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Questcor Advice

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September 21, 2013 – Comments (26) | RELATED TICKERS: QCOR.DL , BBEP , HLF

Last week's Value Line update included biotechnology stocks.  One stock caught my attention and that was Questcor.  I kind of wish I knew about it a year ago but, alas, I didn't.  The financials look rock solid.  Growth looks nice.  Has a PEG of only .44.  Earnings projected to go from 4.25 this year to 5.50 next year.  Pays a small dividend. 

They seem to be a one trick drug company but this drug has 19 different indications.

It looks like the shorts have declared war on this stock at the moment.  Stock has about a 55million share float with about 10 million shorted, down from 11.59 million last year (so appears some shorts are closing their position).  Personally I like looking at short attacks for opportunities.  This isn't to say that all short attacks do not have valid reasons.  But sometimes they are grounded in manipulation than in validity.  And sometimes they are flat out wrong (just ask Ackman with Herbalife).

When I saw BBEP get knocked to under $15 I acted and added.  I know the stock.  Owned it since 2009.  It is a real company so I saw silly market over reaction because of one guy's off hand comment during his attack on LINE.

Now with QCOR it deserved to take a hit when Aetna pulled coverage for their drug.  But the company has survived that hit and has been steadily growing their earnings.  And with 20% short eventually they will need to cover and move on should the company continue to grow its earnings.

So with the above said, I am eyeing selling April 2014 $40 puts bid/ask 6.60/7 or the January 2015 $40 puts 10/10.90.  They have January 2016 ones at 12/13.70 but the extra premium over the January 2015 ones doesn't seem enough for the extra year.

If anyone has any opinions regarding the above I would appreciate it.

26 Comments – Post Your Own

#1) On September 21, 2013 at 2:43 PM, awallejr (75.45) wrote:

11.49 "last year" should have read last month.

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#2) On September 21, 2013 at 2:43 PM, awallejr (75.45) wrote:

11.59 ;p

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#3) On September 21, 2013 at 4:59 PM, HarryCaraysGhost (99.60) wrote:

Wish I could help you, but the last biotech stock I was interested in was JNJ @$60.

Have you checked Porte & ZZ's twitter fund?

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#4) On September 23, 2013 at 9:35 AM, awallejr (75.45) wrote:

Dipped my toe in the waters.  Sold 5 2014 $40 puts for 6.45.

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#5) On September 27, 2013 at 1:12 PM, spaniard1492 (< 20) wrote:

Why did you sell the April 2014 versus the January 2014 puts?  Are you willing to give up some premium in exchange for a lower cost basis?

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#6) On September 27, 2013 at 6:37 PM, awallejr (75.45) wrote:

I string out puts in several companies.  January tends to be a busy month for me.  I just didn't want to add there so I stretched it to April.  Also come January, after I close out the positions I will start selling January 2016 puts.

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#7) On October 01, 2013 at 12:29 PM, awallejr (75.45) wrote:

Sold 10 January 37 2014 Qcor puts for $3.46 today.  Changed my mind about adding to January 2014 picks heheh.

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#8) On October 04, 2013 at 10:00 PM, awallejr (75.45) wrote:

January 40 2016 10.70/13.80 last at 11.16 puts looking interesting, as in selling to open. Or January 60 2016 22.40/25.20 last 24.10.

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#9) On October 05, 2013 at 5:57 PM, HarryCaraysGhost (99.60) wrote:

Hey Andy been keeping track of you options trades on this, not for me as I prefer DCA'ing and DRIP'n my dividend stocks. Still interesting though.

Just updated this blog-

http://caps.fool.com/Blogs/the-pursuit-of-happiness/822927

I'll be doing updates so please keep on your following tab. We could have our own Caps support group ;)

Cheers

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#10) On October 05, 2013 at 8:28 PM, awallejr (75.45) wrote:

Well I suspect no one is following my put suggestions here and on other stocks, though a couple said they did on Yahoo.  But I post just to be helpful to others. 

I actually have 18 put plays in my real life portfolio.  15 strongly in green and 3 in red.  2 of the 3 I can either accept the stock (which long term I don't mind) or string them out except 1, ATPG.  They went BK so I can't roll the puts over.  Alas I am stuck being put the stock come January (I set aside the money for it).

I don't know, since 2009 I have always included some put selling in my portfolio.  Of all the puts I sold to date only once was I actually put the stock (IPXL) but I quickly sold the stock for a gain anyway. ATPG will be the 2nd and for a loss, proving I am human.

QCOR has a lot of put selling options.  Ones I sold I don't expect getting put the stock so the money gained is all mine.

Puts in #4 sold for 6.45 now at 4.50. The ones in #7 sold for 3.46 now at 2.50.  Shorts have this stock wrong.  Earnings at Oct 28 so we shall see.

