Issues
The coronavirus is sending the market into a tailspin. It took a thriving bull market from all-time highs to the cusp of a bear market in a matter of weeks.
It is likely that this market will not significantly recover until there is more clarity on the extent of the economic disruptions it is causing and how long they will last. That seems unlikely for several weeks at least. In the meantime, the market is vulnerable to constant headline risks.
It is likely that the market has not found a bottom.
That said, this too shall pass. The coronavirus is a black swan event that is singularly responsible for the market crash. When the panic and emergency subsides, and it will, the market will likely recover and make up for lost time.
In this issue I discuss the ramifications and measures to protect your investments. As well, I identify rare securities that are timely opportunities while the market is down. These stocks have limited downside if the market continues to fall and huge upside leverage when it recovers.
It is likely that this market will not significantly recover until there is more clarity on the extent of the economic disruptions it is causing and how long they will last. That seems unlikely for several weeks at least. In the meantime, the market is vulnerable to constant headline risks.
It is likely that the market has not found a bottom.
That said, this too shall pass. The coronavirus is a black swan event that is singularly responsible for the market crash. When the panic and emergency subsides, and it will, the market will likely recover and make up for lost time.
In this issue I discuss the ramifications and measures to protect your investments. As well, I identify rare securities that are timely opportunities while the market is down. These stocks have limited downside if the market continues to fall and huge upside leverage when it recovers.
Amazon and others have a lock on the market for large-scale e-commerce, but this stock leads a different niche, as it’s the go-to place for buyers (46 million of them at year-end, up 16% from a year ago) and sellers (2.7 million, up 20%) of homemade, handcrafted goods.
This morning’s market crash will go down in history as a big one—biggest by point drop and one of the biggest by percentage drop. But this is no time to panic. Instead, it’s time to recognize that the market is increasingly offering its wares at bargain prices, and all you need to do is have cash on hand when the climate improves.
For our portfolio, that means selling one more stock today, Endava (DAVA).
In the meantime, Cabot analysts continue to find stocks that are attractive for one reason or another and today’s featured stock is one of them—a leading chipmaker with great prospects as the world goes increasingly online and digital.
Full details in the issue.
For our portfolio, that means selling one more stock today, Endava (DAVA).
In the meantime, Cabot analysts continue to find stocks that are attractive for one reason or another and today’s featured stock is one of them—a leading chipmaker with great prospects as the world goes increasingly online and digital.
Full details in the issue.
Current Market OutlookAfter two weeks of dreadful action, the perfect storm crashed down on Wall Street this morning, with imploding oil prices and more virus/economic fears causing a panic, though the damage was limited after the open. Short-term, today brought many truly extreme readings (more than 2,800 stocks hit new lows on the NYSE and Nasdaq combined!), so short-term, some sort of bounce or relief rally is possible (even probable). That said, (a) the nature of this decline has been breaking some rules, so there are no sure things, and (b) our focus remains on the intermediate-term, where the trends of just about everything are pointed down. Thus, while we’re keeping our eyes open, we’re focusing mostly on capital preservation and hunting for the potential big winners for the next uptrend.
This week’s list is a great place to start, whether you’re building a watch list or looking to nibble. Our Top Pick is Vipshop (VIPS), which is one of many Chinese stocks that is acting very well.
| Stock Name | Price | ||
|---|---|---|---|
| eHealth (EHTH) | 122.74 | ||
| Etsy (ETSY) | 112.97 | ||
| Everbridge (EVBG) | 107.90 | ||
| GSX Techedu (GSX) | 97.59 | ||
| iRhythm Technologies (IRTC) | 51.15 | ||
| Newmont Mining (NEM) | 57.31 | ||
| Teladoc, Inc. (TDOC) | 127.95 | ||
| Tradeweb Markets (TW) | 51.44 | ||
| Vipshop Holdings (VIPS) | 14.25 | ||
| ZTO Express (ZTO) | 28.84 |
This week’s volatility has been a bit unnerving but below the drama some good things are happening. The majority of our stocks finished the week higher and Sea Limited (SE) hit an all-time high after reporting another great quarter, confirming our view that this
could be an enduring growth story. No surprise that our emerging market timer is mixed, in a very modest uptrend but still below 50- and 200-day moving averages
Today, we have a new recommendation for you as we follow Warren Buffett to a financial technology play in Brazil
could be an enduring growth story. No surprise that our emerging market timer is mixed, in a very modest uptrend but still below 50- and 200-day moving averages
Today, we have a new recommendation for you as we follow Warren Buffett to a financial technology play in Brazil
This month we’re jumping into a software company that’s developed an innovative product for the emerging gig economy. But it’s not another Airbnb, Lyft or Uber. No apartments for rent or cars for hire here.
Rather, just like eBay and Etsy have created online marketplaces for buyers and sellers of physical goods, this company has created a marketplace that matches buyers and sellers of digital services—things like graphic design, writing and web development.
