The S&P 500 has now gained 90% since its closing low in March 2020. This alone has made investors a bit cautious but all indications are that we are still in a bull market. Explorer recommendations did well this past week and today we go back to China for a new idea that many of you will know.
Despite last week’s overreaction to the Fed, the market will likely continue sideways for a while for two reasons. One, the market indexes had to take a breather after a massive 90% move higher from the pandemic lows. Two, investors look ahead and can’t decide what will drive the market six months from now after the economy slows and comparisons get tough.
In a sideways market, income is at a premium. Income is the only game in town when stock prices aren’t rising. Dividends roll in regardless of near-term market gyrations. Covered calls greatly enhance that income.
In times like this, a portfolio geared towards high income can provide strong returns while the overall market languishes. In this issue, I highlight two new covered call opportunities that will enable you to ring the register while the market wallows.
Monday, shortly after the market open, we exited the stock components of three of our June covered call positions (FNKO, IGT, RRC). With these sales, here are our profits for all four June positions:
The bull market rolls on, and our portfolio continues to deliver, so I continue to recommend that you be heavily invested in stocks that help achieve your investing goals.
Today’s featured stock is making a repeat appearance, because we lost it on a shakeout earlier this year and I think it’s worth trying again.
As for the current portfolio, Tesla (TSLA) and Trulieve (TCNNF) are upgraded to buy, but we’re selling Coca Cola (KO), mainly because something’s got to go.
There are definitely some positives among the action out there—growth stocks, for instance, have continued their rally, with many “old” winners finally showing some power in both volume and price (including some names that have poked out to new highs). That said, the overall action in the market remains hectic: Cyclical stocks have cascaded for the most part while growth has ramped, with most major indexes we track now below key support. Moreover, on a daily basis rotation remains intense (like today), with stocks and sectors getting whipped around depending on what’s in favor on a given day. Again, it’s not bearish per se, but the environment is like Jell-O wobbling on a plate, making it tough to pinpoint entries and hold onto stuff. We’re OK with some buying, but until more investors row in the same direction, you should keep it smaller than normal and generally aim for dips.
This week’s list looks like 2020 all over again, with lots of technology and growth earnings spots. Our Top Pick is HubSpot (HUBS), which showed top-notch relative strength during the growth stock correction and has now started to power ahead.
Growth stocks continue to slowly repair the damage, with the evidence rounding into form. However, the trick of actually making (and keeping) much money remains very tough — few stocks are showing persistent moves, and those that rally for two to three weeks tend to back off. Maybe that will change—today was certainly a plus for growth stocks — but the point is the environment remains tricky and challenging.
In the Model Portfolio, we’ve been riding things up and down of late, but tonight are holding what we have. There are a couple of names we’re watching that we would like to own, but again, these have ramped up in recent days so we’ll wait for a little shaking and baking. Open up for all of our latest thoughts.
In the June Issue of Cabot Early Opportunities we take note of the market’s string of all-time highs and accelerating pace of consumer spending.
Against that backdrop we present a batch of stocks that offer exposure to a variety of trends, from retail spending and auto maintenance to consumer lending, customer care for enterprises and even vaccine manufacturing.
SPACs – special purpose acquisition companies – had their moment. For about six months until this spring, they were the hottest thing in the market – hotter even than meme stocks. That ended, though, thanks to a combination of a few poor deals that made institutional investors pull back from supporting SPACs and regulatory crackdowns that have dramatically slowed new blank-check creation. In the Greentech space, however, that retreat means there are some opportunities to be found amid the market detritus. That’s our focus this issue. We sorted through the more than 850 active SPACs in the market, identifying 71 that are ESG focused and then whittling our selections down from there.
These mark our first additions to the Excelsior (“ever upward”) portfolio. Excelsior is our special opportunities portfolio for occasional dips into equities that don’t fit into our regular Real Money Portfolio approach and strategy. The Real Money Portfolio is meant to be fully invested at 12 holdings of equal starting size, a design allowing us to seek market-beating results while containing long-term risk. Our approach in the Real Money Portfolio for each selection is largely the same too – a collection of chart and technical screens bolstered by fundamental evaluations. Excelsior will tend to be riskier: we don’t have a recommended position size among its recommendations (that is, don’t anchor buying to the Real Money Portfolio sizing) and selections often don’t have the trading history to be vetted deeply by technical analysis–as is the case with our SPAC choices. Still, we see SPACs as a type of late-stage venture capital opportunity and there are some very exciting businesses coming to market in solar, EVs and materials. We also discuss ways to grab quick, easy profits in any SPAC. Enjoy!
No issue ranks higher than climate change on our clients’ lists of priorities. They ask us about it nearly every day. -Larry Fink, CEO of BlackRock, the world’s largest asset manager in his annual letter to CEOs.
A 19th Century Japanese print of Ben Franklin’s electrical experiment
The Emerging Markets Timer (EEM) has managed to maintain its positive stance this week as most of our positions moved forward. While this is a good sign, I remain somewhat cautious and awaiting a stronger signal to put more of our cash to work.
The market got a nice bounce off the Christmas Eve lows. It’s up about 10% since then. But the bounce back is leveling off. If the market continues to recover here, it will be in a guarded and cautious state for another year or two. Beyond that, there will be fantastic opportunities to get aggressive. But, for now, I will remain cautious but not fearful.
Crista is adding a new stock to the Growth Portfolio, it’s one of the world’s largest producers of nitrogen products, serving customers on six continents.
In the fourth quarter of 2018 it felt like we all finally succumbed to some festering illness that landed us in the intensive care unit. Thus far, the beginning of 2019 has the feeling of a trip home from the hospital and the beginning of the healing process.
It’s time to do a little buying. The market’s trends are still pointed down, so we still think going slow and stepping lightly makes sense. We are adding three new half positions to the portfolio tonight and keeping our cash position around 67%.
Don’t look now but the market is in rally mode and has been for a couple of weeks. We will continue to favor safer, more recession-resistant stocks and investments for the foreseeable future but the selloff may be over. One rating change as we move a position from buy to hold.
This will be a busy week for Wall Street as analysts speak with the companies within their stock purviews and write updated research reports. I expect to relay lots of changes in consensus earnings estimates in next week’s update.
This home builder beat analysts’ EPS forecasts by $0.05 last quarter, and Wall Street expects the company to grow at an annual rate of 14.83% over the next five years.
Especially with small caps, it’s not always an efficient market in the short-term. So sometimes the best thing to do is nothing. Just sit back and think it over.
The good news is that 2019, which started off so well for the cannabis sector but is ending so poorly, is nearing the finish line. The bad news is that we still have three weeks to go, technically, though many of those days will see light trading volume.
The five largest holdings of this ETF are: Apple Inc (AAPL, 3.38% of net assets), Microsoft Corp (MSFT, 3.18%), JPMorgan Chase & Co (JPM, 3.04%), Johnson & Johnson (JNJ, 2.82%), and Verizon Communications Inc (VZ, 2.69%).
Coverage of the shares of this building supply company was recently initiated at Deutsche Bank and Buckingham, with a ‘Buy’ rating, and five analysts have raised their EPS estimates for the company over the past 30 days.
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.
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.
Current Market Outlook