Issues
Emerging markets have stayed strong into the second quarter, with China leading the way and calming markets by delivering 6% economic growth.
Inside this issue is a new recommendation with a play on a market some estimate as large as $94 trillion over the next two decades. The company delivers a key ingredient that turns steel into “super steel” and plays a key role in electrifying the grid.
Inside this issue is a new recommendation with a play on a market some estimate as large as $94 trillion over the next two decades. The company delivers a key ingredient that turns steel into “super steel” and plays a key role in electrifying the grid.
The market remains in good health, and all Cabot’s market timing indicators are positive, telling us the odds are that the market will be higher in the months ahead.
For today’s recommendation we move outside the U.S. to a Chinese company targeting a mass market, a mass market that is virtually guaranteed to grow in the years ahead. It’s a stock that not known to most U.S. investors, and I think it’s a good buy here.
As for the current portfolio, some stocks are hitting new highs and many are close to it, while our value-based selections and Heritage stocks still show long-term potential.
For today’s recommendation we move outside the U.S. to a Chinese company targeting a mass market, a mass market that is virtually guaranteed to grow in the years ahead. It’s a stock that not known to most U.S. investors, and I think it’s a good buy here.
As for the current portfolio, some stocks are hitting new highs and many are close to it, while our value-based selections and Heritage stocks still show long-term potential.
Current Market OutlookLast week was a solid one for the market, not necessarily in the major indexes but in the action of leading stocks, many of which bounced nicely off key intermediate-term support. Looking at the evidence, the vast majority of it is bullish, so we are, too—we’re bumping our Market Monitor up to a level 8 in tonight’s issue. That said, earnings season is just getting underway for most stocks, which will obviously be important. There will surely be the usual ups and downs, but we’ll be looking to see if any new leadership emerges or, conversely, if some of the leading stocks that have had good moves show abnormal weakness.
In the meantime, we’re just following the system, looking for strong stocks that are relatively early in their overall runs. Our Top Pick this week is Okta (OKTA), which looks to be resuming its run after a seven-week rest.
| Stock Name | Price | ||
|---|---|---|---|
| Armstrong World (AWI) | 88.01 | ||
| Avalara (AVLR) | 102.00 | ||
| The Walt Disney Company (DIS) | 144.76 | ||
| Heico (HEI) | 134.84 | ||
| Marvell Technology Group (MRVL) | 36.88 | ||
| Nexstar Media Group (NXST) | 105.68 | ||
| Okta, Inc. (OKTA) | 148.41 | ||
| Yeti Holdings (YETI) | 42.80 | ||
| Yext Inc. (YEXT) | 21.32 | ||
| Zscaler (ZS) | 126.22 |
The past few weeks have been choppy and challenging for many growth stocks, but we’re happy to see some of the yellow flags from last week be addressed--our Cabot Tides, which were on the fence, are again positive, and most growth stocks that dipped to support have found buyers. Of course, there remain some worries (earnings season is coming up; relatively few stocks are hitting new highs), but most of the evidence remains bullish
Tonight, in fact, we’re putting some of our sidelined cash back to work by averaging up in one stock and starting with a half-sized position in another, which will leave us with 17% cash.
In tonight’s Cabot Growth Investor, we talk about all our current holdings, highlight one beaten-down sector we’re keeping a distant eye on for a new upturn, as well as look at some little-known names that are on our watch list.
Tonight, in fact, we’re putting some of our sidelined cash back to work by averaging up in one stock and starting with a half-sized position in another, which will leave us with 17% cash.
In tonight’s Cabot Growth Investor, we talk about all our current holdings, highlight one beaten-down sector we’re keeping a distant eye on for a new upturn, as well as look at some little-known names that are on our watch list.
I’ve just spent two glorious days cleaning out my flower beds and planting my annuals. Cleaning up my yard reminds me that it would also be a good time to review your portfolio—get rid of the non-performers and make room for some more profitable investments.
The volatility in the market has abated—for now—with the Dow Jones Industrial Average gaining about 600 points since the last issue. And as you’ll see in Market Views and our Advisor Investment Barometer, the investment pros continue to be bullish. The economy continues to be strong, with decent housing and manufacturing numbers, as well as low unemployment.
The volatility in the market has abated—for now—with the Dow Jones Industrial Average gaining about 600 points since the last issue. And as you’ll see in Market Views and our Advisor Investment Barometer, the investment pros continue to be bullish. The economy continues to be strong, with decent housing and manufacturing numbers, as well as low unemployment.
The market remains in good health, though selectivity remains important.
For today’s recommendation we swing back to the more conservative side of the market with a very big, very well known company whose stock has just begun a new uptrend.
As for the current portfolio, we have five stocks hitting new highs in recent days, and none doing poorly, so overall, progress is being made! There are no sells today. Details in the issue.
For today’s recommendation we swing back to the more conservative side of the market with a very big, very well known company whose stock has just begun a new uptrend.
