Issues
Thank you to everyone who joined us last week for our virtual Cabot Summit. We really missed seeing you in person, but were so happy that we could at least share some of our investing ideas and strategies during this strange time in which we are living. I hope you enjoyed the Summit!
We are keeping our fingers crossed that the coronavirus trend seems to be improving. Unemployment is still dismal, but there are some very bright spots in the economy—both housing starts, building permits, and manufacturing are rising.
And as you’ll see in our Advisor Sentiment Barometer and Market Views, sentiment continues to be bullish.
We are keeping our fingers crossed that the coronavirus trend seems to be improving. Unemployment is still dismal, but there are some very bright spots in the economy—both housing starts, building permits, and manufacturing are rising.
And as you’ll see in our Advisor Sentiment Barometer and Market Views, sentiment continues to be bullish.
In this month’s issue of Cabot Early Opportunities we serve up a diverse group of stocks with exposure to vastly different areas of the economy.
There’s some software and biotech, and plenty of IPOs, but also a few ways to play rising strength in cyclical stocks.
Enjoy!
There’s some software and biotech, and plenty of IPOs, but also a few ways to play rising strength in cyclical stocks.
Enjoy!
A lot has happened with our marijuana stocks in recent weeks, with the most important being the release of excellent quarterly reports by all the major U.S. multi-state operators that explained why the sector had been so strong in recent months.
However, growth stocks in general—and marijuana stocks in particular—have now begun a well-deserved correction, so I’m now getting a bit more cautious.
Full details in the issue.
However, growth stocks in general—and marijuana stocks in particular—have now begun a well-deserved correction, so I’m now getting a bit more cautious.
Full details in the issue.
It’s time to look beyond the pandemic. It may seem like it will drag on forever. And it may still be a while yet before it’s behind us. But it will pass. In the grand scheme of things, it is a very temporary situation.
The overwhelming majority of your investing career from here will be in the post pandemic environment. And the virus has created opportunities. While the market indexes are at all time highs, many of the more cyclical and real economy stocks are still historically very cheap. But these stocks will be lifted by the inevitable recovery ahead.
In this issue, I identify two industry leaders with stock prices that are temporarily depressed in the current environment. Yet, they present fantastic opportunities if we look beyond the haze.
The overwhelming majority of your investing career from here will be in the post pandemic environment. And the virus has created opportunities. While the market indexes are at all time highs, many of the more cyclical and real economy stocks are still historically very cheap. But these stocks will be lifted by the inevitable recovery ahead.
In this issue, I identify two industry leaders with stock prices that are temporarily depressed in the current environment. Yet, they present fantastic opportunities if we look beyond the haze.
For now our positions remain in great shape, and this week we are adding a stock that we successfully traded in March, and has shown no signs of pulling back after an earnings blowout last week.
Current Market OutlookThere’s not much negative to say about the market if you’re looking at the major indexes—all remain in solid intermediate-term uptrends, and longer-term, there are many bullish signposts for the overall market. But it’s also a fact that this rally has become awfully thin—the number of stocks hitting new highs is half (or less) of what we saw earlier this month, and the rotation between extended growth (those that got going back in April/May), fresher growth (those that got going in the past month or so) and cyclicals is becoming more frequent and intense. Once again, none of this necessarily portends doom, but there’s little doubt that making money has become tougher, so factor that into your plan—possibly buying smaller positions, entering on weakness, and focusing on what’s attracting buyers.
That’s just what our screens do, and this week’s list has another batch of in-favor stocks. For our Top Pick, we’ll go with JD.com (JD), a well-traded name that just reacted positively to earnings, and whose group (China) is picking up steam.
| Stock Name | Price | ||
|---|---|---|---|
| The AZEK Company (AZEK) | 39.88 | ||
| Big Lots (BIG) | 53.65 | ||
| DaQo New Energy Corp (DQ) | 124.59 | ||
| Elastic (ESTC) | 103.35 | ||
| Emergent BioSolutions, Inc. (EBS) | 125.55 | ||
| Etsy (ETSY) | 128.74 | ||
| JD.com (JD) | 76.18 | ||
| Natera (NTRA) | 65.49 | ||
| Trade Desk (TTD) | 466.66 | ||
| Whirlpool (WHR) | 181.38 |
The market remains in good health and trending higher, though the rotation from previously hot growth stocks continues, to some degree.
This week’s recommendation is a well-known consumer name whose stock is truly cheap, in part because the company recently discontinued dividend payments (they had been 6%) in response to the pandemic shutdown.
As for the current portfolio, I will now drop Nvidia (which has been very successful but is now sky-high), and downgrade GFL Environmental (GFL) to hold.
Full details in the issue.
This week’s recommendation is a well-known consumer name whose stock is truly cheap, in part because the company recently discontinued dividend payments (they had been 6%) in response to the pandemic shutdown.
