Issues
Despite the fact that the market indexes have come roaring back near the old highs, many stocks are still cheap. Cheap dividend stocks have created some of the highest yields in a decade. While there is great opportunity, it’s not as easy as it might seem.
There is also great risk. In most cases, stock prices have fallen because the coronavirus lockdown has seriously hurt business. The financial pain is yet to be realized. Many of these high-yielding stocks will be forced to cut the dividend to free up much needed cash.
It is only those rare cheap, high-yielding stocks with safe dividends that offer great opportunity for dividend investors in this market. In this issue I highlight one of the very best. It is one of the best high-yield opportunities in a decade.
There is also great risk. In most cases, stock prices have fallen because the coronavirus lockdown has seriously hurt business. The financial pain is yet to be realized. Many of these high-yielding stocks will be forced to cut the dividend to free up much needed cash.
It is only those rare cheap, high-yielding stocks with safe dividends that offer great opportunity for dividend investors in this market. In this issue I highlight one of the very best. It is one of the best high-yield opportunities in a decade.
This week, we profile an under-the-radar podcast hosting company in secular growth that is about to announce the results of a strategic review.
Our micro-cap recommendations have performed well in aggregate. Nonetheless, I believe my open BUY recommendations remain significantly undervalued as they have been left behind in this surging market.
Micro caps don’t benefit from passive investing as they are not owned by any indexes or ETFs. Nonetheless, the historical performance (~18% annual CAGR) of micro caps speaks for itself.
If we continue to patiently buy undervalued micro caps, we should do quite well over time.
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.
Our monthly member call will take place this Thursday, June 11, 2020 at 2 p.m. ET. We will review all open recommendations and answer subscriber questions. You can register here.
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.
Our micro-cap recommendations have performed well in aggregate. Nonetheless, I believe my open BUY recommendations remain significantly undervalued as they have been left behind in this surging market.
Micro caps don’t benefit from passive investing as they are not owned by any indexes or ETFs. Nonetheless, the historical performance (~18% annual CAGR) of micro caps speaks for itself.
If we continue to patiently buy undervalued micro caps, we should do quite well over time.
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.
Our monthly member call will take place this Thursday, June 11, 2020 at 2 p.m. ET. We will review all open recommendations and answer subscriber questions. You can register here.
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.
Today’s Covered Call idea is a recent earnings winner that broke out to new highs last week, and has pulled back in marginally early this week.
Current Market OutlookFrom a top-down perspective, there’s not much to complain about when it comes to the current market—the intermediate-term trend of the major indexes is firmly pointed up, and the broad market has come alive in a big way, with two major blastoff indicators turning green in the past two weeks. Thus, for the overall market, the outlook is mostly sunny, though there’s always the chance of a passing shower. However, leading growth stocks are now on the run a little bit; it’s been two weeks of on-and-off selling, and many are beginning to approach key support areas. As we’ve written lately, the good news is that breakdowns have been few and far between; the pullbacks have been normal thus far, but the next few days should be telling to see if growth names are in for a deeper retreat or whether everything can get in gear with the broad market on the upside.
As you’d expect, this week’s list is heavier in names that have more recently come to life, including a few cyclical-related names. Our Top Pick is Autodesk (ADSK), a growth-y name that should also get a boost from the economic recovery, and the stock has leapt nicely to new highs.
| Stock Name | Price | ||
|---|---|---|---|
| ASML Holding (ASML) | 350.01 | ||
| Autodesk (ADSK) | 229.00 | ||
| Carrier Global Corporation (CARR) | 26.23 | ||
| Datadog (DDOG) | 81.52 | ||
| Elastic (ESTC) | 86.17 | ||
| Marvell Technology Group (MRVL) | 36.88 | ||
| Square, Inc. (SQ) | 91.04 | ||
| Thor Industries (THO) | 104.76 | ||
| Trade Desk (TTD) | 468.02 | ||
| Trex Company (TREX) | 117.56 |
Eleven weeks off the market bottom, with the S&P 500 up 45% from its low, the news is finally getting good—which to me says that short-term, investing in stocks is likely to become a bit more challenging. That’s one reason I’m recommending selling two stocks today—and putting another two on hold.
Long-term, however, the future remains bright, especially for companies like the one featured today, which are serving global mass markets with products that they’re (literally) hungry for.
Full details in the issue.
Long-term, however, the future remains bright, especially for companies like the one featured today, which are serving global mass markets with products that they’re (literally) hungry for.
Full details in the issue.
The evidence for the overall market continues to improve; over the past week, two blastoff indicators have turned green, which should bode well when looking out over the next few months. Growth stocks, however, remain in a consolidation phase following some huge runs, with many (not all) stocks sagging back during the past week or two. Overall, though, the pullbacks have been normal, so we remain optimistic, though we’re still stepping slowly and looking for decent entry points.
