Issues
After a sharp two-week correction that targeted growth stocks in particular (and high-flyers like TSLA and ZM above all), the market may or may not be ready to resume its uptrend. For now, however, I’m keeping it simple and staying heavily invested.
Today’s recommendation is a stock that’s been in the news recently and might be viewed as the next Tesla, but I don’t like that comparison, as there are numerous differences. In any case, it has great potential and I think you’ll like the story.
As for the current portfolio, something’s got to go to keep the portfolio at or below 20 stocks and the victim this week is Zscaler (ZS), which has brought us a fine profit in five months and is now at risk of giving some back.
Full details in the issue.
Today’s recommendation is a stock that’s been in the news recently and might be viewed as the next Tesla, but I don’t like that comparison, as there are numerous differences. In any case, it has great potential and I think you’ll like the story.
As for the current portfolio, something’s got to go to keep the portfolio at or below 20 stocks and the victim this week is Zscaler (ZS), which has brought us a fine profit in five months and is now at risk of giving some back.
Full details in the issue.
Current Market OutlookThe market has been thrashing around during the past few trading days, with big gaps up and down, dramatic reversals and news-driven moves. But overall, nothing has really changed from our point of view—most growth leaders are still under pressure after suffering abnormal selling the prior couple of weeks, which, coming after a prolonged upmove, raises the odds that further potholes are ahead. Of course, it’s not all bad—today was a stick save for the major indexes (most bounced nicely off their 50-day lines), and while the broad market has pulled back, many areas are doing so normally. All told, we remain flexible, and are open to the possibility that the recent dip was more of a shakeout than the start of a rough patch, but the burden of proof is on the bulls to step up. Until then, we prefer being cautious.
The good news is that our stock screens continue to pick up on some potential fresh leaders should the market find its footing. Our Top Pick this week is Novocure (NVCR), an innovative player in the cancer market that’s come to life after a year-long rest. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| 10X Genomics (TXG) | 121 | ||
| DouYu (DOYU) | 16 | ||
| The Gap, Inc. (GPS) | 17 | ||
| Guardant Health (GH) | 103 | ||
| The Mosaic Company (MOS) | 18 | ||
| MyoKardia (MYOK) | 124 | ||
| Novocure (NVCR) | 98 | ||
| Snap Inc. (SNAP) | 24 | ||
| Taiwan Semiconductor (TSM) | 80 | ||
| Target (TGT) | 148 |
Growth stocks have changed character over the past week, with abnormal action and breakdowns appearing. The good news is that a major top doesn’t appear to be in place; the general market is still hanging in there for now, and the long-term trend of most leaders is still up. But, taking things on a stock-by-stock basis, we’ve pared back a bunch and are actually holding more than half the portfolio in cash. That’s probably too high (we’d like to put some to work in fresher leaders), but we’re content to patiently wait for buyers to support the market.
In tonight’s issue, we review all our stocks, dive into the two main factors to your investment returns and go over many fresher names that could help lead the market’s next upmove.
In tonight’s issue, we review all our stocks, dive into the two main factors to your investment returns and go over many fresher names that could help lead the market’s next upmove.
For the first time since the summer began, the market is faltering. The rally that thrust the S&P 500 60% higher in little more than five months is cracking.
The end of summer is being greeted by cranky investors who see a market that has run up to new all time highs despite the risks of Covid and the election. Of course, a huge rally of this magnitude needed a breather. The pullback is normal, healthy and overdue.
It is impossible to say how far stocks will fall. But, unless there is some very bad news, I don’t expect a prolonged or deep selloff. The market is still looking ahead to a positive environment where the pandemic is fading away and the economy is quickly recovering.
In this uncertain environment, I found a rare stock. It is a company that benefits from the undeniable trend toward technological proliferation. It has solid earnings growth and stock performance. But it provides these benefits with remarkably low volatility.
The stock is off the high after a rare pullback and selling at a cheap price. Historically, it has less than a quarter of the volatility of the overall market. It’s a great forward-looking investment for this uncertain environment.
The end of summer is being greeted by cranky investors who see a market that has run up to new all time highs despite the risks of Covid and the election. Of course, a huge rally of this magnitude needed a breather. The pullback is normal, healthy and overdue.
It is impossible to say how far stocks will fall. But, unless there is some very bad news, I don’t expect a prolonged or deep selloff. The market is still looking ahead to a positive environment where the pandemic is fading away and the economy is quickly recovering.
In this uncertain environment, I found a rare stock. It is a company that benefits from the undeniable trend toward technological proliferation. It has solid earnings growth and stock performance. But it provides these benefits with remarkably low volatility.
The stock is off the high after a rare pullback and selling at a cheap price. Historically, it has less than a quarter of the volatility of the overall market. It’s a great forward-looking investment for this uncertain environment.
The online casino market has experienced rapid growth this year as more states legalize so-called iGaming to supplement faltering tax revenues.
Today, we are profiling a Canadian SaaS company that is trading for a “value” multiple.
This company has sticky, recurring revenue. Other characteristics include:
All the details are inside this month’s Issue. Enjoy!
This company has sticky, recurring revenue. Other characteristics include:
- Strong historic revenue growth (25% CAGR)
- Over 40% insider ownership
- strong balance sheet (a significant net cash position)
- A cheap valuation
All the details are inside this month’s Issue. Enjoy!
