Issues
Extreme sector rotation has been the story of the last week as red-hot growth sectors came under some pressure, while out of favor value stocks finally found some buying. This is a fine situation for our diversified portfolio as we are selling expensive calls that help offset any short-term stock/sector weakness. This brings me to our pick of the week, which is in a red-hot sector and recently reported very strong earnings.
Current Market OutlookAfter an impressive four-month rebound, many investors are nervously expecting the return of volatility during earnings season. But despite some recent choppiness among the leading stocks, the market remains largely unperturbed. Growth stocks are holding up well, while the major indices remain above their key trend lines. And while there are signs lately of increased demand in defensive areas of the market (like consumer staples and precious metals mining), the more aggressive segments remain strong. Finally, a healthy number of stocks are still making new 52-week highs on both major exchanges (especially the NYSE), while new lows have been remarkably sparse. All of this tells us that the intermediate-term trend still favors the bulls. While volatility may yet rear its head, we’ll continue to follow the weight of evidence.
This week’s list contains a nice mix of some of today’s leading themes: healthcare, internet, real estate/home improvement and education. Our Top Pick is Owens & Minor (OMI), which has a solid story and has broken out of an extended base on more than 10 times normal volume.
| Stock Name | Price | ||
|---|---|---|---|
| Farfetch (FTCH) | 26.23 | ||
| Floor & Décor (FND) | 68.03 | ||
| GSX Techedu (GSX) | 97.59 | ||
| Invitae (NVTA) | 32.06 | ||
| Meritage Homes (MTH) | 102.20 | ||
| Owens & Minor (OMI) | 17.01 | ||
| SailPoint Technologies (SAIL) | 31.60 | ||
| Sea Limited (SE) | 132.86 | ||
| Watsco (WSO) | 237.50 | ||
| Wix.com (WIX) | 302.53 |
The market remains in good health and trending higher, though as always, fine-tuning of your portfolio is required to continue to stay in the right stocks.
This week, that means selling two stocks (SLQT and VRTX), as well as upgrading one (ZM) to buy.
As for the new recommendation, it’s tailor-made for investors looking to maximize income from dividends (it pays a 7.3% yield) and get capital appreciation potential too.
Full details in the issue.
This week, that means selling two stocks (SLQT and VRTX), as well as upgrading one (ZM) to buy.
As for the new recommendation, it’s tailor-made for investors looking to maximize income from dividends (it pays a 7.3% yield) and get capital appreciation potential too.
Full details in the issue.
Tesla shares have more than tripled this year as the company delivered a net profit yesterday, marking its fourth consecutive profitable quarter for the first time in its history. Alibaba connected Ant Group announced a mega IPO in Shanghai and Hong Kong.
These two companies dominated the news as investors looked past the upsurge in the pandemic, rising tensions in U.S.-China relations and wrangling in Washington over another shot of stimulus to jump start the economy. Today we highlight a recommendation that was previously in the Explorer portfolio but has moved only modestly from March lows despite a very innovative approach to cancer treatment.
These two companies dominated the news as investors looked past the upsurge in the pandemic, rising tensions in U.S.-China relations and wrangling in Washington over another shot of stimulus to jump start the economy. Today we highlight a recommendation that was previously in the Explorer portfolio but has moved only modestly from March lows despite a very innovative approach to cancer treatment.
In anticipation of a booming economy in the months and quarters ahead, the stock market has rallied within a whisker of all time highs. But certain individual stocks and sectors are still languishing despite the index performance. It is among these stocks where great value and high yield can still be found.
In this issue I highlight one of the best banks in the country at a historically low price as the sector struggles. But the bank has remained solidly profitable through the horrible economy in the second quarter, and the stock will benefit as the recovery gains traction. It currently offers a great income opportunity with a high yield and getting high call premiums as the market anticipates better days ahead.
In this issue I highlight one of the best banks in the country at a historically low price as the sector struggles. But the bank has remained solidly profitable through the horrible economy in the second quarter, and the stock will benefit as the recovery gains traction. It currently offers a great income opportunity with a high yield and getting high call premiums as the market anticipates better days ahead.
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While we’re not normally fans of very low-priced stocks (you usually get what you pay for in the market), today’s recommendation has been around for a while, is liquid and is just beginning what looks like a multi-year growth wave thanks to two big drivers.
Current Market OutlookGrowth stocks suffered another shot across the bow last Monday, and for the next three days, most didn’t bounce much. But last Friday and today’s action was far more encouraging, with leading stocks rebounding nicely and the broad market doing decently, too. Of course, we never put too much emphasis on just a day or two; the market wasn’t hanging by a thread before the latest bounce (the trends of the indexes and leading stocks were up), and today’s action doesn’t necessarily mean it’s up and away from here, either. In fact, with earnings season coming up, we still think focusing on the right stocks and looking for relatively lower-risk entries is your best bet. But until proven otherwise, most of the rubber-meets-the-road evidence remains bullish, so you should, too.