As for the current portfolio, I will now drop Nvidia (which has been very successful but is now sky-high), and downgrade GFL Environmental (GFL) to hold.
Full details in the issue.
Current Market OutlookThe market continues to look fine, with both primary (trend) and secondary (new lows, etc.) evidence boding well—not to mention many of the longer-term signposts like blastoff indicators telling us this is a bull market. But for leading growth stocks, it’s tricky out there; while there haven’t been a rash of breakdowns, there’s plenty of iffy action, with low volume rallies, selling on strength and relatively few stocks hitting new highs. (While the Nasdaq tested new-high ground today, the number of stocks doing so was half of what we saw a week and a half ago.) We certainly don’t think you should be holed up in your bunker, and we’re staying flexible, but given the prolonged run and the recent sloppiness, we think moving closer to shore makes sense, especially if you own some sluggish performers.
Interestingly, while the leaders of the April-July move rest, we’re seeing other names (both growth and cyclical) perk up. This week’s list has plenty of both, and our Top Pick is Quanta Services (PWR), which has decisively broken out on the upside.
| Stock Name | Price | ||
|---|---|---|---|
| Berry Global (BERY) | 64.22 | ||
| Builders FirstSource (BLDR) | 44.12 | ||
| Cerence (CRNC) | 107.77 | ||
| First Solar (FSLR) | 83.74 | ||
| HubSpot (HUBS) | 582.89 | ||
| Innovative Industrial Properties (IIPR) | 214.38 | ||
| iRhythm Technologies (IRTC) | 51.15 | ||
| L Brands (LB) | 79.48 | ||
| Quanta Services (PWR) | 91.45 | ||
| Shift4 Payments (FOUR) | 89.97 |
The market remains in good health and trending higher, though there is some rotation going on from growth stocks to cyclicals—not unusual for this stage of a bull market.
This week’s recommendation is a big cap global technology stock benefitting from both the spread of communications technology and the company’s dominant position in the global supply chain.
As for the current portfolio, there are no stocks that look like they should be sold, but I must sell one to respect my portfolio cap, and the victim will be Brookfield Infrastructure Partners (BIP), where we have a modest profit.
Full details in the issue.
This week’s recommendation is a big cap global technology stock benefitting from both the spread of communications technology and the company’s dominant position in the global supply chain.
As for the current portfolio, there are no stocks that look like they should be sold, but I must sell one to respect my portfolio cap, and the victim will be Brookfield Infrastructure Partners (BIP), where we have a modest profit.
Full details in the issue.
Updates
Last week, Mattel (MAT) introduced a boy doll named Logan to its American Girl product line. I can’t say that the doll will change much at Mattel’s bottom line, but it will certainly bring attention to the company.
Two of our positions reported this week. One was up over 8% the day after reporting. And the other is up nicely in early trade today after reporting yesterday.
I include summaries of 10 Cabot Benjamin Graham Value Investor companies that have reported quarterly financial results or other noteworthy news during the past week. I also report on the sectors of the economy that are likely to benefit from economic and political changes in 2017 and 2018.
The Emerging Markets Timer continues to flash a buy signal, as the iShares Emerging Markets Fund (EEM) has been sprinting away from its moving averages. We are responding by returning one stock to a Buy rating and initiating a half position in another.
The market is healthy and investors should be bullish. For our part, we’re putting one stock back on Buy today. Investors looking to put money to work should also consider these five stocks, which all look healthy and strong today.
Today’s portfolio changes: Archer Daniels Midland (ADM) moves from Strong Buy to Buy, Boise Cascade (BCC) moves from Buy to Hold and Tesoro (TSO) moves from Hold to Buy.
All but two of our positions are showing positive gains, and all but four have outperformed the Russell since they were recommended. On average, each position is outperforming by around 10%.
AbbVie’s (ABBV) earnings failed to impress last week, the stock is stuck in a trading range with a slight downward bias, and the biotech rally has failed—or at least been delayed—once again.
Alerts
Our New Top Pick (AMD) is forecast to grow at a rate of 34.8% this year.
In the past 30 days, 12 analysts have increased their EPS estimates for this tech company, and the consensus forecast is for 24.6% growth next year.
This speculative stock has significant insider holdings and looks very undervalued.
Crista is adding a new stock to the Buy Low Opportunities Portfolio
Analysts expect this sleep innovator to grow 31.1% this year.
There is earnings news on several of the stocks in the portfolio.
Analysts expect this chipmaker to grow 34.8% next year.
Stocks in the marijuana sector are off to a flying start this year.
One of our portfolio stocks rose 11% this morning upon a Reuters report that private equity firms Sycamore Partners and/or Apollo Global Management (APO) might announce a buyout in February.
Analysts expect this fitness company to grow at an annual rate of 28.2% over the next five years.
Analysts expect this medical data company to grow at an annual rate of 30% over the next five years.
This software company beat analysts’ estimates by $0.05 last quarter, and Wall Street expects it to grow 45.5% next year.
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.