Issues
We’ve been writing that the recent straight-up move in leading stocks, combined with signs of speculation in early October, all happening right in front on earnings season, was a recipe for lower prices in the short-term. And voilà! Stocks got hit hard last week and early this morning, as the sellers gained traction. At this point, the major market trends are up, so we believe this correction will eventually lead to higher prices … but we’d still be a bit cautious in the short-term, as selling pressures usually don’t disappear after just one week. This week’s Top Ten contains a few earnings winners from last week (always good candidates for further upside), as well as a few new names. Our favorite of the week is New Oriental Education (EDU), a Chinese firm that gapped up on strong earnings last week, but has pulled back with the market in recent days. It’s a bit thinly traded, and thus jumpier, but we think buying a little here will work out.
| Stock Name | Price | ||
|---|---|---|---|
| ANR (ANR) | 0.00 | ||
| AUO (AUO) | 0.00 | ||
| BIDU (BIDU) | 0.00 | ||
| EDU (EDU) | 0.00 | ||
| ISRG (ISRG) | 0.00 | ||
| LIFC (LIFC) | 0.00 | ||
| LULU (LULU) | 0.00 | ||
| MTL (MTL) | 0.00 | ||
| SA (SA) | 0.00 | ||
| SPWR (SPWR) | 0.00 |
After weeks of straight-up action, leading stocks finally came under some selling pressure late last week, and it appears more selling is on the way, short-term. We’ve written that such a pullback is likely (you often see peaks and troughs near the 15th of the month of earnings season), so if you’re holding a couple of laggards, now’s the time to kick them out of your portfolio. Longer-term, however, we believe any retreat will result in buying opportunities – our OptiMo stock screening system continues to uncover a wide array of great-looking stocks with even greater-sounding stories. Thus, while you should expect some choppiness in the near-term, you should be putting money to work on weakness. Our favorite idea this week is Aecom Technology (ACM), part of the strong engineering and construction group. It’s a new issue, which helps, and looks like a good buy around here, or on a slight pullback.
| Stock Name | Price | ||
|---|---|---|---|
| ACM (ACM) | 0.00 | ||
| ANW (ANW) | 0.00 | ||
| CRM (CRM) | 0.00 | ||
| FLR (FLR) | 0.00 | ||
| GIGM (GIGM) | 0.00 | ||
| GOLD (GOLD) | 0.00 | ||
| HNSN (HNSN) | 0.00 | ||
| JASO (JASO) | 0.00 | ||
| LVS (LVS) | 0.00 | ||
| VIP (VIP) | 0.00 |
The market continues to perform well, with the market’s leading stocks outperforming the broad market indexes. These are good times, so enjoy them! But remember to guard against complacency; hundreds of earnings reports are about to flood Wall Street, and we’re sure that some leaders will fail, while others will soar. Thus, while the overall bull market shows no sign of ending, the next few weeks will be volatile. This week’s Top Ten contains another well-rounded batch of stocks, with a couple of biotech names highlighting the newfound strength in that sector. Another group that’s quietly improved has been the steel stocks, with Schnitzer Steel (SCHN) leading the way. The stock is in a mild pullback following a powerful breakout in recent weeks. We think it’s buyable around here.
| Stock Name | Price | ||
|---|---|---|---|
| TKC (TKC) | 0.00 | ||
| ALNY (ALNY) | 0.00 | ||
| AUXL (AUXL) | 0.00 | ||
| CIEN (CIEN) | 0.00 | ||
| FSLR (FSLR) | 0.00 | ||
| HANS (HANS) | 0.00 | ||
| OVTI (OVTI) | 0.00 | ||
| QMAR (QMAR) | 0.00 | ||
| RIMM (RIMM) | 0.00 | ||
| SCHN (SCHN) | 0.00 |
If your portfolio is full of growth or materials stocks, you’re likely a happy camper, as these types of issues are being gobbled up by institutional investors these days. Indeed, we’re glad to see the Nasdaq – a good representation of growth stocks – outperforming the broader S&P 500, a sign that investors are growing more bullish. That’s a good sign for the market as a whole, but remember that with a new quarter underway, earnings season is about to begin, so be prepared for increased volatility (both upside and downside) going forward. This week’s Top Ten contains something for everyone, whether it’s China, oil, chips or even engineering and construction. Our favorite of the week is Focus Media (FMCN), a great growth company that just leaped out from a nice basing structure. It’s already reported earnings, and we think you can buy a little on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| Aecom Technology (ACM) | 0.00 | ||
| CMED (CMED) | 0.00 | ||
| Crocs (CROX) | 0.00 | ||
| New Oriental Education (EDU) | 113.97 | ||
| Focus Media Holdings (FMCN) | 0.00 | ||
| Flotek (FTK) | 0.00 | ||
| HANS (HANS) | 0.00 | ||
| OMTR (OMTR) | 0.00 | ||
| OmniVision (OVTI) | 0.00 | ||
| VeriFone Systems, Inc. (PAY) | 0.00 |
Updates
If you have the feeling that this year’s boom in the tech sector—and the corresponding record highs in the major averages—isn’t being felt on a market-wide basis, you’re not imagining it.
