Issues
The market remains all over the place, with news- and rumor-driven action pushing the indexes and individual stocks around every day. Our biggest thought remains that, while there’s plenty of evidence that tells us the next major move is probably up, the current environment remains extremely choppy with few stocks hitting new highs and little real money being made. Thus, we remain cautious, holding plenty of cash and going slow on the buy side—although we’re always keeping our eyes open for a sustained turn higher. In the Model Portfolio, we’re a bit more than half in cash and are building our watch list for the next advance.
The market is no longer as healthy as it was, but the bull market is not dead, either, just going through a change of character—a change that helps some of our stocks and hurts others. That’s investing!
As for this week’s stock, it’s a name you may not have heard of yet—it’s young—but lots of Chinese have, as it serves the mass market.
And in the portfolio, there are two changes—one simple sell and one “retirement” of a stock that has achieved its short-term potential but that might still be kept around for the long term.
Details in the issue.
As for this week’s stock, it’s a name you may not have heard of yet—it’s young—but lots of Chinese have, as it serves the mass market.
And in the portfolio, there are two changes—one simple sell and one “retirement” of a stock that has achieved its short-term potential but that might still be kept around for the long term.
Details in the issue.
Current Market OutlookThe market cracked its intermediate-term uptrend last week, with all the major indexes diving below their 50-day lines decisive fashion, and it appeared they could be ready to go over the falls. But as has been the case for months, the market reversed, with a decent-looking bounce to end the week. Overall, the trend of the major indexes remains effectively sideways, with no net progress for five-plus months at this point. And for individual stocks, it’s mostly the same story—we’re still seeing many that are holding up well, but few are going up, so no real money is being made. We’re still game for holding your strong, resilient stocks, especially if they’ve already taken some hits and held support. But we also think it’s best to mostly lay low, holding plenty of cash and being choosy on the buy side until the buyers flex their muscles. We’re dropping our Market Monitor down to level 5.
This week’s list has a good number of names that have recently shown strong accumulation and have held most of their gains, despite the soft environment. Our Top Pick is RingCentral (RNG), which announced a game-changing deal last week that lit a fire under the stock. Dips would be tempting.
| Stock Name | Price | ||
|---|---|---|---|
| Coupa Software (COUP) | 262.20 | ||
| Edwards Lifesciences (EW) | 228.06 | ||
| Lennar (LEN) | 61.85 | ||
| Medicines Company (MDCO) | 56.98 | ||
| Proofpoint (PFPT) | 113.79 | ||
| RH Inc. (RH) | 252.93 | ||
| RingCentral (RNG) | 238.73 | ||
| Seattle Genetics (SGEN) | 150.85 | ||
| Visteon (VC) | 89.82 | ||
| ZTO Express (ZTO) | 28.84 |
It was 2007 when James Morales first realized he had sleep apnea. For over a decade he frequently stopped breathing at night, struggled in life and at work due to chronic fatigue, and his wife was always worried about what could happen if he didn’t get help.
Today, James sleeps like a baby. He rocks out of bed, attacks the day doing house projects and in his job. The best thing is he’s not relying on a CPAP machine – complete with hoses and a face mask – to deal with the sleep apnea.
What was his solution?
It’s all laid out in the October Issue of Cabot Small-Cap Confidential.
Today, James sleeps like a baby. He rocks out of bed, attacks the day doing house projects and in his job. The best thing is he’s not relying on a CPAP machine – complete with hoses and a face mask – to deal with the sleep apnea.
What was his solution?
It’s all laid out in the October Issue of Cabot Small-Cap Confidential.
Some weak economic numbers and political uncertainty about Hong Kong roiled markets a bit but emerging and international stocks rebounded a bit today. China stocks are getting some scrutiny in Washington amidst U.S.-China rivalry. Nevertheless, our new recommendation today is from the Middle Kingdom and is centered on a high growth theme that has a lot of momentum behind it.
The market remains healthy, with all major indexes in uptrends and no major signs of divergence, and thus I continue to recommend heavy investment in stocks that meet your portfolio’s goals.