Current Market OutlookThere have been a growing number of yellow flags among leading growth stocks in recent months, and last week the sellers finally came out of the woodwork, causing a quick 10% top-to-bottom drop in the Nasdaq and cracking the uptrends in many leaders. Where does that leave us? Overall, the market’s intermediate-term trend remains up, though it’s getting close to the fence as most indexes test their 50-day lines. Throw in the fact that many areas are holding up OK and we don’t advise you to sell wholesale. But with decisive weakness in most leaders following huge runs (and some climactic upside activity during the past two weeks), paring back makes sense, and from here, the onus is on the bulls to step up. We’re knocking our Market Monitor down to a level 5.
This week’s list contains a bunch of names that have either avoided any major selling or have pulled back normally to support. Our Top Pick is Penn National Gaming (PENN), which looks like one of a couple of leaders in the “new” gaming boom.
| Stock Name | Price | ||
|---|---|---|---|
| AutoNation (AN) | 56.16 | ||
| Boston Beer Company (SAM) | 791.28 | ||
| Chipotle Mexican Grill (CMG) | 1299.15 | ||
| Deere & Company (DE) | 210.19 | ||
| EPAM Systems (EPAM) | 308.95 | ||
| Farfetch (FTCH) | 26.04 | ||
| Five Below (FIVE) | 122.69 | ||
| Freeport-McMoRan Inc. (FCX) | 15.72 | ||
| Nintendo Co., Ltd. (NTDOY) | 66.76 | ||
| Penn National Gaming (PENN) | 55.31 |
The long-awaited market correction has arrived, but whether it will be brief or long, shallow or deep, remains to be seen. The one thing I am sure of is that it won’t be like the previous one! In the meantime, it’s important to treat each stock on its own merits, and today that means selling our weakest, Chegg (CHGG).
As for today’s recommendation, it’s a small company thriving in the homebuilding sector, dominant in its own sub-sector. I think you’ll like it.
As for today’s recommendation, it’s a small company thriving in the homebuilding sector, dominant in its own sub-sector. I think you’ll like it.
Updates
Amid all the debate around health care, and despite the on-again-off-again repeal-and-replace effort, small-cap healthcare is still the number-one performing sector this year. Our two medical device stocks are rated Buy, and both are trading at or near 52-week highs.
Earnings season, which brings quarterly financial reports to light, has begun. Initial quarterly reports have spawned some volatile action in individual stocks. Some of the wide swings are warrantied and some aren’t. I sort through the maze and offer my advice on nine companies in the updates.
The iShares EM Fund has bolted higher since July 10, giving us a robust and unambiguous Buy signal. We have two portfolio moves tonight.
The broad market strengthened over the past week, led by a rebound in tech stocks. Other leading sectors included real estate, energy and, for a second week, materials. Utilities also rebounded, as interest rates pulled back. The only industry group that hasn’t advanced over the past five days are the financial stocks.
We seem to be experiencing a more active stock market than that of a typical summer. The adage “sell in May and go away” hasn’t seemed to fit in 2017. There’s been lots of price action among oil refiners and marketers, food retailers, steel, technology and investment companies.
On average, our portfolio rose by 3.2% this week. That pleases me because it was twice as much as the small cap index. Across our 11 positions, we have an average gain of 32%, which is 22.7% better than you’d have done if you just bought the Russell 2000 every time I recommended one of our current stocks.
Relief and a rally returned to the stock market on Wednesday, July 12, as Fed Chair Janet Yellen assured Congressional members and investors that her Federal Open Market Committee would not “normalize” interest rates by raising rates at predetermined time intervals.
Put a little money back to work. Our trend-following indicators are still bullish, and we’ve seen the Nasdaq and growth stocks show renewed strength in recent days. The market isn’t completely out of the woods, but there’s enough evidence to do a little new buying.
The broad market remains in a holding pattern. Some stocks are breaking out to new highs, but others are breaking down. The Nasdaq regained some ground this week, but the divergences between the major indexes remain. There’s no reason to panic, but we are making a couple of moves to reduce risk this week.
Just in case any of my subscribers wants to invest in energy companies, but feel bad that perhaps those companies are cheating America, there are three things I’d like to point out about ExxonMobil (XOM).
The turmoil in stock prices continued last week. The S&P 500 index declined only 0.4%, but consumer discretionary, energy and technology stocks suffered larger losses. Money flowed into several value sectors, including industrial, financial and materials stocks. Is the bull market in growth stocks over?
The iShares EM Fund has been trading mostly sideways since the middle of May, and that has kept the Emerging Markets Timer above its moving averages, but just barely. We have two portfolio moves tonight.
Alerts
Analysts expect this consulting company to grow by 16.9%, annually, over the next five years.
This semiconductor supplier beat analysts’ estimates by $0.47 last quarter.
One portfolio stock reported a great first quarter and moves from Strong Buy to Hold.
Overall, cannabis/marijuana stocks still look fine, even though the stocks were generally soft yesterday, so I’m not doing a full update, but there has been action, both good and bad, in a few stocks worth mentioning.
This e-sports company is expected to grow at a rate of more than 40% annually over the next five years.
Chefs’ Warehouse (CHEF) reported last night and the results were just fine.
One portfolio stock announced a corporate conversion, and three others reported first-quarter results.
We’re selling one-third of the shares and holding the rest of one stock in the portfolio. The move will boost the Model Portfolio’s cash position to 21%.
11 analysts have raised their EPS estimates for this investment banking firm in the last 30 days.
Two of the portfolio stocks each reported first quarter results that beat expectations.
One of our gold companies today is gaining cash from a mine sale; the other—post merger—is a previous recommendation that is now a hold.
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.