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
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.
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 |
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Updates
Twenty Cabot Benjamin Graham Value Investor companies reported quarterly financial results. Five produced outstanding results: AbbVie, Harman, Lear, LKQ and Penske, while five reported rather weak results: Apple, Avnet, Ensco, Gilead and Synaptics. I will review all the quarterly reports within the next few days and offer Sell recommendations if necessary.
The Cabot Emerging Markets Timer continues to give a Buy signal, but many stocks in both emerging and developed markets are trading sideways. We have no changes to our portfolio today.
Beginning next week, Smart Investing in Turbulent Times will receive a new name: Cabot Undervalued Stocks Advisor. But don’t worry! Everything below the title remains the same. All of the portfolio stocks will remain intact, with weekly updates on excellent value stock opportunities. In today’s Update, there are a few noteworthy portfolio stock news items.
There are no ratings changes today. My stance is cautiously optimistic, and favors resisting the temptation to chase stocks. Action is going to pick up next week as we have Blackbaud (BLKB), LogMeIn (LOGM) and Mitek (MITK) reporting. I’m expecting good things from all.
Fourteen Cabot Benjamin Graham Value Investor companies reported financial results in the past week. Six reports were outstanding, including BJ’s Restaurants, Danaher, General Motors, Johnson Controls, Southwest Airlines and UnitedHealth Group.
Continue to lean bullish. From a top-down perspective, there’s little negative to say about the overall market—all of our indicators remain positive, and the indexes refuse to give up any gains, a sign of strength. Individual stocks are more hit and miss, but we’re looking forward to earnings season to reveal some new leadership. We have no changes in the Model Portfolio tonight—we’re holding seven stocks and a cash position near 30%.
A correction is still possible, but the overall trend of the market is clearly up. I have no rating changes today, although I’m watching U.S. Bancorp (USB) closely after the bank reported mixed results this morning.
Most stocks in our portfolios were the subject of research articles from high-profile financial media outlets, this past week: Forbes, Barron’s, TheStreet and others. We have one dividend increase today: Carnival Corp. (CCL), and I’m lowering the rating on Federated Investors (FII) to Hold.
We have a few nuggets of news this week. And in two weeks, earnings season will kick in with three of our software stocks reporting. There are no ratings changes this week. And we should tip our hats to PFSweb (PFSW), which earned top gun honors with its 15% rally.
Recent gains in the stock market are impressive. Ms. Market seems very determined to climb a wall of worry. Economic growth in the U.S. continues to barely inch ahead, while employment is robust.
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.
Alerts
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.
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’.
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.