Issues
The online casino market has experienced rapid growth this year as more states legalize so-called iGaming to supplement faltering tax revenues.
Current Market OutlookThere have been a growing number of yellow flags among leading growth stocks in recent months, and last week the sellers finally came out of the woodwork, causing a quick 10% top-to-bottom drop in the Nasdaq and cracking the uptrends in many leaders. Where does that leave us? Overall, the market’s intermediate-term trend remains up, though it’s getting close to the fence as most indexes test their 50-day lines. Throw in the fact that many areas are holding up OK and we don’t advise you to sell wholesale. But with decisive weakness in most leaders following huge runs (and some climactic upside activity during the past two weeks), paring back makes sense, and from here, the onus is on the bulls to step up. We’re knocking our Market Monitor down to a level 5.
This week’s list contains a bunch of names that have either avoided any major selling or have pulled back normally to support. Our Top Pick is Penn National Gaming (PENN), which looks like one of a couple of leaders in the “new” gaming boom.
| Stock Name | Price | ||
|---|---|---|---|
| AutoNation (AN) | 56.16 | ||
| Boston Beer Company (SAM) | 791.28 | ||
| Chipotle Mexican Grill (CMG) | 1299.15 | ||
| Deere & Company (DE) | 210.19 | ||
| EPAM Systems (EPAM) | 308.95 | ||
| Farfetch (FTCH) | 26.04 | ||
| Five Below (FIVE) | 122.69 | ||
| Freeport-McMoRan Inc. (FCX) | 15.72 | ||
| Nintendo Co., Ltd. (NTDOY) | 66.76 | ||
| Penn National Gaming (PENN) | 55.31 |
The long-awaited market correction has arrived, but whether it will be brief or long, shallow or deep, remains to be seen. The one thing I am sure of is that it won’t be like the previous one! In the meantime, it’s important to treat each stock on its own merits, and today that means selling our weakest, Chegg (CHGG).
As for today’s recommendation, it’s a small company thriving in the homebuilding sector, dominant in its own sub-sector. I think you’ll like it.
As for today’s recommendation, it’s a small company thriving in the homebuilding sector, dominant in its own sub-sector. I think you’ll like it.
With the exception of another nice gain by NovoCure (NVCR), this was a quiet week for the Cabot Explorer portfolio as the Nasdaq continues its march, up almost 35% so far in 2020. Our Emerging Markets timer (EEM) stays positive as some of these markets bounce back against the backdrop of very weak economies. Perhaps the worst is India with its latest quarterly GDP falling 24%. This issue’s new recommendation is a high quality stock in a growth sector with a wonderful high margin, low risk business model.
This month we’re jumping back into the pure-play software space with an up and coming SaaS company that has remained under the radar since going public in December, just a few months before the market tanked.
It specializes in social media management solutions, which are increasingly important as the trend toward digital transformation strategies gets stronger. Organizations increasingly recognize they must market to consumers through social networks.
Revenue growth is hovering around 30% and first profits are still a couple years away, meaning we’re still early to the table.
All the details are inside this month’s Issue. Enjoy!
It specializes in social media management solutions, which are increasingly important as the trend toward digital transformation strategies gets stronger. Organizations increasingly recognize they must market to consumers through social networks.
Revenue growth is hovering around 30% and first profits are still a couple years away, meaning we’re still early to the table.
All the details are inside this month’s Issue. Enjoy!
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the September 2020 issue.
With earnings season mostly completed, the markets have drifted upwards in the waning days of this otherwise unusual summer. Some splashy IPOs and stock splits have provided some excitement, but the bigger and more enduring news came from the Fed’s official change in its priorities. We discuss our thoughts on this shift in the letter.
We also introduce price targets for several recommended stocks. Over the next few weeks, we will provide targets for the remaining stocks and all newly recommended stocks. Price targets help stay the course when our stocks weaken on noise, and provide a tangible exit point. The assumptions behind the price targets provide a roadmap to gauge the company’s recovery process.
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.
With earnings season mostly completed, the markets have drifted upwards in the waning days of this otherwise unusual summer. Some splashy IPOs and stock splits have provided some excitement, but the bigger and more enduring news came from the Fed’s official change in its priorities. We discuss our thoughts on this shift in the letter.
We also introduce price targets for several recommended stocks. Over the next few weeks, we will provide targets for the remaining stocks and all newly recommended stocks. Price targets help stay the course when our stocks weaken on noise, and provide a tangible exit point. The assumptions behind the price targets provide a roadmap to gauge the company’s recovery process.
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.
The Turnaround Letter has been acquired by the Cabot Wealth Network, a family-owned business based in nearby Salem, Massachusetts. Founded in 1970 by Carlton Lutts, Cabot is celebrating its 50th year in business, having served hundreds of thousands of investors. The company focuses exclusively on publishing high-quality investment newsletters and currently has a portfolio of 20 advisory services.
In this issue you’ll read about an energy company and a powerful catalyst for turnarounds.
In this issue you’ll read about an energy company and a powerful catalyst for turnarounds.
Today’s recommendation had been in a slow, steady uptrend for years, though it got dented with everything else in March of this year.
Current Market OutlookWe don’t want to repeat ourselves too much, but the environment has remained mostly the same during the past few weeks. First, overall, this is a bull market that’s likely to carry nicely higher when looking out a few months; there remains plenty of doubt and uncertainty, which is (contrarily) a good thing. Second, though, making money has become trickier—there are far more news-driven moves, buying pressures seem to come and go for many leading stocks (as opposed to the sustained upmoves seen earlier this year) and there’s no question most indexes are extended to the upside. That’s no reason to get overly worried (most stocks are still acting normally), and in fact, we’re nudging our Market Monitor up a notch this week as leading stocks have perked up a bit. But it remains important to look for good entry points, honor your stops and take some partial profits when the opportunity arises.
