Issues
Here is the August 2020 issue of Cabot Undervalued Stocks Advisor.
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. It’s earnings season, and in this issue we review fresh reports from MKS Instruments (MKSI), Tyson Foods (TSN), Columbia Sportswear (COLM), Amazon.com (AMZN) and Marathon Petroleum (MPC). Marathon also announced a deal to sell their Speedway retail gas station business for $21 billion in an all-cash deal, which we discuss.
As a newsletter looking for undervalued stocks in a market full of enthusiasm for only a select few mega-sized tech companies, we almost feel a moral obligation to highlight contrarian ideas. In this issue, we recommend a stable but meaningfully out-of-favor company that has the potential to provide solid long-term returns. “Out-of-favor” implies that it doesn’t have the immediate profit potential of a “digital economy” stock, but that lack of zest produces the opportunity. With low expectations comes upside surprises. We believe global beverage company Molson Coors (TAP) fits the bill.
You may notice that we are tweaking some of the components of the Cabot Undervalued Stocks Advisor letter. For example, we’re bringing back the portfolio tables to every weekly and monthly issue. A “Hold” rating means that we believe the stock is fine to hold in the portfolio, but that the risk/return trade-off isn’t compelling enough to warrant a “Buy” nor unfavorable enough to warrant a “Sell.” Also, for the monthly issue, we may not always have a “Feature” stock in each portfolio – that doesn’t mean we don’t like any of the names, it probably just means that we featured it recently and want to avoid being repetitive to save you time and effort.
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.
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. It’s earnings season, and in this issue we review fresh reports from MKS Instruments (MKSI), Tyson Foods (TSN), Columbia Sportswear (COLM), Amazon.com (AMZN) and Marathon Petroleum (MPC). Marathon also announced a deal to sell their Speedway retail gas station business for $21 billion in an all-cash deal, which we discuss.
As a newsletter looking for undervalued stocks in a market full of enthusiasm for only a select few mega-sized tech companies, we almost feel a moral obligation to highlight contrarian ideas. In this issue, we recommend a stable but meaningfully out-of-favor company that has the potential to provide solid long-term returns. “Out-of-favor” implies that it doesn’t have the immediate profit potential of a “digital economy” stock, but that lack of zest produces the opportunity. With low expectations comes upside surprises. We believe global beverage company Molson Coors (TAP) fits the bill.
You may notice that we are tweaking some of the components of the Cabot Undervalued Stocks Advisor letter. For example, we’re bringing back the portfolio tables to every weekly and monthly issue. A “Hold” rating means that we believe the stock is fine to hold in the portfolio, but that the risk/return trade-off isn’t compelling enough to warrant a “Buy” nor unfavorable enough to warrant a “Sell.” Also, for the monthly issue, we may not always have a “Feature” stock in each portfolio – that doesn’t mean we don’t like any of the names, it probably just means that we featured it recently and want to avoid being repetitive to save you time and effort.
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.
People are flocking to the company’s hobby photo- and video-sharing application, posting pics and videos of their cooking masterpieces, children’s activities, business décor ideas and just about any other creative task you can imagine.
Current Market OutlookThe market had been a bit wobbly, but last week brought a bunch of good-looking earnings reactions (not just the mega-cap names on Friday), which has put the sellers back on their heels—the Nasdaq actually kissed new high ground today! Of course, earnings season isn’t over, so it’s possible we see some air pockets emerge, and some of the blemishes we’ve been writing about still exist (the number of new highs continue to dry up a bit even as the Nasdaq pushes ahead). Because of all that, we still think picking your stocks and buy points is important; try to avoid chasing any old thing just because it’s going up. But there’s no question most of the evidence remains bullish, so we advise you to stick with a heavily invested position and buy fresh leaders either on initial pullbacks or powerful earnings moves.