As it turns out, the record lift in the Nasdaq and S&P is being driven by a troublingly small number of stocks. The result of this narrowing market is that value-focused investors like us have been forced to exercise patience while waiting for the boom to visit our corner of the market (more on that in a minute).
As it turns out, the record lift in the Nasdaq and S&P is being driven by a troublingly small number of stocks. The result of this narrowing market is that value-focused investors like us have been forced to exercise patience while waiting for the boom to visit our corner of the market (more on that in a minute).
WHAT TO DO NOW: Big picture, the market and most leaders look great, and our market timing indicators are in fine shape. Near-term, though, there’s little doubt things have gotten a bit giddy, with many names and indexes extended to the upside. Tonight, we’re placing Cava (CAVA) on Hold as that stock has been caught up in some group weakness; we’ll hold our 45% cash position for now, but stay tuned, as we’d like to add some new names (or add to existing names) in the near future.
What a difference a month can make! What an April! The S&P rose 9.6% in April, making it the best single month for the market in six years. It hit an all-time high on Friday.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.
The results are in for the month of April. It was fabulous. The S&P rose 9.6%, making it the best single month for the market in six years. It hit an all-time high on Friday.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of minor skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of minor skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings.
Now before you call me crazy concerning today’s newsletter headline, hear me out.
Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”
Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”
The market is digesting the push and pull of higher oil prices, a deeply divided Federal Reserve, prospects for a prolonged blockade of the Strait of Hormuz and fading momentum from the AI trade that helped push markets to all‑time highs earlier this month.
Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.
Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.
Yesterday, four tech giants, Alphabet, Amazon, Meta and Microsoft, representing 22% of the S&P 500’s market value, reported strong quarterly earnings that highlighted the importance of AI.
You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.
You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.
It’s been a glorious April following a miserable March for the market. What happens in May may determine which direction stocks are headed for the rest of the year.
That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.
That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.
What war? This market is moving on. We may not be out of the woods yet, but investors are looking beyond the Iran war.
Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.
Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.
The other day I was paid a visit by a roving ISP salesman who was pitching his company’s fledgling internet service over the local monopoly’s. We struck up a conversation and he asked what I did for a living. When I told him, his eyes lit up and he asked, “Got any good stocks you can recommend?”
Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation
Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation
Note: I’m out of town this week, so I’ll be a bit briefer on the update today—but I’m still checking my laptop a couple of times a day if you have any questions or comments. I’ll be back at my desk come Monday. Cheers.
WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.
WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.
Despite all the headline noise lately we’re marching deeper into first‑quarter earnings season with the market’s path of least resistance still pointing higher.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
Alerts
The shares of this Chinese e-commerce company were just initiated at Bernstein with an “outperform” rating and were upgraded by Goldman to “buy”. The company beat estimates by eight cents last quarter.
Alibaba (BABA)
from Cabot China & Emerging Markets Report
Alibaba (BABA) is my pick, partly because of the company’s position in...
Alibaba (BABA)
from Cabot China & Emerging Markets Report
Alibaba (BABA) is my pick, partly because of the company’s position in...
Our contributor is trading in his January pick for a new stock, which has recently been endorsed by hedge fund manager Julian Robertson, who says he is “extremely positive” on the shares.
Sell: Fossil Group (FOSL)
from Cabot Benjamin Graham Value Investor
Fossil Group (FOSL) Results have been disappointing during the past couple...
Sell: Fossil Group (FOSL)
from Cabot Benjamin Graham Value Investor
Fossil Group (FOSL) Results have been disappointing during the past couple...
Exciting developments are at hand for this biotech with a new ticker.
Benitec Biopharma (BTEBD)
from Global Investing
Benitec Biopharma (BTEBD) announced hot news. First, the company will issue US$70 million in new ADRs under its new ticker symbol, BTEBD (BLT in Australia), each new US share equal to 4 former BTEBY shares....
Benitec Biopharma (BTEBD)
from Global Investing
Benitec Biopharma (BTEBD) announced hot news. First, the company will issue US$70 million in new ADRs under its new ticker symbol, BTEBD (BLT in Australia), each new US share equal to 4 former BTEBY shares....
The shares of this home décor company were just upgraded by BB&T Capital Markets to “buy”, and analysts have raised their earnings estimates by six cents in the past 90 days.
Restoration Hardware (RH)
from Cabot Top Ten Trader
Business-wise, Restoration Hardware (RH) has done exactly what I thought it would—grow rapidly as...
Restoration Hardware (RH)
from Cabot Top Ten Trader
Business-wise, Restoration Hardware (RH) has done exactly what I thought it would—grow rapidly as...
Direxion Daily 20 Plus Year Bear 3 Shares (TMV), Proshares Short 20 Plus Year Treasury (TBF), and Pr
These three ETFs are a hedge against rising inflation and bond yields.
