Issues
January was another good month for the Cabot Profit Booster portfolio as we closed our two positions for profits:
Get this Investor Briefing now, How to Get and Stay Rich, and you’ll learn about how to gain and maintain financial independence—so that you have all the resources to make any decision you want. From advice about the best places to retire to how the long-term housing forecast may affect you … from the latest on interest rates to how to invest in BDCs … and from how your conservative investments make sense in a crisis to preparing yourself for the post-coronavirus era. How to Get and Stay Rich is your best guide to financial wellness, now and for the rest of your life.
Current Market OutlookSellers finally landed a few punches last week, with many tech-related growth stocks finding resistance and the big-cap indexes losing a little ground. Given the big run of late, lots of speculation and signs of greed, we have our antennae up for abnormal weakness—but so far, there hasn’t been much (if any), with the pullbacks in the indexes and individual stocks appearing normal and other timing indicators (number of new lows, etc.) looking fine. In fact, some solid entry points could appear with a bit more weakness! We are seeing continuing rotation into more cyclical areas and out of some growth names, but the trends of just about all indexes and leaders are up, so we remain mostly bullish.
This week’s list has stocks from many different nooks and crannies of the market. Our Top Pick is Guardant Health (GH), from the strong medical area, as it’s come under major accumulation this year. It’s a bit extended so start small and/or aim for dips.
| Stock Name | Price | ||
|---|---|---|---|
| Cimarex Energy (XEC) | 49.1 | ||
| Enterprise Products Partners L.P. (EPD) | 23.3 | ||
| Farfetch (FTCH) | 58.8 | ||
| Guardant Health (GH) | 160.0 | ||
| Halozyme Therapeutics (HALO) | 48.3 | ||
| Shake Shack (SHAK) | 111.7 | ||
| Sonos (SONO) | 27.0 | ||
| TG Therapeutics, Inc. (TGTX) | 50.2 | ||
| The Timken Company (TKR) | 85.0 | ||
| Upwork (UPWK) | 40.7 |
The market’s main trend remains up, and thus I continue to recommend that you be heavily invested.
At the same time, it’s important (as ever) to monitor your individual stocks and prune any from your portfolio that no longer deserve to be there. In our portfolio, Berkeley Lights (BLI) is being pruned this week, for a small loss.
As for today’s recommendation, it’s a fast-growing consumer streaming service that came public in 2018 and has hit new highs recently—and you may be familiar with it.
At the same time, it’s important (as ever) to monitor your individual stocks and prune any from your portfolio that no longer deserve to be there. In our portfolio, Berkeley Lights (BLI) is being pruned this week, for a small loss.
As for today’s recommendation, it’s a fast-growing consumer streaming service that came public in 2018 and has hit new highs recently—and you may be familiar with it.
Get this Investor Briefing now, All You Need to Prepare for a Happy—and Rich—Retirement, and you’ll learn about the the best ways to prepare for a prosperous retirement. From when to start taking Social Security to choosing low-risk stocks during the pandemic … from the best fixed-rate bonds to REIT investing for retirement … and from understanding retirement plans to the best investments for after retirement. All You Need to Prepare for a Happy—and Rich—Retirement, is your best guide to ensuring a wealthy and enjoyable retirement through financial independence and security.”
The market remains very strong, with the trends of the major indexes and the vast majority of stocks pointed up, both of which keeps us mostly bullish. But really, we’re looking at things mainly on a stock-by-stock basis now; some names are extremely extended and vulnerable to air pockets, while others are just a few weeks into what look like new, sustained advance. With that in mind, we’re actually taking partial profits on one stock today, while averaging up in another — all in all, we’ll still be around 18% in cash.
Elsewhere in tonight’s issue, we write about some of our favorite cookie-cutter stories out there at the moment; we own one great one, but we’d like to have another. And we also review all our stocks, present some new ideas and talk a bit how to handle the speculative, super-hot names in the proper fashion.
Elsewhere in tonight’s issue, we write about some of our favorite cookie-cutter stories out there at the moment; we own one great one, but we’d like to have another. And we also review all our stocks, present some new ideas and talk a bit how to handle the speculative, super-hot names in the proper fashion.
Today, we are recommending a leading app developer.
The stock is near a 52 week high, but I think there is ~50% additional upside over the next year.
This company’s characteristics include:
•85% revenue growing in its most recent quarter
•A reasonable valuation (P/E of 19x annualized earnings)
•Company insiders own over 12% of shares outstanding
•Recent insider buying
All the details are inside this month’s Issue. Enjoy!
The stock is near a 52 week high, but I think there is ~50% additional upside over the next year.
This company’s characteristics include:
•85% revenue growing in its most recent quarter
•A reasonable valuation (P/E of 19x annualized earnings)
•Company insiders own over 12% of shares outstanding
•Recent insider buying
All the details are inside this month’s Issue. Enjoy!
Beyond the incessant trumpeting of current events by every orifice of the media, a future awaits. And it’s right around the bend. Beneath the current noise, tectonic plates are moving below the surface, and the world is changing.
Identifying these underlying shifts is a great way to find winning investments. And there is a particular shift that is affecting the market far more than any other, the rapid pace of technological advancement. It is the greatest force driving the market and its dominance is likely to grow.
