Issues
Current Market OutlookThe market staged a stunning rebound last week, producing rare strength that bodes well for the months ahead. And today’s action was even more dramatic, with news of a virus vaccine causing some wild moves up in the major indexes. The intermediate-term trend is now clearly up, but the tricky part comes with individual stocks—today’s action saw growth stocks get hit (in general) while lagging cyclical names exploded higher. Overall, the evidence has clearly improved so we’re optimistic the next leg up has begun, but at the same time, it’s likely the crosscurrents we’re seeing among individual names and sectors will be with us a while (rotation and re-rotation, etc.). Thus, we’re OK with gradually extendingyour line, but it’s probably not going to be like April or May when throwing a dart made you money; continue to pick your spots and stocks carefully and give names room to maneuver.
This week’s list is growth-heavy after we saw many positive earnings reactions last week; yes, most took on some water today but they remain in uptrends until proven otherwise. Our Top Pick is Zendesk (ZEN), which is early stage and acts like it wants to go higher. Try to buy on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| Amicus Therapeutics (FOLD) | 21.15 | ||
| Enphase Energy (ENPH) | 116.95 | ||
| HubSpot (HUBS) | 345.57 | ||
| JD.com (JD) | 84.91 | ||
| QUALCOMM Incorporated (QCOM) | 142.44 | ||
| Roku, Inc. (ROKU) | 221.95 | ||
| Uber (UBER) | 48.20 | ||
| Yeti Holdings (YETI) | 51.52 | ||
| Zendesk (ZEN) | 124.63 | ||
| Zillow (Z) | 104.12 |
The market’s recovery this week has been very impressive, especially in the face of what looks like continued election uncertainty in the days ahead. That said, two days of action isn’t the be-all, end-all, but it’s certainly encouraging; we’re adding one new half position tonight in Novocure (NVCR) and aiming to add more. The only issue is that many stocks we’re high on are reporting earnings tonight or early next week; if they can survive their reports, we’ll likely be putting money to work.
In tonight’s issue, we write about all our stocks and some bullish signposts for the market longer-term--whether we’re seeing a kickoff here or whether it takes a while longer, the odds strongly favor the past two months being a normal rest within a major bull market.
In tonight’s issue, we write about all our stocks and some bullish signposts for the market longer-term--whether we’re seeing a kickoff here or whether it takes a while longer, the odds strongly favor the past two months being a normal rest within a major bull market.
This month we’re jumping into a small MedTech company that represents a picks and shovels play on the cell and gene therapy market. It makes biopreservation media and storage solutions for cutting-edge treatments, including Kite’s (owned by Gilead) CAR T-cell therapies YESCARTA and TECARTUS.
It’s a high growth company with exposure to both clinical trial and commercial-stage therapies. Covid-19 therapies and vaccines are part of the mix too. And there is an M&A angle that’s increasingly relevant.
The stock appears to have huge upside over the coming years. And we’ll get an update from management almost immediately after you read my reports since the company reports Q3 earnings after the close today.
All the details are inside. Enjoy!
It’s a high growth company with exposure to both clinical trial and commercial-stage therapies. Covid-19 therapies and vaccines are part of the mix too. And there is an M&A angle that’s increasingly relevant.
The stock appears to have huge upside over the coming years. And we’ll get an update from management almost immediately after you read my reports since the company reports Q3 earnings after the close today.
All the details are inside. Enjoy!
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the November 2020 issue.
We briefly discuss the soon-to-evaporate election cloud, the merits of holding value stocks when growth/momentum stocks tumble, and highlight one of our portfolio stocks that had some earnings issues along with several others that reported strong earnings that lifted their share prices meaningfully.
Earnings season is in full swing. Six portfolio companies report later this week. We encourage subscribers to visit the reporting companies’ websites to review their earnings-related slide presentations and listen to the post-earnings conference call. These are all available to the public under the “Investor Relations” tab. Sometimes what portfolio companies actually do can seem murky – a quick visit to their website can help clarify, and (at least to me, a certified investment geek) provide some fascinating reading.
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 discuss the soon-to-evaporate election cloud, the merits of holding value stocks when growth/momentum stocks tumble, and highlight one of our portfolio stocks that had some earnings issues along with several others that reported strong earnings that lifted their share prices meaningfully.
Earnings season is in full swing. Six portfolio companies report later this week. We encourage subscribers to visit the reporting companies’ websites to review their earnings-related slide presentations and listen to the post-earnings conference call. These are all available to the public under the “Investor Relations” tab. Sometimes what portfolio companies actually do can seem murky – a quick visit to their website can help clarify, and (at least to me, a certified investment geek) provide some fascinating reading.
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.
If you’ve ever searched for instructions for tackling do-it-yourself tasks, there’s a good chance you’ve turned to today’s recommendation for ideas.
Current Market OutlookThe market had been under some pressure since early October, but last week was a different animal, with the sellers coming out of the woodwork and cracking numerous leading stocks and major indexes. Longer-term, this is still a bull market, with the past two months being a (very) tedious up-and-down consolidation period following the huge March-August advance; we still think the next major move is up. Near-term, though, stocks are back in the soup, and while the headlines will be coming fast and furiously this week (earnings and the election), the onus is on the buyers to step up. Until that happens, we advise a cautious stance—holding a good chunk of cash makes sense, while keeping new positions on the small side and honoring your stops and loss limits. We’re pulling down our Market Monitor another notch to a level 5.
