Issues
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.
Today’s recommendation is a British outfit that, as its stock symbol suggests, is thriving thanks to offerings that help workplace teams plan, interact, engage, track progress and more, all of which is becoming more difficult as workplaces become more mobile.
The much-needed market correction is now two weeks old and thus still quite young, but as it evolves, and we adapt to its actions, we will continue to cultivate a portfolio of the best stocks by selling our laggards and holding our leaders.
Last week that meant selling four stocks, but this week it means only a couple of downgrades to hold, along with one upgrade to buy.
As for this week’s recommendation, it’s a big old high-tech company that is currently range bound, but whose valuation and chart are attractive, so long-term investment should work out well. Plus it pays a dividend of 4.3%.
Details in the issue.
Last week that meant selling four stocks, but this week it means only a couple of downgrades to hold, along with one upgrade to buy.
As for this week’s recommendation, it’s a big old high-tech company that is currently range bound, but whose valuation and chart are attractive, so long-term investment should work out well. Plus it pays a dividend of 4.3%.
Details in the issue.
Current Market OutlookThe market rebounded nicely today, and we won’t pooh-pooh that, as a show of support is always a positive. That said, we need to see more to conclude the sellers have left the building—the intermediate-term trend, for instance, remains on the fence, and while there are no sure things, it’s likely the market will need more than six days to consolidate a four-month advance. Bigger picture, nothing has changed our view that this is a bull market, though, so we’re certainly not advising you to become overly defensive, but we’d stick with the plan of holding some cash, keeping your weakest stock or two on a tight leash and being careful on the buy side, especially when it comes to buying on strength (most moves to new highs are being met with selling). Our Market Monitor will remain at 6 for now, though we’re obviously watching things closely.
Believe it or not, many stocks did well last week, and today’s list features some of them. Our Top Pick is Yeti (YETI), which is set up nicely ahead of earnings in two weeks; you could nibble here, or just wait until you see a powerful breakout.
| Stock Name | Price | ||
|---|---|---|---|
| Atlassian (TEAM) | 182.16 | ||
| Dynatrace (DT) | 36.59 | ||
| Fortune Brands Home & Security (FBHS) | 81.02 | ||
| Franco-Nevada (FNV) | 125.51 | ||
| Momenta Pharma (MNTA) | 31.63 | ||
| Penn National Gaming (PENN) | 45.38 | ||
| PulteGroup (PHM) | 45.93 | ||
| ServiceNow (NOW) | 341.86 | ||
| Tandem Diabetes (TNDM) | 74.77 | ||
| Yeti Holdings (YETI) | 42.80 |
With the market near record highs, many stocks are trading well above the $1,000/share price level. Investors tend to dismiss stocks with basement-level prices, so we explored this maligned group in search of neglected value.
In this issue, we look at the several of our recommended stocks in this range.
In this issue, we look at the several of our recommended stocks in this range.
The long-awaited pullback appears to have arrived, with fears and uncertainty surrounding the coronavirus and its impact on economic growth bringing out the sellers; our Cabot Tides, in fact, are now on the fence. In the near-term, the odds favor some more pain being dished out, not necessarily because of the virus, but as the market consolidates its strong four-month advance. Big picture, though, this is still a bull market, so while we’ve trimmed a bit, we’re aiming to hold our strong, profitable stocks, thinking higher highs are likely once this pullback does its work.
In the Model Portfolio, we took partial profits on DocuSign and ProShares S&P 500 Fund earlier this week, which lifted our cash position to around 20%. And from here, we’ll just take it as it comes, as we explain in tonight’s issue.
In the Model Portfolio, we took partial profits on DocuSign and ProShares S&P 500 Fund earlier this week, which lifted our cash position to around 20%. And from here, we’ll just take it as it comes, as we explain in tonight’s issue.
The latest issue of Cabot Marijuana Investor is now available, with my current advice on the fifteen stocks in the portfolio.
While coronavirus fears infect the broad market, the good news is that marijuana stocks seem to have an immunity, mainly because they already had their correction last year. Many stocks in the sector are looking better, and I’m now recommending averaging up in three stocks already in the portfolio.
These changes will reduce the portfolio’s cash level to roughly 12%, so we will be well positioned to benefit from the sector’s resumption of its big uptrend.
Full details in the issue.
While coronavirus fears infect the broad market, the good news is that marijuana stocks seem to have an immunity, mainly because they already had their correction last year. Many stocks in the sector are looking better, and I’m now recommending averaging up in three stocks already in the portfolio.
These changes will reduce the portfolio’s cash level to roughly 12%, so we will be well positioned to benefit from the sector’s resumption of its big uptrend.
Full details in the issue.
STMicroelectronics is one of the world’s largest semiconductor companies, delivering solutions that are key to the smartphone and automotive markets. Major customers include Apple and Tesla, though the firm (which is based in Switzerland) sports more than 100,000 customers around the globe.
Current Market OutlookThe rapid spread of China’s coronavirus provided the impetus for a selloff that began last Friday and exploded onto the scene today. Where does that leave us? First, the intermediate-term trend of the indexes is still positive but close to the fence; the big-cap indexes look OK, but the broader measures (small and mid caps) are right around their key 50-day lines. Beyond the charts, it’s likely that more time is needed for investors to trim/hedge after four months of straight-up action. As for leading stocks, we’re taking it on a case-by-case basis—some are looking ragged and ripe for a deeper correction, but most are pulling back normally. If you’re heavily invested, our advice is to follow the usual plan: Hold most of your shares in your strong, profitable stocks, while selling or keeping tight leashes on losers and laggards. We’re moving our Market Monitor down to a level 6.
