Issues
A stimulus bill looks like it is right around the corner but we need to get through this winter before vaccines are widely available. Facebook faces a real challenge to break it up and accept legal liability for content. An EU-China summit is cancelled after China tried to limit speakers critical of China’s clampdown of Hong Kong. On the Explorer front this past week, MP Materials (MP) and NovoCure (NVCR) were particularly strong as Sea Limited (SE) briefly made a new high at 200. As promised, our new idea this week hails from Brazil and is a monopoly play on the most essential of all resources.
Due to the holidays, the next issue of Cabot Global Stocks Explorer will be published on January 7, 2021.
Due to the holidays, the next issue of Cabot Global Stocks Explorer will be published on January 7, 2021.
The vaccine is changing everything. Stocks that had been left for dead by the market recovery are springing back to life and leading the market higher.
One area of opportunity ahead of the New Year is in banks stocks. As a cyclical sector, banks took it on the chin during the pandemic. They crashed during the bear market and have lagged the recovery. But they are rising fast and have great momentum ahead of what looks to be a promising year for the sector.
In this issue, I highlight one of the very best and most profitable banks in the country. It still sells at a great value, pays one of the highest dividends in the industry and now has solid upward momentum.
One area of opportunity ahead of the New Year is in banks stocks. As a cyclical sector, banks took it on the chin during the pandemic. They crashed during the bear market and have lagged the recovery. But they are rising fast and have great momentum ahead of what looks to be a promising year for the sector.
In this issue, I highlight one of the very best and most profitable banks in the country. It still sells at a great value, pays one of the highest dividends in the industry and now has solid upward momentum.
Today, we are recommending a micro-cap stock in the virtual lease-to-own market.
I think this stock has ~100% upside over the next year or so.
This company’s characteristics include:
All the details are inside this month’s Issue. Enjoy!
I think this stock has ~100% upside over the next year or so.
This company’s characteristics include:
- Secular revenue growth
- Significant operating leverage
- Company insiders own over 20% of shares outstanding
- Recent insider buying
All the details are inside this month’s Issue. Enjoy!
As 2020 winds to a close, and as the market races to all-time highs, our six open covered call positions are all doing very well ... especially our December positions set to expire next Friday, December 18.
Current Market OutlookIf you’re looking at the trends of the major indexes, the price/volume action of leading stocks (both cyclical and growth) or the breadth of the overall market, it’s hard to find much to fault—the buyers are clearly in control as most stocks, sectors and indexes trend higher. About the only thing to worry about is that there’s not much to worry about; sentiment measures of all stripes (money flows, option activity, surveys) as well as some market action (huge moves in many speculative stocks) tell us that things are a bit hot and heavy right now. To be clear, that’s no reason to dramatically alter your game plan, but it’s a reminder that risk is rising, so keep your feet on the ground, look for good entry points and, once you’re in, honor your stops and book some profits (or partial profits) on the way up.
This week’s list features a wide mix of stocks, including many that have recently staged longer-term breakouts. One of those is our Top Pick: Applied Materials (AMAT) sports accelerating growth and a beautiful chart, and while short-term dips are possible, a major advance looks to be underway.
| Stock Name | Price | ||
|---|---|---|---|
| Applied Materials (AMAT) | 89.25 | ||
| Cleveland-Cliffs (CLF) | 12.62 | ||
| Pinduoduo (PDD) | 146.82 | ||
| Qorvo (QRVO) | 167.01 | ||
| Snowflake (SNOW) | 388.38 | ||
| Tapestry, Inc. (TPR) | 29.75 | ||
| Uber (UBER) | 53.80 | ||
| Vale S.A. (VALE) | 16.29 | ||
| United States Steel Corporation (X) | 17.20 | ||
| Zscaler (ZS) | 178.17 |
The bull market remains alive and well, and I continue to recommend that you be heavily invested in a diversified portfolio of stocks.
This week’s recommendation is a very small medical technology company focused on the business of processing and testing cells, as accurately and efficiently as possible. Long-term potential is big.
But to make room for it in the portfolio, something has to go, and this week it’s Digital Realty (DLR), which never really got going for us.
Full details in the issue.
This week’s recommendation is a very small medical technology company focused on the business of processing and testing cells, as accurately and efficiently as possible. Long-term potential is big.
But to make room for it in the portfolio, something has to go, and this week it’s Digital Realty (DLR), which never really got going for us.
Full details in the issue.
The market remains in great shape, and even better, growth stocks have (mostly) avoided any further severe rotation in recent weeks, with more and more joining the party. There are a couple of bugaboos out there (especially sentiment, which has gotten giddy), but we continue to steadily put money to work as opportunities arise. Last week, we added a new half position in Halozyme (HALO), and tonight, we’re filling out our position in Uber (UBER), which looks like a fresh, early-stage leader to us.
Open up tonight’s issue for all our latest thoughts on the market, our stocks, some new ideas and the myriad longer-term breakouts we’re seeing across sectors and themes, which should bode well.
Open up tonight’s issue for all our latest thoughts on the market, our stocks, some new ideas and the myriad longer-term breakouts we’re seeing across sectors and themes, which should bode well.
This month we’re jumping into a company that specializes in precision medicine for cancer.
It has developed a sequencing platform that is able to analyze over 20,000 genes, far more than most competitor solutions. Even better, this platform allows analysis of both tissue biopsies and liquid biopsies.
Ultimately, the company is going after a roughly $40 billion market. Yet its market cap is a mere $1 billion today.
