Issues
It’s not a blastoff-type of environment, but the evidence has steadily improved during the past three weeks, first due to the action of leading growth stocks, and now, our Cabot Tides have returned to bullish territory. Thus, we continue to follow the evidence, slowly putting money to work and rotating into stronger situations. Last week, we averaged up in two of our recent buys, and tonight, we’re adding a full position in a fresh leader.
Elsewhere in tonight’s issue, we write about the ups and downs of recent IPOs, as well as one sector that is beginning to reemerge and has many stocks that fit our stock picking criteria.
Elsewhere in tonight’s issue, we write about the ups and downs of recent IPOs, as well as one sector that is beginning to reemerge and has many stocks that fit our stock picking criteria.
This month and early November will be jammed with possibly market-moving events: earnings season, presidential (and now importantly, vice presidential) debates, the actual elections, a likely new federal stimulus package, possible change (in either direction) in the pandemic’s course, and perhaps news about a vaccine solution.
But for now, we’re stuck in Limbo-Land, with the worst (hopefully) of the pandemic behind us, yet so many unknowns just ahead. We outline some basic suggestions that we follow when in this type of market.
But for now, we’re stuck in Limbo-Land, with the worst (hopefully) of the pandemic behind us, yet so many unknowns just ahead. We outline some basic suggestions that we follow when in this type of market.
After a dismal 2019, when semiconductor sales fell 12% to $412 billion, the World Semiconductor Trade Statistics organization predicts that they will rise 3.3% in 2020 and 6.2% in 2021. But today’s recommendation is doing a lot better than the average chip company.
The intermediate-term negative signal I mentioned last week remains in effect, telling us some caution is appropriate, whether it be holding cash or leaning toward lower-risk stocks. But overall, I can’t say the danger is high yet—and because I sold our three highest-risk stocks last week, this week I am selling none.
As for new buying, this week I’m going with a high-potential fast-growth stock that came public last year and that was recently hitting new highs.
You may not be a user (I’m not) but you’ll almost certainly know the name.
Full details in the issue.
As for new buying, this week I’m going with a high-potential fast-growth stock that came public last year and that was recently hitting new highs.
You may not be a user (I’m not) but you’ll almost certainly know the name.
Full details in the issue.
Current Market OutlookThe top-down view of the market remains just so-so, with the intermediate-term trend effectively on the fence—most indexes are hanging around their 50-day lines and have recouped about half of the recent corrections. Thus, some caution is still in order, especially as further news-driven moves are likely in the days and weeks ahead. However, the leaders (and potential leaders) of the market are very impressive, with more and more flashing constructive action, including some that are rallying on outsized volume, both of which are a sign that big investors are getting comfortable putting money to work. It’s not a wild bull market obviously, with relatively few stocks hitting new highs, but it’s safe to say the evidence has improved, causing us to nudge up our Market Monitor today.
This week’s list has a bunch of good-looking stocks that have seen good-volume buying of late. Our Top Pick is Datadog (DDOG), which has returned to form after a big-volume breakout last week. Start small and add if the stock and market improve from here.
| Stock Name | Price | ||
|---|---|---|---|
| Alibaba (BABA) | 288 | ||
| Datadog (DDOG) | 107 | ||
| Purple Innovation (PRPL) | 25 | ||
| Seres Therapeutics (MCRB) | 30 | ||
| SolarEdge Technologies Inc. (SEDG) | 273 | ||
| STMicroelectronics (STM) | 33 | ||
| Teck Resources Limited (TECK) | 14 | ||
| Twilio (TWLO) | 283 | ||
| Twitter (TWTR) | 47 | ||
| Zendesk (ZEN) | 105 |
While automobiles have become more consumer-friendly over the last decade there are still a lot of clunky technologies that drivers deal with.
Sometimes mobile devices pair seamlessly, sometimes they don’t. Sometimes, a car’s infotainment system functions so poorly that drivers are more distracted than they were in the good old days of reaching for cassette tapes under the passenger seat.
Today we’re investing in a company that’s developing a digital ecosystem for connected and autonomous vehicles that will make driving safer and more enjoyable for everyone.
