Issues
The overall market remains mixed, with most of the market doing just OK but growth stocks acting very well, especially this week, which has brought with it a ton of powerful gaps. Divergent environments lend themselves to rotation and potholes, so we don’t think it’s a time to floor the accelerator, but we are adding one more name to the Model Portfolio tonight, leaving us with around 36% in cash.
Elsewhere in tonight’s letter, we write about the importance of being patient soon after you buy a stock, as well as some very encouraging action from our old Two-Second Indicator. We also review some enticing names and give a full view of all our stocks.
Elsewhere in tonight’s letter, we write about the importance of being patient soon after you buy a stock, as well as some very encouraging action from our old Two-Second Indicator. We also review some enticing names and give a full view of all our stocks.
This month we’re adding a high-growth biotech name that has just begun to commercialize a unique compound for fighting aggressive cancers and other diseases including, potentially, COVID-19.
The company just began booking revenue from its first cancer treatment. That launch significantly de-risks the stock and raises the potential for future approval of the same compound for other indications.
The stock has retreated lately because prescription sales were curbed during the COVID-19 outbreak. This should be a temporary dip as there are many potential stock-moving catalysts coming this year. We’re hoping to sneak in and buy the dip on this high-potential name.
All the details are inside this month’s Issue. Enjoy!
The company just began booking revenue from its first cancer treatment. That launch significantly de-risks the stock and raises the potential for future approval of the same compound for other indications.
The stock has retreated lately because prescription sales were curbed during the COVID-19 outbreak. This should be a temporary dip as there are many potential stock-moving catalysts coming this year. We’re hoping to sneak in and buy the dip on this high-potential name.
All the details are inside this month’s Issue. Enjoy!
Three of today’s featured companies seem most obviously ready to begin or continue run-ups in the coming days Yesterday’s earnings report made it clear that a fourth’s dividend is safe, with a current yield of 8.4%. Plus, energy stocks are acting well recently.
The stock is strong today thanks to a solid quarterly report last week; earnings came in at $0.15 per share, beating analyst estimates by a penny (the third time in the last four quarter it’s topped expectations) and up 36% over last year. Revenues were $97.3 million, though results there were mixed; the consumer segment saw revenues plunge 24% from a year ago (partly due to the virus), but communications/computing was up 8% (including far faster growth in 5G-related products) and the industrial and auto markets saw sales leap 14%.
The market has pulled back a bit in recent days, but not enough to change our stance. By our measurements, the market’s intermediate-term trend remains up, while the long-term trend is still working to turn up.
More important, however, is how the stocks in our portfolio are acting, and the answer is “pretty good!” In fact, we’ll continue to hold them all today.
As for today’s recommendation, it’s a very well-known U.S. meat company that reported earnings just this morning—and the dip that followed that report now makes the stock an even better bargain!
Full details in the issue.
More important, however, is how the stocks in our portfolio are acting, and the answer is “pretty good!” In fact, we’ll continue to hold them all today.
As for today’s recommendation, it’s a very well-known U.S. meat company that reported earnings just this morning—and the dip that followed that report now makes the stock an even better bargain!
Full details in the issue.
Current Market OutlookAfter a nice five-week recovery rally that saw the S&P 500 recoup 63% of its crash (the Nasdaq got 72% back), some sort of retreat wasn’t uncalled for, and that began last week. How this pullback unfolds will be key: If the intermediate-term uptrend cracks (would likely take another 3% down in some indexes) and many leaders do the same, it will be a sign to back off and/or tighten stops, but to this point, the retreat has been normal for both the major indexes and individual stocks. Thus, we’re obviously watching closely, but we have no change in our stance right here, thinking the path of least resistance remains generally up, but potholes and news-driven moves (especially on earnings) are likely given the recent run-up and the overhead resistance from February. It’s fine to do some buying, but don’t go wild until the buyers really flex their muscles. We’re keeping our Market Monitor at a level 6.
This week’s list has a bunch of intriguing stories, though a few have earnings coming up soon. Our Top Pick is Bandwidth (BAND), a lesser-known outfit whose offering is key to many fast-growing companies.
| Stock Name | Price | ||
|---|---|---|---|
| Bandwidth Inc. (BAND) | 129.19 | ||
| Bill.com Holdings (BILL) | 88.76 | ||
| Coupa Software (COUP) | 262.20 | ||
| Datadog (DDOG) | 81.52 | ||
| Dexcom (DXCM) | 421.36 | ||
| DraftKings Inc. (DKNG) | 38.26 | ||
| Halozyme Therapeutics (HALO) | 24.82 | ||
| Lattice Semi (LSCC) | 23.92 | ||
| Seattle Genetics (SGEN) | 150.85 | ||
| West Pharmaceutical (WST) | 210.25 |
Like most consumer industries, residential housing construction is declining sharply in the wake of the Covid-19 shutdown. The industry’s recovery, which was accelerating at the beginning of the year, is now reversing rapidly.
In this issue, we review five homebuilders whose valuations appear to overly discount the industry’s recovery prospects.
In this issue, we review five homebuilders whose valuations appear to overly discount the industry’s recovery prospects.
