Issues
Let’s turn our attention to additional profitable opportunities
In that light, I added four extra stocks at the end of this month’s issue; bonus stocks that won’t permanently join the portfolios, but nevertheless offer excellent money-making opportunities today.
In that light, I added four extra stocks at the end of this month’s issue; bonus stocks that won’t permanently join the portfolios, but nevertheless offer excellent money-making opportunities today.
The major indexes have been hitting new highs in recent days, all Cabot’s market timing indicators are currently positive, and our portfolio looks good!
However, there is one sale—of a strong stock that now has less upside potential—as well as one downgrade to hold and one upgrade to buy. Details in the issue.
As to the new addition, with true growth stocks turning strong again, I’m recommending one of the strongest, a provider of hardware that enables ever-faster movement of data in the cloud-computing environment.
Details in the issue.
However, there is one sale—of a strong stock that now has less upside potential—as well as one downgrade to hold and one upgrade to buy. Details in the issue.
As to the new addition, with true growth stocks turning strong again, I’m recommending one of the strongest, a provider of hardware that enables ever-faster movement of data in the cloud-computing environment.
Details in the issue.
Current Market OutlookIt’s not a wild, rampaging bull market, but there’s no question the evidence has improved during the past couple of weeks—earnings season has offered more good than bad, with a decent number of positive reactions and breakouts, and for the first time in months, we’re seeing some follow-on buying (strength leading to more strength), which is typical of what you see in a sustained uptrend. There are still hurdles to overcome (most indexes are still testing the top of multi-month ranges), and short-term, investors are a touch complacent, so we wouldn’t be shocked to see some wiggles or further crosscurrents. But with more stocks acting well and with the trends of the major indexes pointed up, we think extending your line makes sense. We’re nudging our Market Monitor up to a level 7 on tonight’s issue.
This week’s list is chock-full of recent earnings winners, including many that appear to be early in new uptrends. Our Top Pick is Qorvo (QRVO), a well-traded chip maker that’s just staged a wild earnings gap. Start small and preferably on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| Agnico Eagle Mines (AEM) | 79.05 | ||
| Bristol-Myers (BMY) | 66.24 | ||
| Garmin (GRMN) | 97.45 | ||
| Inphi (IPHI) | 120.16 | ||
| Leggett & Platt, Incorporated (LEG) | 49.79 | ||
| MasTec, Inc. (MTZ) | 66.65 | ||
| MurphyUSA (MUSA) | 118.21 | ||
| Qorvo (QRVO) | 129.47 | ||
| TopBuild (BLD) | 111.00 | ||
| TransDigm (TDG) | 599.41 |
This month we’re venturing into the services sector with a stock that fits the Growth at a Reasonable Price (GARP) strategy that’s come back into favor recently. This isn’t a high-flying stock with a new widget or software solution. It’s a pretty basic business really. In all likelihood, it’s insulated from trade wars, and even recessions too.
This little nugget is helping rebuild America’s infrastructure, one road at a time. With funding for road construction and repairs going up, and a long list of acquisition targets to roll into its business, this young company has a bright future.
All the details are inside the November Issue of Cabot Small-Cap Confidential.
This little nugget is helping rebuild America’s infrastructure, one road at a time. With funding for road construction and repairs going up, and a long list of acquisition targets to roll into its business, this young company has a bright future.
All the details are inside the November Issue of Cabot Small-Cap Confidential.
While the broad stock market reaches for new all-time record highs, companies that produce oil and natural gas remain heavily out-of-favor. Yet, with Big Oil stock prices down by as much as 60% since oil prices peaked at over $100/barrel in mid-2014, they look like high-yielding bargains.
In this issue, we outline our bullish outlook for six major oil companies.
In this issue, we outline our bullish outlook for six major oil companies.
Have you noticed that the chatter concerning the U.S.-China trade deal has gone down considerably? It probably reflects a good reset of expectations.
Our emerging markets timer is positive so it pays to be optimistic and keep investing in outstanding companies with strong fundamentals.
Today’s new recommendation has steadily rising net revenues, strong market position, a robust pipeline of products, an extensive family of patents as well as a strong cash flow and a strong balance sheet.