Meanwhile, it’s easiest to spot strength in a down market, so the next couple of weeks should be telling. This week’s list has a broad array of stocks and sectors on it, and our Top Pick is Pinduoduo (PDD), one of many resilient Chinese names that’s actually picking up steam while the market sags.
| Stock Name | Price | ||
|---|---|---|---|
| Bunge Ltd (BG) | 57.98 | ||
| Cloudflare (NET) | 51.96 | ||
| Five9 (FIVN) | 144.12 | ||
| Martin Marietta Materials (MLM) | 270.94 | ||
| Mattel, Inc. (MAT) | 13.95 | ||
| Novocure (NVCR) | 112.15 | ||
| Pinduoduo (PDD) | 91.62 | ||
| Pinterest (PINS) | 58.56 | ||
| Quanta Services (PWR) | 66.45 | ||
| Ultragenyx Pharmaceutical Inc. (RARE) | 95.53 |
With the election tomorrow, the biggest cause of uncertainty will soon be behind us, leaving investors able to focus once again on what’s important—growth and valuation.
In the meantime, it’s worth noting that the market’s technical strength deteriorated last week, turning our intermediate-term timing indicator negative once again. For that reason, among others, we have a couple of sell recommendations today.
As for today’s recommendation, it’s one of America’s most well-known companies, and selling for a bargain price as management steers the big old beast into what could be an exciting future.
In the meantime, it’s worth noting that the market’s technical strength deteriorated last week, turning our intermediate-term timing indicator negative once again. For that reason, among others, we have a couple of sell recommendations today.
As for today’s recommendation, it’s one of America’s most well-known companies, and selling for a bargain price as management steers the big old beast into what could be an exciting future.
Markets are choppy, which is normal considering uncertainty is high and we’re less than a week from the presidential election. Today I look at what history can teach us about politics and markets and why it might be a bit different this time. The Ant Technology giant IPO moves forward as China flexes its muscle, and it’s a signal for coming events. Today’s new idea is an electric vehicle play from Canada that is under the radar of even the trends of most avid supporters.
Updates
Last week’s action still improves the market picture a bit, but yesterday’s panic shows we’re not out of the woods yet. I’m making one portfolio change today.
In this Weekly Update, I summarize the latest news for five companies.
The iShares EM Fund is holding up well, staying comfortably above its 25-day moving average, so our Buy signal remains in place. While our stocks are holding up well, there’s a lot of sideways movement in the portfolio. We have no changes to the portfolio tonight.
If you want to build a buy-and-hold portfolio of attractive takeover targets, look no further than undervalued small- and mid-cap growth stocks. Presuming normal stock market action, you’ll reap the benefits associated with owning growth stocks, and you’ll periodically reap the additional exciting benefit of owning takeover stocks.
The market continues to be a bit sketchy, and the S&P 600 Small Cap Index is still trading right around the 820 level, which has served as a rough support line thus far this year.
In this Weekly Update, I summarize the latest news for eight companies. Max Buy and Min Sell Prices are the recent price targets appearing in the Cabot Enterprising Model Issue 277E, for which you received the link on August 10.
Remain cautious on the buy side, but continue to hold your top performers. Our Cabot Tides and Two-Second Indicator are both negative, which tells us to hold some cash and cut back on new buying. At the same time, many growth stocks (including a few we own) continue to act well, so we’re also sitting tight with our strong, profitable stocks.
The market deteriorated further this week, so dividend investors should continue to act cautiously. While the major indexes staged a nice comeback yesterday, it isn’t enough to erase the damage done at the end of last week.
Last week, Jim Cramer did a TV segment on “broken companies” vs. “broken stocks.” His point bears repeating.
Despite the weakness in the broad market, most of our stocks have held up well. Over that past week, not one of our remaining stocks fell, and only Primo Water (PRMW) failed to move at all. Our average gain of 3.4% this week was almost 4% better than the S&P 600 Small Cap Index.
Stock market action will likely moderate as investors, looking for bargains, will step in and buy stocks, although once-a-week tumbles could reappear on a regular basis. Hold conservative and defensive stocks to avoid large losses.
The iShares EM Fund has been jumpy, but is still well above its 50-day moving averages, keeping our Buy signal in place, if a little bruised.
Alerts
One portfolio stock reported a great first quarter and moves from Strong Buy to Hold.
Overall, cannabis/marijuana stocks still look fine, even though the stocks were generally soft yesterday, so I’m not doing a full update, but there has been action, both good and bad, in a few stocks worth mentioning.
This e-sports company is expected to grow at a rate of more than 40% annually over the next five years.
Chefs’ Warehouse (CHEF) reported last night and the results were just fine.
One portfolio stock announced a corporate conversion, and three others reported first-quarter results.
We’re selling one-third of the shares and holding the rest of one stock in the portfolio. The move will boost the Model Portfolio’s cash position to 21%.
11 analysts have raised their EPS estimates for this investment banking firm in the last 30 days.
Two of the portfolio stocks each reported first quarter results that beat expectations.
One of our gold companies today is gaining cash from a mine sale; the other—post merger—is a previous recommendation that is now a hold.
Two of the portfolio stocks each reported strong quarterly earnings beats.
The shares of this pharmaceutical stock is seeing new analyst coverage.
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.