As the gig economy explodes this company is poised to enjoy rapid growth. And while no company is inoculated from the coronavirus, this one has some protection since it’s part of the digital, not physical, economy.
Rather, just like eBay and Etsy have created online marketplaces for buyers and sellers of physical goods, this company has created a marketplace that matches buyers and sellers of digital services—things like graphic design, writing and web development.
As the gig economy explodes this company is poised to enjoy rapid growth. And while no company is inoculated from the coronavirus, this one has some protection since it’s part of the digital, not physical, economy.
Today’s portfolio changes include one stock joining us with strong earnings growth and a stronger price chart than most stocks during this market correction, and another leaving the portfolio due to frequent downward revisions in earnings estimates.
The stock market will not likely bounce back quickly to its February highs. I’d be completely shocked if any such rebound occurred this month, or even in April. Instead, I expect a significant amount of volatility in the coming days, as buyers and sellers take turns embracing and dumping stocks. Despite the occasional up day in the market, there are many stocks that have not finished falling yet. Most such stocks are companies that will likely be harmed by a pullback in this year’s expected economic growth. After all, when people are quarantined – or just plain staying home and canceling travel and outings – many businesses suffer, not the least of which are travel, restaurant and retail companies.
I know that you will hear some friends or stock market pundits imply that the market will rebound quickly. Please, I beg you not to fall for that rosy prognosis. The market fell nearly 13%. That’s a BIG DROP. It’s going to take quite a few months to recover, and the recovery will most likely be precipitated by news that global economies are recovering from the coronavirus-induced lapse in economic output.
That’s not to say that there won’t be buying opportunities. I will continue to point out growth stocks that have somewhat bullish or tradeable price charts. These will be the ones with which you’ll want to “buy low.”
Lastly, take your time investing your cash. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges
The stock market will not likely bounce back quickly to its February highs. I’d be completely shocked if any such rebound occurred this month, or even in April. Instead, I expect a significant amount of volatility in the coming days, as buyers and sellers take turns embracing and dumping stocks. Despite the occasional up day in the market, there are many stocks that have not finished falling yet. Most such stocks are companies that will likely be harmed by a pullback in this year’s expected economic growth. After all, when people are quarantined – or just plain staying home and canceling travel and outings – many businesses suffer, not the least of which are travel, restaurant and retail companies.
I know that you will hear some friends or stock market pundits imply that the market will rebound quickly. Please, I beg you not to fall for that rosy prognosis. The market fell nearly 13%. That’s a BIG DROP. It’s going to take quite a few months to recover, and the recovery will most likely be precipitated by news that global economies are recovering from the coronavirus-induced lapse in economic output.
That’s not to say that there won’t be buying opportunities. I will continue to point out growth stocks that have somewhat bullish or tradeable price charts. These will be the ones with which you’ll want to “buy low.”
Lastly, take your time investing your cash. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges
Today, the widespread, ongoing move to the cloud by businesses of all sizes means there are all sorts of customized apps and differentiated hardware that don’t always work together the way they’re supposed to.
As the coronavirus correction rolls on, wise investors adapt,by selling weak stocks, holding cash and making smaller strategic investments in new opportunities.
Today, for our portfolio, that means selling two current holdings (one for a loss and one for a profit) and recommending a fast-growing medical company that has notonly a great growth story but also a chart that has been building a base for three months, setting up for its next advance.
Full details in the issue.
Today, for our portfolio, that means selling two current holdings (one for a loss and one for a profit) and recommending a fast-growing medical company that has notonly a great growth story but also a chart that has been building a base for three months, setting up for its next advance.
Full details in the issue.
Current Market OutlookFollowing last week’s rolling crash in the market, everyone is wondering what comes next, but instead of predicting (guessing), it’s better to stick with the facts. Here’s where the evidence stands: The intermediate-term trend is clearly down for all major indexes and most (though not all) stocks, and given that this comes after a prolonged advance, some time is likely going to be needed to repair the damage. Short-term, though, we did see some legitimate extremes in a few key measures (900-plus new lows on the NYSE on Friday; just 3% of S&P 500 stocks above their 50-day line; record SPY volume on Friday) that says today’s bounce could go further. All together, it’s best to be in a cautious stance (holding cash, limiting new buying, pruning your worst performers), though you shouldn’t panic out of everything—holding on to your resilient winners is fine, and if you have plenty of cash, a little buying is fine as well.
