Issues
The potential vaccine and mixed election results pushed the market forward this past week, but the acceleration of the pandemic and near-term uncertainty in Washington pulled it back. It is a time to be a bit cautious. Emerging markets are showing some strength, as our timing indicator turns decidedly positive. Rotation into international stocks may be coming.
Alibaba (BABA) is a good example of the push and pulls. The Chinese e-commerce giant raked in a record-breaking $56 billion in sales in the first 30 minutes of China’s Singles’ Day on Wednesday, much higher than the $38 billion total in the entire 24-hour period last year. In comparison, Amazon booked $10.4 billion during its two-day Prime Day event last month. Yet, Alibaba’s stock was down sharply for the week. Find out why inside, where you can also learn about this week’s new SPAC recommendation.
Alibaba (BABA) is a good example of the push and pulls. The Chinese e-commerce giant raked in a record-breaking $56 billion in sales in the first 30 minutes of China’s Singles’ Day on Wednesday, much higher than the $38 billion total in the entire 24-hour period last year. In comparison, Amazon booked $10.4 billion during its two-day Prime Day event last month. Yet, Alibaba’s stock was down sharply for the week. Find out why inside, where you can also learn about this week’s new SPAC recommendation.
The huge market rally earlier this week gives us a taste of what lies ahead on the other side of this pandemic. The lockdowns will end and the economy will boom. Many stocks that have not participated in the market recovery will come alive.
While the market indexes have recovered, many stocks and sectors have not. Technology may be booming but energy, travel and hospitality, finance and other industries are still wallowing in bear market oblivion. It is these stocks that came alive this week and they should benefit when the virus fades and the recovery gains full traction.
It’s time to invest for the other side of the pandemic. In this issue, I highlight one of the very best income stocks in the history of the market. While the company has remained profitable, it has experienced a disproportionate selloff. The stock is still cheap but starting to move ahead of the next phase of this recovery.
While the market indexes have recovered, many stocks and sectors have not. Technology may be booming but energy, travel and hospitality, finance and other industries are still wallowing in bear market oblivion. It is these stocks that came alive this week and they should benefit when the virus fades and the recovery gains full traction.
It’s time to invest for the other side of the pandemic. In this issue, I highlight one of the very best income stocks in the history of the market. While the company has remained profitable, it has experienced a disproportionate selloff. The stock is still cheap but starting to move ahead of the next phase of this recovery.
Today, we are recommending a micro-cap turnaround stock. If you look at the long-term stock chart, it looks like a company in secular decline. But once you look under the hood, you will realize the company has transitioned into a software/tech enabled services company with recurring revenue.
I think this stock has ~200% upside over the long term.
This company’s characteristics include:
All the details are inside this month’s Issue. Enjoy!
I think this stock has ~200% upside over the long term.
This company’s characteristics include:
- Near-term tailwinds from the booming IPO and SPAC market
- A draconian valuation
- An activist investor with a 10% equity stake (ensuring aligned incentives)
- Low capex requirements
All the details are inside this month’s Issue. Enjoy!
The good news is the election has passed, and there is hope in the race to find a coronavirus vaccine. The bad news is that these two developments aren’t necessarily great news for all stocks, as money viciously rotated yesterday out of hyper-growth stocks, and into cyclicals.
Current Market OutlookThe market staged a stunning rebound last week, producing rare strength that bodes well for the months ahead. And today’s action was even more dramatic, with news of a virus vaccine causing some wild moves up in the major indexes. The intermediate-term trend is now clearly up, but the tricky part comes with individual stocks—today’s action saw growth stocks get hit (in general) while lagging cyclical names exploded higher. Overall, the evidence has clearly improved so we’re optimistic the next leg up has begun, but at the same time, it’s likely the crosscurrents we’re seeing among individual names and sectors will be with us a while (rotation and re-rotation, etc.). Thus, we’re OK with gradually extendingyour line, but it’s probably not going to be like April or May when throwing a dart made you money; continue to pick your spots and stocks carefully and give names room to maneuver.