This week’s list has a growth-ier feel as we highlight many of the recent earnings winners. Our Top Pick is Qualcomm (QCOM), which won’t be the fastest horse but just emerged from a huge consolidation and has giant earnings estimates thanks to a huge deal and the 5G boom.
| Stock Name | Price | ||
|---|---|---|---|
| Advanced Micro Devices (AMD) | 82.24 | ||
| Fortune Brands Home & Security (FBHS) | 81.02 | ||
| GenMark Diagnostics (GNMK) | 15.47 | ||
| Kirkland Lake Gold (KL) | 51.30 | ||
| Pinduoduo (PDD) | 87.53 | ||
| Penn National Gaming (PENN) | 45.38 | ||
| Pinterest (PINS) | 35.86 | ||
| QUALCOMM Incorporated (QCOM) | 106.36 | ||
| Qorvo (QRVO) | 129.47 | ||
| Scotts Miracle-Gro (SMG) | 155.72 |
The market remains in good health and trending higher, spurred on by some very impressive second quarter reports.
This week’s recommendation is a high-risk stock with high potential in the energy industry, and I’m trying to get in near a short-term low here.
As for the current portfolio, many of our stocks are hitting new highs today and there’s only one change—a downgrade of Columbia Sportswear (COLM) to hold.
Full details in the issue.
This week’s recommendation is a high-risk stock with high potential in the energy industry, and I’m trying to get in near a short-term low here.
As for the current portfolio, many of our stocks are hitting new highs today and there’s only one change—a downgrade of Columbia Sportswear (COLM) to hold.
Full details in the issue.
This year, individual stock performance has largely been driven by a single narrative: how well the underlying companies are positioned for a pandemic-striken world. Those with strong digital-economy businesses have surged, while those with physical-economy businesses have stalled, or worse.
In this issue we recommend a life insurance stock and talk about Dow laggards with rebound potential.
In this issue we recommend a life insurance stock and talk about Dow laggards with rebound potential.
The Nasdaq and growth stocks have a lost a little steam since early July, with fewer stocks moving up and the indexes doing more chopping than trending. That’s a good reason to take your foot off the accelerator, but most of the big-picture evidence remains positive, so we’re holding our strong, profitable stocks and remaining mostly bullish.
In tonight’s issue, we review some of that bullish longer-term evidence, talk a bit about gold stocks and, as always, go over our latest thoughts on the stocks we own and are watching.
In tonight’s issue, we review some of that bullish longer-term evidence, talk a bit about gold stocks and, as always, go over our latest thoughts on the stocks we own and are watching.
The broad market remains healthy (climbing a wall of worry) and the marijuana sector is even stronger!
Leading the way are the big U.S. producers (we own them all), but there’s more, including the Canadian volume leader’s earnings report of today and a surprisingly strong performance from our (totally legal nationwide) hydroponics growing supply store, whose stock was up more than 10% just this morning!
Full details in the issue.
Leading the way are the big U.S. producers (we own them all), but there’s more, including the Canadian volume leader’s earnings report of today and a surprisingly strong performance from our (totally legal nationwide) hydroponics growing supply store, whose stock was up more than 10% just this morning!
Full details in the issue.
Extreme sector rotation has been the story of the last week as red-hot growth sectors came under some pressure, while out of favor value stocks finally found some buying. This is a fine situation for our diversified portfolio as we are selling expensive calls that help offset any short-term stock/sector weakness. This brings me to our pick of the week, which is in a red-hot sector and recently reported very strong earnings.
Current Market OutlookAfter an impressive four-month rebound, many investors are nervously expecting the return of volatility during earnings season. But despite some recent choppiness among the leading stocks, the market remains largely unperturbed. Growth stocks are holding up well, while the major indices remain above their key trend lines. And while there are signs lately of increased demand in defensive areas of the market (like consumer staples and precious metals mining), the more aggressive segments remain strong. Finally, a healthy number of stocks are still making new 52-week highs on both major exchanges (especially the NYSE), while new lows have been remarkably sparse. All of this tells us that the intermediate-term trend still favors the bulls. While volatility may yet rear its head, we’ll continue to follow the weight of evidence.
This week’s list contains a nice mix of some of today’s leading themes: healthcare, internet, real estate/home improvement and education. Our Top Pick is Owens & Minor (OMI), which has a solid story and has broken out of an extended base on more than 10 times normal volume.
| Stock Name | Price | ||
|---|---|---|---|
| Farfetch (FTCH) | 26.23 | ||
| Floor & Décor (FND) | 68.03 | ||
| GSX Techedu (GSX) | 97.59 | ||
| Invitae (NVTA) | 32.06 | ||
| Meritage Homes (MTH) | 102.20 | ||
| Owens & Minor (OMI) | 17.01 | ||
| SailPoint Technologies (SAIL) | 31.60 | ||
| Sea Limited (SE) | 132.86 | ||
| Watsco (WSO) | 237.50 | ||
| Wix.com (WIX) | 302.53 |
The market remains in good health and trending higher, though as always, fine-tuning of your portfolio is required to continue to stay in the right stocks.