Direxion Daily 20 Plus Year Bear 3 Shares (TMV), Proshares Short 20 Plus Year Treasury (TBF), and Proshares Ultrashort Lehman 20 Plus Year (TBT)
from Sound Advice
Bond yields have risen recently as Europe’s QE programs and other expansionary monetary policies...
Direxion Daily 20 Plus Year Bear 3 Shares (TMV), Proshares Short 20 Plus Year Treasury (TBF), and Proshares Ultrashort Lehman 20 Plus Year (TBT)
from Sound Advice
Bond yields have risen recently as Europe’s QE programs and other expansionary monetary policies...
Low oil prices have discounted the stock price of this oil giant.
Exxon-Mobil (XOM)
from The Heartland Adviser
At the beginning of the year I chose Exxon Mobil (XOM) as my top stock pick.
The company was my choice in January because Exxon is a Value Line A++ company whose value fell due to...
Exxon-Mobil (XOM)
from The Heartland Adviser
At the beginning of the year I chose Exxon Mobil (XOM) as my top stock pick.
The company was my choice in January because Exxon is a Value Line A++ company whose value fell due to...
With both assets and loans growing at double-digit rates, this bank may be growing closer to a takeover.
Avid Bank Holdings (AVBH)
from Hughes Investment Management
Avid Bank Holdings (AVBH) continues to grow strongly, in the fast-paced high tech market. The bank still has almost zero charge offs for bad loans. The management...
Avid Bank Holdings (AVBH)
from Hughes Investment Management
Avid Bank Holdings (AVBH) continues to grow strongly, in the fast-paced high tech market. The bank still has almost zero charge offs for bad loans. The management...
This small cap company saw its revenues rise 35%, to a record $13.8 million, last quarter, due to expanded contracts, as well as a nice dose of new recurring revenue.
Auxilio (AUXO)
from The Quiet Investor
I continue to espouse Auxilio (AUXO), despite the sideways movement of the stock price over the past...
Auxilio (AUXO)
from The Quiet Investor
I continue to espouse Auxilio (AUXO), despite the sideways movement of the stock price over the past...
Declining oil prices affected recent earnings, but this company just received a glowing endorsement as a “bargain” in Barron’s.
Precision Castparts’ (PCP)
from Hendershot Investments
For fiscal 2015, Precision Castparts’ (PCP) sales increased 5% to $10 billion with net income declining 14% to $1.5 billion and EPS falling 10% on fewer shares outstanding...
Precision Castparts’ (PCP)
from Hendershot Investments
For fiscal 2015, Precision Castparts’ (PCP) sales increased 5% to $10 billion with net income declining 14% to $1.5 billion and EPS falling 10% on fewer shares outstanding...
The shares of this animal health and retailer are on the rise, but technical analysis indicates they have further to go.
Zoetis Inc. (ZTS)
from Shortex Market Letter
Zoetis Inc. (ZTS)
52 wk high: 49.55 52wk low: 30.50
Mkt cap: $24.44B EPS: 1.18 P/E: 41.43
Div/Yld: 0.33 (0.70%)
Ascending pattern since mid Dec ’14 (42-44), to...
Zoetis Inc. (ZTS)
from Shortex Market Letter
Zoetis Inc. (ZTS)
52 wk high: 49.55 52wk low: 30.50
Mkt cap: $24.44B EPS: 1.18 P/E: 41.43
Div/Yld: 0.33 (0.70%)
Ascending pattern since mid Dec ’14 (42-44), to...
Ross Stores (ROST 51)
from Shortex Market Letter
Please note: Shares split 2:1 on June 12, 2015
Ross Stores (ROST)
52 wk high: 54.48 52wk low: 30.92
Mkt cap: $20.28B EPS: 4.64 P/E: 21.14
Div/Yld: 0.94 (1.00%)
Operator of 1,242 Ross Dress and 157 dd’s DISCOUNTS stores. In correction/retraction mode since...
from Shortex Market Letter
Please note: Shares split 2:1 on June 12, 2015
Ross Stores (ROST)
52 wk high: 54.48 52wk low: 30.92
Mkt cap: $20.28B EPS: 4.64 P/E: 21.14
Div/Yld: 0.94 (1.00%)
Operator of 1,242 Ross Dress and 157 dd’s DISCOUNTS stores. In correction/retraction mode since...
The top five holdings of this five-star-rated fund (by Morningstar) are Eli Lilly and Company (LLY, 3.85% of assets); Amgen Inc. (AMGN, 2.92%); Carnival Corporation (CCL, 2.81%); Roche Hldg AG (RHHVF, 2.80%) and Charles Schwab Corporation (SCHW, 2.35%).
PRIMECAP Odyssey Stock (POSKX)
from Dow Theory Forecasts
We’re always looking for standout funds to...
PRIMECAP Odyssey Stock (POSKX)
from Dow Theory Forecasts
We’re always looking for standout funds to...
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.