This week’s list has a broad mix of cyclical and growth issues to choose from. For our Top Pick, we’re going a bit speculative—Plug Power (PLUG) is low priced, but very liquid, and the recent pattern (huge-volume rally, controlled pullback) looks very tempting.
| Stock Name | Price | ||
|---|---|---|---|
| ANGI Homeservices Inc. (ANGI) | 14.81 | ||
| Arconic (ARNC) | 17.00 | ||
| Bloom Energy (BE) | 16.22 | ||
| Carrier Global Corporation (CARR) | 26.23 | ||
| D. R. Horton (DHI) | 66.55 | ||
| GDS Holdings Limited (GDS) | 80.15 | ||
| Plug Power (PLUG) | 8.35 | ||
| Saia Inc. (SAIA) | 129.19 | ||
| Spotify (SPOT) | 272.82 | ||
| Vapotherm (VAPO) | 48.53 |
The market remains in good health and trending higher, though the rotation out of the leading Nasdaq glamour stocks may have further to go—or may be just a false alarm.
In any case, it’s the stocks YOU own that matter, and if you’ve been choosing from our portfolio, you’ve been doing pretty well!
Today’s recommendation is a well-known and well-run company in the apparel business that should benefit from the trend toward more casual clothing. And according to our Cabot expert, it’s undervalued!
As for the current portfolio, there are two changes, a sell recommendation for Beyond Meat (BYND), which has lost momentum and a move to hold for Big Lots (BIG).
Full details in the issue.
In any case, it’s the stocks YOU own that matter, and if you’ve been choosing from our portfolio, you’ve been doing pretty well!
Today’s recommendation is a well-known and well-run company in the apparel business that should benefit from the trend toward more casual clothing. And according to our Cabot expert, it’s undervalued!
As for the current portfolio, there are two changes, a sell recommendation for Beyond Meat (BYND), which has lost momentum and a move to hold for Big Lots (BIG).
Full details in the issue.
Updates
The Emerging Markets Timer continues to flash a buy signal, although the iShares Emerging Markets Fund (EEM) has weakened somewhat. We have one change in the portfolio today.
A few wobbles finally appeared in the stock market last week, as overextended growth and momentum stocks took a well-deserved rest. Most other names remain healthy though, and most of our portfolio holdings are in consolidation mode at or near their highs.
The stock market is still showing a lot of strength, despite an approximate 4% run-up since a breakout in mid-January. It’s perfectly normal for stock markets to rise and to have pullbacks. However, I don’t see the stock charts signaling an imminent pullback so be prepared for more near-term capital gains.
There’s been some softening in the broad market this past week and yesterday’s action looked a little erratic to me. By the time the market closed yesterday, small caps were down less than 1%. But they traded in a wide range.
I include summaries for 15 Cabot Benjamin Graham Value Investor companies that have reported quarterly financial results or other noteworthy news during the past week.
Our market timing indicators remain bullish, and while a short-term pullback is always possible, the odds favor higher prices down the road. For individual stocks, the goal is to hold your winning stocks while rotating out of any stocks that crack support.
Last week, Mattel (MAT) introduced a boy doll named Logan to its American Girl product line. I can’t say that the doll will change much at Mattel’s bottom line, but it will certainly bring attention to the company.
Two of our positions reported this week. One was up over 8% the day after reporting. And the other is up nicely in early trade today after reporting yesterday.
I include summaries of 10 Cabot Benjamin Graham Value Investor companies that have reported quarterly financial results or other noteworthy news during the past week. I also report on the sectors of the economy that are likely to benefit from economic and political changes in 2017 and 2018.
The Emerging Markets Timer continues to flash a buy signal, as the iShares Emerging Markets Fund (EEM) has been sprinting away from its moving averages. We are responding by returning one stock to a Buy rating and initiating a half position in another.
The market is healthy and investors should be bullish. For our part, we’re putting one stock back on Buy today. Investors looking to put money to work should also consider these five stocks, which all look healthy and strong today.
Today’s portfolio changes: Archer Daniels Midland (ADM) moves from Strong Buy to Buy, Boise Cascade (BCC) moves from Buy to Hold and Tesoro (TSO) moves from Hold to Buy.
Alerts
Two of our stocks move from Hold to Buy in advance of tomorrow’s earnings releases.
Our first idea is a company that is expected to grow more than 20% next year, and we are taking profits on our sale recommendation.
This homebuilder will announce earnings on February 26.
One of our stocks reported a strong earnings beat and another joins the Buy Low Opportunities Portfolio as a Strong Buy.
Our first idea today is taking advantage of the low-P/E bank stocks, and our second idea is a sell recommendation.
Marijuana is still far from universally accepted, and until it is, the sector will continue to have great growth potential. That’s how investing works.
As I mentioned in yesterday’s Weekly Update, I am generally waiting for the stock market’s first pullback, during this recovery from the fourth-quarter 2018 stock market correction, before moving many good stocks from Hold to Buy recommendations. However, today’s news on this stock is so good that the odds of a significant pullback have all but disappeared.
Coverage of the shares of this software company have recently been initiated at Deutsche Bank and Stifel Nicolaus, with a ‘Buy’ rating.
Shares of this apparel company were recently upgraded to ‘Buy’ at Stifel Nicolaus.
Crista is making several rating changes today.
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.