In tonight’s issue, we’re doing a touch more buying, filling out a position in one of our stocks, following the addition of a full position last week. That will leave us with around 18% in cash.
In tonight’s issue, we’re doing a touch more buying, filling out a position in one of our stocks, following the addition of a full position last week. That will leave us with around 18% in cash.
Today we’re breaking into a familiar market by going back to the insurance industry.
But today’s addition is very different from our other rapid growth insurance companies in a major way (as you’ll soon see!).
The stock is acting strong and the fundamentals remain great, despite COVID-19.
All the details are inside this month’s Issue. Enjoy!
But today’s addition is very different from our other rapid growth insurance companies in a major way (as you’ll soon see!).
The stock is acting strong and the fundamentals remain great, despite COVID-19.
All the details are inside this month’s Issue. Enjoy!
Three of today’s featured companies seem most obviously ready to begin or continue run-ups in the coming days. The fourth featured company is sitting at the bottom of a steady trading range, offering attractive opportunities for growth investors, dividend investors and traders.
U.S. stock markets are rising again. At some point in the coming months, the sober reality of the country’s economic situation will impact the stock market, but for now, there’s money to be made. Energy stocks and stocks within the investment, life insurance and annuity industry look especially bullish right now.
U.S. stock markets are rising again. At some point in the coming months, the sober reality of the country’s economic situation will impact the stock market, but for now, there’s money to be made. Energy stocks and stocks within the investment, life insurance and annuity industry look especially bullish right now.
Precious metal stocks have become mixed of late as economic optimism has increased, but some are still strong, and today’s recommendation is one of them.
Current Market OutlookLast week saw some vicious rotation early in the week, with the super-strong growth names coming down to earth while money gushed into cyclical sectors, but the leaders stabilized as the week wore on and the broad market remains positive, too. From a big-picture perspective, the 90% Blastoff signal last week (90% of NYSE stocks above their 50-day lines) bodes well for the overall market, and the fact that few (if any) leading stocks have cracked is a good sign. All in all, further potholes, rotations and shakeouts are relatively likely given the big run over the past two months and the divergent environment, but until proven otherwise, we continue to think the path of least resistance is pointed up. We’re moving our Market Monitor up another notch to a level 8.
This week’s list has a good mix of setups, with some recent earnings winners, some that have pulled back and others that are in persistent uptrends. Our Top Pick is Arconic (ARNC), which is one of the few cyclical stocks to appear in Top Ten since the uptrend got underway.
| Stock Name | Price | ||
|---|---|---|---|
| Adaptive Biotechnologies Corporation (ADPT) | 39.41 | ||
| Arconic (ARNC) | 17.00 | ||
| Bill.com Holdings (BILL) | 88.76 | ||
| Dynatrace (DT) | 36.59 | ||
| II-VI Incorporated (IIVI) | 48.64 | ||
| LiveRamp Holdings (RAMP) | 46.54 | ||
| Pan American Silver (PAAS) | 27.28 | ||
| Seattle Genetics (SGEN) | 150.85 | ||
| Tractor Supply Company (TSCO) | 122.24 | ||
| Zscaler (ZS) | 126.22 |
Updates
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.
While today brings an unexpected new political reality, markets around the world are already adjusting to the new order.
The reality is, there are so many undervalued stocks right now that I have to fight the urge to add another dozen to the Cabot Undervalued Stocks Advisor portfolios.
Fourteen Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news.
Remain cautious! The sellers continue to have the upper hand with the major indexes and most stocks. You should be holding plenty of cash (and some resilient stocks) while waiting for the bulls to retake control.
Alerts
We all saw U.S. stock markets exhibit exuberance on December 3 and then fear on December 4. I anticipate another strong upward move during the remainder of this week.
This old favorite and new punching bag offers turnaround potential for adventurous investors.
Our second recommendation is a sale based on sector downturn.
In the past 30 days, seven analysts have raised their EPS forecasts for our first idea today, a power services company.
Just a quick update on two of our positions and a bit of an educational component by using the strategy of averaging up, rather than averaging down.
This cutting-edge tech company’s earnings estimates were recently increased by 6 analysts who expect the company to grow 39.6% next year.
Here’s an update on five of our stocks in the portfolio.
The dividend is growing for this shipping company, and with the holiday season is full swing, analysts are expecting the company to grow 25.8% this quarter.
The market was relatively quiet today, with the Dow down 28 points and the Nasdaq down 19 as investors looked for news and rumors about the G20 economic summit this weekend.
Analysts expect this technology company to grow 18.8% annually for the next five years.
This tech company beat earnings estimates by $0.06 last quarter, but an announced acquisition caused shares to tumble a bit, creating a buying opportunity.
This technology company is forecasted to grow its earnings at an annual rate of 30% over the next five years.
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.