Encouragingly, this week’s list is very broad, with all different types of sectors, sizes and growth/value outlook represented. There are many good names to choose from, but our Top Pick is Horizon Pharmaceuticals (HZNP), which has huge earnings estimates and a tight chart.
| Stock Name | Price | ||
|---|---|---|---|
| Anaplan (PLAN) | 61.25 | ||
| Enphase Energy (ENPH) | 77.23 | ||
| FedEx (FDX) | 219.84 | ||
| Futu Holdings (FUTU) | 32.17 | ||
| Horizon Therapeutics (HZNP) | 75.12 | ||
| Lithia Motors Inc. (LAD) | 248.96 | ||
| Roku, Inc. (ROKU) | 173.48 | ||
| Salesforce.com (CRM) | 272.65 | ||
| Trupanion (TRUP) | 62.73 | ||
| Tupperware Brands (TUP) | 16.29 |
The market remains in fine health, with the major indexes regularly hitting new highs as investors look forward to a recovery from the intentional recession. At some point, that means we’ll have a top, but it’s hard to predict when.
In the meantime, the portfolio continues to recommend a well-diversified group of high-potential stocks, including this week’s—a well-known pharmaceutical giant that is coming off a normal correction.
As for our current stocks, most look great, but something’s got to be sold to keep the portfolio under 21 holdings, and the victim is our weakest stock, GFL Environmental (GFL).
Full details in the issue.
In the meantime, the portfolio continues to recommend a well-diversified group of high-potential stocks, including this week’s—a well-known pharmaceutical giant that is coming off a normal correction.
As for our current stocks, most look great, but something’s got to be sold to keep the portfolio under 21 holdings, and the victim is our weakest stock, GFL Environmental (GFL).
Full details in the issue.
Updates
The S&P 500 and Dow finally joined the Nasdaq at new highs this week, although they continue to underperform the tech-oriented index. Despite this divergence, most signals continue to point to further gains for the stock market in the months ahead. I have one rating change today.
We’re on the tail end of earnings seasons for companies that wrapped up their quarters in March. Almost every one of our portfolio companies that reported earnings delivered an upside earnings surprise, especially in the integrated oil and construction materials industries.
This Weekly Update includes summaries for 11 Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other noteworthy news during the past week.
Most of the market’s evidence remains bullish, so we remain optimistic that higher prices are ahead; the Model Portfolio is more than 80% invested in nine strong stocks. That said, it’s not all peaches and cream, as some key indexes are again testing their 50-day lines and we’re still in the thick of earnings season.
This Weekly Update includes earnings updates and expectations on all our portfolio companies. I have no rating changes this week, and most of our holdings are acting quite well.
If you have any exposure at all to small-cap cloud-based software stocks, you’re likely singing in the shower these days. It has been hard to miss with this class of stocks. In our portfolio, our small business cloud software stocks are driving overall portfolio returns with weekly gains of 5% to 10% not uncommon.
At about half way through earnings season, the results look good. Average sales gains for our 27 stocks that have reported thus far are 13%. In today’s Weekly Update, I provides summaries for 16 of our companies that reported quarterly financial results or other noteworthy news during the past week.
The Emerging Markets Timer is in great shape, as the iShares EM Fund is sitting well above its 25- and 50-day moving averages. We have no changes to the portfolio tonight.
It looks like we’re in for an up week in the stock market. Stocks are reacting well to election results in France, in which a moderate candidate took the lead, with an outsider standing in second place. It seems like voters around the world are weary of their recent political regimes, choosing instead to either vote for moderates or vote for opposite political extremes from what they recently experienced.
Small caps got their mojo back this week. The asset class jumped 3.2%, driven by strong performance in consumer discretionary (up 5%), tech (up 4%) and industrials (up 3.7%). In fact, everything was up except energy (down 5%).
Thirteen Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news during the past week. This update also includes two Sell alerts.
Our Cabot Tides turned negative last week, though we didn’t take any action in the Model Portfolio as we already had 29% in cash. We’ve seen a modest bounce this week, and with our Cabot Trend Lines and Two-Second Indicator still positive, we think the next big move is up. But until we get a new Tides buy signal, we’re holding some cash and taking things on a stock-by-stock basis.
Alerts
Last week, we began to see selling begin to appear in some leaders, either through stalling action (selling on the way up) or, more importantly, via some selling on good news. Today we saw the sellers really come out of the woodwork, with many leading growth stocks taking big hits on volume.. As a result, we placing three of our stocks on Hold.
This resource company mines a key ingredient for electric vehicles—a booming market.
One stock moves from Hold to Strong Buy.
The shares of this defense company were recently initiated with a ‘Positive’ rating at Susquehanna.
One stock moves from Buy to Hold and there is price action and/or news on three more.
This potato company beat Wall Street’s earnings forecasts by $0.08 last quarter.
Two of our portfolio stocks reported Q4 2018 results.
Two stocks reported fourth-quarter results; plus price action on two more.
This cybersecurity company is expected to grow by 53.2% this year.
In the past 30 days, nine analysts have raised their EPS estimates for this DNA sequencing company.
This medical device company beat analysts’ EPS estimates by $0.09 last quarter, and the shares were recently initiated at Deutsche Bank with a ‘Buy’ rating.
Two stocks have rating changes today.
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.