Issues
Today I am fulfilling your dreams and profiling a company that specializes in tax collection. Three cheers for taxes!
Seriously, nobody likes taxes. With the exception of state treasurers. Taxes are just one of those parts of life that you’d prefer to ignore. But if you’re a retailer you can’t do that. In fact, retailers across the U.S. - and the world for that matter – have to devote more and more attention to sales tax compliance.
That’s the big picture trend powering one company’s growth. All the details are inside this month’s Issue. And I promise, it’s going to be more interesting than you think!
Seriously, nobody likes taxes. With the exception of state treasurers. Taxes are just one of those parts of life that you’d prefer to ignore. But if you’re a retailer you can’t do that. In fact, retailers across the U.S. - and the world for that matter – have to devote more and more attention to sales tax compliance.
That’s the big picture trend powering one company’s growth. All the details are inside this month’s Issue. And I promise, it’s going to be more interesting than you think!
Investment management companies, which manage mutual funds and other investments on behalf of individuals, pensions and other clients, have fallen sharply out of favor. As contrarians, we think there is still good value in these companies.
In this issue, we cover eight managers whose weak shares offer attractive valuations and dividend yields.
In this issue, we cover eight managers whose weak shares offer attractive valuations and dividend yields.
The market has been acting in a near picture-perfect manner for the past few weeks, and we’ve responded by steadily adding to our exposure—we put 15% of our cash to work in early January, another 20% last week when our Cabot Tides turned positive, and tonight we’re adding one new (but familiar) name to the Model Portfolio, leaving us with around 35% on the sideline. There are still headwinds (like our Cabot Trend Lines being negative), so we’re not flooring the accelerator, but as the evidence has improved, we’ve grown more optimistic. Tonight’s issue goes over all our current stocks (including tonight’s new addition), and details a better way to “buy low” than most investors use.
The past month has been very profitable for investors in the sector, as stocks rallied off their December lows and climbed strongly through January, with several hitting new highs as I write. In general, I recommend that you enjoy the trend; the long-term prospects remain bright.
But short-term, there are opportunities for fine-tuning and risk reduction, and thus I have a few recommended changes in today’s issue, as well as one new addition, a company thriving in the booming CBD market.
But short-term, there are opportunities for fine-tuning and risk reduction, and thus I have a few recommended changes in today’s issue, as well as one new addition, a company thriving in the booming CBD market.
In this issue I identify a fast-growing biopharmaceutical company that will benefit as the changing population demands better healthcare than ever before. It is well established with a high dividend yield and poised in front of the wave at the cutting edge of medical innovation.
Market trends remain quite positive, and I continue to recommend that you work to get more invested. Months from now, the market will be higher.
As for today’s recommendation, it’s a dirt-cheap dividend-payer in the energy industry that may not get going right away, but downside risk looks minimal and all the fundamentals argue that it will eventually be higher.
As for today’s recommendation, it’s a dirt-cheap dividend-payer in the energy industry that may not get going right away, but downside risk looks minimal and all the fundamentals argue that it will eventually be higher.
Current Market OutlookToday’s news centered around earnings duds from a couple of big names (Caterpillar and Nvidia), causing the major indexes to take some hits. But stepping back a bit, we’re not seeing anything abnormal—since the start of last week, the major indexes have slipped 1.5% (ballpark) and most leading stocks are acting just fine. Of course, further dips in the short-term are certainly possible given that the Nasdaq ran 1,000 points from its Christmas Eve low, earnings season is revving up and most stocks have plenty of overhead to battle. Even so, the intermediate-term trend remains pointed up and, in general, the market and leading stocks continue to act how they “should” if the sellers have run out of ammo. We remain optimistic, and think many names will be good buys if we do see some more retrenchment.
Tonight’s list has a great batch of mostly growth stocks, albeit from a variety of industries. Our Top Pick is Lululemon (LULU), which, after a great six-month run and fourth-quarter correction, is showing terrific strength. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Ciena (CIEN) | 44.25 | ||
| EPAM Systems (EPAM) | 188.24 | ||
| Exact Sciences (EXAS) | 116.91 | ||
| Lululemon Athletica (LULU) | 304.69 | ||
| Mirati Therapeutics (MRTX) | 104.98 | ||
| ServiceNow (NOW) | 341.86 | ||
| Shopify (SHOP) | 585.00 | ||
| Splunk (SPLK) | 207.67 | ||
| Tencent Music Entertainment (TME) | 18.41 | ||
| Xilinx (XLNX) | 134.50 |
The Emerging Markets Timer held and slightly improved its position and is sitting right at its 50-day moving average, which is both constructive and bullish.
