Issues
Current Market OutlookThe market has been thrashing around during the past few trading days, with big gaps up and down, dramatic reversals and news-driven moves. But overall, nothing has really changed from our point of view—most growth leaders are still under pressure after suffering abnormal selling the prior couple of weeks, which, coming after a prolonged upmove, raises the odds that further potholes are ahead. Of course, it’s not all bad—today was a stick save for the major indexes (most bounced nicely off their 50-day lines), and while the broad market has pulled back, many areas are doing so normally. All told, we remain flexible, and are open to the possibility that the recent dip was more of a shakeout than the start of a rough patch, but the burden of proof is on the bulls to step up. Until then, we prefer being cautious.
The good news is that our stock screens continue to pick up on some potential fresh leaders should the market find its footing. Our Top Pick this week is Novocure (NVCR), an innovative player in the cancer market that’s come to life after a year-long rest. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| 10X Genomics (TXG) | 121 | ||
| DouYu (DOYU) | 16 | ||
| The Gap, Inc. (GPS) | 17 | ||
| Guardant Health (GH) | 103 | ||
| The Mosaic Company (MOS) | 18 | ||
| MyoKardia (MYOK) | 124 | ||
| Novocure (NVCR) | 98 | ||
| Snap Inc. (SNAP) | 24 | ||
| Taiwan Semiconductor (TSM) | 80 | ||
| Target (TGT) | 148 |
After a sharp two-week correction that targeted growth stocks in particular (and high-flyers like TSLA and ZM above all), the market may or may not be ready to resume its uptrend. For now, however, I’m keeping it simple and staying heavily invested.
Today’s recommendation is a stock that’s been in the news recently and might be viewed as the next Tesla, but I don’t like that comparison, as there are numerous differences. In any case, it has great potential and I think you’ll like the story.
As for the current portfolio, something’s got to go to keep the portfolio at or below 20 stocks and the victim this week is Zscaler (ZS), which has brought us a fine profit in five months and is now at risk of giving some back.
Full details in the issue.
Today’s recommendation is a stock that’s been in the news recently and might be viewed as the next Tesla, but I don’t like that comparison, as there are numerous differences. In any case, it has great potential and I think you’ll like the story.
As for the current portfolio, something’s got to go to keep the portfolio at or below 20 stocks and the victim this week is Zscaler (ZS), which has brought us a fine profit in five months and is now at risk of giving some back.
Full details in the issue.
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.
Updates
The Emerging Markets Timer is in good shape, with iShares EM Fund sitting well above its 25-day moving average.
The broader U.S. stock market is having a pullback after a 12% post-election run-up. The S&P 500 is only down about 2.5% from its recent high, and it’s too soon to tell whether it might fall a little more.
Well, it couldn’t last forever, right? After months of hardly any pullbacks on the heels of the massive post-election rally, stocks—including small caps—finally had a down week.
This Weekly Update includes summaries for six Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other important news during the past week.
Our Two-Second Indicator remains negative, our Cabot Tides are now on the fence, and the breadth-related yellow flags have led to some strong selling this week. Short-term, it’s best to pare back on any stocks that break down; longer-term, though, we remain optimistic.
Yesterday, the stock market had its worst day since October; the Dow, Nasdaq and S&P 500 all declined over 1%. Financials and materials stocks were the biggest losers, while safe havens gained.
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.)
Alerts
Two of our stocks move from Hold to Buy in advance of tomorrow’s earnings releases.
Our first idea is a company that is expected to grow more than 20% next year, and we are taking profits on our sale recommendation.
This homebuilder will announce earnings on February 26.
One of our stocks reported a strong earnings beat and another joins the Buy Low Opportunities Portfolio as a Strong Buy.
Our first idea today is taking advantage of the low-P/E bank stocks, and our second idea is a sell recommendation.
Marijuana is still far from universally accepted, and until it is, the sector will continue to have great growth potential. That’s how investing works.
As I mentioned in yesterday’s Weekly Update, I am generally waiting for the stock market’s first pullback, during this recovery from the fourth-quarter 2018 stock market correction, before moving many good stocks from Hold to Buy recommendations. However, today’s news on this stock is so good that the odds of a significant pullback have all but disappeared.
Coverage of the shares of this software company have recently been initiated at Deutsche Bank and Stifel Nicolaus, with a ‘Buy’ rating.
Shares of this apparel company were recently upgraded to ‘Buy’ at Stifel Nicolaus.
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.