Our emerging markets timer is positive so it pays to be optimistic and keep investing in outstanding companies with strong fundamentals.
Today’s new recommendation has steadily rising net revenues, strong market position, a robust pipeline of products, an extensive family of patents as well as a strong cash flow and a strong balance sheet.
One year ago, soon after marijuana sales became legal in Canada, investors were throwing money at the sector, anxious to get a piece of the action. Today, the opposite is true—getting money for a cannabis business takes real work!
At a new all-time high, this is a tough market to navigate. Sure, the market could stay good for a while. But at this late-stage of the bull market and recovery, how much is left in the tank?
It’s hard to muster the enthusiasm to take on risk to get the last drop of this late stage bull market before the next downturn. While defensive stocks make a lot of sense here, most are very expensive. But there is one place where stock prices are still cheap, value stocks.
Investors have been rotating toward the long-neglected value stocks and they are starting to perk up. These stocks represent a way to get bargains in an expensive market as well as protection from the next downturn. And some stocks even have momentum.
In this issue, I highlight a stock that is one of the best healthcare companies in the world that is perfectly positioned ahead of the world’s most pronounced megatrend. It also offers great value in an expensive market and has recently found upward momentum.
It’s hard to muster the enthusiasm to take on risk to get the last drop of this late stage bull market before the next downturn. While defensive stocks make a lot of sense here, most are very expensive. But there is one place where stock prices are still cheap, value stocks.
Investors have been rotating toward the long-neglected value stocks and they are starting to perk up. These stocks represent a way to get bargains in an expensive market as well as protection from the next downturn. And some stocks even have momentum.
In this issue, I highlight a stock that is one of the best healthcare companies in the world that is perfectly positioned ahead of the world’s most pronounced megatrend. It also offers great value in an expensive market and has recently found upward momentum.
Many major indexes have hit new highs in recent days, and all Cabot’s market timing indicators are currently positive. Conclusion: it’s a bull market and you need to be heavily invested.
But, as always, you need to manage your portfolio. In our own portfolio, eight of our stocks have hit new highs in the past week, which is great. But two of the others are being downgraded to hold because their prospects are less secure.
As for today’s new recommendation, it’s a young, fast-growing company in a high-risk/high-potential market sector. It’s certainly not for everyone, but for aggressive investors, it could be fun.
But, as always, you need to manage your portfolio. In our own portfolio, eight of our stocks have hit new highs in the past week, which is great. But two of the others are being downgraded to hold because their prospects are less secure.
As for today’s new recommendation, it’s a young, fast-growing company in a high-risk/high-potential market sector. It’s certainly not for everyone, but for aggressive investors, it could be fun.
Current Market OutlookThe market had another constructive week, and today, the S&P 500 actually nosed out to new highs, with the Nasdaq close behind. While small- and mid-cap indexes are still further behind, the tenor of the overall market continues to improve—it’s likely not up and away, but the odds continue to favor the next big move being up. Individual stocks remain far trickier, with rotation occurring daily, but our thoughts from last week haven’t changed much: Given the many solid setups out there, a positive earnings season could launch a bunch of new leaders we can hop on (we think we’ve already highlighted some of them), but it’s still up to the bulls to produce a bunch more powerful breakouts in the indexes and individual stocks.
This week’s list is a mix of recent earnings winners and others that are set up nicely ahead of reports this week. Our Top Pick is Vertex Pharmaceuticals (VRTX), which might finally be getting going after years of ups and downs. Earnings are due Wednesday evening so handle with care.
| Stock Name | Price | ||
|---|---|---|---|
| ACADIA Pharmaceuticals (ACAD) | 47.84 | ||
| Allegiant Travel (ALGT) | 170.65 | ||
| Fortune Brands Home & Security (FBHS) | 81.02 | ||
| Lam Research (LRCX) | 268.47 | ||
| Pinduoduo (PDD) | 87.53 | ||
| Reliance Steel & Aluminum Co. (RS) | 117.45 | ||
| Seattle Genetics (SGEN) | 150.85 | ||
| Teladoc, Inc. (TDOC) | 127.95 | ||
| Valero Energy (VLO) | 97.40 | ||
| Vertex Pharmaceuticals (VRTX) | 230.36 |
Updates
The high-flying AI stocks got crushed on Friday. But those stocks started this week higher. Where do we go from here?
