Issues
As we move into a new year, the market shrugs off the chaos engulfing Capitol Hill and the GOP losing its majority in the U.S. Senate. Expect higher federal spending and debt in the next couple years, though it should be mentioned that we have already added $8 trillion to the national debt over the past four years. There were a few bright spots but Explorer stocks in general drifted a bit lower over the last week.
Today we have a new recommendation of a company of at the forefront of the technology revolution.
Today we have a new recommendation of a company of at the forefront of the technology revolution.
In the closing days of 2020, when many people were focused on preparing for the holidays, a small software company went public through a SPAC IPO. The event occurred on December 23.
Part customer relationship management (CRM) platform, part lead generation and marketing platform, the company’s software helps home services companies grow and manage their businesses, and it streamlines the move-in and post-move journey for homeowners.
The stock represents a compelling way for investors to gain exposure to evolving consumer and business trends related to the housing market and home services, especially home inspection, moving, insurance and utility services. After a pandemic-affected 2020 growth could top 60% in 2021, then remain well above 30% for the foreseeable future.
All the details are inside. Enjoy!
Part customer relationship management (CRM) platform, part lead generation and marketing platform, the company’s software helps home services companies grow and manage their businesses, and it streamlines the move-in and post-move journey for homeowners.
The stock represents a compelling way for investors to gain exposure to evolving consumer and business trends related to the housing market and home services, especially home inspection, moving, insurance and utility services. After a pandemic-affected 2020 growth could top 60% in 2021, then remain well above 30% for the foreseeable future.
All the details are inside. Enjoy!
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the January 2021 issue.
With the turning of the calendar, we list eleven long-term secular trends that we see shaping the world for years to come. We also include four additional trends that investors may think are enduring yet which we have less certainty about their ability to continue indefinitely.
Contrarian investors can benefit from considering these trends. Sometimes the most appealing stocks are those that superficially go against them.
The current recommended list includes 14 names, with Merck (MRK) and U.S. Bancorp (USB) added this month. Earning season is starting soon, so we’ll get updates on how these companies are faring and provide our commentary and analysis on them.
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.
With the turning of the calendar, we list eleven long-term secular trends that we see shaping the world for years to come. We also include four additional trends that investors may think are enduring yet which we have less certainty about their ability to continue indefinitely.
Contrarian investors can benefit from considering these trends. Sometimes the most appealing stocks are those that superficially go against them.
The current recommended list includes 14 names, with Merck (MRK) and U.S. Bancorp (USB) added this month. Earning season is starting soon, so we’ll get updates on how these companies are faring and provide our commentary and analysis on them.
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.
The Cabot Profit Booster portfolio had a spectacular 2020, aided by great stock picks from Cabot Top Ten Trader Chief Analyst Mike Cintolo, “juicy” call premiums which we sold via our covered call strategy, and a generally strong market. Now that the calendar has flipped to 2021, we will stick to the plan, and manage our open positions with an eye out for risk, while continuing to sell covered calls on the best of stocks. This brings me to today’s recommendation …
Current Market OutlookAfter a prosperous last 12 months, 2021 got off to a sour start today, though that wasn’t totally surprising—early-January is known for crosscurrents and profit taking (especially after good years) as big investors un-hedge and reposition their portfolios. That doesn’t mean today’s weakness should be excused, but what counts most is what happens from here: Another couple of rounds of sharp selling in the leaders and major indexes (possibly coinciding with some intermediate-term breakdowns) would tell us the bears are making a stand, while a quick show of support in many key stocks will be a good sign. We’re keeping our eyes peeled, but so far, the trends of the market and the vast majority of stocks remains up, so we remain mostly bullish, though are continuing to pick our spots.
The first Top Ten list of the year is a mixed bag in terms of stocks and sectors. Our Top Pick is Bill.com (BILL), which is finding support after a normal, early-stage retreat.
| Stock Name | Price | ||
|---|---|---|---|
| AGCO Corporation (AGCO) | 102 | ||
| Arvinas, Inc. (ARVN) | 84 | ||
| Bill.com Holdings (BILL) | 138 | ||
| BridgeBio Pharma (BBIO) | 64 | ||
| CrowdStrike (CRWD) | 201 | ||
| Inari Medical (NARI) | 85 | ||
| Kohl’s (KSS) | 39 | ||
| Lam Research (LRCX) | 478 | ||
| Lemonade (LMND) | 113 | ||
| MongoDB (MDB) | 350 |
The market sold off broadly this morning, and it certainly needed it. The market has been too strong for too long! But the main trend remains up and thus I continue to recommend that you be heavily invested.
Today’s recommendation is a search technology company with fast growth and great growth prospects, first recommended by Mike Cintolo.
As for our current holdings, I have two sell recommendations today, B&G Foods (BGS) and Zoom Video (ZM).
Full details in the issue.
Today’s recommendation is a search technology company with fast growth and great growth prospects, first recommended by Mike Cintolo.
As for our current holdings, I have two sell recommendations today, B&G Foods (BGS) and Zoom Video (ZM).
Full details in the issue.
As we near the end of 2020, I’m thankful that 2020 was so very good to the leading marijuana stocks, and that we managed, overall, to ride the trend quite profitably.