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#11) On October 16, 2013 at 6:07 PM, awallejr (75.45) wrote:

Nice price action in QCOR.  I am suspecting the shorts are getting nervous.  Selling January 2016 62.50  puts 20.90/22.70 last 21. 10 of those will net almost $21,000  if you just sold the on the bid.  More risk than the other plays but a nice reward if the stock stays above 62.50.

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#12) On October 17, 2013 at 7:46 PM, awallejr (75.45) wrote:

Sold 10 Jan 2015 55 QCOR puts for $13.

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#13) On October 21, 2013 at 8:12 PM, awallejr (75.45) wrote:

Wow some serious manipulation today with QCOR.  This is why I like playing with far out puts selling under the current price of a volatile stock.

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#14) On October 23, 2013 at 5:51 PM, awallejr (75.45) wrote:

Looks like a short squeeze is unfolding.  A clearly biased SA article was just taken apart by the longs. I had to roll my eyes over some of the author's arguments. 

The one that amused me the most was how the author was arguing that because there is a service that will do the paperwork for the doctor and negotiate for payment the doctor would then figure why not give the drug a shot.  I guess the thought that perhaps doctors prefer to prescribe medicines they believe in for the patient's benefit wasn't possible.

Going to be a wild ride to October 29 earnings release.

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#15) On October 29, 2013 at 7:33 PM, awallejr (75.45) wrote:

Well earnings were stellar and stock started to soar after hours and then reports of NY US Attorney's office and LA SEC joined into an ongoing probe about promotional practices.

Well the January 37 and April 40 2014 puts are 50% in the green but I suspect they will be less come tomorrow.  You can close those still at a nice profit.  I plan to hold longer since I can't imagine the stock crashing that far down based on a promotional practice investigation.  The bottom line numbers count in the end and they hit a home run in my opinion.

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#16) On February 18, 2014 at 8:18 PM, awallejr (75.45) wrote:

Stock near $76 now.  Earnings next week.  Shorts getting squeezed.  It will only get uglier.  You can close out the April $40 puts for .90 if you want.  I am letting them expire.  I want that extra $450.

I doubt anyone is reading this but I still post in the hope this does help others.

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#17) On February 18, 2014 at 8:46 PM, HarryCaraysGhost (99.60) wrote:

I'm still reading man, I just have a distrust of margin. That's why the crash escalated so badly IMO.

On a cheerier note, sent a check to buy some more coke (yes, the sugary kind) to my DRIP. Earnings miss should lower my DCA. Works for me as I really just care about the ever increasing dividend. 

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#18) On February 18, 2014 at 11:58 PM, awallejr (75.45) wrote:

Yes Harry that is why I say no more than 50% available.  But leverage can make you a decent profit if you aren't reckless.  QCOR is such a great "put selling" stock because the premiums are insane and the shorts REALLY DO have it wrong here.  Amazes me that you can even get .90 on an April 40 put when stock is at $76.

Why do you think I keep pushing XRX or ACAS.  The companies are doing massive stock buybacks.  That means only 1 thing, fewer shares.  So they become perfect "put selling" stocks.

Sheesh Harry I have given you and everyone a ton of winners. Just my luck you will finally listen to me when I make a bad pick heheh.

Stick with yield. Interest rates are not going double digit. BDCs, MLPs, Reits will still yield you about 10%. Sounds good to me.

I dunno I have a great 5 year record here.  I just wish people would listen.  I want everyone to make money.

KO is a double edged sword. US will give it trouble because older people going to water, yours included.  Overseas you should still see growth.  Personally I would switch KO to T. More shares and more dividends.

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#19) On February 19, 2014 at 9:13 PM, HarryCaraysGhost (99.60) wrote:

Stick with yield. Interest rates are not going double digit. BDCs, MLPs, Reits will still yield you about 10%. Sounds good to me.

Oh yeah, we totally agreed that yield was king. I picked up an MREIT- MTGE

And a BDC- FSC (monthly payer)

Still looking for a MLP, I still have BBEP on my watchlist based on your reccomandation.I've owned a few in the past. Taxes are only a hassle as you have to file really close to the deadline.

As far as margin and options go, thats not my investing style. I know theres money to be made, but I'll stick with my slow and steady wins the race approach towards investing. Plus I sleep well at night that way.

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#20) On February 20, 2014 at 7:32 PM, awallejr (75.45) wrote:

Well if you really hate the K1s then MLPs and asset managers like KKR, BX or FIG aren't for you.  You kind of missed your chance with BBEP.  Was at $15 when I urged people to buy.  It is now nearing $21.  Now SDRL is worth a look:

 http://caps.fool.com/Blogs/another-opportunity-sdrl/923711

Also take a look at the January 2016 35-40 calls.  Those are 2 years out and SDRL will be putting online a bunch of new deepsea rigs. Personally I bought the $40s for $1.50.  I could sell now at $1.95 for an excellent pct gain of 30% but  I fully expect to see the stock in the $60s by then.  

