, years and years ago as a fledgling financial editor, involved the Z-Score. (It was a favorite metric of Marty Fartman, who yelled at me and made me throw up the burrito.) Hello darkness, my old friend.

Ceiling Fan Garrett isn’t interested in options on this stock, per se. He wants you to sell cash-secured puts, which equates to picking up the stock itself at a steep bargain.

When you sell a cash-secured put, you sell-to-open an OTM put – and make sure you have enough margin to buy the stock. (Don’t be frightened by the term margin – you only need level 1 options clearance to make this play.)

Always remember that put-selling on a stock you’d like to own is a win-win: if the option stays out of the money (OTM) through the expiration, you can collect that initial premium – but if it moves into the money (ITM), you’ll buy the shares at the put strike and own a great company.

Obligated to buy something that I already want? Twist my arm.

Garrett has a couple of different recommendations here (possibly, one for each of his Slack accounts). Here’s what to do:

NICKEL SLOTS Actions to Take: SELL-to-OPEN DGX November 19 $145 Put (DGX211119P00145000) for no less than $3.75. Open as a Good-til-Canceled (GTC) order Or
SELL-to-OPEN DGX October 15 $150 Put (DGX211015P00150000) for no less than $3.25 Open as a Good-til-Canceled (GTC) order

The Dollar Slots Double Where The Spit Test Comes Into Play

Co-Diagnostics Inc. (NASDAQ: CODX) is a speculative play – Garrett has some technical things he likes about it, but in his words “mainly, I’m just looking at sentiment.” If you’re a flex trader, more interested in quick results than in in-depth processes, you may resonate more with CODX.

CODX didn’t beat Q2 earnings, but they beat expectations. Their sales recently jumped 14% on strong sales of their new “Logix Smart” test, which is, as you’ve guessed, the spit test. Swish and gargle. 30 seconds.

Sign me UP.

It’s also seen some promising technical signs – for instance, the 20-day MA is about to catch up and cross over the 200-day, the classically bullish “golden cross.”(There was also a golden cross earlier this year, where the 20-day crossed the 50-day).
Garrett does see a couple of red flags – for instance, a low P/E ratio, which means the stock could be considered a “value trap,” and the fact that the 50-day moving average is under the 200-day. But again, he’s mainly looking at sentiment – and this is a speculative play.

Not that speculative, though – you have about a 33% chance to profit here. I might not take the umbrella into the park with me, but I’d definitely bring it in the car.

“Valuation on CODX is dirt cheap,” says Ceiling Fan Garrett. He recommends that you either buy the stock outright with a 10% trailing stop to protect your profits – or else pick up a call.

The stock has whipsawed and it’s back under $11 as of this writing – but one year ago, it was trading at $14.50. For the options Garrett has in mind, the stock just has to get to $14 for you to make 100%.

Or, possibly much more. If CODX gets to $15 by late October (also a real possibility), you’d be spending $150 to make $500.

Even if the stock doesn’t move that far – or that fast – you’ll still take home a nice chunk of change. $12 by the end of September gets you 24.5%. 12.50 gets you 48%. (For some reason, I’m having flashbacks to the ticket machine at Chuck E. Cheese right now.)

For this “Dollar Slots” play, here’s what to do:

DOLLAR SLOTS: Action to Take: BUY-to-OPEN CODX November 19 $11 Call (CODX211119C00011000). Pay no more than $1.55 Open as a Good-til-Canceled (GTC) order

As always, you can track these plays in our open portfolio right here.

As a conclusion – because I know you wanted to see this – I have attached the actual picture of Ceiling Fan Garrett. There’s also a random – I want to say corgi, but I haven’t been to Windsor Castle since before Covid and I’m a little rusty.

Unless something weird happens (always a possibility), I’ve got the one and only Andrew Keene teed up for tomorrow. Same time, same place.

Liz

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments