Issues
Last Friday was the expiration of our December covered call positions, and I’m happy to report it was yet another great month. Here were our final profits and yields:
Note: This is our final issue of Cabot Stock of the Week this year. Next week we get a little “vacation.”
But rest assured we’ll be keeping an eye on the market, where market trends remain very positive as we head toward the end of the year.
Today’s recommendation is a low-risk water company in a foreign country, so it may be the perfect diversification move if you’ve got a lot of U.S. growth stocks.
But to fit it into the portfolio, we’ve got to sell something, and the victim this week is Eli Lilly (LLY), which has brought us a decent profit in a fairly short time.
Full details in the issue.
But rest assured we’ll be keeping an eye on the market, where market trends remain very positive as we head toward the end of the year.
Today’s recommendation is a low-risk water company in a foreign country, so it may be the perfect diversification move if you’ve got a lot of U.S. growth stocks.
But to fit it into the portfolio, we’ve got to sell something, and the victim this week is Eli Lilly (LLY), which has brought us a decent profit in a fairly short time.
Full details in the issue.
Current Market OutlookNews of travel restrictions due to a new strain of the virus over in Europe hit the major indexes early today, but when it comes to our analysis, the reason for the initial selloff is secondary—the setup for an air pocket has been around for a couple of weeks as sentiment was elevated and most stocks and indexes were extended to the upside. Thus, today’s hiccups weren’t totally unexpected, but the damage was limited; at day’s end, the major indexes held up well and remain in intermediate-term uptrends, as do most stocks. Near term, further reverberations are likely, so we still think it best to pick your spots and stocks carefully, but with the major evidence still positive, we are too.
This week’s list has a nice mix of stocks benefiting from different trends (growth, reopening, cyclical, etc.). Our Top Pick is Elastic (ESTC), which has finally, decisively gotten going from a long 20-month IPO base.
| Stock Name | Price | ||
|---|---|---|---|
| Alcoa (AA) | 22.12 | ||
| Cardlytics (CDLX) | 146.04 | ||
| Coeur Mining (CDE) | 9.88 | ||
| Elastic (ESTC) | 155.91 | ||
| Floor & Décor (FND) | 99.10 | ||
| Kodiak Sciences (KOD) | 149.51 | ||
| PayPal (PYPL) | 237.79 | ||
| Redfin (RDFN) | 78.54 | ||
| Smartsheet (SMAR) | 72.00 | ||
| WESCO International (WCC) | 75.16 |
The evidence remains mostly bullish, with the major indexes and a growing number of leading stocks acting well. To be fair, it’s not 1999 out there, as many stocks are suffering a lot of choppy action and sentiment is buoyant--that’s no reason to be negative, but we’re continuing with our step-by-step buying spree.
Last week, we started a new half position in CrowdStrike (CRWD), and tonight, we’re filling out our position in Novocure (NVCR), leaving us with around 20% in cash.
Last week, we started a new half position in CrowdStrike (CRWD), and tonight, we’re filling out our position in Novocure (NVCR), leaving us with around 20% in cash.
Hopefully, 2021 will remove some of the uncertainties that the virus has wrought, and the economy can begin to speed up its recovery. And while the markets have done very well this year, there are still pockets that are undervalued, many of which are represented in our pages this month.
In December’s Issue of Cabot Early Opportunities we look back at one of the strangest years in decades and discuss the seemingly counterintuitive strategy that drove huge portfolio gains.
Then we look at a fresh batch of names that seem ripe for the picking now and which could serve us well in the beginning of 2021. Our new stocks span clean energy, PC gaming, biotech, industrial supplies, and payment processing. As always, there should be something for everyone!
Then we look at a fresh batch of names that seem ripe for the picking now and which could serve us well in the beginning of 2021. Our new stocks span clean energy, PC gaming, biotech, industrial supplies, and payment processing. As always, there should be something for everyone!
In this season of good cheer, we have a lot to be thankful for: 1) It looks like we can finally put this election to rest (thank goodness!); 2) the first coronavirus vaccine is being distributed across the country; and 3) hopefully, we’ll soon have another stimulus package.
Despite all the challenges, the markets have held up very well, and the Dow Jones Industrial Average has surpassed the big 30,000 mark several times in the last few weeks.
Unemployment continues to decline, with the rate dropping to 6.7% in November. Consumers are shopping for the holidays, with online Thanksgiving sales up 21.5%, to $5.1 billion. I know my finger is sure hitting the ‘buy’ button a lot more this year!
Hopefully, 2021 will remove some of the uncertainties that the virus has wrought, and the economy can begin to speed up its recovery. And while the markets have done very well this year, there are still pockets that are undervalued, many of which are represented in our pages this month.
We begin with our Spotlight Stock, the largest water company in Brazil, which is expanding to deliver services outside its borders. In my Feature article, I further explore that growth—as well as the rising need—for potable water in Latin America.
Moving on to Growth, our contributors have a number of ideas here, including companies in the e-commerce, ride sharing/food delivery, infrastructure, industrial equipment, and rent-to-own industries. Our Growth & Income picks include an alcoholic beverage manufacturer as well as a gas/chemical company.
In Healthcare, you’ll find stocks from the testing medial technology, biopharma, and cannabis sectors. Technology has been the big winner of 2021, and here we offer ideas in the printing equipment, audio & video, software, and electronics industries.
Our Resources & Utilities section has a couple of gold and utility companies. In High Yield and Preferred Stocks, you’ll find a host of companies offering better-than-market yields, from the banking, energy, franchising, shipping, and natural gas sectors.
This month, we include two Real Estate Investment Trusts, as well as a company offering a nice Special Dividend opportunity. Make sure you check the dates, so that you don’t miss out on this chance for extra cash flow.
Lastly, our Funds & ETFs are well-diversified, with ideas in the midcap value, emerging small caps, low-priced stocks, materials, and energy industries.
I hope you and your families enjoy a wonderful and safe holiday. I’m sticking close to home this year, but hope to enjoy some traveling in 2021. As always, please don’t hesitate to email me with your feedback and questions. My address is nancy@financialfreedomfederation.com.
Despite all the challenges, the markets have held up very well, and the Dow Jones Industrial Average has surpassed the big 30,000 mark several times in the last few weeks.
Unemployment continues to decline, with the rate dropping to 6.7% in November. Consumers are shopping for the holidays, with online Thanksgiving sales up 21.5%, to $5.1 billion. I know my finger is sure hitting the ‘buy’ button a lot more this year!
Hopefully, 2021 will remove some of the uncertainties that the virus has wrought, and the economy can begin to speed up its recovery. And while the markets have done very well this year, there are still pockets that are undervalued, many of which are represented in our pages this month.
We begin with our Spotlight Stock, the largest water company in Brazil, which is expanding to deliver services outside its borders. In my Feature article, I further explore that growth—as well as the rising need—for potable water in Latin America.
Moving on to Growth, our contributors have a number of ideas here, including companies in the e-commerce, ride sharing/food delivery, infrastructure, industrial equipment, and rent-to-own industries. Our Growth & Income picks include an alcoholic beverage manufacturer as well as a gas/chemical company.
In Healthcare, you’ll find stocks from the testing medial technology, biopharma, and cannabis sectors. Technology has been the big winner of 2021, and here we offer ideas in the printing equipment, audio & video, software, and electronics industries.
Our Resources & Utilities section has a couple of gold and utility companies. In High Yield and Preferred Stocks, you’ll find a host of companies offering better-than-market yields, from the banking, energy, franchising, shipping, and natural gas sectors.
This month, we include two Real Estate Investment Trusts, as well as a company offering a nice Special Dividend opportunity. Make sure you check the dates, so that you don’t miss out on this chance for extra cash flow.
Lastly, our Funds & ETFs are well-diversified, with ideas in the midcap value, emerging small caps, low-priced stocks, materials, and energy industries.
I hope you and your families enjoy a wonderful and safe holiday. I’m sticking close to home this year, but hope to enjoy some traveling in 2021. As always, please don’t hesitate to email me with your feedback and questions. My address is nancy@financialfreedomfederation.com.
This Friday is the expiration of our December covered calls, and I am happy to report that all five of our positions are in good/great shape. As is always the case, expect an email from me Friday morning breaking down where we stand with each position.
Market trends remain very positive as we head toward the end of the year, so I continue to recommend that you remain heavily invested—but with one eye on the exit door. The fact is, sentiment is very high, which means risk is growing—but I can’t argue with trends.
Today’s recommendation is a fast-growing cybersecurity stock with a special focus on the cloud, and great upside potential. Aggressive investors should like it.
But to fit it into the portfolio, I’ve got to sell something, and the victim is another hot growth stock, recommended just five weeks ago and now being sold for a quick 39% profit.
Full details in the issue.
Today’s recommendation is a fast-growing cybersecurity stock with a special focus on the cloud, and great upside potential. Aggressive investors should like it.
