Issues
We’re beginning to see some short-term signs of spring in the market, first via some resiliency in the broad market, and now from buyers actually stepping up to the plate. We think there’s a decent chance the market has found a workable low, and we’re encouraged to see a decent number of growth stocks bounce back. All of that is good to see, but the primary evidence -- the trends of the market and most stocks --are still pointed down. We’re not ruling out a nibble or two if the buyers keep at it, but it’s best to remain defensive until we see more than a modest bounce.
In tonight’s issue we talk about one group that has seen some very big-volume buying of late, a sign big investors were eager to jump in on weakness. And we also review our remaining positions and a few other top-notch names we think could put on big runs once the market enters a new uptrend.
In tonight’s issue we talk about one group that has seen some very big-volume buying of late, a sign big investors were eager to jump in on weakness. And we also review our remaining positions and a few other top-notch names we think could put on big runs once the market enters a new uptrend.
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These are harrowing times to be an investor but we’re always on the hunt for emerging opportunities, regardless of market conditions. As always we’re spreading things around this month, with the focus on two defensive names (including one larger company), two beaten and battered names that seem miss-priced (depends on what happens) and one stock that seems to be in high demand, despite the market conditions. Suffice to say, there’s little incentive to place big bets right now. But we’d be remiss not so send some ideas your way. These new names will come with a short leash!
On Monday, the market completed the quickest 30% pullback in history.
Since then, it’s completed one of the quickest rebounds!
Interesting times.
Equally interesting for investors in the young and fast-growing marijuana sector is that marijuana stocks actually bottomed a week ago, and they’ve been advancing every day since, which is a very good sign.
Because of that, I’m recommending a little averaging up in the portfolio today, taking our cash level down to 50%.
Full details in the issue.
Since then, it’s completed one of the quickest rebounds!
Interesting times.
Equally interesting for investors in the young and fast-growing marijuana sector is that marijuana stocks actually bottomed a week ago, and they’ve been advancing every day since, which is a very good sign.
Because of that, I’m recommending a little averaging up in the portfolio today, taking our cash level down to 50%.
Full details in the issue.
China was the first country to be devastated by coronavirus, and although the pandemic there is not completely over (and there are doubts about the accuracy of that country’s daily virus count), it’s almost surely on a downhill swing. That’s helped the Shanghai composite to fare better than the S&P this year, and not surprisingly, many (not all) Chinese stocks have shown some interesting resilience during this crisis
Current Market OutlookWith all of the measures (both in real life, and in the financial markets) taken during the past month, one thing has remained the same: The trend of the major indexes and the vast majority of stocks has been down since late February, which has kept us cautious and holding lots of cash. And until that changes, your top priority is to remain defensive and patient as we wait for the buyers to show up for more than a couple of hours. That said, we’re always on the lookout for rays of light, and we are seeing one from the broad market, as fewer stocks are participating on the downside during the last week. That’s a plus, though we need to see it backed up by real buying and a break of at least some shorter-term moving averages (10-day, etc.) to think a workable low could be in. Right here, we remain cautious.
Encouragingly, though, this week’s list is fairly heavy on the growth side of the equation, including many stocks that found big-volume support on earnings last week. Our Top Pick is Chewy (CHWY), a defensive growth stock that’s executing well and has seen some major accumulation.
| Stock Name | Price | ||
|---|---|---|---|
| Adobe Inc. (ADBE) | 315.23 | ||
| Chewy (CHWY) | 43.92 | ||
| Cloudflare (NET) | 39.32 | ||
| Coupa Software (COUP) | 262.20 | ||
| Gilead Sciences (GILD) | 75.10 | ||
| JD.com (JD) | 39.58 | ||
| Moderna (MRNA) | 29.39 | ||
| Smartsheet (SMAR) | 44.12 | ||
| Vertex Pharmaceuticals (VRTX) | 230.36 | ||
| Zoom Communications (ZM) | 155.83 |
Bottoms bring bargains, but identifying bottoms is devilishly difficult—which is why it’s better not to try but to simply reduce your risk-taking until the environment is more constructive. Last week’s recommendation of Zoom Video is off to a great start (though risk in the stock is higher now), and this week’s recommendation is a smaller Software-as-a-Service (SaaS) company with decent growth prospects in the corporate finance sector.
As for the current portfolio, we now hold eleven stocks out of a possible twenty, and many of them look like they are building a bottom here. Thus the only change is a downgrade of our weakest stock, Brookfield Infrastructure Partners (BIP) to Sell
Full details in the issue.
