Issues
I just returned from the Orlando Money Show, where I had an opportunity to see and speak with several of our contributors. The mood was festive, and the advisors were optimistic. And why not? The markets continue to outperform, as we navigate through the nasty election season. Both investors and advisors continue to be very bullish, as you can see from our Advisor Sentiment Barometer, as well as our Market Views.
The economy is very strong, with a healthy housing market, steady employment, and good retail sales. We’ve yet to see if the coronavirus outbreak will have any major and long-lasting effects on the global economy.
But for now, the investment opportunities are plentiful. Read the Issue for more details.
The economy is very strong, with a healthy housing market, steady employment, and good retail sales. We’ve yet to see if the coronavirus outbreak will have any major and long-lasting effects on the global economy.
But for now, the investment opportunities are plentiful. Read the Issue for more details.
In this Month’s Issue of Cabot Early Opportunities I discuss one simple way to measure how much a given stock will move relative to the market. I also feature five stocks, from quite small to larger than we normally go. All have something different going for them. We are tilted toward software names this month, though I round things out with another solar name and an emerging biotech opportunity.
This stock has a good, solid story and a stock that appears to finally be kicking into gear after 16 months of post-IPO meandering.
There’s an old saying that a bull market climbs a wall of worry, and today is a perfect example, with many of our stocks hitting new highs despite the widespread fears of coronavirus. Thus I continue to recommend that you be heavily invested.
However, not all our stocks are strong, and this week three in particular have turned too weak to hold any longer. So out they go.
As for the new recommendation, it’s an insurance company (investment company) that pays a dividend but has great prospects for capital gains. Full details in the issue.
However, not all our stocks are strong, and this week three in particular have turned too weak to hold any longer. So out they go.
As for the new recommendation, it’s an insurance company (investment company) that pays a dividend but has great prospects for capital gains. Full details in the issue.
Current Market OutlookNothing much changed with the market’s evidence last week: The trends of the major indexes and most leading stocks remain strongly up, and there’s been very little in the way of intermediate-term abnormal selling action out there. On the other hand, many indexes have yet to hit new post-virus highs, fewer stocks are hitting new highs and the leading big-cap indexes are extended to the upside. As always, we put most of our emphasis on the primary evidence, which is why we remain mostly bullish; in fact, we’re nudging our Market Monitor up to a level 7 this week. But, while we still favor holding your strong, resilient performers, we also think it’s best to be choosy on the buy side, looking for names that have shown some recent power on earnings or have been running for a few months but have dipped to support.
Happily, this week’s list features many of names that have one of those two chart characteristics. Our Top Pick is Redfin (RDFN), which has been mostly a bust since coming public two years ago but showed overwhelming buying after earnings last week. As with most names, try to enter on some weakness.
| Stock Name | Price | ||
|---|---|---|---|
| Acceleron Pharma (XLRN) | 75.11 | ||
| Alteryx (AYX) | 132.78 | ||
| Amazon.com (AMZN) | 2.00 | ||
| Appian (APPN) | 46.48 | ||
| Envestnet (ENV) | 77.12 | ||
| Invitae (NVTA) | 32.06 | ||
| iRhythm Technologies (IRTC) | 51.15 | ||
| Redfin (RDFN) | 40.40 | ||
| Sunrun (RUN) | 38.40 | ||
| Survey Monkey (SVMK) | 19.97 |
The overall market remains in an uptrend, as do most leading stocks, and that’s why we remain mostly bullish. But while we’re positive, we’re not pounding the table, partly because of some secondary measures (most broader indexes haven’t hit new highs in a month) but mostly because individual stocks aren’t offering up many great entry points. Tonight, then, we’re again standing pat, happy to ride our winners but monitoring earnings season closely, both for stocks we own and for those we want to buy.
In tonight’s issue, we go over a few new ideas, including a couple of IPOs from last year that were nailed but are now coming back from the dead; they could be morphing into leaders. And as usual we go over all of our current holdings and our updated watch list.
In tonight’s issue, we go over a few new ideas, including a couple of IPOs from last year that were nailed but are now coming back from the dead; they could be morphing into leaders. And as usual we go over all of our current holdings and our updated watch list.
The rollout of the new 5G technology is an evolution that is thrusting the world into a digital age that will change the world. This new technology will have a huge effect on the market in 2020 and beyond.
Companies that benefit from 5G have a powerful catalyst for growth that will push stock prices to a new level. But finding stocks in the area that are still cheap and defensive in a pricey and uncertain market is a challenge.
In this issue I identify a company that is defensive and high dividend-paying. But, unlike most stocks in that area, it is still reasonably priced. At the same time, the company has massive exposure to 5G and a huge catalyst for growth. With this company you can play offense and defense at the same time.
Companies that benefit from 5G have a powerful catalyst for growth that will push stock prices to a new level. But finding stocks in the area that are still cheap and defensive in a pricey and uncertain market is a challenge.
In this issue I identify a company that is defensive and high dividend-paying. But, unlike most stocks in that area, it is still reasonably priced. At the same time, the company has massive exposure to 5G and a huge catalyst for growth. With this company you can play offense and defense at the same time.
In the field of speech recognition software, this stock is a pioneer with plenty of room to grow. The company is known for its Dragon Naturally Speaking software package, which makes dictation faster and nearly as accurate as typing. It also allows users to control computer programs and send emails by voice command.
