Issues
While we are definitely not out of the woods yet—with the economy and the markets—we are making progress. The Dow Jones Industrial Average has had a nice bounce back, albeit, with some volatility. We can expect that to continue, probably through year-end. As you can see by our Advisor Sentiment Barometer and our Market Views section, we are turning more bullish.
As most of the economy is just beginning to reopen, unemployment remains a big issue. So far, some 38 million people have lost their jobs, bringing the unemployment rate in the U.S. to almost 15%. We can expect that to continue rising for the near future, also.
But in better news, housing seems to be holding up pretty well, and building permits this week were better than expected, around 1.074 million.
Of course, the bright side is that as more businesses reopen, we will start a steady climb back to normal.
As most of the economy is just beginning to reopen, unemployment remains a big issue. So far, some 38 million people have lost their jobs, bringing the unemployment rate in the U.S. to almost 15%. We can expect that to continue rising for the near future, also.
But in better news, housing seems to be holding up pretty well, and building permits this week were better than expected, around 1.074 million.
Of course, the bright side is that as more businesses reopen, we will start a steady climb back to normal.
The market has hit a little turbulence over the past week, first seeing the major indexes test support and then, this week, as the major indexes rebounded, growth stocks have softened a bit. But net-net, the evidence remains mostly positive, so we remain optimistic. In the Model Portfolio, we did a little trimming last week, but as some growth stocks pull in, we’re adding a half position in a fresh leader.
Growth stocks are red hot! In this month’s Issue of Cabot Early Opportunities, I sift through all my ideas to feature a compelling mix of five stocks that still look to have significant upside potential over the coming months. Several of these names should represent new ways for investors to participate in long-term growth trends.
Today’s recommendation continues to look like the market’s top networking-related play, as it’s one of the only firms out there that’s firing on all cylinders.
The overall market continues to look healthy—though we still haven’t yet received an “all-clear” signal from our long-term timing indicator—and our stocks, in general, continue to reward, with many hitting new highs in recent days as the economic outlook improves.
Long-term, the prospects for the economy and market have improved, but short-term, the relative elation of recent days has brought numerous growth stocks to what seem like unsustainable heights—so I’ve lowered the ratings on three of our positions to Hold, and if you’d like to take partial profits, that’s fine with me.
As for today’s recommendation, it’s a very unusual one for me. But the chart is strong and the story has some validity, so we’ll give it a shot!
Full details in the issue.
Long-term, the prospects for the economy and market have improved, but short-term, the relative elation of recent days has brought numerous growth stocks to what seem like unsustainable heights—so I’ve lowered the ratings on three of our positions to Hold, and if you’d like to take partial profits, that’s fine with me.
As for today’s recommendation, it’s a very unusual one for me. But the chart is strong and the story has some validity, so we’ll give it a shot!
Full details in the issue.
Current Market OutlookThis morning’s positive news of a possible COVID vaccine helped the major indexes surge, but it also revealed some of the crosscurrents that remain—today saw a big bout of rotation, as leading growth titles were mostly lower while the lagging (usually economically-sensitive) areas did well. Even so, we don’t advise getting too involved in the day-to-day news or gyrations; overall, there’s still more positive evidence than negative, with the intermediate-term trend still up (today’s action helped on that front) and just about every leading stock remaining in a firm uptrend. Given the crosscurrents, we don’t advise going hog wild on the buy side, but we continue to think holding your strong performers (maybe with some partial profits here or there) and looking for decent entry points on strong names is the way to go. While we were going to knock our Market Monitor down late last week, the action of the past two sessions has us keeping it at a level 7.
This week’s list is a bit more diversified than in recent weeks, with strength seen in a few more sectors. Our Top Pick is PayPal (PYPL), which appears to have resumed its run after a multi-month rest period. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Avalara (AVLR) | 102.00 | ||
| Beyond Meat (BYND) | 132.87 | ||
| Fastly (FSLY) | 39.31 | ||
| Fortinet Inc. (FTNT) | 137.53 | ||
| Inphi (IPHI) | 120.16 | ||
| MyoKardia (MYOK) | 108.56 | ||
| Ollie’s Bargain Outlet (OLLI) | 103.94 | ||
| PayPal (PYPL) | 147.00 | ||
| Scotts Miracle-Gro (SMG) | 155.72 | ||
| Tesla, Inc. (TSLA) | 818.87 |
Markets have pulled back a bit over the last few days as investors hit the pause button to digest a Nasdaq in the black for 2020 while the real economy struggles to reopen. Congress begins work on the next stimulus spending bill and international stocks come under consideration, as they have not rebounded anywhere near as much as U.S. markets.
Our emerging market (EEM) momentum timer has turned positive by the slightest of margins as we replace one China idea with another.
Our emerging market (EEM) momentum timer has turned positive by the slightest of margins as we replace one China idea with another.
The market has rallied like crazy over the past seven weeks. It’s up over 30% from the low in March. The market is already looking beyond the coronavirus to a strong economic recovery.