It’s an under-the-radar story still, but not for long. Enjoy!
Sometimes mobile devices pair seamlessly, sometimes they don’t. Sometimes, a car’s infotainment system functions so poorly that drivers are more distracted than they were in the good old days of reaching for cassette tapes under the passenger seat.
Today we’re investing in a company that’s developing a digital ecosystem for connected and autonomous vehicles that will make driving safer and more enjoyable for everyone.
It’s an under-the-radar story still, but not for long. Enjoy!
This was a good week for the Explorer portfolio as all our positions advanced, led by NovoCure (NVCR), Sea Limited (SE) and Virgin Galactic (SPCE), which jumped 25% this past week. We now head into the fourth quarter, which may bring some turbulence as the election approaches. We will take what the market gives us but will be on guard. Our emerging markets timer (EEM) is still positive.
Today, we have a new recommendation in emerging markets that we hope will benefit from the biggest shopping day in the world.
Today, we have a new recommendation in emerging markets that we hope will benefit from the biggest shopping day in the world.
Over the past seven weeks, we’ve been steadily lightening up in our marijuana stock portfolio, initially taking profits within a day of the top, and more recently continuing to shift to cash as the sector weakened.
Today we’re raising just a little more cash, with the sale of Aphria (APHA)—a sale that will take us to a roughly 52% cash position.
But overall, I’m still very bullish on the sector as a whole as a long-term investment and I fully expect to be moving back into the leading stocks in the sector once the tide starts coming in again.
Full details in the issue.
Today we’re raising just a little more cash, with the sale of Aphria (APHA)—a sale that will take us to a roughly 52% cash position.
But overall, I’m still very bullish on the sector as a whole as a long-term investment and I fully expect to be moving back into the leading stocks in the sector once the tide starts coming in again.
Full details in the issue.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the September 30th issue.
This month we look at stocks that might benefit from the (eventual) arrival of a post-Covid world. Currently, the news seems uninspiring – new cases are accelerating in some regions that may foreshadow a return of economically-crippling lockdowns, and hopes are dimming for a vaccine in the near future.
Many stocks have surged already in anticipation of this yearned-for world, but many remain moribund. Some laggards are likely to be zombies – still alive but burdened with overwhelming debt loads. We avoided these, and instead found several that should prosper with the return of a fully-opened economy and also have more resilient capital structures to help them endure while we all wait.
We also looked at publicly-traded chicken processors and found that the sky is not actually falling, even if the shares seem to imply an atmospheric tumbling. Near-term wholesale chicken prices have become meaningfully but temporarily depressed, in our view. We highlight three stocks and discuss their risk/return nuances, along with a fourth intriguing commodity food company.
Our feature recommendation, Western Digital (WDC), trades at a depressed valuation but has major strategic changes underway.
The letter also includes a summary of our recent sale of Gilead Sciences (GILD) as well as the full roster of our current recommendations.
Please feel free to send me your questions and comments. This newsletter is written for you and a great way to get more out of your 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.
Thanks!
This month we look at stocks that might benefit from the (eventual) arrival of a post-Covid world. Currently, the news seems uninspiring – new cases are accelerating in some regions that may foreshadow a return of economically-crippling lockdowns, and hopes are dimming for a vaccine in the near future.
Many stocks have surged already in anticipation of this yearned-for world, but many remain moribund. Some laggards are likely to be zombies – still alive but burdened with overwhelming debt loads. We avoided these, and instead found several that should prosper with the return of a fully-opened economy and also have more resilient capital structures to help them endure while we all wait.
We also looked at publicly-traded chicken processors and found that the sky is not actually falling, even if the shares seem to imply an atmospheric tumbling. Near-term wholesale chicken prices have become meaningfully but temporarily depressed, in our view. We highlight three stocks and discuss their risk/return nuances, along with a fourth intriguing commodity food company.
Our feature recommendation, Western Digital (WDC), trades at a depressed valuation but has major strategic changes underway.
The letter also includes a summary of our recent sale of Gilead Sciences (GILD) as well as the full roster of our current recommendations.
Please feel free to send me your questions and comments. This newsletter is written for you and a great way to get more out of your 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.