As I write, the uptrend is intact and we remain fully invested, but as the calendar turns to 2021, there’s a chance that the trend (and the trend of the broad market as well) might turn down.
Thus I’m on alert.
But I learned long ago not to argue with the trend of the market, so until the trend changes, I recommend staying heavily invested.
Full details in the issue.
As I write, the uptrend is intact and we remain fully invested, but as the calendar turns to 2021, there’s a chance that the trend (and the trend of the broad market as well) might turn down.
Thus I’m on alert.
But I learned long ago not to argue with the trend of the market, so until the trend changes, I recommend staying heavily invested.
Full details in the issue.
It’s been a great year for growth stocks, and we’re glad to have easily outperformed the major indexes, adding to our longer-term track record. Whatever the exact numbers, we hope you enjoyed a prosperous 2020, and have a great and healthy New Year.
That said, we’re always looking ahead. Big picture, we remain bullish, but growth stocks have hit a bit of a pothole this week, which wasn’t totally unexpected. We’re not reacting to the action yet, though we’re also comfortable holding our 19% cash position and see what comes as the calendar flips.
That said, we’re always looking ahead. Big picture, we remain bullish, but growth stocks have hit a bit of a pothole this week, which wasn’t totally unexpected. We’re not reacting to the action yet, though we’re also comfortable holding our 19% cash position and see what comes as the calendar flips.
This is one of the two weeks a year where Cabot Top Ten Trader is not published, which means there won’t be a new Profit Booster covered call trade this week. That being said, I did want to note that our four open positions (AA, UBER, ADNT, CDE) are all in good shape.
Updates
he iShares EM Fund (EEM) has dropped decisively below its 25- and 50-day moving averages, which returns the Emerging Markets Timer to a negative reading. We take the Timer’s advice seriously, so we are shifting a couple of stocks to Hold ratings, but because the damage to the portfolio thus far has been minimal, we don’t have any sells tonight.
Warren Buffett’s highly anticipated annual letter to shareholders was released on Saturday. In it, Buffett reaffirmed our conservative outlook on the market.
The stock market correction came and went rapidly in recent weeks! Granted, stocks are not done bouncing around yet, and a few sectors are lagging the broader market, including energy and healthcare.
Small caps paused this week to digest a few wild weeks. The S&P 600 Small Cap Index is essentially unchanged since I last wrote, which I think is a victory at this point.
Two of our stocks released earnings in the past week but there was no significant news. The economy, in general, is doing great, corporate profits are reaching record highs, and the European economy is improving. Although market reacted sharply to inflationary concerns, inflation is in line with Fed expectations.
The market has recovered well from its January–February slide, but after forming a V-shaped bounce, the major indexes have stalled out over the last few days. It’s likely that markets will need a while to catch their breath, and we don’t want to get ahead of them. In the Model Portfolio, while we are close to recommending new buys, we want to have the Cabot Tides at our back when we do so.
The market is certainly healthier, but it probably won’t go straight up from here. In fact, it’s more likely that sellers will see this bounce as an opportunity, and we’ll get another, probably smaller, leg down before the market starts a sustainable new uptrend.
Now that the stock market correction finally arrived, I want to sketch out what investors can expect in the near future.
What a difference a week makes. Last Friday, it seemed the market was in a death spiral and it was hard to make sense out of the volatility. This week has been downright placid, and all the major indexes are up nicely. Since last week’s update, the S&P 600 Small Cap Index is up by 5%.
The iShares EM Fund (EEM) gapped up to top its 25- and 50-day moving averages, which returns the Emerging Markets Timer to a positive reading. We are returning our half positions in two stocks and our full position in one stock to Buy ratings and initiating a new position.
I introduce a new stock to the prudent portfolio and am selling two stocks.
The 10-year yield has been quiet ahead of the announcement, trading sideways since Monday morning. That’s given utilities a bit of a reprieve, at least in the short term.
Alerts
This time share company is forecasted to grow 27.4% this year.
Nine analysts have increased their earnings estimates for this royalty company in the past 30 days, and they forecast the company will grow by 21.9% annually over the next five years.
A Spanish news outlet, Intereconomia.com, is reporting that biotech company Amgen (AMGN) is in talks to buy Alexion Pharmaceuticals (ALXN) for close to $200 per share.
We provide the top five holdings of this cybersecurity ETF.
This equipment company is expected to report earnings tomorrow, and analysts expect EPS of $0.74 per share.
This fintech company beat analysts’ earnings estimates by a whopping $0.62 last quarter and four analysts have recently raised their EPS forecasts for the company.
This pharma beat earnings estimates by $1.62 last quarter and 29 analysts have raised their EPS forecasts for the company in the past 30 days.
This discount retailer beat analysts’ earnings estimates by $0.09 last quarter.
A diversified global manufacturing company of highly engineered products.
The market enjoyed a couple rounds of decent buying during the past week, but today brought a huge round of selling as the headlines blared about the inverted yield curve.
Yesterday’s strong market triggered a technical indicator, a follow-through signal that tells us buyers are lurking. Of course, today’s big decline so far isn’t good to see, but nevertheless, this and other measures (awful sentiment, etc.) tell us there should be support on weakness.
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.