This week’s list is a good place to start building your watch list (or, if you’re in the buying mood, looking for candidates to nibble on). Our Top Pick is Regeneron Pharmaceuticals (REGN), which has a good overall story and what could be a big catalyst, too. Aim for dips.
| Stock Name | Price | ||
|---|---|---|---|
| Atlassian (TEAM) | 182.16 | ||
| Bill.com Holdings (BILL) | 88.76 | ||
| Cloudflare (NET) | 39.32 | ||
| Datadog (DDOG) | 81.52 | ||
| Dexcom (DXCM) | 421.36 | ||
| Enphase Energy (ENPH) | 46.70 | ||
| Regeneron Pharmaceuticals (REGN) | 512.96 | ||
| RingCentral (RNG) | 238.73 | ||
| Seattle Genetics (SGEN) | 150.85 | ||
| Square, Inc. (SQ) | 91.04 |
Updates
Nine Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news. I also include some interesting questions from subscribers with my responses.
We had four companies report earnings this week and I’ve already updated you on three of them through Special Bulletins. A review of the fourth, as well as incremental updates on our other positions, is provided in today’s Update. Overall, my stance is still cautiously optimistic.
The Cabot Emerging Markets Timer is flashing a warning signal, and even good earnings results are no guarantee of big advances. We are trimming the portfolio by selling Sibanye Gold and dropping YY Inc.
Most of our portfolio holdings are acting similarly healthy, and if you feel underinvested, you can add positions judiciously here. I’m switching Smucker (SJM) back to Buy today based on the solid technical support the stock demonstrated over the past week.
In this update, we take a look at recent news and earnings reports from our portfolio stocks, and raise the ratings on Boise Cascade (BCC), Delta Air Lines (DAL) and D.R. Horton (DHI) to Buy.
Sixteen Cabot Benjamin Graham Value Investor companies reported quarterly financial results. Four produced outstanding sales and earnings: AMC Networks, IntercontinentalExchange, Priceline and Scripps Networks, and four reported rather weak results: Maiden Holdings, McKesson, Prudential and WestJet Airlines. I will review all of the quarterly reports soon and offer sell recommendations if necessary.
Stand pat. The market has been pulling back for the past two weeks, but our market timing indicators are still bullish and most of our stocks are acting well. That said, there’s not enough evidence for us to put more money to work, so except for two small changes (we’re switching Sabre (SABR) to a Hold rating and putting Facebook (FB) back on Buy), we’ll keep our seven stocks (and a cash position of 30%) and watch how things unfold.
We’re switching Target (TGT) and ConEd (ED) from Buy to Hold today. The rest of our ratings remain unchanged.
We had three stocks report this week. Two of them, LogMeIn (LOGM) and Mitek (MITK), are surging higher. There are no ratings changes today. Next week, we’ll hear from NanoString (NSTG) and Primo Water (PRMW). Overall, my stance remains cautiously optimistic.
Twenty Cabot Benjamin Graham Value Investor companies reported quarterly financial results. Five produced outstanding results: AbbVie, Harman, Lear, LKQ and Penske, while five reported rather weak results: Apple, Avnet, Ensco, Gilead and Synaptics. I will review all the quarterly reports within the next few days and offer Sell recommendations if necessary.
The Cabot Emerging Markets Timer continues to give a Buy signal, but many stocks in both emerging and developed markets are trading sideways. We have no changes to our portfolio today.
Beginning next week, Smart Investing in Turbulent Times will receive a new name: Cabot Undervalued Stocks Advisor. But don’t worry! Everything below the title remains the same. All of the portfolio stocks will remain intact, with weekly updates on excellent value stock opportunities. In today’s Update, there are a few noteworthy portfolio stock news items.
Alerts
Our second recommendation is a sale of an RV stock that is suffering from industry woes.
Our first idea today is a tech company that beat Wall Street’s estimates by $0.19 last quarter.
Analysts are looking for 30% annual growth for this cloud-based education company over the next five years.
The top five holdings of this small cap fund are: Emin Russell 2000 Jun18 Rtym8 N/A (0.63% of assets); Nektar Therapeutics Inc (NKTR, 0.59%); GrubHub Inc (GRUB, 0.41%); bluebird bio Inc (BLUE, 0.39%); and Aspen Technology Inc (AZPN, 0.30%).
Our second recommendation is a sale on a company that is not living up to its promise.
Though the shares of this marijuana-related company have retreated a bit, its new collaboration offers an opportunity to participate in this growing sector at a discounted value.
This is an unscheduled interim update to give you some guidelines to deal with the current strength of marijuana stocks.
The shares of this railway company were recently upgraded at Cowen & Co. to ‘Outperform’.
During the last 30 days, Colfax has received 10 upward earnings estimate revisions for both its current year and fiscal 2019.
Several catalysts have brought the price of gold down; here are a couple of ways to get in at discounted prices.
One of our stocks reported a great second quarter and moves from Strong Buy to Buy and moves from Buy Low Opportunities Portfolio to Growth & Income Portfolio.
The top five holdings of this socially-responsible fund are: Microsoft Corp (MSFT, 6.61% of assets); Facebook Inc A (FB, 3.52%); Alphabet Inc C (GOOG, 3.26%); Alphabet Inc A (GOOGL, 3.12%); and Intel Corp (INTC, 1.92%).
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.