Thanks!
Updates
The turmoil in stock prices continued last week. The S&P 500 index declined only 0.4%, but consumer discretionary, energy and technology stocks suffered larger losses. Money flowed into several value sectors, including industrial, financial and materials stocks. Is the bull market in growth stocks over?
The iShares EM Fund has been trading mostly sideways since the middle of May, and that has kept the Emerging Markets Timer above its moving averages, but just barely. We have two portfolio moves tonight.
Stocks were pummeled Thursday, with tech showing the worst losses. The Nasdaq closed down 1.4%, and the S&P 500 and Dow both lost about 0.8%. Financials and energy stocks were among the only names spared, as oil prices continued their recovery and the Fed approved the banks’ new capital plans.
There’s been some turbulence in our portfolio this week, but nothing we haven’t experienced at some point in 2017. Small caps are up 1% from last week, and would have been up more if not for another bout of selling in technology stocks yesterday.
Stock indexes stumbled again yesterday, June 29, led by large-cap tech stocks. Thus far, the profit-taking looks normal. Technology stocks have been on a tear in 2017, so investors are taking advantage of sky-high prices to harvest extraordinary gains.
Our trend following indicators remain bullish and most growth stocks are still in good shape, so we’re sticking with our current stance. Our only change tonight is that we’re placing one of our stocks on Hold.
I’ve been watching for opportunities to add companies to the Cabot Undervalued Stocks Advisor portfolios that are outside the financial, energy and construction sectors and industries. Today, I’m adding an aerospace manufacturer to the Growth Portfolio as a Strong Buy.
All things considered, the past week has been tame. The S&P 600 Small Cap Index retreated 1.4% to get back to its 50-day moving average, while the S&P 500 Index traded sideways.
Stock indexes are situated just a tad below all-time highs, yet tech stocks are sitting on quicksand, energy prices are dropping, and President Trump’s policy agenda is falling apart. The bears have plenty of reasons to push prices lower, but stocks keep rising.
The iShares EM Fund has been trading effectively sideways since the middle of May, and that has kept the Emerging Markets Timer above its moving averages. We have one portfolio move tonight.
The market looks healthier today than it has in nearly two weeks. After its big drop on June 9, the Nasdaq found support repeatedly last week, and this Monday brought an impressive surge in all the indexes.
We could see a stock market correction in the near future, due to an abnormal concentration of capital in technology stocks and S&P 500 index ETFs (exchange traded funds).
Alerts
Today’s update is brief, but it does include a couple of important observations about the behavior of cannabis stocks in recent weeks, as well as updates on all the portfolio stocks.
One stock begins a run-up and moves from Buy to Strong Buy and two others continue to rise.
This fund moves twice the movement of the S&P 500, and pays a small dividend (0.61%).
In the past 30 days, two analysts have increased their EPS estimates for our first idea today, an HVAC company.
This global hotelier beat analysts’ earnings estimates by ten cents last quarter, and eight analysts have increased their forecasts for the company in the past 30 days.
The top three sectors in this ETF are: Real Estate, 26.32% of assets; Financial Services, 15.27%; and Consumer Defensive, 14.87%.
In the past couple of months, coverage of the shares of this cybersecurity stock was initiated at Mizuho.
Analysts expect this grocer to grow by double-digits next year.
Growth stocks were hit hard today, though they found some support in the afternoon. Bigger picture, we remain optimistic that the market’s next big move is up, as our long-term Cabot Trend Lines are still bullish. Near term, however, the market has clearly lost some steam. Near term, however, the market has clearly lost some steam and we are selling one position today as a result.
Rather than wait until Thursday, I would like to let you know that I’m moving one stock to a sell following its 7% decline Tuesday following disappointing news that electric vehicle subsidies in China are being cut 50%.
The top five holdings of this defense fund are: Boeing Co (BA, 20.27%); Northrop Grumman Corp (NOC, 11.93%); General Dynamics Corp (GD, 9.19%); TransDigm Group Inc (TDG, 6.27%); and Spirit AeroSystems Holdings Inc (SPR, 4.99%).
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.