Issues
Growth stocks are red hot! In this month’s Issue of Cabot Early Opportunities, I sift through all my ideas to feature a compelling mix of five stocks that still look to have significant upside potential over the coming months. Several of these names should represent new ways for investors to participate in long-term growth trends.
Today’s recommendation continues to look like the market’s top networking-related play, as it’s one of the only firms out there that’s firing on all cylinders.
Current Market OutlookThis morning’s positive news of a possible COVID vaccine helped the major indexes surge, but it also revealed some of the crosscurrents that remain—today saw a big bout of rotation, as leading growth titles were mostly lower while the lagging (usually economically-sensitive) areas did well. Even so, we don’t advise getting too involved in the day-to-day news or gyrations; overall, there’s still more positive evidence than negative, with the intermediate-term trend still up (today’s action helped on that front) and just about every leading stock remaining in a firm uptrend. Given the crosscurrents, we don’t advise going hog wild on the buy side, but we continue to think holding your strong performers (maybe with some partial profits here or there) and looking for decent entry points on strong names is the way to go. While we were going to knock our Market Monitor down late last week, the action of the past two sessions has us keeping it at a level 7.
This week’s list is a bit more diversified than in recent weeks, with strength seen in a few more sectors. Our Top Pick is PayPal (PYPL), which appears to have resumed its run after a multi-month rest period. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Avalara (AVLR) | 102.00 | ||
| Beyond Meat (BYND) | 132.87 | ||
| Fastly (FSLY) | 39.31 | ||
| Fortinet Inc. (FTNT) | 137.53 | ||
| Inphi (IPHI) | 120.16 | ||
| MyoKardia (MYOK) | 108.56 | ||
| Ollie’s Bargain Outlet (OLLI) | 103.94 | ||
| PayPal (PYPL) | 147.00 | ||
| Scotts Miracle-Gro (SMG) | 155.72 | ||
| Tesla, Inc. (TSLA) | 818.87 |
The overall market continues to look healthy—though we still haven’t yet received an “all-clear” signal from our long-term timing indicator—and our stocks, in general, continue to reward, with many hitting new highs in recent days as the economic outlook improves.
Long-term, the prospects for the economy and market have improved, but short-term, the relative elation of recent days has brought numerous growth stocks to what seem like unsustainable heights—so I’ve lowered the ratings on three of our positions to Hold, and if you’d like to take partial profits, that’s fine with me.
As for today’s recommendation, it’s a very unusual one for me. But the chart is strong and the story has some validity, so we’ll give it a shot!
Full details in the issue.
Long-term, the prospects for the economy and market have improved, but short-term, the relative elation of recent days has brought numerous growth stocks to what seem like unsustainable heights—so I’ve lowered the ratings on three of our positions to Hold, and if you’d like to take partial profits, that’s fine with me.
As for today’s recommendation, it’s a very unusual one for me. But the chart is strong and the story has some validity, so we’ll give it a shot!
Full details in the issue.
Markets have pulled back a bit over the last few days as investors hit the pause button to digest a Nasdaq in the black for 2020 while the real economy struggles to reopen. Congress begins work on the next stimulus spending bill and international stocks come under consideration, as they have not rebounded anywhere near as much as U.S. markets.
Our emerging market (EEM) momentum timer has turned positive by the slightest of margins as we replace one China idea with another.
Our emerging market (EEM) momentum timer has turned positive by the slightest of margins as we replace one China idea with another.
If you have not already, 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 my newest recommendation: Medexus Pharmaceuticals.
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 my newest recommendation: Medexus Pharmaceuticals.
The market has rallied like crazy over the past seven weeks. It’s up over 30% from the low in March. The market is already looking beyond the coronavirus to a strong economic recovery.
But stocks are trading on a rosy scenario that may not come true. While the market is always difficult to predict in the near term, there is at least a good chance of disappointment going forward. The overall market may have gotten ahead of itself and it is prudent to prepare for the possibility of more turbulence ahead.
For those reasons, the Cabot Dividend Investor portfolio is only buying very selectively. While the overall market may be shaky at this point, certain companies are thriving during the pandemic. There are niches where business is actually booming.
In this issue I highlight two stocks that are selling at bargain prices, have businesses barely affected by the pandemic, and stand to thrive in the post-Covid-19 market as well.
But stocks are trading on a rosy scenario that may not come true. While the market is always difficult to predict in the near term, there is at least a good chance of disappointment going forward. The overall market may have gotten ahead of itself and it is prudent to prepare for the possibility of more turbulence ahead.
For those reasons, the Cabot Dividend Investor portfolio is only buying very selectively. While the overall market may be shaky at this point, certain companies are thriving during the pandemic. There are niches where business is actually booming.
In this issue I highlight two stocks that are selling at bargain prices, have businesses barely affected by the pandemic, and stand to thrive in the post-Covid-19 market as well.
