Issues
The overall market remains in an uptrend, as do most leading stocks, and that’s why we remain mostly bullish. But while we’re positive, we’re not pounding the table, partly because of some secondary measures (most broader indexes haven’t hit new highs in a month) but mostly because individual stocks aren’t offering up many great entry points. Tonight, then, we’re again standing pat, happy to ride our winners but monitoring earnings season closely, both for stocks we own and for those we want to buy.
In tonight’s issue, we go over a few new ideas, including a couple of IPOs from last year that were nailed but are now coming back from the dead; they could be morphing into leaders. And as usual we go over all of our current holdings and our updated watch list.
In tonight’s issue, we go over a few new ideas, including a couple of IPOs from last year that were nailed but are now coming back from the dead; they could be morphing into leaders. And as usual we go over all of our current holdings and our updated watch list.
The rollout of the new 5G technology is an evolution that is thrusting the world into a digital age that will change the world. This new technology will have a huge effect on the market in 2020 and beyond.
Companies that benefit from 5G have a powerful catalyst for growth that will push stock prices to a new level. But finding stocks in the area that are still cheap and defensive in a pricey and uncertain market is a challenge.
In this issue I identify a company that is defensive and high dividend-paying. But, unlike most stocks in that area, it is still reasonably priced. At the same time, the company has massive exposure to 5G and a huge catalyst for growth. With this company you can play offense and defense at the same time.
Companies that benefit from 5G have a powerful catalyst for growth that will push stock prices to a new level. But finding stocks in the area that are still cheap and defensive in a pricey and uncertain market is a challenge.
In this issue I identify a company that is defensive and high dividend-paying. But, unlike most stocks in that area, it is still reasonably priced. At the same time, the company has massive exposure to 5G and a huge catalyst for growth. With this company you can play offense and defense at the same time.
In the field of speech recognition software, this stock is a pioneer with plenty of room to grow. The company is known for its Dragon Naturally Speaking software package, which makes dictation faster and nearly as accurate as typing. It also allows users to control computer programs and send emails by voice command.
The market has snapped back in a surprisingly strong fashion, but breadth has narrowed, so I’m still suspicious of this rebound. However, there are still plenty of great charts as well as stories to go along with them, and today’s recommendation is one of them. In fact, you may even be a user of the company’s products!
As for the current portfolio, there are no changes today.
Details in the issue.
As for the current portfolio, there are no changes today.
Details in the issue.
Current Market OutlookThere’s nothing bad to say about the market’s quick rebound two weeks ago and its ability to hold those gains—at the very least, such action from the big-cap indexes and many leading stocks is a good longer-term sign. But it’s also important to look at all of the evidence, and on that front, things are mixed—broader indexes are still hanging around their 50-day lines (acceptable, but not overly powerful) and the number of names hitting new highs has dried up. That doesn’t necessarily portend doom, but it does describe an environment that’s a bit more hit-and-miss, especially with a ton of earnings reports set to be released. Overall, you should remain bullish, but be a bit discerning on the buy side, looking for names that have shown excellent recent strength and volume.
This week’s list has many stocks that meet that criteria, including a few that have popped after earnings. Our Top Pick is Lumentum (LITE), which recently came out of a very long launching pad and, after a four-week rest, has taken off after earnings.
| Stock Name | Price | ||
|---|---|---|---|
| AAXN (AAXN) | 87.11 | ||
| Bilibili (BILI) | 28.71 | ||
| Bill.com Holdings (BILL) | 88.76 | ||
| DocuSign (DOCU) | 107.98 | ||
| GDS Holdings Limited (GDS) | 80.15 | ||
| Insmed Inc. (INSM) | 30.64 | ||
| Lumentum (LITE) | 87.00 | ||
| Nuance Communications, Inc. (NUAN) | 25.35 | ||
| Old Dominion Freight Line Inc. (ODFL) | 221.91 | ||
| Scotts Miracle-Gro (SMG) | 155.72 |
This month we’re going deep into the world of high-speed sensing and communications with an unknown micro-cap stock specializing in fiber optic technologies.
This isn’t another of those boom-to-bust components manufacturers that crush it when data centers are expanding and fall apart when capex falls. Rather, it’s a company that specializes in fiber optics for industrial, transportation and construction applications, such as in airplanes, vehicles, buildings and space stations.
It’s not a low-risk investment. But the potential is huge – if management can execute on its growth plan.
Zoom into the February Issue for all the high-speed details!
This isn’t another of those boom-to-bust components manufacturers that crush it when data centers are expanding and fall apart when capex falls. Rather, it’s a company that specializes in fiber optics for industrial, transportation and construction applications, such as in airplanes, vehicles, buildings and space stations.
It’s not a low-risk investment. But the potential is huge – if management can execute on its growth plan.
Zoom into the February Issue for all the high-speed details!
While the coronavirus concerns are still high, stocks have recovered their footing, as China has taken steps to stimulate its economy and markets.
The Cabot Global Stocks Explorer portfolio is holding up well, though Luckin Coffee (LK) sold off hard and then sharply rebounded this week. Our emerging markets timer (EEM) is marginally positive, and in an uptrend in the last month.
Today’s recommendation is a leader in fintech with a great growth story, strong numbers and an attractive entry point.
