Issues
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January was another good month for the Cabot Profit Booster portfolio as we closed our two positions for profits:
Current Market OutlookSellers finally landed a few punches last week, with many tech-related growth stocks finding resistance and the big-cap indexes losing a little ground. Given the big run of late, lots of speculation and signs of greed, we have our antennae up for abnormal weakness—but so far, there hasn’t been much (if any), with the pullbacks in the indexes and individual stocks appearing normal and other timing indicators (number of new lows, etc.) looking fine. In fact, some solid entry points could appear with a bit more weakness! We are seeing continuing rotation into more cyclical areas and out of some growth names, but the trends of just about all indexes and leaders are up, so we remain mostly bullish.
This week’s list has stocks from many different nooks and crannies of the market. Our Top Pick is Guardant Health (GH), from the strong medical area, as it’s come under major accumulation this year. It’s a bit extended so start small and/or aim for dips.
| Stock Name | Price | ||
|---|---|---|---|
| Cimarex Energy (XEC) | 49.1 | ||
| Enterprise Products Partners L.P. (EPD) | 23.3 | ||
| Farfetch (FTCH) | 58.8 | ||
| Guardant Health (GH) | 160.0 | ||
| Halozyme Therapeutics (HALO) | 48.3 | ||
| Shake Shack (SHAK) | 111.7 | ||
| Sonos (SONO) | 27.0 | ||
| TG Therapeutics, Inc. (TGTX) | 50.2 | ||
| The Timken Company (TKR) | 85.0 | ||
| Upwork (UPWK) | 40.7 |
The market’s main trend remains up, and thus I continue to recommend that you be heavily invested.
At the same time, it’s important (as ever) to monitor your individual stocks and prune any from your portfolio that no longer deserve to be there. In our portfolio, Berkeley Lights (BLI) is being pruned this week, for a small loss.
As for today’s recommendation, it’s a fast-growing consumer streaming service that came public in 2018 and has hit new highs recently—and you may be familiar with it.
At the same time, it’s important (as ever) to monitor your individual stocks and prune any from your portfolio that no longer deserve to be there. In our portfolio, Berkeley Lights (BLI) is being pruned this week, for a small loss.
As for today’s recommendation, it’s a fast-growing consumer streaming service that came public in 2018 and has hit new highs recently—and you may be familiar with it.
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The market remains very strong, with the trends of the major indexes and the vast majority of stocks pointed up, both of which keeps us mostly bullish. But really, we’re looking at things mainly on a stock-by-stock basis now; some names are extremely extended and vulnerable to air pockets, while others are just a few weeks into what look like new, sustained advance. With that in mind, we’re actually taking partial profits on one stock today, while averaging up in another — all in all, we’ll still be around 18% in cash.
Elsewhere in tonight’s issue, we write about some of our favorite cookie-cutter stories out there at the moment; we own one great one, but we’d like to have another. And we also review all our stocks, present some new ideas and talk a bit how to handle the speculative, super-hot names in the proper fashion.
Elsewhere in tonight’s issue, we write about some of our favorite cookie-cutter stories out there at the moment; we own one great one, but we’d like to have another. And we also review all our stocks, present some new ideas and talk a bit how to handle the speculative, super-hot names in the proper fashion.
Today, we are recommending a leading app developer.
The stock is near a 52 week high, but I think there is ~50% additional upside over the next year.
This company’s characteristics include:
•85% revenue growing in its most recent quarter
•A reasonable valuation (P/E of 19x annualized earnings)
•Company insiders own over 12% of shares outstanding
•Recent insider buying
All the details are inside this month’s Issue. Enjoy!
The stock is near a 52 week high, but I think there is ~50% additional upside over the next year.
This company’s characteristics include:
•85% revenue growing in its most recent quarter
•A reasonable valuation (P/E of 19x annualized earnings)
•Company insiders own over 12% of shares outstanding
•Recent insider buying
All the details are inside this month’s Issue. Enjoy!
Beyond the incessant trumpeting of current events by every orifice of the media, a future awaits. And it’s right around the bend. Beneath the current noise, tectonic plates are moving below the surface, and the world is changing.
Identifying these underlying shifts is a great way to find winning investments. And there is a particular shift that is affecting the market far more than any other, the rapid pace of technological advancement. It is the greatest force driving the market and its dominance is likely to grow.