From its modest beginning as an online textbook hub, this recommendation grew into a multi-pronged educational platform.
Current Market OutlookThe market performed well last week, and nothing has changed from a top-down point of view—the intermediate-term trend remains up for the major indexes and many stocks, so we remain optimistic the path of least resistance is up. That said, it’s really all about what you own: Many indexes (small- and mid-caps) and sectors (industrials, financials, transports) look OK, nothing great, but growth oriented stocks are lighting up the sky, with more big earnings-induced breakouts last week than we’ve seen in a very long time. In the near-term, these hot stocks might be a bit too hot; some potholes (or even rotation out of them and into the broad market) could certainly be on the table. But we also think that, assuming the general market holds up, the first retreats in many of these names are likely to provide solid entry points, as the fresh breakouts bode well overall. We’re moving our Market Monitor up to level 7.
This week’s list has many of last week’s most powerful gaps and a few others with solid setups and/or persistent uptrends. It was hard to settle on one, but we’ll go with Chegg (CHGG) for our Top Pick, as it just emerged from a picture-perfect consolidation on earnings.
| Stock Name | Price | ||
|---|---|---|---|
| Atlas Air Worldwide Holdings, Inc. (AAWW) | 38.45 | ||
| Atlassian (TEAM) | 182.16 | ||
| Barrick Gold (GOLD) | 27.20 | ||
| Chegg (CHGG) | 74.21 | ||
| MercadoLibre, Inc. (MELI) | 980.83 | ||
| Peloton (PTON) | 53.03 | ||
| Schrodinger, Inc. (SDGR) | 59.05 | ||
| TG Therapeutics, Inc. (TGTX) | 19.88 | ||
| Twilio (TWLO) | 183.39 | ||
| Wingstop (WING) | 121.52 |
The overall market continues to look healthy—though we haven’t yet received an “all-clear” signal from our long-term trend indicator—and our stocks are certainly behaving well, with several hitting new highs and none behaving badly.
So the only sell recommendation I have today is a bit of short-term profit-taking in one of my recent recommendations—a stock that is due for a bit of a rest.
As for today’s recommendation, it’s a very well-known U.S. telecommunications company with a solid yield that has not only held up well in recent months but that has good growth prospects as the communications revolution continues.
Full details in the issue.
So the only sell recommendation I have today is a bit of short-term profit-taking in one of my recent recommendations—a stock that is due for a bit of a rest.
As for today’s recommendation, it’s a very well-known U.S. telecommunications company with a solid yield that has not only held up well in recent months but that has good growth prospects as the communications revolution continues.
Full details in the issue.
Updates
The Emerging Markets Timer is still pointed up, despite the market’s recent consolidation. Our only move tonight is shifting our position in TAL Education (XRS) to a Hold rating.
Many of our stocks are following the market’s lead and trading sideways. I have no rating changes in today’s update, but several of our holdings reported earnings over the past week.
The bull is back! The recent breakout of stock market indexes above their two-year trading range clearly signals that a new bull market is at hand.
We had a terrific week with the vast majority of our stocks, supported by a 0.8% rise in the S&P 600 Small Cap Index. That’s not a big move, but given the recent break-out to all-time highs, a little follow-on strength across the board suggests the market could be setting up for another run higher.
Remain bullish. We’ve seen some wiggles from individual stocks during the past two weeks, and more are likely as earnings season progresses. But the major trends of the market and most stocks are up, so we advise you to remain heavily invested. There are no changes in the Model Portfolio tonight.
Many of our portfolio stocks either just completed a run-up or they’re trading sideways in synch with the S&P 500 index. A couple of them look capable of continuing their run-ups this week, and cruise company stocks also appear ready to climb. However, the stock that seems most obviously ready to rise is Johnson Controls (JCI) in the Buy Low Opportunities Portfolio.
Eighteen Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news. I have one new sell recommendation: Fortive (FTV).
We may look to exit a few positions on strength over the coming weeks/months, but those moves will depend on share price momentum and/or earnings results. More companies have announced their earnings release dates, and three companies report next week. We have no ratings changes this week.
The Emerging Markets Timer is flashing a buy signal and our stocks are behaving well. Our only move tonight is buying a half position in New Oriental Education (EDU).
Earnings season is well underway and is causing some divergences among stock market sectors. Financials, always among the first companies to report, are finally seeing some investors return after most of the major U.S. banks posted solid earnings numbers late last week.
The S&P 500 index had a nice breakout last week. I consider the move to be the beginning of a trend that could easily last for many months. Along the way, there will be pullbacks that will provide good buying opportunities.
Almost everything is up over the past week. The S&P 600 small cap index jumped 4.8% higher to hit 738. It is now up 10% in 2016, sits just four points below its 2015 high, and is officially above my year-end target of 730. None of our stocks were down over the past week.
Alerts
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.
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.
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 Momentum 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 Momentum Trader features.