Issues
The overall market continues to look healthy—though we still haven’t yet received an “all-clear” signal from our long-term timing indicator—and our stocks, in general, continue to reward, with many hitting new highs in recent days as the economic outlook improves.
Long-term, the prospects for the economy and market have improved, but short-term, the relative elation of recent days has brought numerous growth stocks to what seem like unsustainable heights—so I’ve lowered the ratings on three of our positions to Hold, and if you’d like to take partial profits, that’s fine with me.
As for today’s recommendation, it’s a very unusual one for me. But the chart is strong and the story has some validity, so we’ll give it a shot!
Full details in the issue.
Long-term, the prospects for the economy and market have improved, but short-term, the relative elation of recent days has brought numerous growth stocks to what seem like unsustainable heights—so I’ve lowered the ratings on three of our positions to Hold, and if you’d like to take partial profits, that’s fine with me.
As for today’s recommendation, it’s a very unusual one for me. But the chart is strong and the story has some validity, so we’ll give it a shot!
Full details in the issue.
Markets have pulled back a bit over the last few days as investors hit the pause button to digest a Nasdaq in the black for 2020 while the real economy struggles to reopen. Congress begins work on the next stimulus spending bill and international stocks come under consideration, as they have not rebounded anywhere near as much as U.S. markets.
Our emerging market (EEM) momentum timer has turned positive by the slightest of margins as we replace one China idea with another.
Our emerging market (EEM) momentum timer has turned positive by the slightest of margins as we replace one China idea with another.
The market has rallied like crazy over the past seven weeks. It’s up over 30% from the low in March. The market is already looking beyond the coronavirus to a strong economic recovery.
But stocks are trading on a rosy scenario that may not come true. While the market is always difficult to predict in the near term, there is at least a good chance of disappointment going forward. The overall market may have gotten ahead of itself and it is prudent to prepare for the possibility of more turbulence ahead.
For those reasons, the Cabot Dividend Investor portfolio is only buying very selectively. While the overall market may be shaky at this point, certain companies are thriving during the pandemic. There are niches where business is actually booming.
In this issue I highlight two stocks that are selling at bargain prices, have businesses barely affected by the pandemic, and stand to thrive in the post-Covid-19 market as well.
But stocks are trading on a rosy scenario that may not come true. While the market is always difficult to predict in the near term, there is at least a good chance of disappointment going forward. The overall market may have gotten ahead of itself and it is prudent to prepare for the possibility of more turbulence ahead.
For those reasons, the Cabot Dividend Investor portfolio is only buying very selectively. While the overall market may be shaky at this point, certain companies are thriving during the pandemic. There are niches where business is actually booming.
In this issue I highlight two stocks that are selling at bargain prices, have businesses barely affected by the pandemic, and stand to thrive in the post-Covid-19 market as well.
If you have not already, I recommend that you read my Cabot Micro-Cap Insider Guide. It will help you get the most out of your Cabot Micro-Cap Insider membership, and make your investing decisions easier and more profitable. It will also explain much of the shorthand we use in Cabot Micro-Cap Insider, and explain our ratings.
If you have any questions about any of my recommendations, I encourage you to reach out to me directly at rich@cabotwealth.com.
Now let’s get into my newest recommendation: Medexus Pharmaceuticals.
If you have any questions about any of my recommendations, I encourage you to reach out to me directly at rich@cabotwealth.com.
Now let’s get into my newest recommendation: Medexus Pharmaceuticals.
From its modest beginning as an online textbook hub, this recommendation grew into a multi-pronged educational platform.
The overall market continues to look healthy—though we haven’t yet received an “all-clear” signal from our long-term trend indicator—and our stocks are certainly behaving well, with several hitting new highs and none behaving badly.
So the only sell recommendation I have today is a bit of short-term profit-taking in one of my recent recommendations—a stock that is due for a bit of a rest.
As for today’s recommendation, it’s a very well-known U.S. telecommunications company with a solid yield that has not only held up well in recent months but that has good growth prospects as the communications revolution continues.
Full details in the issue.
So the only sell recommendation I have today is a bit of short-term profit-taking in one of my recent recommendations—a stock that is due for a bit of a rest.
As for today’s recommendation, it’s a very well-known U.S. telecommunications company with a solid yield that has not only held up well in recent months but that has good growth prospects as the communications revolution continues.
Full details in the issue.
Current Market OutlookThe market performed well last week, and nothing has changed from a top-down point of view—the intermediate-term trend remains up for the major indexes and many stocks, so we remain optimistic the path of least resistance is up. That said, it’s really all about what you own: Many indexes (small- and mid-caps) and sectors (industrials, financials, transports) look OK, nothing great, but growth oriented stocks are lighting up the sky, with more big earnings-induced breakouts last week than we’ve seen in a very long time. In the near-term, these hot stocks might be a bit too hot; some potholes (or even rotation out of them and into the broad market) could certainly be on the table. But we also think that, assuming the general market holds up, the first retreats in many of these names are likely to provide solid entry points, as the fresh breakouts bode well overall. We’re moving our Market Monitor up to level 7.