When investors focus on the world beyond the virus and the elections they will ask what’s next. What is next for the market is what is next for technology. And 5G is central to that discussion.
5G will drive the next phase of technological innovation and launch the world into a new digital age. In this month’s issue, I highlight a major player in the technology space that will benefit directly and massively from the rollout. It’s still cheap, pays a good dividend and is on the cusp of an epic year.
Identifying these underlying shifts is a great way to find winning investments. And there is a particular shift that is affecting the market far more than any other, the rapid pace of technological advancement. It is the greatest force driving the market and its dominance is likely to grow.
When investors focus on the world beyond the virus and the elections they will ask what’s next. What is next for the market is what is next for technology. And 5G is central to that discussion.
5G will drive the next phase of technological innovation and launch the world into a new digital age. In this month’s issue, I highlight a major player in the technology space that will benefit directly and massively from the rollout. It’s still cheap, pays a good dividend and is on the cusp of an epic year.
This week, Cabot Profit Booster features a top new-economy recommendation in the fast-growing social media space whose stock is just short of its all-time high.
Current Market OutlookThe first week of the year was extremely volatile, but all in all the action ended up positive, with major indexes kissing fresh all-time highs and many leading stocks ending up nicely on the week. Overall, then, not much has changed—the primary evidence remains positive, so we’re content to ride things higher, but there’s little doubt the environment is hot and heavy (basically the opposite of what we saw 10 months ago), so you should continue to keep your feet on the ground (trail stops, take partial profits when available) and be discerning with your buys (aiming to enter after a bit of rest or some sharp shakeouts to support areas).
Because of this, most of our buy ranges are a bit below current prices (looking for pullbacks), though we still see some solid setups. One is Snap (SNAP), which is a clear leader in the internet space and has just returned to its highs after its first test of the 10-week line since its October blastoff.
| Stock Name | Price | ||
|---|---|---|---|
| 8x8, Inc. (EGHT) | 35.5 | ||
| LPL Financial Holdings (LPLA) | 116.8 | ||
| The Mosaic Company (MOS) | 26.8 | ||
| Palo Alto Networks (PANW) | 364.6 | ||
| Progyny (PGNY) | 44.9 | ||
| Snap Inc. (SNAP) | 54.4 | ||
| Spotify (SPOT) | 344.2 | ||
| Sunrun (RUN) | 95.8 | ||
| Vale S.A. (VALE) | 18.6 | ||
| Zillow (Z) | 143.2 |
Updates
Raise a little cash. Today’s huge selling wave in growth stocks isn’t the end of the world, as the trends of the major indexes and most leading stocks is still up. Thus, it’s vital to take things on a stock-by-stock basis, selling those that are raising red flags and holding (or buying) those that are dipping normally.
After a dismal airline profit situation in 2017, in which only two of the 10 U.S. airlines in today’s research saw a profit increase, the industry is looking forward to a decisive turnaround in 2018. One company’s numbers will soar above all its peers. That stock is joining the Growth Portfolio today.
The iShares EM Fund (EEM) has rebounded sharply and is well above both its 25- and 50-day moving average. That keeps the Buy signal in the Cabot Emerging Markets Timer shining brightly. We have one rating change tonight.
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.
Alerts
The market was hit hard again today as investors continued to discount a protracted trade war between China and the U.S., with fears of slowing growth bringing out the sellers.
Abercrombie & Fitch (ANF) reports first-quarter 2019 results.
This railroad company beat analysts’ estimates by $0.11 last quarter, and 26 analysts have raised their EPS forecasts for the company in the past 30 days.
This Indian bank is expected to grow at an annual rate of 37.6% over the next five years.
This semiconductor industry supplier is forecasted to grow at an annual rate of 115.28% over the next five years.
The earnings estimates for this wireless tower REIT were recently raised by 13 analysts.
The market’s larger, longer-term trend remains up, and the odds are that the market will be higher later this year. But short-term, the market remains in a correction, and marijuana stocks, as a whole, are not fighting the trend.
This health insurer beat analysts’ earnings estimates by $0.22 last quarter.
Today, we are recommending the purchase of a semiconductor equipment company and selling two previous ideas.
This global technology fund is benefiting from doubled-digit returns in many of its holdings.
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 Momentum 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 Momentum Trader features.