Issues
This week’s volatility has been a bit unnerving but below the drama some good things are happening. The majority of our stocks finished the week higher and Sea Limited (SE) hit an all-time high after reporting another great quarter, confirming our view that this
could be an enduring growth story. No surprise that our emerging market timer is mixed, in a very modest uptrend but still below 50- and 200-day moving averages
Today, we have a new recommendation for you as we follow Warren Buffett to a financial technology play in Brazil
could be an enduring growth story. No surprise that our emerging market timer is mixed, in a very modest uptrend but still below 50- and 200-day moving averages
Today, we have a new recommendation for you as we follow Warren Buffett to a financial technology play in Brazil
This month we’re jumping into a software company that’s developed an innovative product for the emerging gig economy. But it’s not another Airbnb, Lyft or Uber. No apartments for rent or cars for hire here.
Rather, just like eBay and Etsy have created online marketplaces for buyers and sellers of physical goods, this company has created a marketplace that matches buyers and sellers of digital services—things like graphic design, writing and web development.
As the gig economy explodes this company is poised to enjoy rapid growth. And while no company is inoculated from the coronavirus, this one has some protection since it’s part of the digital, not physical, economy.
Rather, just like eBay and Etsy have created online marketplaces for buyers and sellers of physical goods, this company has created a marketplace that matches buyers and sellers of digital services—things like graphic design, writing and web development.
As the gig economy explodes this company is poised to enjoy rapid growth. And while no company is inoculated from the coronavirus, this one has some protection since it’s part of the digital, not physical, economy.
Today’s portfolio changes include one stock joining us with strong earnings growth and a stronger price chart than most stocks during this market correction, and another leaving the portfolio due to frequent downward revisions in earnings estimates.
The stock market will not likely bounce back quickly to its February highs. I’d be completely shocked if any such rebound occurred this month, or even in April. Instead, I expect a significant amount of volatility in the coming days, as buyers and sellers take turns embracing and dumping stocks. Despite the occasional up day in the market, there are many stocks that have not finished falling yet. Most such stocks are companies that will likely be harmed by a pullback in this year’s expected economic growth. After all, when people are quarantined – or just plain staying home and canceling travel and outings – many businesses suffer, not the least of which are travel, restaurant and retail companies.
I know that you will hear some friends or stock market pundits imply that the market will rebound quickly. Please, I beg you not to fall for that rosy prognosis. The market fell nearly 13%. That’s a BIG DROP. It’s going to take quite a few months to recover, and the recovery will most likely be precipitated by news that global economies are recovering from the coronavirus-induced lapse in economic output.
That’s not to say that there won’t be buying opportunities. I will continue to point out growth stocks that have somewhat bullish or tradeable price charts. These will be the ones with which you’ll want to “buy low.”
Lastly, take your time investing your cash. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges
The stock market will not likely bounce back quickly to its February highs. I’d be completely shocked if any such rebound occurred this month, or even in April. Instead, I expect a significant amount of volatility in the coming days, as buyers and sellers take turns embracing and dumping stocks. Despite the occasional up day in the market, there are many stocks that have not finished falling yet. Most such stocks are companies that will likely be harmed by a pullback in this year’s expected economic growth. After all, when people are quarantined – or just plain staying home and canceling travel and outings – many businesses suffer, not the least of which are travel, restaurant and retail companies.
I know that you will hear some friends or stock market pundits imply that the market will rebound quickly. Please, I beg you not to fall for that rosy prognosis. The market fell nearly 13%. That’s a BIG DROP. It’s going to take quite a few months to recover, and the recovery will most likely be precipitated by news that global economies are recovering from the coronavirus-induced lapse in economic output.
That’s not to say that there won’t be buying opportunities. I will continue to point out growth stocks that have somewhat bullish or tradeable price charts. These will be the ones with which you’ll want to “buy low.”
Lastly, take your time investing your cash. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges
Today, the widespread, ongoing move to the cloud by businesses of all sizes means there are all sorts of customized apps and differentiated hardware that don’t always work together the way they’re supposed to.
As the coronavirus correction rolls on, wise investors adapt,by selling weak stocks, holding cash and making smaller strategic investments in new opportunities.