When investors focus on the world beyond the virus and the elections they will ask what’s next. What is next for the market is what is next for technology. And 5G is central to that discussion.
5G will drive the next phase of technological innovation and launch the world into a new digital age. In this month’s issue, I highlight a major player in the technology space that will benefit directly and massively from the rollout. It’s still cheap, pays a good dividend and is on the cusp of an epic year.
Identifying these underlying shifts is a great way to find winning investments. And there is a particular shift that is affecting the market far more than any other, the rapid pace of technological advancement. It is the greatest force driving the market and its dominance is likely to grow.
When investors focus on the world beyond the virus and the elections they will ask what’s next. What is next for the market is what is next for technology. And 5G is central to that discussion.
5G will drive the next phase of technological innovation and launch the world into a new digital age. In this month’s issue, I highlight a major player in the technology space that will benefit directly and massively from the rollout. It’s still cheap, pays a good dividend and is on the cusp of an epic year.
This week, Cabot Profit Booster features a top new-economy recommendation in the fast-growing social media space whose stock is just short of its all-time high.
Current Market OutlookThe first week of the year was extremely volatile, but all in all the action ended up positive, with major indexes kissing fresh all-time highs and many leading stocks ending up nicely on the week. Overall, then, not much has changed—the primary evidence remains positive, so we’re content to ride things higher, but there’s little doubt the environment is hot and heavy (basically the opposite of what we saw 10 months ago), so you should continue to keep your feet on the ground (trail stops, take partial profits when available) and be discerning with your buys (aiming to enter after a bit of rest or some sharp shakeouts to support areas).
Because of this, most of our buy ranges are a bit below current prices (looking for pullbacks), though we still see some solid setups. One is Snap (SNAP), which is a clear leader in the internet space and has just returned to its highs after its first test of the 10-week line since its October blastoff.
| Stock Name | Price | ||
|---|---|---|---|
| 8x8, Inc. (EGHT) | 35.5 | ||
| LPL Financial Holdings (LPLA) | 116.8 | ||
| The Mosaic Company (MOS) | 26.8 | ||
| Palo Alto Networks (PANW) | 364.6 | ||
| Progyny (PGNY) | 44.9 | ||
| Snap Inc. (SNAP) | 54.4 | ||
| Spotify (SPOT) | 344.2 | ||
| Sunrun (RUN) | 95.8 | ||
| Vale S.A. (VALE) | 18.6 | ||
| Zillow (Z) | 143.2 |
Updates
Trim your sails. The market’s recent slide has cracked the intermediate-term uptrend, and while the overall bull market is still intact, chances are the market is going to need some time to correct and consolidate going forward.
For investors lulled into a false sense of security by the low-volatility bull market of 2017, the past week has been a rude awakening. Even for investors who remember much longer and much deeper market corrections (and us professionals!) Monday’s sudden drop was a little scary.
The iShares EM Fund (EEM) is still well on top of its moving averages, which keeps the Emerging Markets Timer firmly positive.
Crista gives an update on the Section 232 investigation into the steel industry and describes what a normal stock market correction look like and how you should handle it. One rating change.
It was another good week for small caps, and the S&P 600 Small Cap Index keeps grinding higher. The 1% gain over the past week has the index well above its moving average lines and just slightly behind large caps in terms of year-to-date performance.
Many of our stocks are nearing their fair values, but I recommend that you continue to hold them. As I introduce more undervalued stocks in the coming weeks, you may replace some of your fully valued stocks with the new stocks.
Remain bullish, but keep your eyes open. The overall market looks fine, but remains extended to the upside, which makes finding lower-risk entry points more difficult. We continue to advise holding your uptrending stocks to give them a chance to turn into bigger winners.
The stock market remains hot, and while a pullback is always possible, the trend is firmly up. A lot of stocks are overextended short-term though, including some in our portfolio, so don’t be afraid to take partial profits where you have them, and be selective on the buy side.
We’re going through a highly unusual period in the history of the stock market during which earnings estimates keep rising for a broad spectrum of companies. That’s because we’re experiencing a growing economy, deregulation and lower income tax rates, all of which contribute to rising corporate profits.
I spent a good portion of this past week working on my 2018 Small-Cap Outlook. We’ll be publishing that soon, but I wanted to share a few thoughts from it today, starting with my year-end target for the S&P 600 Small Cap Index.
Alerts
Today’s news: One stock is now Retired from the Growth & Income Portfolio; and one stock joins the Buy Low Opportunities Portfolio as a Strong Buy.
This homebuilder beat analysts’ estimates by $.07 last quarter.
Three of our portfolio stocks reported second-quarter (2Q) results. Here’s what you need to know.
This staffing firm just purchased two consulting firms, which should be immediately accretive.
The broad market is in fine shape, with most major indexes at or near their highs and all Cabot’s market-timing indicators bullish.
Two analysts have raised their earnings estimates for this drug company in the past 30 days.
Our second recommendation is a little profit-taking.
Zacks rates our first idea today—a gold miner—‘Strong Buy’ based on rising volume and earnings estimates.
Every now and then one of our stocks is the target of a short report by a myriad of research houses that try to make the case that a company is garbage and its stock is wildly overvalued.
Goldman Sachs just upgraded this tech company’s shares to ‘Buy’.
This connected device company is expected to grow by 39.4% next year.
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 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.