The technology-heavy Nasdaq index fell 4% on Friday, and the S&P 500 fell for the week for the first time in 10 weeks. A couple of things spooked investors. The AI trade turned sour after Broadcom (AVGO) reported earnings that included slightly lower revenue projections for its AI chips than were expected. Also, a blowout jobs report strengthened the case for a Fed rate hike by the end of the year.
The technology-heavy Nasdaq index fell 4% on Friday, and the S&P 500 fell for the week for the first time in 10 weeks. A couple of things spooked investors. The AI trade turned sour after Broadcom (AVGO) reported earnings that included slightly lower revenue projections for its AI chips than were expected. Also, a blowout jobs report strengthened the case for a Fed rate hike by the end of the year.
A major economic narrative that took shape in recent years was the decline and (presumptive) inevitable death of the so-called “petrodollar,” as a growing number of countries diversified their foreign exchange reserves away from the U.S. dollar and toward gold and alternative currencies like the Chinese yuan.
WHAT TO DO NOW: The overall market remains in good shape, though we are seeing some exuberance on the upside and also a few leaders begin to act sloppy. Near term, then, it’s still a coin flip as to what comes, but the vast majority of intermediate-term evidence remains bullish. In the Model Portfolio, we took partial profits in Marvell (MRVL) earlier this week; tonight, we’re buying a half-sized position (5% of the account) in Bloom Energy (BE), which is extremely volatile but also strong and coming off a few weeks of rest. Our cash position will now be around 28%.
This market just keeps going higher.
Sure, there’s uncertainty out there. The war isn’t over. Inflation and interest rates are still too high. But stocks didn’t get the memo. After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30 and are continuing to make new highs this week.
Sure, there’s uncertainty out there. The war isn’t over. Inflation and interest rates are still too high. But stocks didn’t get the memo. After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30 and are continuing to make new highs this week.
Despite the negative headlines and volatility, stocks just keep going.
After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30. It’s also worth noting that despite the ongoing Iran war, the price per barrel of West Texas Intermediate crude oil closed down 17% for the month of May.
After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30. It’s also worth noting that despite the ongoing Iran war, the price per barrel of West Texas Intermediate crude oil closed down 17% for the month of May.
This week’s Memorial Day observance marked the traditional onset of the summer vacation season for millions of Americans. It’s a time of traveling, sightseeing, picnics and parties. It’s also the peak season for enjoying cold, carbonated beverages like soda pop and energy drinks.
With this dynamic in play, I think it’s time that we give some attention to our holding in PepsiCo (PEP), which is entering a critical period of its sales year.
With this dynamic in play, I think it’s time that we give some attention to our holding in PepsiCo (PEP), which is entering a critical period of its sales year.
On the heels of a miserable March and a euphoric April, I wrote several weeks ago in this space that I thought May would determine which direction the market is truly headed, at least in the intermediate term. We have our answer, and it’s a definitive “up.”
All three major U.S. indexes are touching record highs as of this writing, with the S&P 500 up 4.3% in May, the Nasdaq up 7%, and the slower-moving Dow Jones Industrial inching higher by 1.6%. That’s despite the ongoing Iran war and the accompanying sky-high oil and gas prices, escalating inflation, bond yields at multi-year highs, possible Fed rate hikes later this year, and record-low consumer sentiment.
All three major U.S. indexes are touching record highs as of this writing, with the S&P 500 up 4.3% in May, the Nasdaq up 7%, and the slower-moving Dow Jones Industrial inching higher by 1.6%. That’s despite the ongoing Iran war and the accompanying sky-high oil and gas prices, escalating inflation, bond yields at multi-year highs, possible Fed rate hikes later this year, and record-low consumer sentiment.
Stocks have largely shrugged off this week’s dust‑ups in the Middle East as investors continue to bet on a near‑term memorandum of understanding (MOU) that would reopen the Strait of Hormuz and push bigger sticking points between the U.S. and Iran down the road.
