Issues
It’s been over a month since the major indexes hit their peaks, and while there’s been no major move to the downside yet, the odds of one grow with time, particularly considering that we’re still in October (often a difficult month). Thus, I have no trouble recommending a slightly more cautious attitude at the moment.
But there’s always something attractive to buy, and this week it’s another stock in the vast and complex semiconductor industry. This will be our fourth in the industry.
As for selling, I’m working to hold a bit of cash until the climate improves, and the easy choice to sell today is our biggest loser, Global-E Online (GLBE).
Details inside.
But there’s always something attractive to buy, and this week it’s another stock in the vast and complex semiconductor industry. This will be our fourth in the industry.
As for selling, I’m working to hold a bit of cash until the climate improves, and the easy choice to sell today is our biggest loser, Global-E Online (GLBE).
Details inside.
Current Market OutlookIn true 2021 fashion, just when the market looked ready to go over the falls last week the buyers stepped in, pushing the major indexes sharply higher (recouping nearly 50% of the month-long correction in just three days and seeing many individual stocks pop as well). It’s certainly encouraging, but we need to see a bit more—by our measures, we haven’t seen confirmation of a new intermediate-term uptrend (most indexes remain below their 50-day lines or stuck in the middle of multi-month ranges) and, while a few stocks have popped to new highs, most individual names are in the same no-man’s-land environment. Longer term, the strong, broad bounce is a good sign the overall bull market is alive and well, but near term, it’s still uncertain whether we’ll see another leg lower or more vicious rotation. You shouldn’t be in your bunker, but keeping new buys small and holding some cash makes sense as we see if the strength can persist.
This week’s list is heavier on turnaround and commodity-related names, with many beginning to emerge from long rest periods. Our Top Pick is LPL Financial (LPLA), which won’t be your fastest mover but has staged a good-looking breakout in recent weeks.
| Stock Name | Price | ||
|---|---|---|---|
| Acuity Brands (AYI) | 206 | ||
| Applovin (APP) | 87 | ||
| Builders FirstSource (BLDR) | 55 | ||
| The Goodyear Tire & Rubber Company (GT) | 19 | ||
| Hilton Worldwide Holdings (HLT) | 143 | ||
| LPL Financial Holdings (LPLA) | 167 | ||
| The Mosaic Company (MOS) | 42 | ||
| Pioneer Natural Resources (PXD) | 193 | ||
| Teck Resources Limited (TECK) | 28 | ||
| UPST (UPST) | 311 |
The market’s correction is about a month old, and so far it’s been fairly garden variety, with some potholes but not much big-picture abnormal action. And, this week, we’re seeing a very encouraging bounce, with most indexes recouping half of their decline in just two days and some growth stocks already testing new high ground. We’re not out of the woods yet, but we’re holding what we own (some of which act great) and fine-tuning our watch list should the trend turn back up.
Today we are jumping into a small-cap biotech company that has a drug delivery platform that could completely revolutionize how injectable drugs are delivered.
The short version is that millions of people that require injections could, if all goes well, just take a pill instead.
While the risks are meaningful with any biotech, so too is the potential. Early data shows this platform works, and already there are programs being designed to deliver treatments for osteoporosis, Type-2 diabetes and arthritis.
It’s all inside this month’s Issue.
The short version is that millions of people that require injections could, if all goes well, just take a pill instead.
While the risks are meaningful with any biotech, so too is the potential. Early data shows this platform works, and already there are programs being designed to deliver treatments for osteoporosis, Type-2 diabetes and arthritis.
It’s all inside this month’s Issue.
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the October 2021 issue.
Volatility is a value/contrarian investors’ friend. With the markets becoming more volatile, we’ve made some changes to the portfolio this past month. We recently added ConocoPhillips (COP), a major oil and gas producer that is also an undervalued cash flow machine at current commodity prices.
Volatility is a value/contrarian investors’ friend. With the markets becoming more volatile, we’ve made some changes to the portfolio this past month. We recently added ConocoPhillips (COP), a major oil and gas producer that is also an undervalued cash flow machine at current commodity prices.
The current market is giving investors headaches, but it’s not unusual in Greentech to find savvy investors looking past the near-term economic fears and focusing on companies that are tapping into what promises to be terrific growth from de-carbonizing the economy.
