Issues
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.
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
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.
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 |
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.
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.
Updates
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.
The Cabot Emerging Markets Timer is flashing a warning signal, and even good earnings results are no guarantee of big advances. We are trimming the portfolio by selling Sibanye Gold and dropping YY Inc.
Most of our portfolio holdings are acting similarly healthy, and if you feel underinvested, you can add positions judiciously here. I’m switching Smucker (SJM) back to Buy today based on the solid technical support the stock demonstrated over the past week.
In this update, we take a look at recent news and earnings reports from our portfolio stocks, and raise the ratings on Boise Cascade (BCC), Delta Air Lines (DAL) and D.R. Horton (DHI) to Buy.
Sixteen Cabot Benjamin Graham Value Investor companies reported quarterly financial results. Four produced outstanding sales and earnings: AMC Networks, IntercontinentalExchange, Priceline and Scripps Networks, and four reported rather weak results: Maiden Holdings, McKesson, Prudential and WestJet Airlines. I will review all of the quarterly reports soon and offer sell recommendations if necessary.
Stand pat. The market has been pulling back for the past two weeks, but our market timing indicators are still bullish and most of our stocks are acting well. That said, there’s not enough evidence for us to put more money to work, so except for two small changes (we’re switching Sabre (SABR) to a Hold rating and putting Facebook (FB) back on Buy), we’ll keep our seven stocks (and a cash position of 30%) and watch how things unfold.
Alerts
Two of our medical device stocks have begun to look a little shaky and today we’ll pull back on the reins and move these stocks from buy to hold, at least until the path forward becomes more clear.
The top five sectors of this small cap fund are: Industrials, 28.7% of assets; Technology, 18.0%; Health Care, 16.1%; Financials, 13.6%; and Consumer Discretionary, 11.3%.
This is an unscheduled interim update with three goals. Most importantly, keep in mind this is a marathon not a sprint.
Our second recommendation is a sale of an RV stock that is suffering from industry woes.
Our first idea today is a tech company that beat Wall Street’s estimates by $0.19 last quarter.
Analysts are looking for 30% annual growth for this cloud-based education company over the next five years.
The top five holdings of this small cap fund are: Emin Russell 2000 Jun18 Rtym8 N/A (0.63% of assets); Nektar Therapeutics Inc (NKTR, 0.59%); GrubHub Inc (GRUB, 0.41%); bluebird bio Inc (BLUE, 0.39%); and Aspen Technology Inc (AZPN, 0.30%).
Our second recommendation is a sale on a company that is not living up to its promise.
Though the shares of this marijuana-related company have retreated a bit, its new collaboration offers an opportunity to participate in this growing sector at a discounted value.
This is an unscheduled interim update to give you some guidelines to deal with the current strength of marijuana stocks.
The shares of this railway company were recently upgraded at Cowen & Co. to ‘Outperform’.
During the last 30 days, Colfax has received 10 upward earnings estimate revisions for both its current year and fiscal 2019.
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.