Issues
Growth stocks have changed character over the past week, with abnormal action and breakdowns appearing. The good news is that a major top doesn’t appear to be in place; the general market is still hanging in there for now, and the long-term trend of most leaders is still up. But, taking things on a stock-by-stock basis, we’ve pared back a bunch and are actually holding more than half the portfolio in cash. That’s probably too high (we’d like to put some to work in fresher leaders), but we’re content to patiently wait for buyers to support the market.
In tonight’s issue, we review all our stocks, dive into the two main factors to your investment returns and go over many fresher names that could help lead the market’s next upmove.
In tonight’s issue, we review all our stocks, dive into the two main factors to your investment returns and go over many fresher names that could help lead the market’s next upmove.
Today, we are profiling a Canadian SaaS company that is trading for a “value” multiple.
This company has sticky, recurring revenue. Other characteristics include:
All the details are inside this month’s Issue. Enjoy!
This company has sticky, recurring revenue. Other characteristics include:
- Strong historic revenue growth (25% CAGR)
- Over 40% insider ownership
- strong balance sheet (a significant net cash position)
- A cheap valuation
All the details are inside this month’s Issue. Enjoy!
For the first time since the summer began, the market is faltering. The rally that thrust the S&P 500 60% higher in little more than five months is cracking.
The end of summer is being greeted by cranky investors who see a market that has run up to new all time highs despite the risks of Covid and the election. Of course, a huge rally of this magnitude needed a breather. The pullback is normal, healthy and overdue.
It is impossible to say how far stocks will fall. But, unless there is some very bad news, I don’t expect a prolonged or deep selloff. The market is still looking ahead to a positive environment where the pandemic is fading away and the economy is quickly recovering.
In this uncertain environment, I found a rare stock. It is a company that benefits from the undeniable trend toward technological proliferation. It has solid earnings growth and stock performance. But it provides these benefits with remarkably low volatility.
The stock is off the high after a rare pullback and selling at a cheap price. Historically, it has less than a quarter of the volatility of the overall market. It’s a great forward-looking investment for this uncertain environment.
The end of summer is being greeted by cranky investors who see a market that has run up to new all time highs despite the risks of Covid and the election. Of course, a huge rally of this magnitude needed a breather. The pullback is normal, healthy and overdue.
It is impossible to say how far stocks will fall. But, unless there is some very bad news, I don’t expect a prolonged or deep selloff. The market is still looking ahead to a positive environment where the pandemic is fading away and the economy is quickly recovering.
In this uncertain environment, I found a rare stock. It is a company that benefits from the undeniable trend toward technological proliferation. It has solid earnings growth and stock performance. But it provides these benefits with remarkably low volatility.
The stock is off the high after a rare pullback and selling at a cheap price. Historically, it has less than a quarter of the volatility of the overall market. It’s a great forward-looking investment for this uncertain environment.
The online casino market has experienced rapid growth this year as more states legalize so-called iGaming to supplement faltering tax revenues.
Current Market OutlookThere have been a growing number of yellow flags among leading growth stocks in recent months, and last week the sellers finally came out of the woodwork, causing a quick 10% top-to-bottom drop in the Nasdaq and cracking the uptrends in many leaders. Where does that leave us? Overall, the market’s intermediate-term trend remains up, though it’s getting close to the fence as most indexes test their 50-day lines. Throw in the fact that many areas are holding up OK and we don’t advise you to sell wholesale. But with decisive weakness in most leaders following huge runs (and some climactic upside activity during the past two weeks), paring back makes sense, and from here, the onus is on the bulls to step up. We’re knocking our Market Monitor down to a level 5.
This week’s list contains a bunch of names that have either avoided any major selling or have pulled back normally to support. Our Top Pick is Penn National Gaming (PENN), which looks like one of a couple of leaders in the “new” gaming boom.
| Stock Name | Price | ||
|---|---|---|---|
| AutoNation (AN) | 56.16 | ||
| Boston Beer Company (SAM) | 791.28 | ||
| Chipotle Mexican Grill (CMG) | 1299.15 | ||
| Deere & Company (DE) | 210.19 | ||
| EPAM Systems (EPAM) | 308.95 | ||
| Farfetch (FTCH) | 26.04 | ||
| Five Below (FIVE) | 122.69 | ||
| Freeport-McMoRan Inc. (FCX) | 15.72 | ||
| Nintendo Co., Ltd. (NTDOY) | 66.76 | ||
| Penn National Gaming (PENN) | 55.31 |
The long-awaited market correction has arrived, but whether it will be brief or long, shallow or deep, remains to be seen. The one thing I am sure of is that it won’t be like the previous one! In the meantime, it’s important to treat each stock on its own merits, and today that means selling our weakest, Chegg (CHGG).
As for today’s recommendation, it’s a small company thriving in the homebuilding sector, dominant in its own sub-sector. I think you’ll like it.
As for today’s recommendation, it’s a small company thriving in the homebuilding sector, dominant in its own sub-sector. I think you’ll like it.