This week, that means selling two stocks (SLQT and VRTX), as well as upgrading one (ZM) to buy.
As for the new recommendation, it’s tailor-made for investors looking to maximize income from dividends (it pays a 7.3% yield) and get capital appreciation potential too.
Full details in the issue.
This week, that means selling two stocks (SLQT and VRTX), as well as upgrading one (ZM) to buy.
As for the new recommendation, it’s tailor-made for investors looking to maximize income from dividends (it pays a 7.3% yield) and get capital appreciation potential too.
Full details in the issue.
Updates
When I’m out and about in the world, talking to investors, I’ve noticed that when I mention my goal of minimizing the risk associated with stock investing, people’s eyes glaze over. I’ve come to realize that people generally believe eliminating risk actually means eliminating reward. Holy moly, NO!
We have 10 stocks, seven of which are doing quite well, one of which is new, and two of which are acting a little weak.
This Weekly Update includes summaries for four Cabot Benjamin Graham Value Investor companies which reported quarterly financial results or other important news during the past week. I have also included questions from subscribers along with my answers.
The Emerging Markets Timer is in fine shape after Wednesday’s big rally. We have no changes to the portfolio today.
The stock market’s pullback resumed yesterday, but this still looks like a normal retreat following a breakneck four-month rally. One warning light is decreasing breadth, which suggests that when the rally gets going again, it could be driven by a smaller group of stocks.
All the major U.S. stock market indexes are experiencing orderly pullbacks right now. (This is good news because the farther the market climbs without resting, the bigger the pullback when it finally arrives.)
The market’s attention has been squarely focused on jobs this week as updates on that front are likely to influence the Fed’s upcoming decision on interest rates next week. If it hikes (which is likely), it will mark just the third increase since the financial crisis.
This Weekly Update includes one summary of a company that reported quarterly financial results during the past week. I also include questions from subscribers along with my answers.
Remain bullish, but keep your eyes open. For the first time in months, we’re seeing some yellow flags, including from our Two-Second Indicator. That said, the trends of the market and most stocks are still positive, and pullbacks have been normal thus far.
After shooting to new all-time highs last Wednesday, the major indexes are taking a well-deserved breather this week. The pullback looks orderly and normal so far, and investors with money to put to work can use it as a buying opportunity.
This Weekly Update includes summaries for the 10 Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other noteworthy news during the past week and were not reported in my March 3 Weekly Update.
This Weekly Update includes summaries for six Cabot Benjamin Graham Value Investor companies that reported quarterly financial results. On Monday, March 6, I’ll update the remaining stocks.
Alerts
The top five holdings of this ETF are: AdvisorShares Sage Core Reserves ETF (HOLD), 35.79% of assets; Fidelity Instl Govt 657 C, 4.83%; PTC Inc (PTC), 4.42%; MasTec Inc (MTZ), 3.73%; and MSCI Inc (MSCI), 3.68 %.
One of our positions reports a strong earnings and revenue beat. For now it’s still a hold as we are awaiting a pullback, but it should be a buy candidate in the near future.
Gold is looking more favorable, and this ETF gives you wide exposure.
We’re moving a stock from Buy to Hold.
This media/entertainment company is forecast to grow by 64% next year, and 16 analysts have increased their earnings estimates for the company in the past 30 days.
One stock moves from Buy to Strong Buy and four more stocks in the portfolio report quarterly earnings.
The top three sectors in this fund are Technology (21.4% of assets); Financial Services (15.66%); and Healthcare (14.89%).
Three of the stocks in the portfolio please the market with their quarterly earnings releases.
This life sciences company beat analysts’ earnings estimates by $0.07 last quarter.
Two of our stocks report strong earnings.
The top three sectors in this growth fund are Consumer Cyclical (23.57% of assets); Technology (19.67%); and Healthcare (14.26%).
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.