Issues
The market remains in good health and trending higher, though there is some rotation going on from growth stocks to cyclicals—not unusual for this stage of a bull market.
This week’s recommendation is a big cap global technology stock benefitting from both the spread of communications technology and the company’s dominant position in the global supply chain.
As for the current portfolio, there are no stocks that look like they should be sold, but I must sell one to respect my portfolio cap, and the victim will be Brookfield Infrastructure Partners (BIP), where we have a modest profit.
Full details in the issue.
This week’s recommendation is a big cap global technology stock benefitting from both the spread of communications technology and the company’s dominant position in the global supply chain.
As for the current portfolio, there are no stocks that look like they should be sold, but I must sell one to respect my portfolio cap, and the victim will be Brookfield Infrastructure Partners (BIP), where we have a modest profit.
Full details in the issue.
Current Market OutlookThe market continues to look fine, with both primary (trend) and secondary (new lows, etc.) evidence boding well—not to mention many of the longer-term signposts like blastoff indicators telling us this is a bull market. But for leading growth stocks, it’s tricky out there; while there haven’t been a rash of breakdowns, there’s plenty of iffy action, with low volume rallies, selling on strength and relatively few stocks hitting new highs. (While the Nasdaq tested new-high ground today, the number of stocks doing so was half of what we saw a week and a half ago.) We certainly don’t think you should be holed up in your bunker, and we’re staying flexible, but given the prolonged run and the recent sloppiness, we think moving closer to shore makes sense, especially if you own some sluggish performers.
Interestingly, while the leaders of the April-July move rest, we’re seeing other names (both growth and cyclical) perk up. This week’s list has plenty of both, and our Top Pick is Quanta Services (PWR), which has decisively broken out on the upside.
| Stock Name | Price | ||
|---|---|---|---|
| Berry Global (BERY) | 64.22 | ||
| Builders FirstSource (BLDR) | 44.12 | ||
| Cerence (CRNC) | 107.77 | ||
| First Solar (FSLR) | 83.74 | ||
| HubSpot (HUBS) | 582.89 | ||
| Innovative Industrial Properties (IIPR) | 214.38 | ||
| iRhythm Technologies (IRTC) | 51.15 | ||
| L Brands (LB) | 79.48 | ||
| Quanta Services (PWR) | 91.45 | ||
| Shift4 Payments (FOUR) | 89.97 |
The market remains in good shape, but growth stocks have come under pressure -- for the first time in months, we’re seeing a good amount of abnormal action. Longer-term, we’re still quite bullish, both on the market and on leading stocks, but given the action (and our solid gains this year), we’ve been paring back, with numerous partial profits and one outright sale, which has us holding a 37% cash position.
In tonight’s issue we write about all our latest thoughts on the market, and how to handle big winners that begin to act iffy. We also write up a handful of names we’re watching should growth stocks stabilize.
In tonight’s issue we write about all our latest thoughts on the market, and how to handle big winners that begin to act iffy. We also write up a handful of names we’re watching should growth stocks stabilize.
These are uncertain times. Risks abound, yet the market forges to new all-time highs. With so many things we can’t know about the virus and the election, it’s a good time to focus on what we do know.
Certain powerful trends will continue regardless of what the economy does or who’s President. One such undeniable trend is the aging population. The population is older now than it has ever been before. And it’s getting still older, at warp speed. The aging population is an irrefutable fact. And older people will require more health care.
This mega trend is literally transforming the demographics of the human race. It will be a huge tailwind for the health care sector in the future. At the same time, many great health care stocks haven’t gotten nearly as pricey as the overall market. And they tend to hold up well if things turn south.
In this issue I highlight one of the very best health care companies in the world. The stock is defensive and barely budged when the market crashed. Yet there are huge growth opportunities ahead as it sells cutting-edge treatments and drugs for illnesses and diseases to a public that will demand them like never before.
Certain powerful trends will continue regardless of what the economy does or who’s President. One such undeniable trend is the aging population. The population is older now than it has ever been before. And it’s getting still older, at warp speed. The aging population is an irrefutable fact. And older people will require more health care.
This mega trend is literally transforming the demographics of the human race. It will be a huge tailwind for the health care sector in the future. At the same time, many great health care stocks haven’t gotten nearly as pricey as the overall market. And they tend to hold up well if things turn south.
In this issue I highlight one of the very best health care companies in the world. The stock is defensive and barely budged when the market crashed. Yet there are huge growth opportunities ahead as it sells cutting-edge treatments and drugs for illnesses and diseases to a public that will demand them like never before.
Today, we are getting defensive and recommending a micro-cap consumer staples company.
While this issue’s new recommendation is defensive, it has many other attractive attributes:
All the details are inside this month’s Issue. Enjoy!
While this issue’s new recommendation is defensive, it has many other attractive attributes:
- Strong historic revenue growth (24% CAGR)
- Over 50% insider ownership
- A strong balance sheet
- A cheap valuation (P/E of 15.0x)
All the details are inside this month’s Issue. Enjoy!
With nearly four million apps in Google Play Store, developers face the daunting task of targeting potential customers. Today’s recommendation makes this effort easier by simplifying the app advertising, delivery and tracking process, helping developers and digital advertisers increase revenue and user engagement at scale.