This issue, we highlight a small cap stock with amazing engineering savvy at a minor, but essential, feature of electric vehicles. Management expects it can grow revenue about 50% every year through the rest of the decade as automaker customers begin to churn out EVs. It’s in the early stages of growth and is seeing strong fund buying as well as exceptional technicals.
We also highlight three ESG stocks showing the best technicals in the group, as part of our recurring ESG Three, give the current sector outlook indicated by our Greentech Timer, and provide a detailed rundown of the stocks in our current portfolios. We have some ratings changes and refreshed sell-stop recommendations for many of our holdings.
Read through for more details.
This issue, we highlight a small cap stock with amazing engineering savvy at a minor, but essential, feature of electric vehicles. Management expects it can grow revenue about 50% every year through the rest of the decade as automaker customers begin to churn out EVs. It’s in the early stages of growth and is seeing strong fund buying as well as exceptional technicals.
We also highlight three ESG stocks showing the best technicals in the group, as part of our recurring ESG Three, give the current sector outlook indicated by our Greentech Timer, and provide a detailed rundown of the stocks in our current portfolios. We have some ratings changes and refreshed sell-stop recommendations for many of our holdings.
Read through for more details.
Last week the major indices pulled back in a meaningful way. The S&P 500 lost 2.20%, the Dow declined 1.36%, and the Nasdaq pulled back 3.20%.
The benchmark index sank 4.8% in September, marking its worst month since March 2020. It was also the first losing month for the S&P after seven straight months of gains. The outlook didn’t look much brighter Monday as the market saw another bout of losses.
The benchmark index sank 4.8% in September, marking its worst month since March 2020. It was also the first losing month for the S&P after seven straight months of gains. The outlook didn’t look much brighter Monday as the market saw another bout of losses.
Bearish sentiment has risen a bit last month, following the market’s up and down gyrations—mostly due to COVID-19 (although new cases finally seem to be slowing), as well as the continuing drama from Congress, who doesn’t appear to be able to agree on anything!
However, the economy is continuing on a strong bent. Durable goods manufacturing has risen, the unemployment rate remains healthy, and housing is strong. Building permits and housing starts—along with prices—continue to rise. There has been some abatement in the rate of pricing increases, which is a good sign. We are seeing a little more inventory, just not enough to put a big damper on prices as of yet.
It’s a mixed outlook for the markets right now—we’re seeing some major pullbacks in certain big names, but today’s action was very positive. We may continue to see some dips in the next few weeks, but overall, I’m optimistic that the economy is still strong. And as long as earnings continue to outperform, the markets should hold up nicely.
I’m looking forward to the colorful fall, which is already starting here in Tennessee. I wish you a pleasant autumn and hope you will email me with your thoughts and questions. I look forward to hearing from you.
Happy Investing!
However, the economy is continuing on a strong bent. Durable goods manufacturing has risen, the unemployment rate remains healthy, and housing is strong. Building permits and housing starts—along with prices—continue to rise. There has been some abatement in the rate of pricing increases, which is a good sign. We are seeing a little more inventory, just not enough to put a big damper on prices as of yet.
It’s a mixed outlook for the markets right now—we’re seeing some major pullbacks in certain big names, but today’s action was very positive. We may continue to see some dips in the next few weeks, but overall, I’m optimistic that the economy is still strong. And as long as earnings continue to outperform, the markets should hold up nicely.
I’m looking forward to the colorful fall, which is already starting here in Tennessee. I wish you a pleasant autumn and hope you will email me with your thoughts and questions. I look forward to hearing from you.
Happy Investing!
The market weakness has been spreading in recent weeks, and as a result, we have three sell recommendations in today’s issue, as well as three downgrades to Hold.
As for the new recommendation, it’s a major retailer with a stable of familiar names that has transitioned its business very successfully through the pandemic, and it pays a nice dividend!
Details inside.
As for the new recommendation, it’s a major retailer with a stable of familiar names that has transitioned its business very successfully through the pandemic, and it pays a nice dividend!
Details inside.