On the buy side, newer names that are holding up well should be near the top of your shopping list. This week features plenty of those, with our Top Pick being Kansas City Southern (KSU), a reliable grower that just reacted well to earnings.
| Stock Name | Price | ||
|---|---|---|---|
| Agios Pharmaceuticals, Inc. (AGIO) | 52.43 | ||
| Bristol-Myers (BMY) | 66.24 | ||
| Datadog (DDOG) | 81.52 | ||
| Kansas City Southern (KSU) | 176.54 | ||
| Sea Limited (SE) | 132.86 | ||
| Snap Inc. (SNAP) | 16.68 | ||
| STMicroelectronics (STM) | 30.09 | ||
| Taiwan Semiconductor (TSM) | 78.41 | ||
| Wix.com (WIX) | 302.53 | ||
| Zillow (Z) | 76.64 |
The long-awaited market correction has finally begun, and while you may be tempted to tie the correction to fundamental events, I don’t find any value in that—because all that news is public information so it has no real value to us. Instead, I prefer to watch the action of the stocks carefully, to judge where the money is flowing. And the result of my observations today is that we will sell four stocks and downgrade another to hold—and then continue watching.
As for this week’s recommendation, it’s a high-potential little medical stock that most investors haven’t heard of. It’s not for everyone, but it does provide diversity to our portfolio and it may be perfect for yours.
Details in the issue.
As for this week’s recommendation, it’s a high-potential little medical stock that most investors haven’t heard of. It’s not for everyone, but it does provide diversity to our portfolio and it may be perfect for yours.
Details in the issue.
Updates
Another week of modest gains has investors moving back into stocks, and the major indices are around breakeven for the year.
The Cabot Emerging Markets Timer continues to give a buy signal, so we’re maintaining our strategy of increasing our exposure. Today, we are increasing our half position in SBGL to a full Buy.
The broad market strengthened further this week, and I’m putting Equifax (EFX) back on Buy today for investors with cash to put to work.
There are no new earnings reports, dividend changes or stock repurchase news to report, but I’m raising the rating on Adobe Systems (ADBE) from Hold to Buy, after the stock pulled back a little, and I’m lowering the rating on Universal Electronics (UEIC) from Strong Buy to Buy because the stock has had an aggressive run-up.
As compared to the last month, this was a relatively subdued week. Stocks fell modestly, with large caps giving back a mere 0.1% and small caps giving back 0.7%.
Continue to play things halfway. The market has made solid progress during the past two weeks, increasing the odds that a low has been formed. That said, few growth stocks have kicked into gear, and the longer-term trend is still down. We continue to fine-tune our watch list, but tonight, we’re standing pat in the Model Portfolio with five stocks and a cash position near 52%.
Given the generally improving health of the broad market, I’m putting General Motors (GM) and CVS Health (CVS) back on Buy today. We have no other changes to the portfolio.
I’m changing the stock rating on BorgWarner (BWA) to Hold, E*Trade Financial (ETFC) to Buy, H&R Block (HRB) to Hold and Vulcan Materials (VMC) to Hold. Quarterly earnings were reported last week by Big Lots and H&R Block. There’s dividend news on Big Lots (BIG), and there’s stock repurchase news on Big Lots (BIG), Delta Air Lines (DAL) and H&R Block (HRB).
The Cabot Emerging Markets Timer is flashing a robust buy signal. So, following our rules, we’re edging steadily back into the market, increasing our exposure to strong growth stocks. Today, we are upgrading SSW from Hold to Buy and initiating positions in SBGL and TLK with recommendations to Buy a Half position of each stock.
The market has maintained its intermediate-term uptrend, and you can continue to become more invested, cautiously. Today we’re putting Target (TGT) back on Buy after the retailer reported improvement in some key metrics in the latest quarter.
It was a good week despite the ongoing rumblings of oil-related debt defaults, talk of the perils of a negative interest rate environment and relatively lackluster growth from companies that have reported thus far.
Remain defensive but keep your eyes open. Our Cabot Tides are toying with a buy signal, though the past couple of days have delayed it. Because of that, we’re sticking with our three remaining stocks and a cash position around 75% tonight, but we have our shopping list ready should we get a clear green light in the days ahead.
Alerts
Three of our portfolio stocks reported earnings this week.
While biotech shares have been pressured of late, this fund is entering its historically best season.
Our second recommendation is some profit-taking.
Our first idea is an airline that beat Wall Street’s earnings forecasts by $0.33 last quarter.
In the past 30 days, 15 analysts have increased their earnings estimates for this drug store/pharmacy chain.
The major indexes did well on Friday, with the Dow up 136 points and the Nasdaq up 9 points. But growth stocks were once again hit relatively hard with another few breaking intermediate-term support. One our positions broke down after a good-not-great quarterly report and it’s time to sell.
Coverage of the shares of this optoelectronics maker were recently initiated at Cowen & Co. with an ‘Outperform’ rating. Wall Street is forecasting annual growth of 30.8% over the next five years for the company.
We have one Sell today and one stock that moves from Strong Buy to Hold
Our second recommendation is a short sale.
Our first pick today just received an upgrade from Morgan Stanley, to ‘Overweight’.
Five of the stocks in the portfolio have reported earnings.
Six of our stocks reported earnings recently.
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.