Issues
Current Market OutlookNothing much changed with the market’s evidence last week: The trends of the major indexes and most leading stocks remain strongly up, and there’s been very little in the way of intermediate-term abnormal selling action out there. On the other hand, many indexes have yet to hit new post-virus highs, fewer stocks are hitting new highs and the leading big-cap indexes are extended to the upside. As always, we put most of our emphasis on the primary evidence, which is why we remain mostly bullish; in fact, we’re nudging our Market Monitor up to a level 7 this week. But, while we still favor holding your strong, resilient performers, we also think it’s best to be choosy on the buy side, looking for names that have shown some recent power on earnings or have been running for a few months but have dipped to support.
Happily, this week’s list features many of names that have one of those two chart characteristics. Our Top Pick is Redfin (RDFN), which has been mostly a bust since coming public two years ago but showed overwhelming buying after earnings last week. As with most names, try to enter on some weakness.
| Stock Name | Price | ||
|---|---|---|---|
| Acceleron Pharma (XLRN) | 75.11 | ||
| Alteryx (AYX) | 132.78 | ||
| Amazon.com (AMZN) | 2.00 | ||
| Appian (APPN) | 46.48 | ||
| Envestnet (ENV) | 77.12 | ||
| Invitae (NVTA) | 32.06 | ||
| iRhythm Technologies (IRTC) | 51.15 | ||
| Redfin (RDFN) | 40.40 | ||
| Sunrun (RUN) | 38.40 | ||
| Survey Monkey (SVMK) | 19.97 |
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.
Updates
The Cabot Emerging Markets Timer continues to give a Buy signal, so we’re looking for opportunities to increase our exposure. Today, however, we have no changes to our portfolio.
Most of our stocks have spent the past week either pulling back or trading sideways, providing a good opportunity for members who are underinvested to start new positions. We’re putting Wynn Resorts (WYNN) back on Buy today after the company wowed investors with plans for a new resort last week.
Housing sector stocks—including homebuilders, raw materials, and appliances—look stronger right now than any other major industry group. Their charts are bullish, with many of them showing signs of near-term upside breakouts. In that light, I’m expecting good things from Boise Cascade (BCC), D.R. Horton (DHI), Vulcan Materials (VMC) and Whirlpool (WHR) this month.
This was another week of relatively scant stock-specific news. Action will heat up in three weeks once our companies start reporting Q1 results. Alcoa (AA) will get things going on Monday. There are no ratings changes this week.
You should continue to lean bullish, as our Cabot Tides and Two-Second Indicator, along with some secondary indicators (like the S&P 500 blastoff signal), remain positive. We’re adding one new name to the Model Portfolio tonight—Five Below (FIVE)—but will still have about 30% in cash as we wait for the longer-term trend and growth stocks to kick into gear.
After a strong end to last week—the Nasdaq joined the Dow and S&P above its 200-day moving average on Wednesday—the market is pulling back a bit to start April, but we don’t think there’s any cause for alarm yet. We are putting WYNN on Hold today, after the company reported continued weakness in Macau last night.
The Cabot Emerging Markets Timer continues to give a Buy signal, so we’re maintaining our strategy of slowly increasing our exposure. Today, we have no changes to our portfolio.
Many Smart Investing portfolio stocks are trading in narrow, sideways price ranges, since having a strong initial rebound from the winter’s stock market correction. Those trading ranges give us good guidance on how to proceed with stocks.
If market trends continue to improve, I’ll consider taking on more risk in the portfolio—but only if I think we’ll be well compensated for it. There are no ratings changes this week, and none of our stocks reported.
Continue to lean bullish, but keep some powder dry. Selling pressures remain light, but we still want to see more strength among growth stocks before getting heavily invested. There are no changes in the Model Portfolio tonight; we own six stocks and hold a cash position near 40%.
Overall, the market looks healthy, and we think you can continue to get a little more aggressive, putting cash to work and taking on a little more risk if you’re comfortable with it.
Occasionally, I will lower ratings on stocks that rose too far, too fast, and raise ratings on the stocks that present the best opportunities. Today, I’m raising the ratings on Carnival (CCL) and Vulcan Materials (VMC) to Strong Buy, and I’m lowering the rating on FedEx (FDX) to Hold.
Alerts
Berenberg and Raymond James also like this medical device company, boosting its ratings to ‘Buy’ and ‘Outperform’, respectively.
Wall Street is raising its earnings estimates for this cloud company after its $0.04 earnings beat for its latest quarter.
This tech company beat analysts’ earnings estimates by $0.37 last quarter.
Coverage of the shares of this insurance company was just initiated at Credit Suisse with an ‘Outperform’ rating.
The top five holdings of this fund are: Amazon.com Inc (AMZN, 23.60% of assets); The Home Depot Inc (HD, 7.51%); Walt Disney Co (DIS, 5.57%); Comcast Corp Class A (CMCSA, 5.42%); and Netflix Inc (NFLX, 4.84%).
Change out an international fund for a worldwide fund.
Here’s a recommendation to change out an international fund for a worldwide fund, in which the majority of assets are invested in the United States.
This human resources solutions provider beat analysts’ earnings estimates by $0.20 last quarter.
This is an unscheduled interim update to let you know that the next full issue of Cabot’s 10 Best Marijuana Stocks will be published Thursday, August 30.
One of the stocks in our portfolio popped after it reported Q1 earnings but, for the most part, has been trending down since.
Three analysts have increased their EPS estimates for this energy firm.
This tech company is a new spin-off and just received a contract to provide the U.S. Postal Service with maintenance and development support of its over 700 applications.
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.