Today, for our portfolio, that means selling two current holdings (one for a loss and one for a profit) and recommending a fast-growing medical company that has notonly a great growth story but also a chart that has been building a base for three months, setting up for its next advance.
Full details in the issue.
Today, for our portfolio, that means selling two current holdings (one for a loss and one for a profit) and recommending a fast-growing medical company that has notonly a great growth story but also a chart that has been building a base for three months, setting up for its next advance.
Full details in the issue.
Current Market OutlookFollowing last week’s rolling crash in the market, everyone is wondering what comes next, but instead of predicting (guessing), it’s better to stick with the facts. Here’s where the evidence stands: The intermediate-term trend is clearly down for all major indexes and most (though not all) stocks, and given that this comes after a prolonged advance, some time is likely going to be needed to repair the damage. Short-term, though, we did see some legitimate extremes in a few key measures (900-plus new lows on the NYSE on Friday; just 3% of S&P 500 stocks above their 50-day line; record SPY volume on Friday) that says today’s bounce could go further. All together, it’s best to be in a cautious stance (holding cash, limiting new buying, pruning your worst performers), though you shouldn’t panic out of everything—holding on to your resilient winners is fine, and if you have plenty of cash, a little buying is fine as well.
This week’s list is a good place to start building your watch list (or, if you’re in the buying mood, looking for candidates to nibble on). Our Top Pick is Regeneron Pharmaceuticals (REGN), which has a good overall story and what could be a big catalyst, too. Aim for dips.
| Stock Name | Price | ||
|---|---|---|---|
| Atlassian (TEAM) | 182.16 | ||
| Bill.com Holdings (BILL) | 88.76 | ||
| Cloudflare (NET) | 39.32 | ||
| Datadog (DDOG) | 81.52 | ||
| Dexcom (DXCM) | 421.36 | ||
| Enphase Energy (ENPH) | 46.70 | ||
| Regeneron Pharmaceuticals (REGN) | 512.96 | ||
| RingCentral (RNG) | 238.73 | ||
| Seattle Genetics (SGEN) | 150.85 | ||
| Square, Inc. (SQ) | 91.04 |
Although it is plenty large to be relevant (its economy is the 9th largest in the world and is comparable in size to that of Canada), to many investors Brazil remains a regional backwater mired in political scandals and weak corporate governance. Weak oil prices combined with poor government leadership led to sharp recessions in 2015 and 2016.
However, the country’s fortunes may be turning upward. In this issue, we look at five companies that should benefit from Brazil’s incipient turnaround, and also have appealing turnaround potential in their own right.
However, the country’s fortunes may be turning upward. In this issue, we look at five companies that should benefit from Brazil’s incipient turnaround, and also have appealing turnaround potential in their own right.
The long-awaited correction has begun, and it’s been a doozy, driving the major indexes and many stocks dramatically lower; our Cabot Tides turned negative on Monday, and despite coming into the week with 17% in cash, we’ve been paring back quickly, selling all of Inphi and taking partial profits in both Vertex and Sea Ltd, leaving us with 36% in cash. And going forward, we have a few names on tight leashes should the selling continue.
That said, it’s not all doom and gloom; our Cabot Trend Lines are still positive, and many leading stocks, while dented, are hanging in there (including some we own). The odds favor this correction needing more time to finish up, but the odds also favor the overall bull market still being intact.
In tonight’s issue, we dive into all of our stocks, highlight a few we’re watching, and talk about one sector that, despite this week’s maelstrom, seems to be in position to thrive during the market’s next sustained upmove.
That said, it’s not all doom and gloom; our Cabot Trend Lines are still positive, and many leading stocks, while dented, are hanging in there (including some we own). The odds favor this correction needing more time to finish up, but the odds also favor the overall bull market still being intact.
In tonight’s issue, we dive into all of our stocks, highlight a few we’re watching, and talk about one sector that, despite this week’s maelstrom, seems to be in position to thrive during the market’s next sustained upmove.
We’re now presented with an interesting situation. The broad market, which hit record highs just last week, is now sick, thanks to investors’ perception that the coronavirus will negatively affect global trade. But the marijuana sector, which has been in a correction for more than two years, has many stocks that have been building bottoms.