This week’s list is growth-heavy after we saw many positive earnings reactions last week; yes, most took on some water today but they remain in uptrends until proven otherwise. Our Top Pick is Zendesk (ZEN), which is early stage and acts like it wants to go higher. Try to buy on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| Amicus Therapeutics (FOLD) | 21.15 | ||
| Enphase Energy (ENPH) | 116.95 | ||
| HubSpot (HUBS) | 345.57 | ||
| JD.com (JD) | 84.91 | ||
| QUALCOMM Incorporated (QCOM) | 142.44 | ||
| Roku, Inc. (ROKU) | 221.95 | ||
| Uber (UBER) | 48.20 | ||
| Yeti Holdings (YETI) | 51.52 | ||
| Zendesk (ZEN) | 124.63 | ||
| Zillow (Z) | 104.12 |
The market strength of the past week has turned our intermediate-term market timing indicator positive once again, so it’s a good time to buy, especially if you focus on the leaders, like this week’s recommended stock, which has a novel and effective treatment for cancer.
As for our current holdings, some are hitting new highs today, while some have taken a hit, as investors sell stocks (like Zoom) that benefitted from the pandemic. But one day does not a trend make; we’re selling nothing today.
As for our current holdings, some are hitting new highs today, while some have taken a hit, as investors sell stocks (like Zoom) that benefitted from the pandemic. But one day does not a trend make; we’re selling nothing today.
The market’s recovery this week has been very impressive, especially in the face of what looks like continued election uncertainty in the days ahead. That said, two days of action isn’t the be-all, end-all, but it’s certainly encouraging; we’re adding one new half position tonight in Novocure (NVCR) and aiming to add more. The only issue is that many stocks we’re high on are reporting earnings tonight or early next week; if they can survive their reports, we’ll likely be putting money to work.
In tonight’s issue, we write about all our stocks and some bullish signposts for the market longer-term--whether we’re seeing a kickoff here or whether it takes a while longer, the odds strongly favor the past two months being a normal rest within a major bull market.
In tonight’s issue, we write about all our stocks and some bullish signposts for the market longer-term--whether we’re seeing a kickoff here or whether it takes a while longer, the odds strongly favor the past two months being a normal rest within a major bull market.
This month we’re jumping into a small MedTech company that represents a picks and shovels play on the cell and gene therapy market. It makes biopreservation media and storage solutions for cutting-edge treatments, including Kite’s (owned by Gilead) CAR T-cell therapies YESCARTA and TECARTUS.
It’s a high growth company with exposure to both clinical trial and commercial-stage therapies. Covid-19 therapies and vaccines are part of the mix too. And there is an M&A angle that’s increasingly relevant.
The stock appears to have huge upside over the coming years. And we’ll get an update from management almost immediately after you read my reports since the company reports Q3 earnings after the close today.
All the details are inside. Enjoy!
It’s a high growth company with exposure to both clinical trial and commercial-stage therapies. Covid-19 therapies and vaccines are part of the mix too. And there is an M&A angle that’s increasingly relevant.
The stock appears to have huge upside over the coming years. And we’ll get an update from management almost immediately after you read my reports since the company reports Q3 earnings after the close today.
All the details are inside. Enjoy!
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the November 2020 issue.
We briefly discuss the soon-to-evaporate election cloud, the merits of holding value stocks when growth/momentum stocks tumble, and highlight one of our portfolio stocks that had some earnings issues along with several others that reported strong earnings that lifted their share prices meaningfully.
Earnings season is in full swing. Six portfolio companies report later this week. We encourage subscribers to visit the reporting companies’ websites to review their earnings-related slide presentations and listen to the post-earnings conference call. These are all available to the public under the “Investor Relations” tab. Sometimes what portfolio companies actually do can seem murky – a quick visit to their website can help clarify, and (at least to me, a certified investment geek) provide some fascinating reading.
Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
We briefly discuss the soon-to-evaporate election cloud, the merits of holding value stocks when growth/momentum stocks tumble, and highlight one of our portfolio stocks that had some earnings issues along with several others that reported strong earnings that lifted their share prices meaningfully.