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#21) On February 26, 2014 at 8:38 AM, awallejr (75.45) wrote:

A must read for those interested in QCOR;

 http://us.rd.yahoo.com/finance/external/xtrsa/SIG=13pl1tqih/*http://seekingalpha.com/article/2048483-questcor-pharmaceuticals-ceo-discusses-q4-2013-results-earnings-call-transcript?source=yahoo

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#22) On February 26, 2014 at 9:08 AM, awallejr (75.45) wrote:

And my take:

 Having read the earnings transcript I have to say it was pretty good. The only "negative" if you want to call it that is they are noticing a certain seasonality. So the best way to analyze future performance would be year over year Q comparisons and not current with last.

I notice the snake from GS tried to get them to talk about CDF, but CEO didn't take the bait. This is the last bullet shorts have. The drug is expanding. They are selling more and more vials. Insurance is paying them. They have a solid balance sheet. Excellent free cash flow. They obviously aren't dependent on CDF for sales.

So that is it, the investigations. Jamie Dimon paid what 28 BILLION in fines on behalf of JPM and the stock rebounded because despite the incredibly high amount, the investigations are now in the past. This too will come to pass for QCOR. ASSUMING improprieties they will be settled with fines and that last headwind goes away. Since the drug actually works and helps many especially those facing dialysis and kidney transplants the regulatory agencies will not be gunning to shut the company down. That isn't in their mandates.

With all that said see how the open goes then take advantage. I still urge selling pretty much any $60 or under strike price put because you are getting crazy premiums and this stock has seen under $60 for the last time.

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#23) On February 27, 2014 at 4:29 PM, awallejr (75.45) wrote:

Reprinted from a blog by me on Yahoo:

"I have to admit I did not expect that report by Citron.  That was a desperate act by a consortium who's short thesis no longer existed.  Now they make a materially false allegation that "Acthar Faces Severe Risk of Being Pulled off The Market by the FDA" in a clear attempt to scare investors. Unless there is a formal current inquiry by the FDA regarding doing so, which Citron did not say that there is one, Citron has violated the Securities Exchange Act.  In addition QCOR may very well have a tortious intereference claim against Citron.

Longs NEED to file a complaint with the SEC.  Use my arguments below. Also any large holder should seek counsel regarding a class action against Citron.  It is imperative to find out who was selling shares of stock on the open yesterday as well.  That was a clear manipulative attack to try to crash the stock.  If Citron has any connection there that strengthens claims against them.  Points:

1.  The report is an attempt to bait Bailey into disclosing the drug's formula.  
2.  Nowhere in the report does Citron submit evidence that the drug itself does not work, that it has serious side effects or that the 3,000 doctors prescribing it are doing so not in the best interest of their patients.
3.  Absent the above there is no reason to expect the FDA to pull the drug.  ESPECIALLY since it has ORPHAN status and has been WORKING.
4.  No one really knows why asprin can cure a headache.  But it can.  I was given a compound for a personal ailment where my doctor said no one knows how it works but it usually does, and it did for me.  There are MANY compounds that just simply work.
5.  Doesn't matter who conducted their tests if you don't ESTABLISH A CHAIN OF CUSTODY.  Absent that the results are irrelevent since the vials could have been tampered with.
6.  Not knowing the formula would impair any test result.

Legal action has to come from longs first because as stated Citron is baiting QCOR by getting the formula."

The maliciousness by Citron makes investing here impossible.  So I revoke my reccomendation to do so.  People need to avoid or sit on the sidelines.

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#24) On March 05, 2014 at 12:10 PM, awallejr (75.45) wrote:

I think the "all clear" exists now with this stock.  Citron got their butt kicked on the yahoo message board as a result of that report.  I helped kicking it;)  QCOR filed an 8k indicating they will pursue remedies against certain shorts with the SEC.  Whatever lawyer Citron had better have his malpractice insurance paid up because Citron blew it big time with their report heading.  I think they see their exposure and they have backed off.

Take advantage of those high premiums while you can.  Sold 10 $40 Jan 2015 puts for $8.  Stock would need to sell for under 32 for me to lose.  It is currently at $66. I expect to close out my April $40 for .50 (received 6.45).

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#25) On March 05, 2014 at 12:11 PM, awallejr (75.45) wrote:

I think the "all clear" exists now with this stock.  Citron got their butt kicked on the yahoo message board as a result of that report.  I helped kicking it;)  QCOR filed an 8k indicating they will pursue remedies against certain shorts with the SEC.  Whatever lawyer Citron had better have his malpractice insurance paid up because Citron blew it big time with their report heading.  I think they see their exposure and they have backed off.

Take advantage of those high premiums while you can.  Sold 10 $40 Jan 2015 puts for $8.  Stock would need to sell for under 32 for me to lose.  It is currently at $66. I expect to close out my April $40 for .50 (received 6.45).

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#26) On April 07, 2014 at 11:20 AM, awallejr (75.45) wrote:

Well closed out those Aprils for .05.  The Shorts got crushed in light of today's takeover bid.  I sure hope at least someone listened to me here.

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