Issues
Put simply, the market’s snapback from the selloff two weeks ago has been extremely impressive, and while it doesn’t erase all of the yellow flags, it’s certainly a positive sign. Because we didn’t drastically change our stance during the weakness (a little trimming), we’re not doing anything drastic during the rebound — at least not yet. We filled out our position in CrowdStrike last week and are placing Pinterest and Twilio back on Buy.
If all goes well, we could have a new addition or two soon, with our top choices written about in tonight’s issue. But tonight, we’ll stand pat and see how the market acts as earnings season continues.
If all goes well, we could have a new addition or two soon, with our top choices written about in tonight’s issue. But tonight, we’ll stand pat and see how the market acts as earnings season continues.
Market performance for the rest of the year will depend upon a full recovery brought on by the vaccines the removal of lockdowns and restrictions. If that doesn’t happen, look out. But I’m confident it will.
Of course, the pricey market indexes don’t apply to many individual stocks. Some stocks are very overvalued while others remain undervalued. At this point, the more conservative play is to target stocks with cheap valuations to buy, especially while many of those bargain stocks also have newfound momentum.
In this issue, I highlight a blue-chip energy stock. It sells at a dirt-cheap valuation while paying a high and safe dividend. It also has strong momentum ahead of what is likely to be a year of vastly improved profits.
Of course, the pricey market indexes don’t apply to many individual stocks. Some stocks are very overvalued while others remain undervalued. At this point, the more conservative play is to target stocks with cheap valuations to buy, especially while many of those bargain stocks also have newfound momentum.
In this issue, I highlight a blue-chip energy stock. It sells at a dirt-cheap valuation while paying a high and safe dividend. It also has strong momentum ahead of what is likely to be a year of vastly improved profits.
Today, we are recommending a mini conglomerate.
The stock is near a 52 week high, but there is at least 50% upside for the stock.
This company’s characteristics include:
All the details are inside this month’s Issue. Enjoy!
The stock is near a 52 week high, but there is at least 50% upside for the stock.
This company’s characteristics include:
- A cheap valuation (0.3x revenue)
- One of the best value creators of all time on the management team
- Several hidden assets that will be spun off in the next year to unlock value
- High insider ownership.
All the details are inside this month’s Issue. Enjoy!
The stock market enjoyed a big upside reversal last week, snapping back strongly from the recent slump. The DJIA rose 3.9% for the week while the S&P 500 gained 4.6%. Big-tech stocks reasserted a leadership role thanks in part to blow-out earnings from Amazon (AMZN) and Alphabet (GOOGL), propelling the Nasdaq to a 6% advance for the week.
First, note that next week’s Presidents Day holiday means we will publish Cabot Stock of the Week a day later, on Tuesday, February 16th.
As for the market. last week’s GameStop affair had the potential to trigger a broad correction—but it didn’t. Thus, the bull market remains intact, the buyers remain in charge and I am happy to recommend a fast-growing company with a great story today.
Sadly, that means I need to sell something to stay at or under 20 stocks, and the victim today (locking in a nice profit) is Qualcomm (QCOM).
Details inside.
As for the market. last week’s GameStop affair had the potential to trigger a broad correction—but it didn’t. Thus, the bull market remains intact, the buyers remain in charge and I am happy to recommend a fast-growing company with a great story today.
Sadly, that means I need to sell something to stay at or under 20 stocks, and the victim today (locking in a nice profit) is Qualcomm (QCOM).
Details inside.
Current Market OutlookLast week’s issue was titled “Next Few Days Should be Key,” and we think they were—in a bullish way. The market’s strong snapback to new highs (in the indexes and many leaders) made the prior dip look like a shakeout, which generally bodes well. That said, the action didn’t erase all the yellow flags out there, either, as sentiment is bubbly, many stocks are extended in time and price and, most important, tons of names are set to report earnings in the days ahead, which will be key for the intermediate term. Don’t get us wrong, we’re encouraged, but we still think it’s best to pick your spots on the buy side and trail your stops (and book some partial profits here and there) as opportunities arise. We’ll move our Market Monitor back up a notch and see how things go from here.
