Two Biotechs I’m Buying Amid an Overbought Market

Dick’s Sporting Goods, Inc. (DKS) became the latest retailer to be hit by a weak American consumer, or at least those households that are not in the top 10% or 20% of the “K”-shaped economy.  DKS fell 31% yesterday after posting disappointing Q2 results below the bell on Tuesday and reducing forward guidance. It was the biggest daily loss in the stock’s history. Dick’s joins Walmart (WMT), Home Depot (HD) and Lowe’s Companies (LOW) which last week provided a tepid outlook around overall consumer demand. Dick’s was particularly hurt by the performance its new Foot Locker division as well as burgeoning inventories. Much higher gasoline prices evidently are denting the demand for sneakers, that teens and Gen Z in general buy.

The profit prospects for the chipmakers are still robust and remain the core driver of earnings growth within the S&P 500.  Earnings growth is also impressive in the energy sector thanks to the consequences from the conflict with Iran. This sector, however, makes up just under 4% of overall market capitalization.  And the credit markets are starting to flash yellow as names Nvidia (NVDA) and Broadcom, Inc. (AVGO) go bigger into what was termed “vendor financing” during the Internet Boom. 

Nvidia just announced it will boost prices around its core products by at least 15%. That will boost margins for this AI juggernauts and do the opposite for their end users like Oracle (ORCL). Credit default swap prices have surged against these names recently.

It is getting tougher to find relative bargains in this overbought market.  But in today’s column, I will profile two new covered-call positions I have established this week. Gold and silver miners have been one of my largest weightings within my portfolio throughout most of 2026. This is largely a debasement trade as no one seems the slightest bit interested in addressing the yawning U.S. fiscal deficit.

These covered-call holdings have done quite well in 2026. Many of these holdings, however, will expire in the money in the months ahead. I opened a small initial position in First Majestic Silver Corp (AG) this week. The company is experiencing a surge in cash flow on a slight rise in production combined with gold and silver prices shooting up in recent years before selling off earlier this year.  Prices have started to rebound lately.

First Majestic currently trades around $21 a share and sports an approximate market capitalization of $10.5 billion. The company saw free cash flow of nearly $195 million in FCF in Q2. This was up massively from the $78 million in free cash flow in the same period a year ago. Higher realized prices and greater operating efficiency combined to deliver impressive results. The company has north of $1 billion in net cash on its balance sheet.  Management also sold a mine property that hadn’t been in operation since 2019 for $90 million in July.

I also added Jazz Pharmaceuticals (JAZZ) to my portfolio this week. The company has had a busy few weeks. Two weeks ago, the company spent $800 million upfront to purchase Actio Biosciences. That brought a promising candidate that is targeting KCNT1+ epilepsy, which is in mid-stage development. Of note, there are no FDA-approved therapies for KCNT1+ epilepsy currently as it is a rare form of the disease. The candidate has Fast Track, Rare Pediatric Disease, and Orphan Drug designations.

Yesterday, management announced that its cancer therapy Ziihera, garnered Food and Drug Administration approval to treat first-line gastroesophageal adenocarcinoma whose cancers express a protein known as HER2. Zihera was developed with BeOne Medicines (ONC). The compound was licensed from Zymeworks (ZYME). It received FDA approval for a subset of bile tract cancer in late 2024. This will expand Jazz’s footprint in oncology. Analysts expect revenues to rise with a CAGR in the high single digits annually over the next half decade. The stock trades just over 10 times forward earnings.

At the time of publication, Jensen was long AG and JAZZ.