But to fit it into the portfolio, I’ve got to sell something, and the victim is another hot growth stock, recommended just five weeks ago and now being sold for a quick 39% profit.
Full details in the issue.
Current Market OutlookWe could pretty much cut our intro from the past couple of weeks and paste it in this week—the primary evidence (trends and overall action of the market and leading stocks, fresh breakouts, blastoff-type green lights from mid November) remains very encouraging, with most of the major potholes seen lately coming from very speculative situations. The main worry is that few investors are worried (in stark contrast to earlier this year, when the market was kiting higher but few believed it), which tells us that risk is rising. Thus, we remain bullish and think putting money to work is the best course of action, but it’s also important to keep your feet on the ground and focus on the best-looking stocks while trailing stops higher and taking partial profits as things stretch higher.
This week’s list is relatively split between growth situations and those benefiting from cyclical/turnaround buying. Our Top Pick is Axon Enterprise (AAXN), which continues to gain sponsorship and has just tightened up nicely for five weeks.
| Stock Name | Price | ||
|---|---|---|---|
| Adient (ADNT) | 34.99 | ||
| Align Technology (ALGN) | 504.11 | ||
| Ambarella (AMBA) | 90.94 | ||
| AAXN (AAXN) | 127.31 | ||
| Baker Hughes Company (BKR) | 21.72 | ||
| fuboTV Inc. (FUBO) | 27.15 | ||
| The Michaels Companies (MIK) | 11.68 | ||
| Micron Technology, Inc. (MU) | 71.54 | ||
| PagerDuty (PD) | 44.18 | ||
| Stitch Fix (SFIX) | 64.06 |
Updates
The past week was relatively subdued in small-cap land; the asset class, as measured by the S&P 600 Small Cap Index, dropped a modest 0.8%. The biggest declines were seen in the energy, consumer discretionary and healthcare sectors. The latter is likely due to disruption from Hurricane Maria and renewed chatter about reducing federal subsidies that were part of the Affordable Care Act (ACA).
The iShares EM Fund (EEM) has been trending up, keeping the Cabot Emerging Markets Timer a bright green. Our stocks are generally doing well, and we have no changes to the portfolio tonight.
The stock market’s advance slowed a little this week, but the major indexes are still at all-time highs. Strangely enough, after declining for most of September, utilities have been one of the best-performing sectors over the past five days. Technology and real estate are also outperforming.
Notice that the S&P 500 has a very specific pattern this year: advance-rest-pullback-recover, then repeat the cycle, continuing to rise as months pass. The market just completed another advance. Therefore, odds are strong that the market’s now ready for some sideways trading.
After weeks of consultation with Roy Ward, I’ve decided to make the following changes to the Cabot Benjamin Graham Value Investor. I also include updates on two of our stocks.
The general market picture continues to look bright. All three of our key market timing indicators remain bullish—both the market’s intermediate- and longer-term trends are pointed up, and the broad market is in great shape, with the Two-Second Indicator continuing to record fewer than 20 new lows day after day.
The rotation into the year’s underperformers that started last week has continued, while taking on some aspects of a generic risk-on trade. Financial stocks have outperformed all others since our last update, and tech stocks are up again this week. Materials and industrials also continue to do well.
What a week! I’ve been asked a few times by friends and family members (but no subscribers, c’mon guys!) why small caps have suddenly sprung to life. Check out the one-year chart below of the S&P 600 Small Cap Index.
This is my last Weekly Update. I am retiring today after 50 years in the investment business, including 15 years writing the Cabot Benjamin Graham Value Investor.
The iShares EM Fund (EEM) has been in a downtrend since September 22, turning the Cabot Emerging Markets Timer neutral. We will continue to manage our stocks individually, but will curtail new buying and keep stocks on a shorter leash until momentum improves.
Delegates from OPEC and Russia decided last week that they will not make any decisions regarding a possible extension of oil production cuts until January. Some people expect oil production to beginning rising again in March 2018. Conversely, Iraq and Ecuador are leaning toward further production cuts.
Over the past week, small caps looked particularly good as most sectors outperformed their large-cap peers. Our asset class is now up 4% year-to-date, a vast improvement after being flat a week and a half ago.
Alerts
Four stocks in the portfolio reported earnings.
This medical device company beat analysts’ earnings estimates by $0.08 last quarter.
Further bad news on the U.S.-China trade front prompted another sharply lower open today, and unlike Monday, the buyers never showed up. At day’s end, the Dow had fallen 473 points and the Nasdaq plunged 160 points.
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.
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.