A New Investing Opportunity in Genetic Testing Company Invitae

I have been a fan of genetic testing company Invitae (NVTA) for six years. My interest started after I heard co-founder (and now President, CEO, and Chairman) Sean George give a talk at the Stanford Technology Ventures Program. He titled the 2015 talk “Experience Is Your Reward.” George talked about facing down challenges and adversity and sharing the experience in a motivated and dedicated team. I was inspired, and I was fascinated by the prospects genetic testing technology.

So my ears perked when I heard that Invitae recently signed a new lease in San Francisco. I got the news in the middle of last Wednesday’s Marketplace program. Here is the key quote from a segment titled “The big empty: San Francisco is sitting on millions of square feet of vacant office space

“So far though, startups are doing more window-shopping than actual leasing. A different industry is being far more aggressive scooping up space. They’re still tech-ish, just not hoodies and jeans tech-ish.

“If you would through the lab you’d see a typical diagnostic lab, and yes there’s lab coats,” said Ken Knight, chief operating officer at Invitae, a biotech firm that does genetic testing.

Earlier this year Invitae inked a deal for a second San Francisco location. Terms of the deal aren’t public.

“We wouldn’t have signed the lease if we didn’t feel good about the opportunity,” Knight said. “So yeah, we feel good about the deal.””

Marketplace went on to explain that biotech companies still rely on some physical presence and cannot switch to 100% remote work. Even so, I consider this news of a second office space as confirming evidence that Invitae’s business continues to do well.

The Trade

NVTA last topped out after the company issued a secondary stock offering in late January at $51.50/share. Per my rules on secondaries, I waited out the price action. NVTA never quite recovered, so I still had no fresh position when the recent sell-off in growth stocks took NVTA down and through its 200-day moving average (DMA) (the blue line in the chart below). Expecting on-going churn, I bought a covered call position. Ahead of the expiration of the worthless March $45 call option, I rolled into a fresh short April $45 call option. The strike perfectly coincides with presumed resistance at the 50DMA (red line in the chart below).

Invitae (NVTA) is pivoting around its 200DMA.

Whenever NVTA next breaks out to new all-time highs, I expect the stock to sustain upward momentum. Until then, I am content to sell call options against my new position. I would also jump at the chance to grab more shares closer to the recent lows.

Be careful out there!

Full disclosure: long covered call position in NVTA

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