This week’s list is brimming with strong names, including more than a few that reacted well to earnings last week. For our Top Pick, we’ll go with Dynatrace (DT), which has just gotten going from a multi-month structure and looks ready for a sustained advance.
| Stock Name | Price | ||
|---|---|---|---|
| Align Technology (ALGN) | 602 | ||
| Bill.com Holdings (BILL) | 179 | ||
| Canada Goose Holdings (GOOS) | 42 | ||
| Dynatrace (DT) | 56 | ||
| PayPal (PYPL) | 282 | ||
| Pinduoduo (PDD) | 188 | ||
| SM Energy (SM) | 12 | ||
| Snap Inc. (SNAP) | 64 | ||
| Tapestry, Inc. (TPR) | 39 | ||
| Zendesk (ZEN) | 156 |
There is no shortage of great stories in the medical technology field. Today we’re jumping in on one that’s been on my radar for some time.
The company has just begun to commercialize a revolutionary technology for treating BPH and prostate cancer, which affects millions of men around the world. Regulatory approval is in hand across three continents, and revenue growth is in the 80% to 100% range.
There are plenty of challenges ahead, but this company appears to be on the path to enormous success.
All the details are inside. Enjoy!
The company has just begun to commercialize a revolutionary technology for treating BPH and prostate cancer, which affects millions of men around the world. Regulatory approval is in hand across three continents, and revenue growth is in the 80% to 100% range.
There are plenty of challenges ahead, but this company appears to be on the path to enormous success.
All the details are inside. Enjoy!
Years from now, I wonder how historians will label this new decade. Will it be the “Terrific Twenties” or the “Turbulent Twenties”? It’s obviously too soon to tell, but we remain optimistic about the future today with a new idea at the fringe of the powerful clean energy trend that has moved past an inflection point. Meanwhile, the Explorer’s group of stocks had another good week as Virgin Galactic (SPCE) launched into space. I wonder if its take-off might be wrapped up in the Reddit revolution?
In January’s Issue of Cabot Early Opportunities we take a trip down memory lane to January 2020, and try to take some of our own advice that seems even more timely now.
We also dig into five stocks that cover a wide variety of end market exposures. We unpack a small stock that represents a play on infrastructure and clean energy, two rising stars in MedTech, a consumer name that just won’t quit and even a beaten down growth stock that should recover as people get back out there later in 2021.
As always, there should be something for everyone!
We also dig into five stocks that cover a wide variety of end market exposures. We unpack a small stock that represents a play on infrastructure and clean energy, two rising stars in MedTech, a consumer name that just won’t quit and even a beaten down growth stock that should recover as people get back out there later in 2021.
As always, there should be something for everyone!
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the February 2021 issue.
We briefly comment on how the response by hedge funds to the Reddit trades may have led to last week’s sell-off and this week’s rebound in the stock market. Is there a bubble? Yes, and our note touches upon how all four ingredients of a bubble, outlined in a recent book on bubbles, are in place.
Earnings season is upon us. We review the reports from Dow (DOW) and JetBlue (JBLU), and look forward to six more reports in the coming week.
Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
We briefly comment on how the response by hedge funds to the Reddit trades may have led to last week’s sell-off and this week’s rebound in the stock market. Is there a bubble? Yes, and our note touches upon how all four ingredients of a bubble, outlined in a recent book on bubbles, are in place.
Earnings season is upon us. We review the reports from Dow (DOW) and JetBlue (JBLU), and look forward to six more reports in the coming week.
Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Updates
There’s one thing that common stocks and the price of oil—and virtually all other investments—have in common: their price charts. The study of price charts is called technical analysis.
The S&P 600 Small Cap Index broke out to a fresh all-time high this week and is now officially above the 1,000 level! I suspect that milestone isn’t going to make many headlines, but in our little corner of the world it’s kind of a big deal.
Today we’re selling one stock and ask you to consider owning another in its place, because their debt numbers and price chart are improving, and their EPS and P/E numbers continue to look very appealing!