As for the current portfolio, we have five stocks hitting new highs in recent days, and none doing poorly, so overall, progress is being made! There are no sells today. Details in the issue.
Current Market OutlookLast week saw a continuation of the market’s rally, with most major indexes (save small caps) lifting to new recovery highs, led by many “old world” sectors like financials, mining, transports and the like. Meanwhile, many hot growth stocks (mostly technology) lagged, with a bunch falling to key intermediate-term support. What does it mean? As we wrote in Friday’s update, you should take things on a stock-by-stock basis—most stocks still look great, and if you have some winners, you should continue giving them a chance to crank higher. But it’s important not to be complacent, either, so be sure to honor your loss limits and stops in case the selling in growth stocks continues and/or the selling spreads to other corners of the market. Overall, we remain mostly bullish as most of the evidence continues to point up.
Not surprisingly, this week’s list has many newer names to the publication as the buying power rotates to other areas. Our Top Pick is Wynn Resorts (WYNN), which, along with many gaming peers, looks to have changed character last week. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Acacia Communications (ACIA) | 51.83 | ||
| Advanced Micro Devices (AMD) | 82.24 | ||
| Amphenol (APH) | 91.75 | ||
| Autohome (ATHM) | 98.65 | ||
| Cabot Microelectronics (CCMP) | 156.17 | ||
| Delta Air Lines (DAL) | 54.28 | ||
| Lennox International (LII) | 270.56 | ||
| Lululemon Athletica (LULU) | 304.69 | ||
| Rio Tinto plc (RIO) | 57.05 | ||
| Wynn Resorts (WYNN) | 121.08 |
This month we’re wading deeper into the MedTech space with a life sciences company that’s commercializing a disruptive technology that could diagnose disease in seemingly healthy people.
It’s an exciting story of a young company that appears to be in the early innings of its growth curve, but has made it far enough with respect to technology development, customers and strategic partnerships to attract attention from larger investors.
Revenue was up 60% in 2018, and is projected to keep growing at a rapid rate. All the details are inside this month’s Issue.
It’s an exciting story of a young company that appears to be in the early innings of its growth curve, but has made it far enough with respect to technology development, customers and strategic partnerships to attract attention from larger investors.
Revenue was up 60% in 2018, and is projected to keep growing at a rapid rate. All the details are inside this month’s Issue.
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 set to enter the summer near all-time highs, but leadership has narrowed, volatility has ticked up, and there’s been renewed scrutiny on the AI trade and valuation concerns in some of the market’s biggest winners.
At the same time, the macro backdrop remains a mix of resilience and intermittent turbulence. While economic data continues to hold up, energy prices remain elevated due to the ongoing Iran conflict – which has no end in sight – keeping upward pressure on inflation and yields.
At the same time, the macro backdrop remains a mix of resilience and intermittent turbulence. While economic data continues to hold up, energy prices remain elevated due to the ongoing Iran conflict – which has no end in sight – keeping upward pressure on inflation and yields.
Tech, commodity, AI, and Explorer stocks struggled this week as concern over capital expenditures increased. Mideast tensions intensified and inflation numbers came in yesterday at their highest rate in over three years, fueled by rising energy costs. The combination of anticipated higher interest rates and rising bond yields impacted the price of precious metals, with gold sliding below $4,200 an ounce and silver falling below $64 an ounce.
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.
Alerts
This multinational is facing several challenges, but our contributor believes the shares offer potential as its turnaround ensues.
A wave of selling took a bite out of growth stocks today, including every stock in the Cabot China and Emerging Market Investor’s portfolio. I am taking two actions in response to today’s weakness.
This video gaming company continues to lead the sector with innovations to extend game life and increase player engagement.
Three analysts have increased their EPS forecasts for this IoT company in the past 30 days.
The top five holdings of this video game ETF are Glu Mobile Inc (GLUU, 5.52% of assets); Take-Two Interactive Software Inc (TTWO, 5.04%); NEXON Co Ltd (NEXOF, 4.95%); Webzen Inc (069080.KS, 4.87%) and Ubisoft Entertainment (UBSFF.PA, 4.79%).
One of our stocks reported much better-than-expected third-quarter results yesterday afternoon. Investors reacted by pushing the share price up about 8% since the market opened this morning.
One of my top recommendations lost close to 30% on Tuesday after releasing disappointing Q3 earnings results. The quarterly loss was hard to predict because most of the loss was due to unforeseen circumstances.
The big picture is looking better this week. Small caps rode the momentum from the end of last week to a 52-week high yesterday. And early market action today suggests they’ll be able to hold onto those gains.
This jeweler handily beat earnings forecasts, crushing analysts’ estimates by $0.29.
One of our stocks is now rated Sell, simply because it has come so far so fast.
This miner beat analysts’ estimates by $0.05 last quarter and in the last 30 days, 10 analysts have increase their EPS estimates for this year.
The recently-rumored merger between semiconductor companies Marvell Technology Group (MRVL – yield 1.2%) and Cavium (CAVM) was announced this morning.
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.