Issues
Current Market OutlookThe top-down view of the market remains just so-so, with the intermediate-term trend effectively on the fence—most indexes are hanging around their 50-day lines and have recouped about half of the recent corrections. Thus, some caution is still in order, especially as further news-driven moves are likely in the days and weeks ahead. However, the leaders (and potential leaders) of the market are very impressive, with more and more flashing constructive action, including some that are rallying on outsized volume, both of which are a sign that big investors are getting comfortable putting money to work. It’s not a wild bull market obviously, with relatively few stocks hitting new highs, but it’s safe to say the evidence has improved, causing us to nudge up our Market Monitor today.
This week’s list has a bunch of good-looking stocks that have seen good-volume buying of late. Our Top Pick is Datadog (DDOG), which has returned to form after a big-volume breakout last week. Start small and add if the stock and market improve from here.
| Stock Name | Price | ||
|---|---|---|---|
| Alibaba (BABA) | 288 | ||
| Datadog (DDOG) | 107 | ||
| Purple Innovation (PRPL) | 25 | ||
| Seres Therapeutics (MCRB) | 30 | ||
| SolarEdge Technologies Inc. (SEDG) | 273 | ||
| STMicroelectronics (STM) | 33 | ||
| Teck Resources Limited (TECK) | 14 | ||
| Twilio (TWLO) | 283 | ||
| Twitter (TWTR) | 47 | ||
| Zendesk (ZEN) | 105 |
While automobiles have become more consumer-friendly over the last decade there are still a lot of clunky technologies that drivers deal with.
Sometimes mobile devices pair seamlessly, sometimes they don’t. Sometimes, a car’s infotainment system functions so poorly that drivers are more distracted than they were in the good old days of reaching for cassette tapes under the passenger seat.
Today we’re investing in a company that’s developing a digital ecosystem for connected and autonomous vehicles that will make driving safer and more enjoyable for everyone.
It’s an under-the-radar story still, but not for long. Enjoy!
Sometimes mobile devices pair seamlessly, sometimes they don’t. Sometimes, a car’s infotainment system functions so poorly that drivers are more distracted than they were in the good old days of reaching for cassette tapes under the passenger seat.
Today we’re investing in a company that’s developing a digital ecosystem for connected and autonomous vehicles that will make driving safer and more enjoyable for everyone.
It’s an under-the-radar story still, but not for long. Enjoy!
This was a good week for the Explorer portfolio as all our positions advanced, led by NovoCure (NVCR), Sea Limited (SE) and Virgin Galactic (SPCE), which jumped 25% this past week. We now head into the fourth quarter, which may bring some turbulence as the election approaches. We will take what the market gives us but will be on guard. Our emerging markets timer (EEM) is still positive.
Today, we have a new recommendation in emerging markets that we hope will benefit from the biggest shopping day in the world.
Today, we have a new recommendation in emerging markets that we hope will benefit from the biggest shopping day in the world.
Over the past seven weeks, we’ve been steadily lightening up in our marijuana stock portfolio, initially taking profits within a day of the top, and more recently continuing to shift to cash as the sector weakened.
Today we’re raising just a little more cash, with the sale of Aphria (APHA)—a sale that will take us to a roughly 52% cash position.
But overall, I’m still very bullish on the sector as a whole as a long-term investment and I fully expect to be moving back into the leading stocks in the sector once the tide starts coming in again.
Full details in the issue.
Today we’re raising just a little more cash, with the sale of Aphria (APHA)—a sale that will take us to a roughly 52% cash position.
But overall, I’m still very bullish on the sector as a whole as a long-term investment and I fully expect to be moving back into the leading stocks in the sector once the tide starts coming in again.
Full details in the issue.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the September 30th issue.
This month we look at stocks that might benefit from the (eventual) arrival of a post-Covid world. Currently, the news seems uninspiring – new cases are accelerating in some regions that may foreshadow a return of economically-crippling lockdowns, and hopes are dimming for a vaccine in the near future.
Many stocks have surged already in anticipation of this yearned-for world, but many remain moribund. Some laggards are likely to be zombies – still alive but burdened with overwhelming debt loads. We avoided these, and instead found several that should prosper with the return of a fully-opened economy and also have more resilient capital structures to help them endure while we all wait.
