Issues
The market continues to strengthen, and thus you should become more heavily invested; it’s possible this strength could run to the end of the year!
But predictions aren’t necessary; what’s necessary is listening to your stocks and acting accordingly.
Today, doing exactly that leads us to sell one stock, so that we can make room for today’s recommendation, a company that’s built one of the biggest brands in the world.
But predictions aren’t necessary; what’s necessary is listening to your stocks and acting accordingly.
Today, doing exactly that leads us to sell one stock, so that we can make room for today’s recommendation, a company that’s built one of the biggest brands in the world.
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.
Updates
The general market picture continues to look bright. All three of our key market timing indicators remain bullish—both the market’s intermediate- and longer-term trends are pointed up, and the broad market is in great shape, with the Two-Second Indicator continuing to record fewer than 20 new lows day after day.
The rotation into the year’s underperformers that started last week has continued, while taking on some aspects of a generic risk-on trade. Financial stocks have outperformed all others since our last update, and tech stocks are up again this week. Materials and industrials also continue to do well.
What a week! I’ve been asked a few times by friends and family members (but no subscribers, c’mon guys!) why small caps have suddenly sprung to life. Check out the one-year chart below of the S&P 600 Small Cap Index.
This is my last Weekly Update. I am retiring today after 50 years in the investment business, including 15 years writing the Cabot Benjamin Graham Value Investor.
The iShares EM Fund (EEM) has been in a downtrend since September 22, turning the Cabot Emerging Markets Timer neutral. We will continue to manage our stocks individually, but will curtail new buying and keep stocks on a shorter leash until momentum improves.
Delegates from OPEC and Russia decided last week that they will not make any decisions regarding a possible extension of oil production cuts until January. Some people expect oil production to beginning rising again in March 2018. Conversely, Iraq and Ecuador are leaning toward further production cuts.
Over the past week, small caps looked particularly good as most sectors outperformed their large-cap peers. Our asset class is now up 4% year-to-date, a vast improvement after being flat a week and a half ago.
In this Weekly Update, I summarize the latest news for the only one of our companies to report quarterly results during the past two weeks.
In the short-term, the market could be ready to rest and there’s some rotation going on, which could affect leadership. But, big picture, the intermediate- and longer-term trends are pointed up and even the broad market is returning to health.
The Dow and S&P 500 both closed at all-time highs yesterday, as the Dow notched its eighth straight day of gains. Financials were the week’s best-performing sector, as interest rates suddenly reversed direction to post big gains.
After two months of sideways trading, the three major U.S. stock market indices are rising and reaching new highs.
The market backdrop is much improved this week and small caps posted another week of encouraging action (up 2.1% over the last five sessions). The S&P 600 had that sketchy drop below the 200-day line (red line in chart) in mid-August, but the index has come back strong since.
Alerts
Here’s a fund that employs a ‘smart beta’ style to increase performance.
Investing in up markets is easy. From the December low until recently, the strong market provided a huge tailwind that sent marijuana stocks soaring—and had our portfolio, at the peak, up 57.2% year-to-date.
Five analysts have raised their earnings estimates for this biopharma in the past 30 days.
Our Cabot Tides turned negative today, telling us the intermediate-term uptrend has broken.
This semiconductor stock has recently received two analyst upgrades: from KeyBanc, to ‘Overweight’, and Goldman Sachs, to ‘Buy’.
One stock announces first-quarter results and M&A activity and moves from Strong Buy to Hold and another announces first-quarter results, a dividend decrease and an intention to separate into two companies.
Zacks Research also recently recommended this genetic information company stock based on rising sales and increasing analyst price targets.
Three stocks in the portfolio reported earnings.
One portfolio stock reports a disappointing first quarter.
This construction company beat analysts’ estimates by $0.19 last quarter, and five analysts have raised their EPS forecasts for the company in the past 30 days.
Four stocks in the portfolio reported earnings.
Portfolios
Strategy
A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.
A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.
Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.
Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.
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.