Current Market OutlookFor many weeks, we’ve been writing that there’s more good than bad in the market, and indeed, while choppy, many names did work their way jadedly higher. But now the shoe is on the other foot: The intermediate-term trend is now down for the major indexes, and we’re starting to see more and more individual stocks follow suit. It’s not a complete disaster, and given the on-again, off-again environment of 2021, we’re not ruling anything out, including a turn back up in the days or weeks ahead. (Even now, we’re fine sticking with your strong, profitable stocks.) But after a couple of rounds of sharp distribution and some breakdowns among leading stocks, we think it’s simplest to say the onus is on the bulls—we need to see at least a few days of constructive action and some upside power in the indexes and individual stocks to conclude the sellers are losing control. We’re leaving our Market Monitor at a level 5 and, until proven otherwise, would play things cautiously with only small new positions, trailing stops and a decent chunk of cash.
This week’s list has an interesting crop of stocks, ranging from commodity to reopening to legitimate growth outfits. Our Top Pick is CF Industries (CF), which is emerging from a multi-month dead period with a lot of power; as with most names in this market, try to buy on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| Affirm Holdings (AFRM) | 108 | ||
| SKIN (SKIN) | 26 | ||
| Caesars Entertainment Corp. (CZR) | 118 | ||
| CF Industries (CF) | 61 | ||
| ConocoPhillips (COP) | 71 | ||
| International Game Technology (IGT) | 28 | ||
| Live Nation Entertainment, Inc. (LYV) | 98 | ||
| Matador Resources Company (MTDR) | 40 | ||
| Palo Alto Networks (PANW) | 470 | ||
| Paycom Software (PAYC) | 495 |
Updates
It’s the middle of the summer swoon. But there’s a lot going on in the market, namely earnings. Overall, this earnings season is shaping up to be positive but uninspired.
Last week’s economic reports delivered good news, presuming that you are rooting for a stable or strong U.S. economy. June retail sales rose 0.4% vs. May, when economists expected an 0.2% increase; and retail sales also rose 3.4% vs. a year ago.
This week marks the beginning of the second-quarter earnings season. I don’t foresee any major changes in the trends in any of our companies, but stock price reactions and trends don’t always line up in the short term.
Our emerging markets (EEM) signal continues to be positive and right on top of its 20-day moving average as China and other emerging markets are bumping along and lacking a decisive uptrend.
Things look pretty darn good. The S&P 500 has broken the 3000 level for the first time ever and is within a whisker of its all-time high. The index is up over 9% since the beginning of June and 20% so far in 2019.
From a stock market point of view, I suggest avoiding homebuilder stocks in the coming years. Companies that build single-family homes will be competing with a glut of existing homes on the market.
This week’s market recap is a familiar story—the major big-cap market indices are doing great! But the small cap index is still wallowing in the mud.
Remain mostly bullish, but continue to pick your spots. The overall market looks great, and our own 7.5% Rule has flashed, portending higher prices in the months ahead.
The market is at new all-time highs. If there’s more bad news, it could go a lot higher. The biggest risk to the market right now is stronger-than-expected second-quarter GDP growth.
Alerts
In this rare, mid-week update I will try to be brief, because I know you have a lot to read, including numerous notices of cancellations and closings.
The good news is that the amount of cannabis intercepted along all U.S. borders has fallen by 89% since 2011, from 2.5 million pounds per year to about 270,000 pounds in 2019.
We are now living through an unprecedented time in the U.S., and in the world at large, when institutions, schools, universities and more are being shut down from public attendance so as to curtail the spread of a virus named COVID-19.
The fund has five sectors with an annual dividend yield of 2.45%, paid quarterly.
After a sharp one-day bounce, the sellers are at it again today, with the indexes quickly diving back to Monday’s lows, bringing with them most every stock in the market
With this stock below its September lows, we’re back to square one. How did we get here?
Monday’s overnight market decline of 7% caused several stocks in the Profit Booster portfolio to blow through their stops before we could act.
Hedge fund interest is up 18% in this medical device company. The shares have a current dividend yield of 2.16%, paid quarterly.
It’s time to look at some income ideas and this preferred stock is paying a nice 5% fixed rate.
There aren’t a lot of bright spots out there in today’s market but one datapoint I thought worth sharing is this: Heading into today the average return of our positions was 15% better than that of the S&P 500 Index over a comparable time frame.
This is the type of day where you’d typically want to be just watching and waiting, or even doing a little buying. But we have two positions that are at or near prices where we need to take some action.
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.