No one knows how this will shake out in the short term, though clearly, the long-term potential of the marijuana sector remains intact.
Nevertheless, by observing the action of individual stocks and following time-tested procedures, we will come through this in fine shape. Today’s issue includes a few partial sells as well as a handful of downgrades while we wait for the dust to settle.
Full details in the issue.
No one knows how this will shake out in the short term, though clearly, the long-term potential of the marijuana sector remains intact.
Nevertheless, by observing the action of individual stocks and following time-tested procedures, we will come through this in fine shape. Today’s issue includes a few partial sells as well as a handful of downgrades while we wait for the dust to settle.
Full details in the issue.
Updates
Stock-specific news flow is still relatively light, but we’re marching toward the beginning of the second-quarter earnings season. A few of our companies have already announced their earnings release dates. We have no ratings changes this week, meaning there are still plenty of stocks rated Buy.
Four Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news.
The Emerging Markets Timer remains effectively neutral as the market hacks around in its three-month trading range. We have no changes to the portfolio today.
It’s an interesting time to be an income investor, to say the least. Interest rates have plummeted post-Brexit, as investors flee to the safety of fixed income just as central bankers are promising more stimulus for shaky markets. The yields on U.S. 10-year and 30-year treasuries are at record lows, while yields on more and more global bonds are going negative.
Three of my Benjamin Graham companies reported quarterly financial results or other noteworthy news.
With our Cabot Tides negative, we’ve moved to a half-in, half-out stance—we’ve sold three stocks during the past week (one before Brexit, two after), which leaves us with five stocks and a cash position near 50%. The powerful bounce of the past two days is very encouraging, but the odds favor some backing and filling at the very least (if not further weakness) before a sustained uptrend gets underway. We have no changes in the Model Portfolio tonight.
I don’t have a sense that the current market correction will last very long. I am comfortable buying now, as opposed to waiting a few weeks, as I did in the early 2016 market correction. I have two rating changes today: Johnson Controls (JCI) moves from Hold to Buy, and Robert Half (RHI) moves from Buy to Hold.
The U.K. has voted to leave the E.U. in a close vote with 52% saying leave and 48% saying stay. Few people really thought the vote would turn out this way.
Six Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news.
The Emerging Markets Timer is technically positive, but the intermediate-term trend remains mostly neutral.
Most of our holdings are healthy, and several are hitting new highs or positioned to do so soon. Several more names are well positioned to begin new rallies if the market gets in gear. One dark cloud is CVS Health (CVS), which I’m putting on Hold today as the stock’s slump intensifies.
The S&P 500 index traded up near all-time highs in early June, then had an orderly pullback, partly encouraged by investor worries over the Brexit vote. The index seems to have completed its correction, and could easily retrace recent highs. Many of our portfolio stocks mirrored that pullback and are also rebounding.
Alerts
This global beverage company beat consensus analysts’ estimates by $0.27 per share last quarter.
This publisher has just made a nice acquisition, boosting its online business.
Tyler reports on the Lockup Expiration of one stock and the Partial Sale of another.
Two stocks in our Portfolio each reported strong earnings beats this morning.
This engineering company is forecast to grow at an annual rate of 50.17% over the next five years.
Our second recommendation is a sale of a previous idea.
Our first idea today is a tech company that beat analysts’ estimates by $0.25 in the last quarter.
Today, we’re selling a stock from the Growth & Income Portfolio.
Five analysts have increased their EPS targets for this software company in the past 30 days.
Stocks opened higher today on the backs of some good earnings reports, but the sellers have again come out of the woodwork and driven growth stocks lower. Looking at the primary evidence, our Cabot Tides remain negative, our Cabot Trend Lines could turn negative tonight depending on how the market closes and most important, stocks and the major indexes have been unable to mount much of a bounce in recent days. It’s best to stay defensive and we are sell the rest of one of our positions.
Four stocks in our portfolio’s have reported earnings.
This consumer finance company beat EPS estimates by $0.04 last quarter, and is expected to grow at a 13% annual rate over the next five years.
Portfolios
Strategy
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.