Current Market OutlookTwo weeks ago we saw a bunch of positive earnings reactions that bolstered leading stocks, but last week was mostly the reverse—the leaders that had been running for months took on water, often reacting poorly to earnings and/or share offerings. Of course, while we see a few storm clouds, it’s not a hurricane, as the major indexes are in good shape and there are a growing number of “fresher” leaders (just getting going in the past few weeks) that are still acting just fine. All in all, the majority of the evidence is bullish, so we are as well, but it’s a stock-by-stock environment—many names look fine and are even buyable (preferably on weakness), but if you do have some extended stocks that are wobbling, have a plan in place (tightening stops, partial profits, etc.) in case the sellers gain strength.
This week’s list contains many of those fresher leaders mentioned above, including a few that have taken off on earnings. Our Top Pick is Zillow (Z), which should be a great bet to benefit from the new housing boom.
| Stock Name | Price | ||
|---|---|---|---|
| Agnico Eagle Mines (AEM) | 79.05 | ||
| Chart Industries (GTLS) | 72.05 | ||
| Digital Turbine (APPS) | 24.75 | ||
| Freeport-McMoRan Inc. (FCX) | 13.78 | ||
| Freshpet (FRPT) | 107.99 | ||
| LivePerson (LPSN) | 58.55 | ||
| Maxar Technologies (MAXR) | 27.02 | ||
| Ollie’s Bargain Outlet (OLLI) | 103.94 | ||
| Taiwan Semiconductor (TSM) | 78.41 | ||
| Zillow (Z) | 76.64 |
The market continues to hum along, with the S&P 500 closing in on its February highs. Thus, it makes sense to maintain a full portfolio of 20 stocks. To get there, and make room for our newest recommendation, we have to say goodbye to AbbVie (ABBV), which has given us a nice profit in four months but has started to weaken.
Taking AbbVie’s place is a name that’s likely familiar to you, and one that’s showing greater strength than it has in years thanks in part to a new mega-deal. We’re also upgrading Big Lots (BIG) to Buy after a big second quarter.
Full details in the issue.
Taking AbbVie’s place is a name that’s likely familiar to you, and one that’s showing greater strength than it has in years thanks in part to a new mega-deal. We’re also upgrading Big Lots (BIG) to Buy after a big second quarter.
Full details in the issue.
Updates
The Emerging Markets Timer is in good shape, with iShares EM Fund sitting well above its 25-day moving average.
The broader U.S. stock market is having a pullback after a 12% post-election run-up. The S&P 500 is only down about 2.5% from its recent high, and it’s too soon to tell whether it might fall a little more.
Well, it couldn’t last forever, right? After months of hardly any pullbacks on the heels of the massive post-election rally, stocks—including small caps—finally had a down week.
This Weekly Update includes summaries for six Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other important news during the past week.
Our Two-Second Indicator remains negative, our Cabot Tides are now on the fence, and the breadth-related yellow flags have led to some strong selling this week. Short-term, it’s best to pare back on any stocks that break down; longer-term, though, we remain optimistic.
Yesterday, the stock market had its worst day since October; the Dow, Nasdaq and S&P 500 all declined over 1%. Financials and materials stocks were the biggest losers, while safe havens gained.
When I’m out and about in the world, talking to investors, I’ve noticed that when I mention my goal of minimizing the risk associated with stock investing, people’s eyes glaze over. I’ve come to realize that people generally believe eliminating risk actually means eliminating reward. Holy moly, NO!
We have 10 stocks, seven of which are doing quite well, one of which is new, and two of which are acting a little weak.
This Weekly Update includes summaries for four Cabot Benjamin Graham Value Investor companies which reported quarterly financial results or other important news during the past week. I have also included questions from subscribers along with my answers.
The Emerging Markets Timer is in fine shape after Wednesday’s big rally. We have no changes to the portfolio today.
The stock market’s pullback resumed yesterday, but this still looks like a normal retreat following a breakneck four-month rally. One warning light is decreasing breadth, which suggests that when the rally gets going again, it could be driven by a smaller group of stocks.
All the major U.S. stock market indexes are experiencing orderly pullbacks right now. (This is good news because the farther the market climbs without resting, the bigger the pullback when it finally arrives.)
Alerts
This railway company beat analysts’ estimates by $0.05 last quarter, and in the past 30 days, three analysts have increased their EPS forecasts for the company.
After disposing of an unprofitable division and coming out the winner in a lawsuit, this company is trading at a very undervalued level.
This biotech is somewhat speculative, but analysts expect it to grow by 22% annually for the next five years.
One of our positions reported strong fourth-quarter results and just a quick update on the price action with another position.
The top five holdings of this Europe fund are: Roche Holding AG Dividend Right Cert. (ROG), 3.62% of assets; BP PLC (BP.L), 3.33%; Unilever PLC (ULVR.L), 3.21%; Total SA (FP.PA), 2.81%; and SAP SE (SAP.DE), 2.59%.
Two of our positions reported strong fourth-quarter results and one reported an earnings miss. On top of that, two of our positions have seen some interesting price action.
In the past 30 days, 13 analysts have raised their EPS estimates for this trucking company.
Coverage of the shares of this pharmaceutical company were just initiated at Berenberg, with a ‘Buy’ rating.
The top five holdings of this ETF are: AdvisorShares Sage Core Reserves ETF (HOLD), 35.79% of assets; Fidelity Instl Govt 657 C, 4.83%; PTC Inc (PTC), 4.42%; MasTec Inc (MTZ), 3.73%; and MSCI Inc (MSCI), 3.68 %.
One of our positions reports a strong earnings and revenue beat. For now it’s still a hold as we are awaiting a pullback, but it should be a buy candidate in the near future.
Gold is looking more favorable, and this ETF gives you wide exposure.
We’re moving a stock from Buy to Hold.
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.