We also looked at publicly-traded chicken processors and found that the sky is not actually falling, even if the shares seem to imply an atmospheric tumbling. Near-term wholesale chicken prices have become meaningfully but temporarily depressed, in our view. We highlight three stocks and discuss their risk/return nuances, along with a fourth intriguing commodity food company.
Our feature recommendation, Western Digital (WDC), trades at a depressed valuation but has major strategic changes underway.
The letter also includes a summary of our recent sale of Gilead Sciences (GILD) as well as the full roster of our current recommendations.
Please feel free to send me your questions and comments. This newsletter is written for you and a great way to get more out of your 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!
This month we look at stocks that might benefit from the (eventual) arrival of a post-Covid world. Currently, the news seems uninspiring – new cases are accelerating in some regions that may foreshadow a return of economically-crippling lockdowns, and hopes are dimming for a vaccine in the near future.
Many stocks have surged already in anticipation of this yearned-for world, but many remain moribund. Some laggards are likely to be zombies – still alive but burdened with overwhelming debt loads. We avoided these, and instead found several that should prosper with the return of a fully-opened economy and also have more resilient capital structures to help them endure while we all wait.
We also looked at publicly-traded chicken processors and found that the sky is not actually falling, even if the shares seem to imply an atmospheric tumbling. Near-term wholesale chicken prices have become meaningfully but temporarily depressed, in our view. We highlight three stocks and discuss their risk/return nuances, along with a fourth intriguing commodity food company.
Our feature recommendation, Western Digital (WDC), trades at a depressed valuation but has major strategic changes underway.
The letter also includes a summary of our recent sale of Gilead Sciences (GILD) as well as the full roster of our current recommendations.
Please feel free to send me your questions and comments. This newsletter is written for you and a great way to get more out of your 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!
The healthcare industry has had its share of ups and downs, with most of the attention being showered on the biotechs that hope to produce COVID-19 vaccines. But after the recent outlook upgrade of today’s recommendation, investors may want to broaden their healthcare watch list.
Current Market OutlookMost of the issues the market had been suffering from are still out there—even after today’s rally, the intermediate-term trend of the major indexes is questionable at best (still technically down), while relatively few stocks are really moving ahead (the number of new highs remains tame). That said, we have begun to see support show up in the market, partially in the indexes but more so among leading (and potential leading) stocks; we’re seeing many show resilience and a bunch begin to set up in legitimate launching pads. That doesn’t mean these stocks are guaranteed to get going, but it’s a first step to keep an eye on going forward.
This week’s list contains a group of names that’s attracting money, including a few that have popped on news. Our Top Pick is CrowdStrike (CRWD), which is one of the few growth-oriented stocks that’s actually been slowly pushing higher in recent weeks as the market has come in.
| Stock Name | Price | ||
|---|---|---|---|
| Blueprint Medicines (BPMC) | 88.88 | ||
| CrowdStrike (CRWD) | 137.38 | ||
| Digital Turbine (APPS) | 30.98 | ||
| DraftKings Inc. (DKNG) | 56.91 | ||
| Generac Holdings (GNRC) | 190.24 | ||
| JinkoSolar Holding (JKS) | 37.78 | ||
| Owens & Minor (OMI) | 21.67 | ||
| QUALCOMM Incorporated (QCOM) | 118.47 | ||
| Sea Limited (SE) | 160.00 | ||
| Square, Inc. (SQ) | 160.79 |
This morning brought some broad buying to the market, though not enough to reverse the negative signal by our intermediate-term trend-following indicator last week. And that means that raising cash—by selling your weakest growth stocks—is still a good idea.
For Cabot Stock of the Week, I’ve singled out three to sell today (Big Lots - BIG), (RingCentral – RNG) and (Global X Cybersecurity ETF – BUG), but you may have others in your own portfolio.
As for new buying, this week I’m going with a low-risk recommendation from Cabot Dividend Investor, which has a good growth story and pays a 3.1% dividend.
