Issues
Welcome to Cabot Micro-Cap Insider!
This inaugural issue is a little different than future editions.
In this issue, I’ve profiled my initial five recommendations. In future issues, I will profile one new idea in depth, and provide updates on all open recommendations.
Because I’m including five new ideas today, the write-ups are more concise than you can expect going forward.
Before you read this issue, I recommend that you read my Cabot Micro-Cap Insider Guide. It will help you get the most out of your Cabot Micro-Cap Insider membership, and make your investing decisions easier and more profitable. It will also explain much of the shorthand we use in Cabot Micro-Cap Insider, and explain our ratings.
If you have any questions about any of my recommendations, I encourage you to reach out to me directly at rich@cabotwealth.com.
Now let’s get into the stocks that you should start buying today.
This inaugural issue is a little different than future editions.
In this issue, I’ve profiled my initial five recommendations. In future issues, I will profile one new idea in depth, and provide updates on all open recommendations.
Because I’m including five new ideas today, the write-ups are more concise than you can expect going forward.
Before you read this issue, I recommend that you read my Cabot Micro-Cap Insider Guide. It will help you get the most out of your Cabot Micro-Cap Insider membership, and make your investing decisions easier and more profitable. It will also explain much of the shorthand we use in Cabot Micro-Cap Insider, and explain our ratings.
If you have any questions about any of my recommendations, I encourage you to reach out to me directly at rich@cabotwealth.com.
Now let’s get into the stocks that you should start buying today.
Current Market OutlookLast week featured a lot of dramatic news items (including negative oil prices!), but it ended up being a quiet week in the major indexes, which we take as constructive—the action allowed some stocks to settle down a bit, which is often a sign of accumulation. Thus, we’re optimistic, but the key from here is to take things day by day and to stay in gear with the market’s evidence. Right now, with the intermediate-term trend still up and many stocks acting well, you should be putting some money to work, and then see what comes—further upside (especially if we see many bullish earnings gaps) would be a sign to do some follow-on buying, while a couple of sharp, big-volume selloffs in the market would tell you to hold off. As we wrote above, we’re optimistic the path of least resistance is up, but we’ll stay flexible and take it as it comes.
This week’s list again has plenty of good-looking names to choose from. Our Top Pick is Pinduoduo (PDD), which has turned powerful after a five-month rest. You can start a position here or (preferably) on dips of a couple of points.
| Stock Name | Price | ||
|---|---|---|---|
| Alnylam Pharmaceuticals (ALNY) | 143.58 | ||
| Boston Beer Company (SAM) | 459.16 | ||
| DocuSign (DOCU) | 107.98 | ||
| Exelixis (EXEL) | 27.35 | ||
| Freshpet (FRPT) | 107.99 | ||
| MarketAxess (MKTX) | 439.96 | ||
| Netflix, Inc. (NFLX) | 423.92 | ||
| PayPal (PYPL) | 147.00 | ||
| Pinduoduo (PDD) | 87.53 | ||
| Snap Inc. (SNAP) | 16.68 |
The market’s rebound continues and our stocks, as a whole, continue to perform well. Someday, however, a correction will begin and it will pay to be alert—and to react—when it does.
In the meantime, I will keep recommending the best stocks, a system that has worked quite well in recent weeks. This week, we continue to diversify with a recommendation of a marijuana stock, a group that went through a two-plus year correction and in the process got relatively cheap.
As for the rest of the portfolio, it’s acting well and thus the only change today is a downgrade of one stock from buy to hold.
Full details in the issue.
In the meantime, I will keep recommending the best stocks, a system that has worked quite well in recent weeks. This week, we continue to diversify with a recommendation of a marijuana stock, a group that went through a two-plus year correction and in the process got relatively cheap.
As for the rest of the portfolio, it’s acting well and thus the only change today is a downgrade of one stock from buy to hold.
Full details in the issue.
Our Cabot Tides buy signal earlier this week has prompted us to put some cash back to work; we now own seven stocks, though we still have a good-sized cash position of around 46%. As always, we’ll just take it as it comes, but so far leading growth stocks and the major indexes remain in good shape.
In tonight’s issue, we review a little about how we run our ship, as well as dig deeper into Cabot’s Aggression Index, which can also provide some clues for the overall market. And, of course, we dive into all of our stocks and some fresh ideas should the buying pressures grow.
In tonight’s issue, we review a little about how we run our ship, as well as dig deeper into Cabot’s Aggression Index, which can also provide some clues for the overall market. And, of course, we dive into all of our stocks and some fresh ideas should the buying pressures grow.
Despite the self-induced recession, the stay-at-home economy is booming thanks to companies that are letting employees work from home—and even after things go back to normal, it’s likely some of this new workplace flexibility will be here to stay.
The good news is that four weeks of upside action has brought a new buy signal from Cabot’s intermediate-term market timing indicator. But this doesn’t mean you can jump in with both feet yet; there’s still reason for caution.
One way Cabot Stock of the Week exercises caution is by diversifying widely, not only among industries but also among investment strategies. Today’s recommendation, a big undervalued robotics company in Japan, is an excellent example.
As for the rest of the portfolio, it’s acting well and thus the only change today is a downgrade of one stock—which has got a bit high—from buy to hold.
Full details in the issue.
One way Cabot Stock of the Week exercises caution is by diversifying widely, not only among industries but also among investment strategies. Today’s recommendation, a big undervalued robotics company in Japan, is an excellent example.
As for the rest of the portfolio, it’s acting well and thus the only change today is a downgrade of one stock—which has got a bit high—from buy to hold.