We would like to see a stronger uptrend before moving ahead to put much more cash to work but we do have a new recommendation from Brazil—a market that has moved up 20% in the last month.
We would like to see a stronger uptrend before moving ahead to put much more cash to work but we do have a new recommendation from Brazil—a market that has moved up 20% in the last month.
Updates
While flashier, more star-studded teams like Lionel Messi’s Argentina, Kylian Mbappe’s France and Erling Haaland’s Norway garnered most of the headlines at the just-completed World Cup, Spain was the best team. There was nothing flashy about Spain: no mega-stars, not a ton of goals, no relentless attack. Instead, they dominated the tournament with precision passing, immaculate ball control and near-impenetrable (just one goal allowed all tournament!) defense.
The market rolls sideways amidst a slew of conflicting forces.
The S&P 500 has bounced around and is at the same level it was in the middle of May. The primary culprit is technology. That sector has been in a funk. The S&P 500 is hard-pressed to generate any lasting traction while this massive sector, accounting for over 40% of the index, flounders.
The S&P 500 has bounced around and is at the same level it was in the middle of May. The primary culprit is technology. That sector has been in a funk. The S&P 500 is hard-pressed to generate any lasting traction while this massive sector, accounting for over 40% of the index, flounders.
The market has gone sideways since May. It seems to be deciding what to do.
It’s encouraging that the resumption of hostilities with Iran has not sent the market lower. It’s also positive that oil prices aren’t rising back to the $100 level earlier in the war, although prices have risen. It’s also another earnings season and analysts expect a big one.
It’s encouraging that the resumption of hostilities with Iran has not sent the market lower. It’s also positive that oil prices aren’t rising back to the $100 level earlier in the war, although prices have risen. It’s also another earnings season and analysts expect a big one.
With war being one of the most dominant themes of the last four years, it stands to reason that investors should position their portfolios to account for this conspicuous (and unwelcome) trend.
And lest one be tempted to think that the warfare theme will diminish anytime soon, last week’s article by NPR deflates that illusion: It revealed that global military conflicts are at their highest level since WWII.
And lest one be tempted to think that the warfare theme will diminish anytime soon, last week’s article by NPR deflates that illusion: It revealed that global military conflicts are at their highest level since WWII.
Price targets are standard practice on Wall Street. But sometimes, they can act as an artificial ceiling.
For example, say Truist sets a price target on an up-and-coming growth stock that’s 25% higher than its current share price. For a growth stock, a 25% return isn’t much. But then again, the stock could be a total flop, which is the natural boom-or-bust tradeoff growth investors must endure in trading off increased risk for massive upside. So, a price target on a growth stock seems almost like an unnecessary cap on a stock that has the potential to go through the roof.
For example, say Truist sets a price target on an up-and-coming growth stock that’s 25% higher than its current share price. For a growth stock, a 25% return isn’t much. But then again, the stock could be a total flop, which is the natural boom-or-bust tradeoff growth investors must endure in trading off increased risk for massive upside. So, a price target on a growth stock seems almost like an unnecessary cap on a stock that has the potential to go through the roof.
WHAT TO DO NOW: Continue to trim your sails. In the Model Portfolio, we’ve been getting closer and closer to shore as growth funds and indexes are under pressure and AI stocks cascade lower. Tonight we’re going to further trim Marvell (MRVL) given its ugly action, selling a third of what we have left. That will leave the portfolio with a big 58% cash position. We could put some of that to work if growth names find support, but we want to see key growth measures firm up before buying.
After a brief pause last week, small caps are once again leading the pack.
Through Wednesday’s close, the S&P 600 Small Cap Index is up roughly 21% year to date, compared to gains of about 15% for the S&P 400 MidCap Index, 17% for the Nasdaq and 11% for the S&P 500.