This company is still unknown, but that’s likely to change as it brings new products to market and continues to transform the market for personalized cancer vaccines and next-gen cancer immunotherapies.
All the details are inside. Enjoy!
It has developed a sequencing platform that is able to analyze over 20,000 genes, far more than most competitor solutions. Even better, this platform allows analysis of both tissue biopsies and liquid biopsies.
Ultimately, the company is going after a roughly $40 billion market. Yet its market cap is a mere $1 billion today.
This company is still unknown, but that’s likely to change as it brings new products to market and continues to transform the market for personalized cancer vaccines and next-gen cancer immunotherapies.
All the details are inside. Enjoy!
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the December 2020 issue.
We briefly share our thoughts on the surging stock market and run through some valuation math that looks out a few years. Our conclusion: the market’s earnings growth, even side-stepping the pandemic’s effects, doesn’t look that impressive, while the market’s valuation is on the high side of average. It is starting to look like a good time to be pickier about which stocks to own.
With this thought in mind, we are moving Broadcom (AVGO) from a Hold to a Sell, as the shares have essentially reached our price target.
It’s been a fairly active month for a value-oriented newsletter, adding three new names and selling six, including Broadcom. This leaves the holdings list at 12 names. We anticipate expanding this roster over the next month or two, as there are many interesting value ideas out there.
We also tweaked the descriptions under the portfolio titles to more accurately reflect what types of stocks we look for. This should also help add some clarity to the differences between the two categories.
Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
We briefly share our thoughts on the surging stock market and run through some valuation math that looks out a few years. Our conclusion: the market’s earnings growth, even side-stepping the pandemic’s effects, doesn’t look that impressive, while the market’s valuation is on the high side of average. It is starting to look like a good time to be pickier about which stocks to own.
With this thought in mind, we are moving Broadcom (AVGO) from a Hold to a Sell, as the shares have essentially reached our price target.
It’s been a fairly active month for a value-oriented newsletter, adding three new names and selling six, including Broadcom. This leaves the holdings list at 12 names. We anticipate expanding this roster over the next month or two, as there are many interesting value ideas out there.
We also tweaked the descriptions under the portfolio titles to more accurately reflect what types of stocks we look for. This should also help add some clarity to the differences between the two categories.
Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.
I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.
Updates
Many companies reported earnings this week, including many of our recommendations. In this week’s update, I update my position on eight stocks.
While things are a bit giddy in the short-term and we’re still in the midst of earnings season (three of our stocks release their numbers tonight or tomorrow), our trend-following indicators bullish and growth stocks are acting great. Thus, you should keep your optimist’s hat on.
After stumbling last Wednesday, the market is back on its feet, with the major indexes all hitting new highs in recent days. Technology stocks have led the way, a reversal of the Dow outperformance we’d seen over the past two weeks.
Many stocks are rising—either toward former highs, or surpassing recent highs—because the companies are growing profits very well. It’s not “Trump,” nor “irrational exuberance,” nor “a lack of other good investment markets.” It’s simply strong earnings growth.
It’s been another sideways week in small-cap land. The S&P 600 index is essentially unchanged from last week, and despite some cross-currents under the surface, is holding firm just above 910.
The iShares EM Fund (EEM) is holding above its moving averages, which keeps the Cabot Emerging Markets Timer a bright green. But the weakness in Chinese stocks is hitting the portfolio hard. In response, we have six moves today.
In this Weekly Update, I summarize the latest news for three companies that reported earnings in the past week.
The S&P 500 rose 15% year-to-date through October 20, and the Dow Jones Industrial Average rose 18% year-to-date. Those achievements are not remotely unusual when stocks are having a good year. However, it would be normal to expect price corrections along the way—corrections which have been curiously absent this year.
Even though the Dow, S&P 500 and Nasdaq hit all-time highs this week, news flow felt a little more negative, and the small-cap indices all moved slightly lower.
One major news item that hit one of our stocks.
Remain bullish, but be selective on new buys as earnings season revs up. The overall market remains in great shape, with all our market timing indicators solidly bullish. Short-term, a pullback wouldn’t be surprising, but the odds remain in favor of higher prices down the road.
Interest rates fell back this week after the odds of a December rate hike briefly fell below 90% (they’ve since rebounded). The trigger was a September inflation data release that showed consumer prices excluding food and energy rising just 1.7% year-over-year, and only 0.1% since August.
Alerts
Today, we are recommending a gold company and selling two ETFs.
The market suffered another round of selling today, and this time it was concentrated in the Nasdaq and many resilient growth stocks.
This software company is forecast to grow 25.25% annually, over the next five years.
This telecom beat Wall Streets’ estimates by $0.15 last quarter and fifteen analysts have increased their EPS forecasts for the company in the last 30 days.
This building products supplier is expected to grow by 18.7% next year.
The market was hit hard again today as investors continued to discount a protracted trade war between China and the U.S., with fears of slowing growth bringing out the sellers.
Abercrombie & Fitch (ANF) reports first-quarter 2019 results.
This railroad company beat analysts’ estimates by $0.11 last quarter, and 26 analysts have raised their EPS forecasts for the company in the past 30 days.
This Indian bank is expected to grow at an annual rate of 37.6% over the next five years.
This semiconductor industry supplier is forecasted to grow at an annual rate of 115.28% over the next five years.
The earnings estimates for this wireless tower REIT were recently raised by 13 analysts.
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.