Earnings season is in full swing. Six portfolio companies report later this week. We encourage subscribers to visit the reporting companies’ websites to review their earnings-related slide presentations and listen to the post-earnings conference call. These are all available to the public under the “Investor Relations” tab. Sometimes what portfolio companies actually do can seem murky – a quick visit to their website can help clarify, and (at least to me, a certified investment geek) provide some fascinating reading.
Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Updates
The stock market finally experienced a big shakeout last Wednesday, and the S&P 500 closed down more than half a percent for the first time in 50 days. But the major indexes bounced Thursday to end the week about flat, and yesterday saw another big rally.
Many of the undervalued growth stocks that I follow have neutral or bearish price charts right now. No doubt they’re tuckered out from the bullish price action in 2017!
In light of the House tax reform bill, one thing you can do is hold onto a bunch of small-cap stocks, since they have a far higher average tax rate than large caps, and stand to benefit more from a corporate tax cut.
The year-over-year (YoY) increase in inflation in October was 2%, slightly below the 2.2% YoY increase in September, as the cost of gasoline and fuel oil eased after the hurricane-related production glut. One of our stocks reported earnings this week.
Remain bullish. There are some cracks in the market’s armor, with some major indexes softening and the broad market under more and more pressure. However, our two trend-following indicators are positive and most leading growth stocks are acting fine. While we’re keeping a close eye on our stocks and will take action if necessary, we’re not making any major moves tonight.
I don’t have any ratings changes today, but read on for updates on all our holdings, most of which are still rated Buy.
I’m plucking my Bank of America (BAC) stock review out of the Growth Portfolio section, and putting it right here in the editorial section of the weekly update. That’s because good news affecting BAC will also affect virtually all bank stocks.
Broadly speaking, the market has been sketchy. Small caps have been trending down since early October, and the pace of the decline accelerated over the past week. In the grand scheme of things, this isn’t surprising. The September advance was incredibly strong, and a pull-back to the small cap index’s 50-day line isn’t remotely alarming.
The iShares EM Fund (EEM) is holding above its 50-day moving average, which keeps the Cabot Emerging Markets Timer positive. And we’re encouraged by the rebound in Chinese stocks as a group. Five stocks in the portfolio are scheduled to report earnings in the next couple of weeks (and the sixth likely will as well). We have no changes tonight.
REITs have strengthened since our last update, despite the near-certainty that the Fed will hike rates next month. The strongest performers include residential, data center and storage REITs, and a select group of retail REITs. Utilities, industrials and health care stocks have also had a good week, while financials and materials stocks have stumbled.
Many companies reported earnings this week, including many of our recommendations. In this week’s update, I update my position on eight stocks.
While things are a bit giddy in the short-term and we’re still in the midst of earnings season (three of our stocks release their numbers tonight or tomorrow), our trend-following indicators bullish and growth stocks are acting great. Thus, you should keep your optimist’s hat on.
Alerts
The marijuana sector’s charts have been weak overall since the sector’s March top.
This sleep-focused company has risen nicely and is getting near sell territory.
The following four brokerages have recently maintained their ‘Buy’ ratings on this tech stock: B. Riley, Nomura, and Stifel Nicolaus. As well, Raymond James upgraded the shares to ‘Outperform’.
The shares of this fitness center company were just added to the Russell 1000 index.
The shares of this semiconductor stock were just initiated at Wedbush with an ‘Outperform’ rating.
The top three sectors in this fund are: Technology (45.76% of assets), Industrial (40.52%), and Healthcare (12.33%)
Here are the latest rating changes on this tech stock.
In the past 30 days, 22 analysts have increased their EPS estimates for this beauty retailer.
This tech stock beat analysts’ earnings estimates by $0.04 last quarter, and the company is expected to grow at a 33.2% annual rate over the next five years.
Early Tuesday morning Biopharmaceutical giant AbbVie (ABBV) announced plans to acquire Ireland-based Allergan plc (AGN) for $63 billion. The market hates the deal and AbbVie stock plummeted over 16% on the day. Let’s take a look at the deal and see what’s going on.
The shares of this computing company were just upgraded by Barclay’s to ‘Overweight’.
The major indexes took a hit today, with the Dow losing 179 points and the Nasdaq sinking 121 points.
Portfolios
Strategy
Our Cabot Top Ten Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Top Ten features.