I’m Taking Out Some ‘Insurance’ on My Portfolio With These 2 Stocks
Here’s why I’m getting into this ‘boring’ insurance play and a biotech name.
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Well, it certainly has been an eventful week. Let’s take stock of what happened, look at how I’m handling my portfolio on options expirations day and check out two names I’m in right now.
First, the weekly recap. Both the September consumer price index and producer price index levels came in hotter than expected thanks largely to surging energy prices. The probability of another Fed Funds rate hike has increased with these readings. The AI Narrative has taken some notable hits this week as well. Shares in neocloud provider CoreWeave (CRWV) have sold off hard on growing concerns around its burgeoning debt load of just over $50 billion. Credit default swap prices against its debt are now implying that the chances of default over the next five years is better than a coin flip.
Gartner noted this week that it sees 80% of neocloud providers disappearing by 2030 as the revenues needed to justify the current level of capital spending and financing costs will fall far short. The tech-heavy KOSPI sold off over seven percent 7% on Thursday and triggered circuit breakers. The semiconductor sector entered into official correction territory Wednesday and at this rate could fall into a bear market by next week. The iShares Semiconductor ETF (SOXX) has dropped for eight straight sessions. Its longest losing streak in better than a decade. Just a good dollop of sector rotation, or a sign of a bigger market selloff? As my late father would quip “only the Shadow knows.” We will find out together in the weeks ahead.
Expirations Friday
Today is option expiration Friday. With the covered-call positions in my portfolio expiring in the money today, my portfolio allocation within cash and marketable securities will spike to an uncomfortable over 40%. Therefore, I continue to hunt for opportunities in what I believe is still an overbought market. In today’s column, I highlight two new initial positions I have taken via covered call orders this week.
Some Investing ‘Insurance’
It is hard to imagine a more “boring” name than life insurance and annuity company Corebridge Financial, Inc. (CRBG). But boring is good right now. The company is merging with Equitable Holdings to form the largest U.S. life insurer by earnings. The huge combination was announced in the first quarter and should close before yearend. There should be significant synergies with this merger. The stock trades around 7.5x forward earnings, has a nearly 3% dividend yield, and a beneficial owner is purchasing shares.
The second name I established a position this week is a stock I have been in and out of via covered call trades in recent years. It is a biotech name called Vir Biotechnology (VIR), which has a just under $1.8 billion market capitalization. The premiums in the options are lucrative. I do wish they had a bit better liquidity, but I had no problem executing my covered call orders this week.
Most of the company’s pipeline consists of early-stage assets. But its developmental platform has started to attract interest from deeper pocketed players. In the first quarter of this year, the company signed a licensing deal with Astellas Pharma (ALMPY). The agreement provided Vir with $335 million in upfront payments and near-term milestones. Vir can earn nearly another $1.4 billion in additional developmental and regulatory milestone payments as well as royalties on any eventual commercialized sales.
This week Vir Biotechnology signed a similar deal with drug giant Gilead Sciences (GILD) that involved $135 million in upfront and near-term milestone payouts. Two solid votes of confidence in Vir Biotechnology and why the stock is back in my portfolio.
At the time of publication, Jensen was long CRBG and VIR.
