Issues
The past three weeks have gone about as well as anyone could have hoped (assuming you’re a bull), with three main positive things. First and foremost, the major indexes have rallied enough to quickly flip the intermediate-term trend back up. Second, the upmove has been both broad (most stocks and sectors have rallied, with the rotation of 2021 taking a back seat for now) and coming during a spate of worrisome news (hyperinflation!). And third has been the action of leading stocks (especially growth stocks), many of which have been lighting up the sky. It’s not all peaches and cream, with earnings season set to really pick up steam, and that can always change a stock’s positioning. Thus, you shouldn’t throw caution to the wind, but you also shouldn’t ignore the shift in the evidence—we’ll keep our Market Monitor at a level 7 today but could hike it if we start seeing some bullish earnings gaps.
This week’s list has something for everyone, from small growth stocks to good-sized commodity plays that are seeing earnings boom. But we’re going with an oldie-but-goodie for our Top Pick: Netflix (NFLX), which isn’t the young buck it once was, but business is doing great and the stock is picking up steam after breaking out from a year-long base.
| Stock Name | Price | |
|---|---|---|
| Arch Coal (ARCH) | 97 | |
| Ford Motor Co. (F) | 16 | |
| KKR & Co. Inc. (KKR) | 75 | |
| Marathon Oil (MRO) | 17 | |
| monday.com Ltd. (MNDY) | 383 | |
| MongoDB (MDB) | 519 | |
| Netflix, Inc. (NFLX) | 672 | |
| SiteOne Landscape Supply (SITE) | 228 | |
| Tandem Diabetes (TNDM) | 129 | |
| United Rentals, Inc. (URI) | 366 |
The market’s nascent bounce two weeks ago has morphed into a very impressive rally, led by a gaggle of growth stocks that are acting better than they have since late last year and early 2021. We’re not completely out of the woods, and earnings season can always throw a wrench into things, but there’s no question the evidence has improved. We’re putting some more money to work tonight, averaging up in one name and adding a familiar face back to the portfolio as well.
In the October Issue of Cabot Early Opportunities we continue to snap up shares of high-growth software stocks, while adding a couple of consistent growers in the landscaping and waste management arenas to round out our market exposure.
Enjoy!
Enjoy!
Greentech’s made some modest strides the past week and is indicating some bullishness for the first time in three months. There’s still some work to be done to shake the bears loose, but we’re encouraged by recent action. We still believe the market is weighed down by a lack of progress on the proposed infrastructure and long-term spending bills. We’ve said a few times recent history shows clean energy doesn’t need Federal support to thrive, but the promise of still-murky regulatory action has investors wary of making commitments.
Before we dive too deep into this week’s idea I have decided to sell our PureStorage (PSTG) stock position, which will leave us without a stock or option positions, as the stock has not been participating in the recent market rally. This could prove to be a mistake, but I would prefer to lock in our small profit, while at the same time raise some cash for upcoming trades.
Moving on …
The market added to recent gains last week, as the S&P 500 had its best week since July. The S&P 500 rose 1.8%, the Dow climbed 1.6%, and the Nasdaq added 2.2%.
The rally came on the back of better-than-expected earnings from several well-known stocks. The big banks dominated the earnings calendar and the sector’s pandemic-era trading boom fueled the continued bullishness.
Moving on …
The market added to recent gains last week, as the S&P 500 had its best week since July. The S&P 500 rose 1.8%, the Dow climbed 1.6%, and the Nasdaq added 2.2%.
The rally came on the back of better-than-expected earnings from several well-known stocks. The big banks dominated the earnings calendar and the sector’s pandemic-era trading boom fueled the continued bullishness.
Markets rallied strongly last week, with growth stocks in particular showing strength, so the odds are improving that the recent correction is over and new highs are ahead. If so, today’s recommendation of a data-warehousing company will likely thrive.
As for selling, I have no recommendations today, just one downgrade to hold. And I’ll be following Tesla carefully, reading the quarterly report on Wednesday, and watching the stock’s reaction.
Details inside.
As for selling, I have no recommendations today, just one downgrade to hold. And I’ll be following Tesla carefully, reading the quarterly report on Wednesday, and watching the stock’s reaction.
Details inside.
This year has been about as choppy and tricky as we can remember, so nothing the market would throw at us from here would come as a surprise. That said, there’s no question the snapback of the past couple of weeks has been very encouraging—the major indexes have rebounded beautifully, with many regaining their 50-day lines, and individual stocks (especially growth stocks) have done great, with more and more moving back to (or out above) their prior highs. We also like that the bounce has been broad, with the on-again, off-again, rotational action taking a backseat to outright buying. Obviously, the market isn’t totally out of the woods, as most indexes are still range-bound and earnings season is upon us, which will often change the trajectory of things. But we always go with what we see, and the odds are increasing that the September/early October correction is over. We’re moving our Market Monitor back up to a level 7, and could go higher than that if the good vibes continues.