The Cabot Global Stocks Explorer portfolio is holding up well, though Luckin Coffee (LK) sold off hard and then sharply rebounded this week. Our emerging markets timer (EEM) is marginally positive, and in an uptrend in the last month.
Today’s recommendation is a leader in fintech with a great growth story, strong numbers and an attractive entry point.
Today’s featured stocks reported fourth quarter results this morning; we have a new addition to the Growth & Income Portfolio; which could deliver quick capital gains when they report earnings; and another company which gave an informative presentation at the recent Needham Growth Conference.
I also discuss the coronavirus, which could easily cause stock market turbulence through April, even if the virus dissipates quickly.
I also discuss the coronavirus, which could easily cause stock market turbulence through April, even if the virus dissipates quickly.
Updates
Cabot’s market timing indicators show that the intermediate- and longer-term trends of the market are both up, so you can continue to put money to work judiciously. We have one ratings change today—PGX to Hold—but most of our holdings were very quiet over the past week.
For now, based on S&P trends, economic growth and the proliferation of easily identifiable undervalued growth stocks, I remain bullish on U.S. stock markets. I’m raising the rating on Big Lots (BIG) to Strong Buy, raising the rating on FedEx (FDX) to Buy, and lowering the ratings on Cardinal Health (CAH) and Intuit (INTU) to Hold.
Small caps made a heck of a move over the past week to close just below 700 on the S&P 600. That 4.3% move was led by growth (up 4.6%). Sector wise, tech led the charge with a 6.2% rally.
Continue to hold your best stocks, but also hold some cash until our market timing turns positive. This week’s action has been encouraging, but with our Emerging Markets Timer still negative, we have to wait a bit longer before putting cash to work. Tonight, we’re selling our remaining half position in Volaris (VLRS), leaving us with about 35% cash in the portfolio.
There’s a lot of talk about the Federal Reserve potentially increasing the Fed funds rate in June or July. Such a move would be positive for most financial stocks because they’d earn increased fees on their customers’ deposits, thereby boosting EPS. There are two financial stocks that are affected by rising interest rates in the Cabot Undervalued Stocks portfolios: E*Trade (ETFC) and Federated Investors (FII)
Six Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news.
This is one of those periods where it’s impossible to know what’s going to happen next given all the variables. So it’s better to look at the big picture trends and not try to get too cute in the short-term. For us, that means sticking with what we have been doing, since nothing is fundamentally or technically broken.
Pull in your horns a bit. In last night’s Special Bulletin, we cut our loss in Kate Spade and moved our Five Below and Sabre to Hold. Our Cabot Tides are now on the fence, though our Cabot Trend Lines and Two-Second Indicator remain positive. We now have 30% cash in the Model Portfolio, with our next move depending on whether the major indexes can hold support.
Cabot’s intermediate-term market timing indicators are now on the fence, and I recommend holding off on significant new buying for now, unless you’re substantially underinvested. We’re not selling anything today, but I am putting Xcel Energy (XEL) on Hold.
A couple of weeks ago, I bought Kraft Heinz (KHC), and caught the early-May run-up. And if I were buying a stock today, I’d go straight to Adobe Systems (ADBE) because it appears ready to climb, just like KHC did.
Nine Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news. I also include some interesting questions from subscribers with my responses.
We had four companies report earnings this week and I’ve already updated you on three of them through Special Bulletins. A review of the fourth, as well as incremental updates on our other positions, is provided in today’s Update. Overall, my stance is still cautiously optimistic.
Alerts
October 1, 2018, this company completed its spin-off from ServiceMaster.
While we have been holding a large amount of cash in the portfolio and have only a short list of stocks rated buy, the market’s assault has reached unacceptable levels.
Generally speaking, our strategy is to average in on the way up, and out on the way down. That means we need to take one more step today to protect our hard-earned gains.
This healthtech company is expected to grow at 30% annually for the next five years.
The market was on edge last week and reached a tipping point yesterday on concerns that the 10-year yield has broken well above 3% and could move higher still if the Fed continues to tighten (as it has signaled it will).
This restaurant chain beat analysts’ estimates by $0.03 last quarter.
The major indexes finished deep in the red again today, with growth stocks taking another pounding. Our Cabot Tides are now firmly negative, and we’ve been raising cash steadily during the past week. We have two more sales tonight raising our cash position to 52%.
This dredging company just announced a $48 million base contract award on the Big Bend Channel of the Port of Tampa Bay, from the United States Army Corps of Engineers.
The shares of this real estate services firm have been on the minds of Wall Street lately, with Morgan Stanley upgrading the shares to ‘Overweight’; William Blair to ‘Outperform’; and new coverage by JMP Securities, with an ‘Market Outperform’ rating; and Goldman Sachs with a ‘Buy’ rating.
The market weakened further today, with growth stocks in particular hit hard, and now our Cabot Tides has turned negative, telling us the intermediate-term trend of the market is down. Our focus is on risk minimization so that means selling another position from the portfolio.
This instrument and software company is expected to grow at a rate of more than 12% annually over the next five years.
This financial software company just announced the acquisition of Agiletics, Inc., a Florida-based provider of sophisticated escrow, investment, and liquidity management solutions for commercial bank customers.
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.