Through Wednesday’s close, the S&P 600 Small Cap Index is up roughly 21% year to date, compared to gains of about 15% for the S&P 400 MidCap Index, 17% for the Nasdaq and 11% for the S&P 500.
Its earnings season again! That’s a good thing. Earnings just might save the day in an otherwise confusing and uncertain market.
The market is causing whiplash. The Iran peace deal changed things. Stocks held back by high oil prices, and the resulting higher inflation and interest rates, reignited as oil prices came back down after the peace deal. But hostilities with Iran have resumed.
The market is causing whiplash. The Iran peace deal changed things. Stocks held back by high oil prices, and the resulting higher inflation and interest rates, reignited as oil prices came back down after the peace deal. But hostilities with Iran have resumed.
The peace deal may be on hold again. But stocks are hanging in there so far.
The ceasefire with Iran is over and hostilities have resumed. That sounds like a bigger bummer than it’s been in the market so far. Falling oil prices enabled previously beleaguered stocks to soar higher again as the prognosis for inflation and interest rates simultaneously improved. But that rally is over if oil prices spike higher again.
The ceasefire with Iran is over and hostilities have resumed. That sounds like a bigger bummer than it’s been in the market so far. Falling oil prices enabled previously beleaguered stocks to soar higher again as the prognosis for inflation and interest rates simultaneously improved. But that rally is over if oil prices spike higher again.
It’s no surprise that summer often brings lower market volatility levels as Wall Street heads to the Hamptons and participation rates diminish.
Indeed, what we’re seeing right now has all the classic symptoms of a low-participation environment, with investor sentiment being remarkably muted. This can be seen across a number of sentiment indicators for several different markets, most of which are flashing decisively “neutral” signals.
Indeed, what we’re seeing right now has all the classic symptoms of a low-participation environment, with investor sentiment being remarkably muted. This can be seen across a number of sentiment indicators for several different markets, most of which are flashing decisively “neutral” signals.
The divide between value and growth stocks is widening, as the Nasdaq is now more than 5% off its highs after peaking in early June while the Vanguard Value Index ETF (VTV) is hovering near its late-June apex and is up 3% in the last month.
That can flip in an instant, of course, as we saw in April and May. But the bottom line is that value stocks have risen 15% year to date, compared to an 11% gain in the Nasdaq and a 9.5% boost in the S&P 500.
That can flip in an instant, of course, as we saw in April and May. But the bottom line is that value stocks have risen 15% year to date, compared to an 11% gain in the Nasdaq and a 9.5% boost in the S&P 500.
After a very strong run from the March lows, the market appears to be going through an uncomfortable but healthy rotation. Many of the biggest winners from the AI and semiconductor trade have come under pressure, while value stocks, equal-weight indexes and other areas that had lagged earlier in the year have held up much better.
Alerts
This company beat analysts’ EPS estimates by $0.38 last quarter.
Our first idea is a low-priced fund whose top five holdings are UnitedHealth Group Inc (UNH, 4.97% of assets), Seagate Technology PLC (STX.SI, 2.88%), Best Buy Co Inc (BBY, 2.82%), Ross Stores Inc (ROST, 2.80%) and Metro Inc (MTRAF.TO).
This is a sell of a previous recommendation.
This is a sell of a previous recommendation.
Jim Cramer is also forecasting a “lift across the board” for home building companies, including this one.
The shares of this recently IPO’d stock have just been initiated as a ‘Buy’ at Citigroup and Jefferies, and as ‘Outperform’ at Wells Fargo.
This infrastructure company has agreed to sell its Australian mining consumables business, Donhad Pty. Ltd., (acquired in 2010) to Moly-Cop.
My research for September is complete, and my computer-generated price targets for two of our stocks will increase.
This Chinese hospitality company beat analysts’ earnings estimates by $0.12 last quarter, and eight analysts have boosted their forecasts in the past 30 days.
This beverage company is changing focus, selling its manufacturing business and reforming itself into a water, tea and coffee home/office delivery business.
One of our stocks closed below our mental stop of 58 on Friday so we’ll book our small profit today.
This consumer products company beat analysts’ estimates by a penny last quarter, posting EPS of $0.87 per share.
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.