However, the recent market rotation has seen growth stocks struggling while high-yielding safe stocks thrive—and our portfolio has been adjusting accordingly, week by week. And this week the trend continues, as we sell two more growth stocks.
This week’s recommendation is a small company with a valuable piece of the world’s mobile communications infrastructure, as its trading symbol makes so clear.
However, the recent market rotation has seen growth stocks struggling while high-yielding safe stocks thrive—and our portfolio has been adjusting accordingly, week by week. And this week the trend continues, as we sell two more growth stocks.
This week’s recommendation is a small company with a valuable piece of the world’s mobile communications infrastructure, as its trading symbol makes so clear.
There are five growth stocks in our Cabot Undervalued Stocks Advisor portfolios that offer dividend yields in excess of 5%. That’s crazy! Stocks with rising profits in combination with very large dividend yields are generally uncommon, and can indicate an extreme undervaluation of those companies’ share prices. Dividends can tell you a lot about a company, or about the broader stock market. I cover the dividend topic in more detail in today’s issue.
Texas is booming and has the nation’s second-largest economy behind California would be the world’s tenth largest if it were a stand-alone country. Yet not every company in the Lone Star State is doing well.
In this issue, we cover seven companies there that we believe have appealing turnaround potential.
In this issue, we cover seven companies there that we believe have appealing turnaround potential.
Updates
After two near-record-setting months, stocks are encountering their first real turbulence since March. It’s no surprise.
While stocks go up an average of 10% a year, they rarely do so in a straight line. And after the S&P 500 rallied nearly 20% in April and May and the Nasdaq shot up nearly 30%, a pullback of some kind – or possibly even a true correction – was to be expected. It seems it’s happening all at once.
While stocks go up an average of 10% a year, they rarely do so in a straight line. And after the S&P 500 rallied nearly 20% in April and May and the Nasdaq shot up nearly 30%, a pullback of some kind – or possibly even a true correction – was to be expected. It seems it’s happening all at once.
Stocks look to enter summer near all-time highs, but leadership has narrowed and volatility has ticked up thanks to renewed scrutiny on the AI trade and open-ended questions about valuations in some of the hottest areas of the market.
There’s also been more focus on the evolving macro landscape, which features a resilient U.S. economy but stubbornly high energy prices due to the ongoing Iran conflict, and somewhat elevated yields. We’re now looking at a higher likelihood of a Fed rate hike, with the odds of a hike by December now well over 50%.
There’s also been more focus on the evolving macro landscape, which features a resilient U.S. economy but stubbornly high energy prices due to the ongoing Iran conflict, and somewhat elevated yields. We’re now looking at a higher likelihood of a Fed rate hike, with the odds of a hike by December now well over 50%.
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.
Alerts
This tech company is expected to grow by 35% on average, in the next five years.
One stock reports a slight first quarter earnings beat; and another moves from Strong Buy to Hold.
This small-cap stock has a number of catalysts that should boost revenues and profits in the near-term.
One Stock reports great first quarter results; and two more will report first quarter results on April 17 and 18.
Despite this social media giant’s recent data privacy scandal, there are lots of reasons why the company is here for the long-term. Buy it now at discounted prices.
The shares of this restaurant company were recently upgraded by Deutsche Bank to ‘Buy’.
Two stocks move from Strong Buy to Hold and there is bullish price action another.
Both Citigroup and UBS recently initiated coverage of the shares of this financial behemoth with a ‘Buy’ rating.
The top five holdings in this fund are: Medy-Tox Inc (086900.KS, 2.83%); Cavium Inc (CAVM, 2.58%); Copart Inc (CPRT, 2.35%); Trex Co Inc (TREX, 2.27%); and Knight-Swift Transportation Holdings Inc A (KNX, 2.17%).
This tech services company beat analysts’ estimates by $0.06 per share last quarter.
Our first idea is a company’s whose earnings estimates have been boosted by six analysts in the past 30 days, with estimates increasing $1.28 a share 30 days ago, to $1.66 today.
Our second recommendation is a partial sale of a previous idea.
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.