But stocks are trading on a rosy scenario that may not come true. While the market is always difficult to predict in the near term, there is at least a good chance of disappointment going forward. The overall market may have gotten ahead of itself and it is prudent to prepare for the possibility of more turbulence ahead.
For those reasons, the Cabot Dividend Investor portfolio is only buying very selectively. While the overall market may be shaky at this point, certain companies are thriving during the pandemic. There are niches where business is actually booming.
In this issue I highlight two stocks that are selling at bargain prices, have businesses barely affected by the pandemic, and stand to thrive in the post-Covid-19 market as well.
But stocks are trading on a rosy scenario that may not come true. While the market is always difficult to predict in the near term, there is at least a good chance of disappointment going forward. The overall market may have gotten ahead of itself and it is prudent to prepare for the possibility of more turbulence ahead.
For those reasons, the Cabot Dividend Investor portfolio is only buying very selectively. While the overall market may be shaky at this point, certain companies are thriving during the pandemic. There are niches where business is actually booming.
In this issue I highlight two stocks that are selling at bargain prices, have businesses barely affected by the pandemic, and stand to thrive in the post-Covid-19 market as well.
If you have not already, I recommend that you read my Cabot Micro-Cap Insider Guide. It will help you get the most out of your Cabot Micro-Cap Insider membership, and make your investing decisions easier and more profitable. It will also explain much of the shorthand we use in Cabot Micro-Cap Insider, and explain our ratings.
If you have any questions about any of my recommendations, I encourage you to reach out to me directly at rich@cabotwealth.com.
Now let’s get into my newest recommendation: Medexus Pharmaceuticals.
If you have any questions about any of my recommendations, I encourage you to reach out to me directly at rich@cabotwealth.com.
Now let’s get into my newest recommendation: Medexus Pharmaceuticals.
From its modest beginning as an online textbook hub, this recommendation grew into a multi-pronged educational platform.
Updates
I’m not advising any actions before the market opens today. However, I am watching all of our stocks closely for any signs that a significant decline could reduce our gains in the short-term.
The Emerging Markets Timer keeps flashing a green light, so we remain bullish. There are no changes in the portfolio tonight.
For the third time in less than a year, a portfolio stock has received a lucrative buyout offer. The board of directors of chemical company Chemtura (CHMT) unanimously agreed to accept a buyout offer from Lanxess AG in a deal valued at $2.5 billion.
The Federal Reserve, as expected, declined to raise interest rates, although Chair Janet Yellen noted that wages are picking up and further acceleration in wages is possible. I think it’s likely the Fed will raise rates in December, a move which shouldn’t surprise investors.
We don’t have much to complain about after a week when our average gain per position was 5.8%, three positions were up double digits, and our worst performing stock was down a mere 2%. That said, today I’m moving two stocks that have just rallied back to Hold, since the near-term upside appears limited in those names. Five of our positions remain Buys.
Should the market resume its uptrend, we’ll look to put our cash to work, but tonight, with our Tides still negative, we’ll sit tight.
I’m putting Wynn (WYNN), one of our growthiest names, back on Buy today after the stock finally broke out of its multi-month trading range.
This week, financial markets bring us earnings reports from Adobe and FedEx (and possibly Carnival), and a speech by Fed Chairwoman Janet Yellen.
This looks like a classic buy-the-dip scenario. Nothing is for certain, but my best guess is we regain the small-cap 50-day moving average line next week, and after a week or two of choppy action, are trading at another 52-week high.
Volatility returned to the stock market during the past week. Investors are concerned about the possibility of a Fed interest rate hike next week after a batch of weak economic news indicated that the U.S. economy will continue to sputter.
The Emerging Markets Timer is still pointed up, but it’s clearly seen some selling volume over the last week. So while we’re still bullish, we’re not looking to push for further exposure at this point. The only change in the portfolio is the sale of Telkom Indonesia (TLK) that we recommended in a Special Bulletin on Wednesday.
Alerts
Four stocks from the Portfolios reported earnings.
On Tuesday, voters in three states continued the trend toward increased legalization of marijuana: Michigan voted to legalize the recreational use of the plant, while Utah and Missouri voted to legalize it for medical use.
These four funds focus on healthcare and offer a variety of subsectors.
Rapid7 (RPD) and Q2 Holdings (QTWO) Report Q3 Earnings
Our second recommendation is a sale of a company’s whose stock is not performing as expected.
Our first idea is an ecommerce company that is getting rave reviews from Wall Street, with 20 analysts recently increasing their estimates for the company.
Goosehead Insurance (GSHD) and Everbridge (EVBG) Report Q3 Earnings
Altair (ALTR) buys Datawatch (DWCH) and IntriCon (IIN) Reports
Technical indicators say it’s time to trade this gold ETF.
Several readers have asked about what effect tomorrow’s election might have on marijuana stocks, in part because four states have measures on the ballot that would increase legality.
This electrical product maker beat analysts’ estimates by $0.21 last quarter.
This healthcare ETF is also rated ‘Strong Buy’ by Zacks.
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.