Issues
This morning’s market crash will go down in history as a big one—biggest by point drop and one of the biggest by percentage drop. But this is no time to panic. Instead, it’s time to recognize that the market is increasingly offering its wares at bargain prices, and all you need to do is have cash on hand when the climate improves.
For our portfolio, that means selling one more stock today, Endava (DAVA).
In the meantime, Cabot analysts continue to find stocks that are attractive for one reason or another and today’s featured stock is one of them—a leading chipmaker with great prospects as the world goes increasingly online and digital.
Full details in the issue.
For our portfolio, that means selling one more stock today, Endava (DAVA).
In the meantime, Cabot analysts continue to find stocks that are attractive for one reason or another and today’s featured stock is one of them—a leading chipmaker with great prospects as the world goes increasingly online and digital.
Full details in the issue.
Current Market OutlookAfter two weeks of dreadful action, the perfect storm crashed down on Wall Street this morning, with imploding oil prices and more virus/economic fears causing a panic, though the damage was limited after the open. Short-term, today brought many truly extreme readings (more than 2,800 stocks hit new lows on the NYSE and Nasdaq combined!), so short-term, some sort of bounce or relief rally is possible (even probable). That said, (a) the nature of this decline has been breaking some rules, so there are no sure things, and (b) our focus remains on the intermediate-term, where the trends of just about everything are pointed down. Thus, while we’re keeping our eyes open, we’re focusing mostly on capital preservation and hunting for the potential big winners for the next uptrend.
This week’s list is a great place to start, whether you’re building a watch list or looking to nibble. Our Top Pick is Vipshop (VIPS), which is one of many Chinese stocks that is acting very well.
| Stock Name | Price | ||
|---|---|---|---|
| eHealth (EHTH) | 122.74 | ||
| Etsy (ETSY) | 112.97 | ||
| Everbridge (EVBG) | 107.90 | ||
| GSX Techedu (GSX) | 97.59 | ||
| iRhythm Technologies (IRTC) | 51.15 | ||
| Newmont Mining (NEM) | 57.31 | ||
| Teladoc, Inc. (TDOC) | 127.95 | ||
| Tradeweb Markets (TW) | 51.44 | ||
| Vipshop Holdings (VIPS) | 14.25 | ||
| ZTO Express (ZTO) | 28.84 |
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
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.
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.
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.
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 |
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.
Updates
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.
Last week, The Priceline Group (PCLN) reported fourth-quarter 2015 results that surpassed market earnings per share (EPS) expectations, while Boise Cascade (BCC) reported fourth-quarter 2015 results that disappointed the market. I’m raising the ratings on Carnival (CCL), D.R. Horton (DHI) and Royal Carribean Cruises (RCL) to Buy. I’m lowering the rating on Boise Cascade (BCC) to Hold.
The market is still serving up its fair share of surprises, both to the upside and to the downside. We’ve experienced a few of both in our portfolio, and over the last two weeks, we’ve stepped aside from three stocks (my rationale was detailed in the Special Bulletins). This week, two of our stocks reported, and I moved one to Sell.
Alerts
Shares of our little hearing aid and continuous glucose monitor stock are rocketing higher today after the company turned in a far better quarter than expected.
Eight of our stocks reported earnings recently.
This healthcare tech company’s shares were recently initiated at Berenberg to ‘Buy’ and upgraded at Craig-Hallum to ‘Buy’.
This tech company beat analysts’ estimates by $0.06 last quarter and Wall Street is forecasting that the company will grow at a 54.64% annual rate for the next five years.
It was a volatile and divergent day in the market, with the Dow rising 198 points but the Nasdaq fell one point and growth stocks got hit very hard, registering one of their worst days of the year. As a result, we are selling 1/3 of a position and moving another position to hold.
The shares of this tech company were also recently initiated at Guggenheim with a ‘Buy’ rating.
This pharmaceutical company is expected to grow at an annual rate of 31.67% for the next five years.
Blackstone Group reported second quarter economic net income (ENI) of $0.90, above all analysts’ estimates.
The top five holdings of this fund are: Vail Resorts Inc (MTN, 0.66% of assets); PTC Inc (PTC, 0.64%); Burlington Stores Inc (BURL, 0.61%); Jack Henry & Associates Inc (JKHY, 0.60%); and GrubHub Inc (GRUB, 0.56%).
This defense and aerospace company beat analysts’ estimates by $0.02 last quarter, and forecasts for this year are for 14.5% growth.
This home retailer beat analysts’ estimates by $.0.04 last quarter and is expected to grow at a 25% annual rate during the next five years.
This tech company’s shares were just initiated at Evercore ISI Group, with an ‘Outperform’ rating and upgraded at Deutsche Bank, 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.