This week’s list represents the broad advance of late, with stocks of all different spots and stripes making the cut. Our Top Pick is Zscaler (ZS), which has lifted to new price and relative performance highs after a six-week pullback.
| Stock Name | Price | ||
|---|---|---|---|
| Atlassian (TEAM) | 415 | ||
| Cameco Corporation (CCJ) | 26 | ||
| Continental Resources (CLR) | 52 | ||
| Datadog (DDOG) | 157 | ||
| MGM Resorts (MGM) | 48 | ||
| Range Resources (RRC) | 24 | ||
| Snowflake (SNOW) | 338 | ||
| Tesla, Inc. (TSLA) | 870 | ||
| XENE (XENE) | 31 | ||
| Zscaler (ZS) | 301 |
In a market facing inflation, a Taiwan potential takeover, rising oil prices, Explorer stocks had a good week, especially Cloudfare (NET), up twenty points for the week and Sea (SE) is back up to 350, up 7% yesterday. We need to remain confident and my pick today is a niche player in corporate aviation markets.
Updates
The news media continues to whip investors into a frenzy over the direction of interest rates. Depending on where you look, you can find knowledgeable financial pundits making the case for steady, unchanging interest rates or for the Fed to lower the fed funds rate in July.
The S&P 500 is at new all time highs as I write this. We have a market that wants to go higher, but it just keeps getting interrupted with negative headlines. It seems like we can’t get through a week without bad trade news or signs of a weakening global economy that prevents the market from taking off.
The G-20 meetings in Japan yielded only incremental progress. This was grudgingly accepted as a positive by markets with most emerging market stocks getting a boost as we headed into a slow and short week.
Not surprisingly, this week wasn’t a great one for our portfolio. I had a feeling the party was winding down last week, when we had an average gain of 105% going and had just seen our stocks pop an average of 6% over five days.
Lean bullish. The market’s evidence remains mostly positive, though the action of growth stocks over the past two weeks has been less than stellar. But when looking at the overall market, we see more positive vibes than negative ones.
Last week’s much-awaited pronouncement by the Federal Open Market Committee (FOMC) turned out to be a big “nothing burger.” I did not personally expect a cut in the fed funds rate.
This was another one of those weeks where you look at what the S&P 500 did—up 1.5% to a 52-week high—and you look at what the S&P 600 Small Cap Index did—up 1% to 945 and back above its 50-day line, but well off its 2019 high of 994 (let alone its 52-week high of 1,100) and you think the big picture is pretty good, but this still isn’t a broad-based market rally.
Emerging markets got a boost this week as it appears that there will be a high level meeting between the U.S. and China at the upcoming G-20 meeting.
The FOMC is meeting this week and investors can hardly contain their euphoric bliss. In-the-know pundits are already factoring in a rate cut next month and more before the end of the year. The market rallied strongly yesterday as it salivated over the prospect.
All across America, but especially in the Northeast and the Midwest, Boomers will be putting their homes up for sale, and often leaving those areas for warmer climates.
With the market having come back strong since its swift retreat in early June the immediate threat of a larger correction has diminished. The S&P 500 index is back above its 50-day line and within a couple percentage points of its all-time high.
Alerts
Wall Street expects this communications equipment company to grow at a 30% annual rate over the next five years.
One portfolio stock had a earnings beat and there are two additional rating changes.
Further upside is expected from this biotech, as a result of ongoing data on the company’s drug’s trials.
This financial firm beat earnings estimates by $0.32 last quarter and is due to report fourth quarter results at the end of this month.
As the market correction continues, it’s important not to focus on the coronavirus news but to focus on the actions of your stocks instead.
Position update: This recommendation’s covered call has seen extreme volatility the past several days.
This staffing company just reported excellent fourth quarter results, but the share have dipped a bit, creating a buying opportunity.
Today’s market meltdown is turning our Cabot Tides negative, which, following the many yellow flags in recent weeks, has us paring back some.
Global citizens are beginning to witness a relatively unprecedented situation in which a communicable virus that originated in China is now traveling around the globe.
This preferred stock has a current annual yield of 6.76%, and is backed by a lodging Real Estate Investment Trust with a market cap of $2.75 billion.
Today three of our covered calls will expire. The great news, all three trades will be closed for nice profits!
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.