Remain optimistic, but continue to take it day by day. The green light from the Cabot Tides remains in effect, which, combined with our solidly bullish Cabot Trend Lines, tell us to lean bullish. Tonight, we have no changes in the Model Portfolio, where we’re holding about 30% in cash.
After a two-week rally, the major indexes pulled back yesterday, but the retreat isn’t surprising given the market’s recent gains. The last two weeks have turned the market’s intermediate-term trend up, and conditions are in place for a sustained rally. Most importantly, the major indexes have now successfully (meaning they bounced) re-tested their correction lows three times since the start of the year.
Energy stocks are thriving, and some of them have risen into the stratosphere. I never recommend that people chase stocks that just rose 20% to 50% without resting. Let them rest, then jump in to catch the next run-up. On the flip side, financial stocks are just now emerging from a resting period. Many of my favorites appear ready to not only retrace their recent highs, but to surpass them as well!
This was another big week for our portfolio as four stocks reported quarterly results. Fortunately, the wind was at our backs as the broad market is on track for its best weekly gain since March!
Our Emerging Markets Timer is still negative, but it’s good to see EEM perk above its (still downtrending) 25-day line today. A good day or two from here could flip the intermediate-term trend.
One of the Cabot Benjamin Graham Value Investor subscribers asked me about a few stocks that were formerly in this portfolio, so here’s an update on those stocks.
Although the market remains volatile, the action in the major indexes improved this week. The S&P 500, for example, bounced off its 200-day moving average again Friday, its third time retesting that level and finding support since the start of the year. As a result, I have three rating changes today including one sell.
If you are an investor who owns mutual funds or ETFs, either in taxable accounts, IRA accounts, children’s custodial accounts, variable annuities, pension funds, 401(k) plans or 403(b) plans, you probably own AAPL as part of those funds’ portfolios.
It’s been my experience that the more an investor can lower their portfolio risk, the more enjoyable and lucrative their investing experience will be. When researching stocks, select the ones with strong future earnings per share (EPS) growth, relatively low price-earnings ratios (P/Es) and relatively low debt levels.
Alerts
The cannabis sector has been trending down since the end of March, giving back its spectacular gains from the start of the year, and until now I’ve remained optimistic about our stocks, partially because of their outstanding fundamental growth metrics but also because Cabot’s two main trend-following indicators for the market were positive.
The shares of this cloud-based software company were recently initiated at RBC Capital and upgraded at Wedbush with an ‘Outperform’ rating.
As the futures indicated, the market is down sharply this morning, though the major indexes have bounced from their lows. As of 10:45 am, the Dow is sinking 454 points while the Nasdaq is down 118 points.
The market looks set to open down relatively sharply this morning, with the futures indicating opening losses in the 0.7% to 1% range for the major indexes. However, our focus is really on the overall evidence, which is clearly worsening.
Our second recommendation is some profit-taking in a mutual fund.
Our first idea is an ETF whose top five holdings are: L3Harris Technologies Inc (LHX, 8.25% of assets); Lockheed Martin Corp (LMT, 7.48%), United Technologies Corp, (UTX, 7.01%), Boeing Co (BA, 6.82%), and Honeywell International Inc (HON, 6.61%).
The shares of this global pharmaceutical company were just upgraded to ‘Buy’ at Citigroup.
You may have noticed media articles last Friday regarding U.S. listed Chinese stocks that had a negative impact on share prices.
The shares of this diagnostic company were recently upgraded by Benchmark to ‘Buy’ and Zacks reported that the shares are now ‘Oversold’, and noted that earnings estimates for the company have been increased five times in the past two months.
Shares of this animal health company fell after the announcement of its recent acquisition, but it appears that was an overreaction.
It’s been just over a week since the first Issue of Cabot Early Opportunities became available and I’d first like to thank all of you for jumping in early, and for the loads of positive feedback I’ve received.
Yesterday, investment manager Elliott Management Corp. sent a letter to Marathon Petroleum (MPC), the nation’s largest energy refiner, seeking changes that could potentially increase the MPC share price.
Portfolios
Strategy
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.