Issues
While there are still symptoms of a broad unfolding market top, and the market as a whole is soft today, the main trend is still clearly up and thus I continue to recommend you be substantially invested.
In fact, in our recommended portfolio all our stocks look fine; there are no recommended changes today.
As for today’s recommendation, it’s a technology company that’s a household name, but still small enough to grow very fast.
Details inside.
In fact, in our recommended portfolio all our stocks look fine; there are no recommended changes today.
As for today’s recommendation, it’s a technology company that’s a household name, but still small enough to grow very fast.
Details inside.
Current Market OutlookIt certainly hasn’t been a buying panic, but last week was another step in the right direction, with growth stocks avoiding selling pressure even as they approach (or in some cases, sneak out to) new highs—a marked change in character from the prior few weeks. There’s still some iffy pieces of evidence out there, including sentiment (complacent), volume (extremely light) and even some of the broad market (materials and energy stocks are beginning to lose some steam), but overall it appears that the sellers have run out of ammunition for the time being. If the buyers can really show up, we could see some solid breakouts going ahead. For now, we’re leaving our Market Monitor at a level 6, but another good week may change that.
This week’s list has a bunch of good-looking charts, most of which have a solid growth story. Our Top Pick is United Therapeutics (UTHR), which recently staged a big-volume breakout on news.
| Stock Name | Price | ||
|---|---|---|---|
| Acuity Brands (AYI) | 173 | ||
| ASML Holding (ASML) | 630 | ||
| Boot Barn (BOOT) | 67 | ||
| Boston Beer Company (SAM) | 1,261 | ||
| The Goodyear Tire & Rubber Company (GT) | 18 | ||
| Pinterest (PINS) | 84 | ||
| Sally Beauty (SBH) | 21 | ||
| SiteOne Landscape Supply (SITE) | 182 | ||
| United Therapeutics (UTHR) | 199 | ||
| Yeti Holdings (YETI) | 84 |
The evidence has clearly improved during the past week or two, and that’s a good thing; we’re putting another couple of toes back into the water tonight, adding two half-sized positions in what we think can be leaders of the next uptrend. That said, we’re content to go slow for now, mostly because, while selling pressures have eased, buying power really hasn’t shown up yet, and until it does, there’s a chance the bears could reappear.
Still, overall, we’re increasingly optimistic, so we think putting a little money to work and then listening to the market’s clues makes sense. Get all the latest inside tonight’s issue.
Still, overall, we’re increasingly optimistic, so we think putting a little money to work and then listening to the market’s clues makes sense. Get all the latest inside tonight’s issue.
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the April 2021 issue.
As value investors, we look for companies that are selling at a discount to their underlying value. But how do we measure that value? In this issue, we briefly describe and discuss the EV/EBITDA metric, which is our preferred valuation tool.
While our stocks generally did well this past week, there wasn’t much news. With earnings season starting next week, most companies are remaining fairly quiet.
One change we made was to reduce our rating on Tyson (TSN) from a Buy to a Hold. The shares have about 8% upside to our recently raised price target. From here, we’d like to learn more about its earnings power, which hopefully will be provided in its fiscal second quarter report, before deciding to either raise or sell.
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.
Thanks!
As value investors, we look for companies that are selling at a discount to their underlying value. But how do we measure that value? In this issue, we briefly describe and discuss the EV/EBITDA metric, which is our preferred valuation tool.
While our stocks generally did well this past week, there wasn’t much news. With earnings season starting next week, most companies are remaining fairly quiet.
One change we made was to reduce our rating on Tyson (TSN) from a Buy to a Hold. The shares have about 8% upside to our recently raised price target. From here, we’d like to learn more about its earnings power, which hopefully will be provided in its fiscal second quarter report, before deciding to either raise or sell.
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.
Thanks!
While the headlines read “S&P 500 at All-Time Highs,” it’s not all smooth sailing in the market as countless stocks are still suffering from the Nasdaq rout that started a month ago.
The market as a whole is looking healthier, though there are still symptoms of a broad unfolding market top. But our stocks look healthy and all have the potential to move higher from here, so the only change in our portfolio today is the downgrade of DKNG to Hold.
As for today’s recommendation, it’s a company with a great growth story (in the insurance industry) that just came public last May.
Details inside.
As for today’s recommendation, it’s a company with a great growth story (in the insurance industry) that just came public last May.
Details inside.
Current Market OutlookFor the first time in a few weeks, we’re seeing some signs of spring when it comes to the Nasdaq and growth stocks, as many found support near or above their early-March lows and have begun to perk up, including some that have rallied back above their 50-day lines. (The Nasdaq itself has done this, too, which is obviously encouraging.) Moreover, we’re seeing many more six- to 10-week structures out there, which are far more palatable than the jagged three-week bases seen a while back. That said, we’re not out of the woods—the major indexes remain divergent (not the healthiest situation) and very few growth names are hitting new highs. For the first time in a while, we do think the market has a chance to kick into gear, but we have to see it to believe it; we’re nudging our Market Monitor up to a level 6, but still think the general game plan (small positions, buying cyclical names on weakness) makes sense for now.
This week’s list is a nice mix of growth and cyclicals, many of which look like either potential breakouts or early-stage pullbacks. Our Top Pick is Amkor Technology (AMKR), which might need a little more seasoning but has held up great during the correction and is now pushing ahead.
| Stock Name | Price | ||
|---|---|---|---|
| 10X Genomics (TXG) | 191 | ||
| Align Technology (ALGN) | 548 | ||
| Amkor Technology (AMKR) | 26 | ||
| Cleveland-Cliffs (CLF) | 19 | ||
| The Gap, Inc. (GPS) | 30 | ||
| Lam Research (LRCX) | 661 | ||
| Lennar (LEN) | 105 | ||
| Micron Technology, Inc. (MU) | 94 | ||
| Scotts Miracle-Gro (SMG) | 253 | ||
| ShockWave Medical, Inc. (SWAV) | 133 |
The second quarter and major league baseball opens today after a good week for Explorer recommendations. Tech stocks struggle a bit but some EV stocks bounce back as investors look to play the long game. The Biden infrastructure plan captures media attention and today’s new recommendation should benefit from one of the plan’s more ambitious goals—universal broadband access
Updates
While I’m keeping most stocks at Buy this week, I do think near-term upside is somewhat limited and that being more selective with new purchases is a wise decision. Look to nibble on those stocks that aren’t overly extended but still have strong momentum.
Emerging market stocks have had another soft week, with the iShares EM Fund (EEM) below its 25-, 50- and 200-day moving averages, although Chinese stocks continue to hold steady.
This week’s retail news and earnings reports brought great surges in the share prices of two of the stocks in our portfolio.
The yield on the 10-year Treasury rose over 3.1% last week following several strong economic releases and a handful of speeches by current and incoming Fed members. That’s kept utilities and other high-yield investments depressed for another week. Most of our holdings are looking constructive and a few potentially on the cusp of big breakouts.
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.
Alerts
Three retail stocks reported earnings.
This technology company focusing on energy and water beat analysts’ estimates by a whopping $0.40 last quarter, and eight analysts have recently increased their EPS forecasts for the company.
This specialty measurement company beat analysts’ estimates by $0.03 last quarter.
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.
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.