Full details in the issue.
Current Market OutlookWhile the day to day volatility remains extreme, the market’s intermediate-term trend has turned up (according to our measures), which argues for a more constructive stance toward stocks. Of course, that doesn’t mean you should dive in headfirst—there remain plenty of headwinds, including the fact that most stocks are still below their 50-day and 200-day moving averages (i.e., plenty of potential selling to chew through on the upside). But there’s no question the evidence has improved, so it’s a good idea to slowly put money to work, and then use the market for feedback; If you develop some solid profits, you can become more aggressive, but if the uptrend decisively cracks (would take a 6% to 7% drop from here), you want to hold off further buying and honor your stops.
This week’s list continues the trend we’ve seen of many high-potential stocks spiking back toward their old highs. Our Top Pick is Okta (OKTA), which has rejoined the leadership ranks after nine-months of correcting and consolidating.
| Stock Name | Price | ||
|---|---|---|---|
| ACADIA Pharmaceuticals (ACAD) | 47.84 | ||
| Advanced Micro Devices (AMD) | 82.24 | ||
| ASML Holding (ASML) | 350.01 | ||
| CrowdStrike (CRWD) | 105.02 | ||
| Franco-Nevada (FNV) | 125.51 | ||
| Immunomedics (IMMU) | 34.23 | ||
| Okta, Inc. (OKTA) | 148.41 | ||
| Sea Limited (SE) | 132.86 | ||
| Shopify (SHOP) | 585.00 | ||
| Tradeweb Markets (TW) | 51.44 |
Finally, the coronavirus news is improving, and so is the market. We’re now up about 12% on the Dow since our issue last month. Our Adviser Sentiment Barometer is mixed; still mostly bearish, but our contributors—as well as our analysts here at Cabot Wealth feel we are near a bottom on the markets. That, of course, is dependent upon how well we do when our economy begins to reopen.
So far, around 17 million unemployment claims have been filed, and it will take awhile for the unemployment number to recover. But, as you know, the markets generally move ahead of the economy, gathering the good news in first, so we are feeling optimistic.
As you know, I’ve been adding a lot of dividend stocks to my newsletter in the past month or so, so that you could, at least, enjoy some cash flow while we await the recovery. I’m beginning to go back to growth, so you’ll see more of those recommendations in the next few weeks.
And our Spotlight Stock this month, certainly fits the growth category.
Full details in the Issue.
So far, around 17 million unemployment claims have been filed, and it will take awhile for the unemployment number to recover. But, as you know, the markets generally move ahead of the economy, gathering the good news in first, so we are feeling optimistic.
As you know, I’ve been adding a lot of dividend stocks to my newsletter in the past month or so, so that you could, at least, enjoy some cash flow while we await the recovery. I’m beginning to go back to growth, so you’ll see more of those recommendations in the next few weeks.
And our Spotlight Stock this month, certainly fits the growth category.
Full details in the Issue.
Updates
The Emerging Markets Timer is still pointed up, despite the market’s recent consolidation. Our moves tonight are increasing our Buy recommendation for Alibaba (BABA) to a full position, lowering our rating of Telkom Indonesia (TLK) to Hold a Half and returning Weibo (WB) to a Buy a Half recommendation.
Today I’m removing Delta Air Lines (DAL) from the Growth Portfolio. The company’s earnings outlook has deteriorated to an expectation of EPS declining 1% in 2016, and the price chart has not improved since I put the stock on Hold two months ago.
Small caps added another five points this week as the grind higher continues. Granted, the percentage rise was less than 1%. But nevertheless, the strength in small caps is creating a sense of greater confidence in the sustainability of the market’s uptrend.
Six Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news. There is one sell recommendation: Dollar General (DG).
Remain bullish. The market has been consolidating its recent gains, which is a good sign, and all of our market timing indicators remain clearly bullish. Short term, today’s drop could lead to further weakness, especially with Fed Chief Janet Yellen speaking on Friday morning. But our market timing indicators are bullish, so the odds still favor higher prices in the weeks and months ahead. In the Model Portfolio, we’ll stand pat tonight with nine stocks and a cash position of 8%.
The stock market also seems to be in wait-and-see-mode, consolidating on low volume for a second week in a row.
Last week, I changed the recommendation on Dollar Tree (DLTR) to Hold, and on Big Lots (BIG), Kraft Heinz (KHC) and WellCare (WCG) to Buy.
The market has been holding up well, and small caps in particular are looking steadfast as we move into the second half of August.
Eleven of my Benjamin Graham companies reported quarterly financial results or other noteworthy news. I have included one sell recommendation: Avnet, Inc. (AVT).
The Emerging Markets Timer is still pointed up, despite the market’s recent consolidation. Our two moves tonight are buying a half position in Alibaba (BABA) and shifting our position in Anglogold Ashanti (AU) to a Hold rating.
Not much has changed in our portfolio, though Home Depot (HD) did report solid earnings on Tuesday.
I’m changing my recommendations on Dollar Tree (DLTR) to Hold; and on Big Lots (BIG), Kraft Heinz (KHC) and WellCare (WCG) to Buy.
Alerts
Following Friday’s meltdown, the market attempted to bounce this morning, but was overwhelmed with selling pressures again, resulting in another round of huge losses. As a result, this caused one of our positions to dive below long-term support on big volume and it’s time to sell. This sale will raise our cash position to around 78%, which is obviously a highly defensive stance.
This convenience store business beat analysts’ estimates by $0.06 last quarter.
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.
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.