Yields have cooled off this week and continue to do so this morning, thanks to a slightly lower‑than‑expected core PCE reading. April core PCE rose 0.2% month over month, below both March’s 0.3% reading and consensus, giving the Fed some breathing room as policymakers weigh the competing forces of inflation and growth.
Yields have cooled off this week and continue to do so this morning, thanks to a slightly lower‑than‑expected core PCE reading. April core PCE rose 0.2% month over month, below both March’s 0.3% reading and consensus, giving the Fed some breathing room as policymakers weigh the competing forces of inflation and growth.
The $145 trillion global bond market is under some stress due to runaway debt. The 30-year U.S. Treasury bond yielded over 5% last week, up from 4.63% at the end of February. Americans are struggling to keep up with their debt payments, as the cost of borrowing money increases. This is a global story. In Japan, the 30-year government bond yield just hit a record of 4.15%, and U.K. government debt jumped to 5.85% earlier this month.
Nothing stops this market. The S&P 500 hit another new high this week.
The spectacular earnings season helped power the rally. Average earnings growth on the S&P 500 is over 28% in the first quarter. That is far better than the expected 13.1% and the highest level of growth for any quarter since 2021.
The spectacular earnings season helped power the rally. Average earnings growth on the S&P 500 is over 28% in the first quarter. That is far better than the expected 13.1% and the highest level of growth for any quarter since 2021.
We’ve all seen it before: the owner of a home in dire need of structural repair decides to “flip” the house for a quick profit by contracting a restoration service. Instead of making sorely needed foundational repairs, the cleanup crew focuses on superficial fixes like painting, tiling, flooring, etc., in hopes that a shiny new veneer will hide the problems that exist beneath the home’s exterior.
Crude though the analogy may be, I think it’s an apt description of what we sometimes encounter as turnaround investors.
Crude though the analogy may be, I think it’s an apt description of what we sometimes encounter as turnaround investors.
WHAT TO DO NOW: The market and especially most leaders have finally shaken out a bit in recent days, and there are some worries we’re watching, including the rise in Treasury rates and the health of the broad market (our Two-Second Indicator is now negative). Even so, the primary evidence remains in good shape, and while this rest phase could easily take longer if the worries persist, the odds favor higher prices down the road. Tonight we’re making one small move: Averaging up on Axsome Therapeutics (AXSM), buying another 3% position. Our cash position will be around 34%, which we’ll be looking to put to work should the market continue to act properly.
Alerts
Apple (AAPL) has a good earnings report and a stock moves from Hold to Strong Buy.
Coverage of the shares of this global payments processor was just initiated by Bernstein with an ‘Outperform’ rating.
The market had another volatile day, with a big dip early but then with buyers showing up in the afternoon. The Model Portfolio has been holding a good-sized cash position recently, and came into this week with a cash position of 44%. And tonight we’re making a couple more moves that will boost our cash position further.
One of the stocks in our portfolio is involved in a merger. I virtually always advise investors to sell upon receiving buyout offers. However, I admit that owning a debt-free oilfield service company in today’s stock market is enticing. I’ll make my recommendation within a few days.
Today’s pick is a leader in recycling systems for the food retail industry in Europe and the U.S.
One of our portfolio stocks reported a huge earnings beat and moves from Strong Buy to Hold.
This cloud software company’s shares have been receiving Wall Street attention for the past couple of months: BTIG Research upgraded the shares to ‘Buy’.
CNBC is reporting that Boeing (BA) is close to announcing that KLX Inc. (KLXI) is agreeing to be acquired.
Yesterday’s $83 run-up in the share price of this stock outpaced analysts’ projected increase in 2018 and 2019 earnings, which resulted from the strong first quarter earnings report.
Wall Street is forecasting annual growth of 19.98% over the next five years for this homebuilder.
Four of the stocks in our portfolio reported first quarter results today. There are two rating changes.
This manufacturer of leisure boats beat analysts’ estimates by $.09 per share last quarter, and the company is expected to grow 22.3% this year.
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.