The market rebound continues as the Nasdaq 100 (QQQ) is now in positive territory for 2020 and the S&P 500 is up 32% from its March 23 lows. The Fed continues to insist it will accommodate any liquidity concerns and is now even investing in corporate debt. Japan’s central bank is going so far as to purchase Japan equity ETFs. Today, we follow up last week’s focus on big tech and big data with a cybersecurity theme and two new investment ideas.
Since the market bottomed five weeks ago, the charts have been impressive, not only for the broad market but for the marijuana sector as well, which has finally shaken loose from its bear market’s two-year grip.
Of course, some companies didn’t survive the hard times, but those that did are battle-hardened, so now, more than ever, it’s easier to identify the future winners of the industry—and the stocks that can bring you big profits in the years ahead.
So today I’m doing a bit of buying for the Cabot Marijuana Investor portfolio, adding four stocks (three of which we’ve owned before).
Additionally, you’ll find a Special Report with this issue, profiling all the publicly traded, vertically integrated multistate operators (MSOs) in the U.S. The report can be found in the Special Reports section of the website.
Full details in the issue.
Of course, some companies didn’t survive the hard times, but those that did are battle-hardened, so now, more than ever, it’s easier to identify the future winners of the industry—and the stocks that can bring you big profits in the years ahead.
So today I’m doing a bit of buying for the Cabot Marijuana Investor portfolio, adding four stocks (three of which we’ve owned before).
Additionally, you’ll find a Special Report with this issue, profiling all the publicly traded, vertically integrated multistate operators (MSOs) in the U.S. The report can be found in the Special Reports section of the website.
Full details in the issue.
This stock was one of 2019’s biggest turnaround stories, and while it stalled out in the second half of last year, it’s making waves again thanks to a blowout Q1 report.
Updates
I’m putting Wynn (WYNN), one of our growthiest names, back on Buy today after the stock finally broke out of its multi-month trading range.
This week, financial markets bring us earnings reports from Adobe and FedEx (and possibly Carnival), and a speech by Fed Chairwoman Janet Yellen.
This looks like a classic buy-the-dip scenario. Nothing is for certain, but my best guess is we regain the small-cap 50-day moving average line next week, and after a week or two of choppy action, are trading at another 52-week high.
Volatility returned to the stock market during the past week. Investors are concerned about the possibility of a Fed interest rate hike next week after a batch of weak economic news indicated that the U.S. economy will continue to sputter.
The Emerging Markets Timer is still pointed up, but it’s clearly seen some selling volume over the last week. So while we’re still bullish, we’re not looking to push for further exposure at this point. The only change in the portfolio is the sale of Telkom Indonesia (TLK) that we recommended in a Special Bulletin on Wednesday.
Whether this is a quick V-shaped pullback like we saw after Brexit or a more serious correction will become apparent in coming weeks, but I suggest you become a little more conservative while we wait and see. We’re selling half of CVS Health (CVS) and J.M. Smucker (SJM) today and putting Home Depot (HD) on Hold.
Any surprising event of substance can affect the stock market, even if it’s only for one day. The biggest reason that non-financial events, such as the Zika virus, Mrs. Clinton’s health, Y2K and the Brexit vote impact U.S. stock markets is because U.S. news media latch onto these topics and cover them incessantly, giving the general public the impression that these pieces of news are vitally important.
Five Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news. I have one sell recommendation: Cummins (CMI).
Small caps resumed their upward trajectory over the past week, rising by 1.3%. Our portfolio did a little better, rising by an average of 2.6%. And small cap growth looks good for the year ahead. While anything can happen in the market, the game plan remains the same: stay in good stocks, avoid bad ones, and get out of those that have faltering outlooks. In short, stay the course.
Remain bullish. The market is in good shape, and we’re starting to see some growth stocks reassert themselves. There are still some potholes out there, but we believe you should remain heavily invested. In the Model Portfolio, we sold Five Below (FIVE) on a Special Bulletin yesterday, replacing it with GrubHub (GRUB), and today, we’re placing Facebook (FB) back on Buy.
Oil prices and energy stocks have strengthened, so I’m putting Pembina Pipeline (PBA) back on Buy today. However, I’m moving Costco (COST) back to Hold after the warehouse retailer’s latest sales results caused the stock to pull back once more.
Three Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news in the past week. I have one sell recommendation: Rackspace Holding (RAX).
Alerts
Several readers have asked about what effect tomorrow’s election might have on marijuana stocks, in part because four states have measures on the ballot that would increase legality.
This electrical product maker beat analysts’ estimates by $0.21 last quarter.
This healthcare ETF is also rated ‘Strong Buy’ by Zacks.
I expect a traders’ market through year end. Be wary: just because a stock rebounds nicely this week does not mean that it will maintain those share price gains.
The sell-off in this medical diagnostic company is providing a buying opportunity.
Earnings season has taken its first bite out of one of our holdings.
This global automaker is seeing a resurgence in its brands, yet the shares trade at a P/E of just 6.
Our portfolio’s earnings season kicked off with a bang last night with three companies opening their books from Q3. As I expected the reactions were significant and unpredictable. We took partial profits on all positions ahead of earnings and have kept them rated hold into the events.
One of our positions reported middling third-quarter results this morning, and the stock opened 6% lower, although it’s already making up some of those losses. As a result, we’re moving it to Hold.
In the last 30 days, 25 analysts have increased their EPS estimates for this insurer.
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.