The market has snapped back in a surprisingly strong fashion, but breadth has narrowed, so I’m still suspicious of this rebound. However, there are still plenty of great charts as well as stories to go along with them, and today’s recommendation is one of them. In fact, you may even be a user of the company’s products!
As for the current portfolio, there are no changes today.
Details in the issue.
As for the current portfolio, there are no changes today.
Details in the issue.
Current Market OutlookThere’s nothing bad to say about the market’s quick rebound two weeks ago and its ability to hold those gains—at the very least, such action from the big-cap indexes and many leading stocks is a good longer-term sign. But it’s also important to look at all of the evidence, and on that front, things are mixed—broader indexes are still hanging around their 50-day lines (acceptable, but not overly powerful) and the number of names hitting new highs has dried up. That doesn’t necessarily portend doom, but it does describe an environment that’s a bit more hit-and-miss, especially with a ton of earnings reports set to be released. Overall, you should remain bullish, but be a bit discerning on the buy side, looking for names that have shown excellent recent strength and volume.
This week’s list has many stocks that meet that criteria, including a few that have popped after earnings. Our Top Pick is Lumentum (LITE), which recently came out of a very long launching pad and, after a four-week rest, has taken off after earnings.
| Stock Name | Price | ||
|---|---|---|---|
| AAXN (AAXN) | 87.11 | ||
| Bilibili (BILI) | 28.71 | ||
| Bill.com Holdings (BILL) | 88.76 | ||
| DocuSign (DOCU) | 107.98 | ||
| GDS Holdings Limited (GDS) | 80.15 | ||
| Insmed Inc. (INSM) | 30.64 | ||
| Lumentum (LITE) | 87.00 | ||
| Nuance Communications, Inc. (NUAN) | 25.35 | ||
| Old Dominion Freight Line Inc. (ODFL) | 221.91 | ||
| Scotts Miracle-Gro (SMG) | 155.72 |
Updates
After a strong end to last week—the Nasdaq joined the Dow and S&P above its 200-day moving average on Wednesday—the market is pulling back a bit to start April, but we don’t think there’s any cause for alarm yet. We are putting WYNN on Hold today, after the company reported continued weakness in Macau last night.
The Cabot Emerging Markets Timer continues to give a Buy signal, so we’re maintaining our strategy of slowly increasing our exposure. Today, we have no changes to our portfolio.
Many Smart Investing portfolio stocks are trading in narrow, sideways price ranges, since having a strong initial rebound from the winter’s stock market correction. Those trading ranges give us good guidance on how to proceed with stocks.
If market trends continue to improve, I’ll consider taking on more risk in the portfolio—but only if I think we’ll be well compensated for it. There are no ratings changes this week, and none of our stocks reported.
Continue to lean bullish, but keep some powder dry. Selling pressures remain light, but we still want to see more strength among growth stocks before getting heavily invested. There are no changes in the Model Portfolio tonight; we own six stocks and hold a cash position near 40%.
Overall, the market looks healthy, and we think you can continue to get a little more aggressive, putting cash to work and taking on a little more risk if you’re comfortable with it.
Occasionally, I will lower ratings on stocks that rose too far, too fast, and raise ratings on the stocks that present the best opportunities. Today, I’m raising the ratings on Carnival (CCL) and Vulcan Materials (VMC) to Strong Buy, and I’m lowering the rating on FedEx (FDX) to Hold.
Another week of modest gains has investors moving back into stocks, and the major indices are around breakeven for the year.
The Cabot Emerging Markets Timer continues to give a buy signal, so we’re maintaining our strategy of increasing our exposure. Today, we are increasing our half position in SBGL to a full Buy.
The broad market strengthened further this week, and I’m putting Equifax (EFX) back on Buy today for investors with cash to put to work.
There are no new earnings reports, dividend changes or stock repurchase news to report, but I’m raising the rating on Adobe Systems (ADBE) from Hold to Buy, after the stock pulled back a little, and I’m lowering the rating on Universal Electronics (UEIC) from Strong Buy to Buy because the stock has had an aggressive run-up.
As compared to the last month, this was a relatively subdued week. Stocks fell modestly, with large caps giving back a mere 0.1% and small caps giving back 0.7%.
Alerts
Coverage of the shares of this insurance company was just initiated at Credit Suisse with an ‘Outperform’ rating.
The top five holdings of this fund are: Amazon.com Inc (AMZN, 23.60% of assets); The Home Depot Inc (HD, 7.51%); Walt Disney Co (DIS, 5.57%); Comcast Corp Class A (CMCSA, 5.42%); and Netflix Inc (NFLX, 4.84%).
Change out an international fund for a worldwide fund.
Here’s a recommendation to change out an international fund for a worldwide fund, in which the majority of assets are invested in the United States.
This human resources solutions provider beat analysts’ earnings estimates by $0.20 last quarter.
This is an unscheduled interim update to let you know that the next full issue of Cabot’s 10 Best Marijuana Stocks will be published Thursday, August 30.
One of the stocks in our portfolio popped after it reported Q1 earnings but, for the most part, has been trending down since.
Three analysts have increased their EPS estimates for this energy firm.
This tech company is a new spin-off and just received a contract to provide the U.S. Postal Service with maintenance and development support of its over 700 applications.
Three of our portfolio stocks reported earnings this week.
While biotech shares have been pressured of late, this fund is entering its historically best season.
Our second recommendation is some profit-taking.
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.