For Cabot Stock of the Week, I’ve singled out three to sell today (Big Lots - BIG), (RingCentral – RNG) and (Global X Cybersecurity ETF – BUG), but you may have others in your own portfolio.
As for new buying, this week I’m going with a low-risk recommendation from Cabot Dividend Investor, which has a good growth story and pays a 3.1% dividend.
Updates
The S&P 500 and Dow finally joined the Nasdaq at new highs this week, although they continue to underperform the tech-oriented index. Despite this divergence, most signals continue to point to further gains for the stock market in the months ahead. I have one rating change today.
We’re on the tail end of earnings seasons for companies that wrapped up their quarters in March. Almost every one of our portfolio companies that reported earnings delivered an upside earnings surprise, especially in the integrated oil and construction materials industries.
This Weekly Update includes summaries for 11 Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other noteworthy news during the past week.
Most of the market’s evidence remains bullish, so we remain optimistic that higher prices are ahead; the Model Portfolio is more than 80% invested in nine strong stocks. That said, it’s not all peaches and cream, as some key indexes are again testing their 50-day lines and we’re still in the thick of earnings season.
This Weekly Update includes earnings updates and expectations on all our portfolio companies. I have no rating changes this week, and most of our holdings are acting quite well.
If you have any exposure at all to small-cap cloud-based software stocks, you’re likely singing in the shower these days. It has been hard to miss with this class of stocks. In our portfolio, our small business cloud software stocks are driving overall portfolio returns with weekly gains of 5% to 10% not uncommon.
At about half way through earnings season, the results look good. Average sales gains for our 27 stocks that have reported thus far are 13%. In today’s Weekly Update, I provides summaries for 16 of our companies that reported quarterly financial results or other noteworthy news during the past week.
The Emerging Markets Timer is in great shape, as the iShares EM Fund is sitting well above its 25- and 50-day moving averages. We have no changes to the portfolio tonight.
It looks like we’re in for an up week in the stock market. Stocks are reacting well to election results in France, in which a moderate candidate took the lead, with an outsider standing in second place. It seems like voters around the world are weary of their recent political regimes, choosing instead to either vote for moderates or vote for opposite political extremes from what they recently experienced.
Small caps got their mojo back this week. The asset class jumped 3.2%, driven by strong performance in consumer discretionary (up 5%), tech (up 4%) and industrials (up 3.7%). In fact, everything was up except energy (down 5%).
Thirteen Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news during the past week. This update also includes two Sell alerts.
Our Cabot Tides turned negative last week, though we didn’t take any action in the Model Portfolio as we already had 29% in cash. We’ve seen a modest bounce this week, and with our Cabot Trend Lines and Two-Second Indicator still positive, we think the next big move is up. But until we get a new Tides buy signal, we’re holding some cash and taking things on a stock-by-stock basis.
Alerts
This apparel company is seeing tremendous growth, with some very high-end brand names.
Three stocks are updated due to Earnings Reports.
The simplest reason is an imbalance of supply and demand; if supply is insufficient to meet demand, as it often is in a brand new industry, prices rise. That’s one reason marijuana stocks have been rising, overall, for the past few years.
This biopharma is expected to grow by 44.3% next year.
One stock reports fourth-quarter results, another moves from Hold to Buy and we reiterate the Buy recommendation on a third.
This railway company beat analysts’ estimates by $0.05 last quarter, and in the past 30 days, three analysts have increased their EPS forecasts for the company.
After disposing of an unprofitable division and coming out the winner in a lawsuit, this company is trading at a very undervalued level.
This biotech is somewhat speculative, but analysts expect it to grow by 22% annually for the next five years.
One of our positions reported strong fourth-quarter results and just a quick update on the price action with another position.
The top five holdings of this Europe fund are: Roche Holding AG Dividend Right Cert. (ROG), 3.62% of assets; BP PLC (BP.L), 3.33%; Unilever PLC (ULVR.L), 3.21%; Total SA (FP.PA), 2.81%; and SAP SE (SAP.DE), 2.59%.
Two of our positions reported strong fourth-quarter results and one reported an earnings miss. On top of that, two of our positions have seen some interesting price action.
In the past 30 days, 13 analysts have raised their EPS estimates for this trucking company.
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.