This week’s list has many of last week’s most powerful gaps and a few others with solid setups and/or persistent uptrends. It was hard to settle on one, but we’ll go with Chegg (CHGG) for our Top Pick, as it just emerged from a picture-perfect consolidation on earnings.
| Stock Name | Price | ||
|---|---|---|---|
| Atlas Air Worldwide Holdings, Inc. (AAWW) | 38.45 | ||
| Atlassian (TEAM) | 182.16 | ||
| Barrick Gold (GOLD) | 27.20 | ||
| Chegg (CHGG) | 74.21 | ||
| MercadoLibre, Inc. (MELI) | 980.83 | ||
| Peloton (PTON) | 53.03 | ||
| Schrodinger, Inc. (SDGR) | 59.05 | ||
| TG Therapeutics, Inc. (TGTX) | 19.88 | ||
| Twilio (TWLO) | 183.39 | ||
| Wingstop (WING) | 121.52 |
The overall market remains mixed, with most of the market doing just OK but growth stocks acting very well, especially this week, which has brought with it a ton of powerful gaps. Divergent environments lend themselves to rotation and potholes, so we don’t think it’s a time to floor the accelerator, but we are adding one more name to the Model Portfolio tonight, leaving us with around 36% in cash.
Elsewhere in tonight’s letter, we write about the importance of being patient soon after you buy a stock, as well as some very encouraging action from our old Two-Second Indicator. We also review some enticing names and give a full view of all our stocks.
Elsewhere in tonight’s letter, we write about the importance of being patient soon after you buy a stock, as well as some very encouraging action from our old Two-Second Indicator. We also review some enticing names and give a full view of all our stocks.
Updates
The Emerging Markets Timer is still negative, although investors are edging back into the sector, moving the MSCI Emerging Markets Fund (EEM) higher over the past week. Our only portfolio move today is to buy a half position in Vale (VALE) bringing the portfolio to 40% invested.
We head into the holiday with a trimmed-back portfolio after locking in partial profits on three positions, courtesy of the Trump Bump. It feels to me like the market is ready for a modest pullback given the intense buying since the election (early trading today supports this assertion).
We don’t have any rating changes today—we’ve sold three underperforming stocks this month, so our portfolio is in fighting shape. If you’re underinvested, focus on our Buy-rated recommendations, and try to start new positions on pullbacks.
I’m excited about all of the recent price action in the stock market! For many months—or several years?—investors’ stock portfolios alternated between treading water and surviving market corrections. Finally, the markets seem to have been set free, adding bullish stock movements into the mix.
Today I move two stocks back to Buy: Aspen Aerogels (ASPN) looks like a relatively low-risk buy given a very big recent pullback, and Primo Water (PRMW) has begun to act like it should after announcing a big acquisition. Other than that, all guidance remains the same. That means we have five of our 10 stocks rated Hold.
I have recommended selling nine stocks in November because of high stock prices and a turnover in the market caused by the election of the new President, and in this update, I suggest where you should invest the proceeds of your sales. Also, three Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news during the past week.
Put a little money to work. Our Cabot Tides turned positive yesterday, so both the intermediate- and longer-term trends of the market are now pointed up. That said, there remain many crosscurrents and growth stocks are generally struggling.
I now recommend selling Pattern Energy (PEGI), a yieldco that is facing a multitude of short- and medium-term challenges, and I’m putting Pembina Pipeline (PBA) on Hold today. On the plus side, we’re sitting on a two-month, 21% gain in Prudential Financial (PRU) and are going to book some profits today, while holding the rest for further gains. Lastly, because of its recent strength, I’m putting US Bancorp (USB) back on Buy, but I recommend waiting for a pullback.
Financial stocks, as a group, are undervalued, with strong expected earnings growth, bullish price charts and prospects of upward earnings revisions as interest rates rise. Today’s Portfolio Changes: BigLots (BIG) moves to a Hold, and D.R. Horton (DHI) increased its dividend.
We’re going to reel in a few profits during this post-election stock market surge in the event the honeymoon is short-lived. Along those lines, today I recommend you sell your remaining stake in Mitek (MITK), as well as sell half your position in LeMaitre Vascular (LMAT) and NanoString (NSTG).
Fifteen Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news during the past week. I have changed my opinion on CVS Health (CVS) from Buy to Sell.
U.S. markets were mixed today after a remarkable three-day rally in the S&P 500 that began on Monday. The market is still working out the potential winners and losers implied by a Trump presidency, but having the S&P and the Dow above their 25- and 50-day moving averages is a good first step, although there’s no question the action is incredibly bifurcated.
Alerts
This speculative stock has significant insider holdings and looks very undervalued.
Crista is adding a new stock to the Buy Low Opportunities Portfolio
Analysts expect this sleep innovator to grow 31.1% this year.
There is earnings news on several of the stocks in the portfolio.
Analysts expect this chipmaker to grow 34.8% next year.
Stocks in the marijuana sector are off to a flying start this year.
One of our portfolio stocks rose 11% this morning upon a Reuters report that private equity firms Sycamore Partners and/or Apollo Global Management (APO) might announce a buyout in February.
Analysts expect this fitness company to grow at an annual rate of 28.2% over the next five years.
Analysts expect this medical data company to grow at an annual rate of 30% over the next five years.
This software company beat analysts’ estimates by $0.05 last quarter, and Wall Street expects it to grow 45.5% next year.
The market appears to have firmed up a little over the last week.
This bank beat earnings estimates by $0.16 last quarter, 14 analysts have recently raised their EPS estimates for the company, and coverage of its shares was just initiated at Barclays with an ‘Overweight’ rating.
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.