With the exception of another nice gain by NovoCure (NVCR), this was a quiet week for the Cabot Explorer portfolio as the Nasdaq continues its march, up almost 35% so far in 2020. Our Emerging Markets timer (EEM) stays positive as some of these markets bounce back against the backdrop of very weak economies. Perhaps the worst is India with its latest quarterly GDP falling 24%. This issue’s new recommendation is a high quality stock in a growth sector with a wonderful high margin, low risk business model.
This month we’re jumping back into the pure-play software space with an up and coming SaaS company that has remained under the radar since going public in December, just a few months before the market tanked.
It specializes in social media management solutions, which are increasingly important as the trend toward digital transformation strategies gets stronger. Organizations increasingly recognize they must market to consumers through social networks.
Revenue growth is hovering around 30% and first profits are still a couple years away, meaning we’re still early to the table.
All the details are inside this month’s Issue. Enjoy!
It specializes in social media management solutions, which are increasingly important as the trend toward digital transformation strategies gets stronger. Organizations increasingly recognize they must market to consumers through social networks.
Revenue growth is hovering around 30% and first profits are still a couple years away, meaning we’re still early to the table.
All the details are inside this month’s Issue. Enjoy!
Updates
The broad market strengthened over the past week, led by a rebound in tech stocks. Other leading sectors included real estate, energy and, for a second week, materials. Utilities also rebounded, as interest rates pulled back. The only industry group that hasn’t advanced over the past five days are the financial stocks.
We seem to be experiencing a more active stock market than that of a typical summer. The adage “sell in May and go away” hasn’t seemed to fit in 2017. There’s been lots of price action among oil refiners and marketers, food retailers, steel, technology and investment companies.
On average, our portfolio rose by 3.2% this week. That pleases me because it was twice as much as the small cap index. Across our 11 positions, we have an average gain of 32%, which is 22.7% better than you’d have done if you just bought the Russell 2000 every time I recommended one of our current stocks.
Relief and a rally returned to the stock market on Wednesday, July 12, as Fed Chair Janet Yellen assured Congressional members and investors that her Federal Open Market Committee would not “normalize” interest rates by raising rates at predetermined time intervals.
Put a little money back to work. Our trend-following indicators are still bullish, and we’ve seen the Nasdaq and growth stocks show renewed strength in recent days. The market isn’t completely out of the woods, but there’s enough evidence to do a little new buying.
The broad market remains in a holding pattern. Some stocks are breaking out to new highs, but others are breaking down. The Nasdaq regained some ground this week, but the divergences between the major indexes remain. There’s no reason to panic, but we are making a couple of moves to reduce risk this week.
Just in case any of my subscribers wants to invest in energy companies, but feel bad that perhaps those companies are cheating America, there are three things I’d like to point out about ExxonMobil (XOM).
The turmoil in stock prices continued last week. The S&P 500 index declined only 0.4%, but consumer discretionary, energy and technology stocks suffered larger losses. Money flowed into several value sectors, including industrial, financial and materials stocks. Is the bull market in growth stocks over?
The iShares EM Fund has been trading mostly sideways since the middle of May, and that has kept the Emerging Markets Timer above its moving averages, but just barely. We have two portfolio moves tonight.
Stocks were pummeled Thursday, with tech showing the worst losses. The Nasdaq closed down 1.4%, and the S&P 500 and Dow both lost about 0.8%. Financials and energy stocks were among the only names spared, as oil prices continued their recovery and the Fed approved the banks’ new capital plans.
There’s been some turbulence in our portfolio this week, but nothing we haven’t experienced at some point in 2017. Small caps are up 1% from last week, and would have been up more if not for another bout of selling in technology stocks yesterday.
Stock indexes stumbled again yesterday, June 29, led by large-cap tech stocks. Thus far, the profit-taking looks normal. Technology stocks have been on a tear in 2017, so investors are taking advantage of sky-high prices to harvest extraordinary gains.
Alerts
Analysts expect this consulting company to grow by 16.9%, annually, over the next five years.
This semiconductor supplier beat analysts’ estimates by $0.47 last quarter.
One portfolio stock reported a great first quarter and moves from Strong Buy to Hold.
Overall, cannabis/marijuana stocks still look fine, even though the stocks were generally soft yesterday, so I’m not doing a full update, but there has been action, both good and bad, in a few stocks worth mentioning.
This e-sports company is expected to grow at a rate of more than 40% annually over the next five years.
Chefs’ Warehouse (CHEF) reported last night and the results were just fine.
One portfolio stock announced a corporate conversion, and three others reported first-quarter results.
We’re selling one-third of the shares and holding the rest of one stock in the portfolio. The move will boost the Model Portfolio’s cash position to 21%.
11 analysts have raised their EPS estimates for this investment banking firm in the last 30 days.
Two of the portfolio stocks each reported first quarter results that beat expectations.
One of our gold companies today is gaining cash from a mine sale; the other—post merger—is a previous recommendation that is now a hold.
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.