As for the current portfolio, we now hold eleven stocks out of a possible twenty, and many of them look like they are building a bottom here. Thus the only change is a downgrade of our weakest stock, Brookfield Infrastructure Partners (BIP) to Sell
Full details in the issue.
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Well, March in the markets certainly came in like a lion, didn’t it? And it looks like it may end the month the same way. Until we make progress in defeating the coronavirus, we expect continued volatility in the markets, and we recommend that you remain defensive.
That doesn’t mean Sell everything in your portfolio. Remember, you don’t have real losses until you sell your stocks. But it does mean if you are holding on to some stocks that weren’t doing well before the coronavirus outbreak, it might be a good idea to think about unloading them. But being defensive also means being judicious when buying. For the near future, I’m going to include this message in all my writings, as an alert that, certainly, you may buy these recommendations, but for most of us, they will provide entries into a ‘watch’ list that can be acted upon as the volatility disperses. Or you may find that you might want to nibble just a bit at some of them. That’s up to you, but please know that I’m here to help you with your investing decisions, so please don’t hesitate to reach out to me.
In the meantime, I—and our contributors—are very busy trying to find some great recommendations that will help your portfolio recover, once normalcy returns to the markets.
Read the Issue for more details.
That doesn’t mean Sell everything in your portfolio. Remember, you don’t have real losses until you sell your stocks. But it does mean if you are holding on to some stocks that weren’t doing well before the coronavirus outbreak, it might be a good idea to think about unloading them. But being defensive also means being judicious when buying. For the near future, I’m going to include this message in all my writings, as an alert that, certainly, you may buy these recommendations, but for most of us, they will provide entries into a ‘watch’ list that can be acted upon as the volatility disperses. Or you may find that you might want to nibble just a bit at some of them. That’s up to you, but please know that I’m here to help you with your investing decisions, so please don’t hesitate to reach out to me.
In the meantime, I—and our contributors—are very busy trying to find some great recommendations that will help your portfolio recover, once normalcy returns to the markets.
Read the Issue for more details.
Market volatility and weakness accelerated this week through Wednesday though U.S. Senate passage of a “bailout” measure may lead to a rebound on Thursday. In general, you should sell into strength and cautiously buy into weakness. Our emerging market signal is decidedly negative with the EEM down to 30 from a mid-January high of 46. It has not been at this low a level since early 2016 and got down to 20 at the bottom of the global financial crisis in 2008. Today we do a little selling, increase our S&P 500 Inverse ETF position marginally and add JPMorgan (JPM) to the watch list.
Updates
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.
A number of our stocks were on the verge of all-time highs last week. They pulled back this week so we’ll have to be a little more patient. There are no ratings changes this week.
Remain bullish, but stay tuned. The market’s recent Brexit-induced dip has put our Cabot Tides back on the fence, though our Two-Second Indicator and Cabot Trend Lines are still bullish. A Tides sell signal would cause us to raise more cash, but tonight we’re mostly standing pat; our only change is moving Facebook (FB) to Hold. The Model Portfolio is holding about 20% in cash.
The broad market pulled back sharply this week, dragging the S&P 500 through the 2,100 level once again. Today’s Fed meeting, the shooting in Orlando over the weekend and the upcoming Brexit vote are all contributing to a heightened sense of uncertainty and a “risk-off” mood on Wall Street.
The S&P 500 index is having an orderly pullback, after rising for three weeks. In that light, we’re not likely to see a lot of portfolio action this week. Looking out over the next four weeks or so, these buy-rated portfolio stocks appear best-positioned to rise 5% or more.
Alerts
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.
Growth stocks took another massive hit today, as money rotated to safer areas. Our Cabot Tides remains on the fence, growth-oriented indexes have either already broken down or, in the case of the Nasdaq, are looking iffy. As a result of today’s action, we are selling 1/3 in two of our positions.
The market opened higher yesterday thanks to good news on the trade front, but sellers were active after the open, especially with growth stocks. Our longer-term indicators are still up, but the intermediate-term indicator is on the fence. We’re going to sell one position today and place another on hold.
Our first idea today is a medical device company that beat analysts’ estimates by $0.10 last quarter.
Analysts expect this security device maker to grow 32.1% this year.
U.S. stocks make up more than 50% of this global equity fund.
This media/entertainment company saw huge increases in revenues and income in its last quarter, and has been buying back shares, reducing share count by more than 6% in the past year.
We’re moving one stock from Strong Buy to Buy.
The shares of this athletic apparel manufacturer were recently upgraded by Susquehanna, to Positive and PiperJaffray, to Overweight, and were initiated at Morgan Stanley, to Overweight.
Our other recommendations are selling previous ideas, with some profit-taking.
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.