Editor’s Note: Since ABBV is an expensive stock, we are recommending a deep-in-the-money call option as the only trade this time to create a leveraged equity type of return.

OPTIONS TRADE INSTRUCTIONS

Symbol: ABBV190517C00080000
Limit: Buy the Call option below $12
Strike Price: $80
Expiration Date: May 17, 2019
Target Gain: 50%

COMPANY DESCRIPTION

AbbVie Inc. discovers, develops, manufactures, and sells pharmaceutical products worldwide. The company offers HUMIRA, a therapy administered as an injection for autoimmune diseases; IMBRUVICA, an oral therapy for treating chronic lymphocytic leukemia; and VIEKIRA PAK, an interferon-free therapy, with or without ribavirin, to treat adults with genotype 1 chronic hepatitis C. The company was incorporated in 2012 and is based in North Chicago, Illinois. Link to company website.

TRADE RATIONALE

Despite the stock market’s woes over the past month, AbbVie is one of the few names to gain ground. Since reporting better than expected Q3 results three weeks ago, ABBV has climbed from $78 to $88. That’s a nice gain but only gets the stock back to where it was two months. Year to date, ABBV is still in slightly negative territory and well below its $125 high back in January.

I’m not expecting ABBV to get back to $125 anytime soon, but a return to $98 would earn us a 50% return on this call option. I think that is likely to happen. Not only does ABBV earn a perfect score from my IDEAL Stock Rating System, but I believe it is the kind of value stock that will lead the market higher in 2019.

ABBV is currently priced at only 10 times forward earnings while paying a forward dividend yield of better than 4%. If you’re wondering if that dividend is safe, the company just announced an 11.5% increase to the dividend payable in February 2019.

During the most recent quarter, EPS (earnings per share) jumped 68% (YOY – year over year) while revenue improved 17%. In addition, the company raised guidance for EPS for full year 2018. Also, the threat of trade wars should have little if any impact on AbbVie’s sales over the next six months as evidenced by the 48% jump in global net revenues from its hematologic oncology suite of products.