Issues
The market remains in good shape, generally shrugging off a stream of bad news by marching higher. Pullbacks are certainly possible, but most investors are positioned cautiously, which is another arrow in the bulls’ quiver when looking down the road.
In tonight’s issue, we’re putting another chunk of money to work by adding two half-sized positions (one in a stock we already own). That will leave us with 25% in cash.
Elsewhere in the issue, we write about a couple of additional positive longer-term signs for the market (one based on money flows, one based on the market itself), look at some new ideas and review all of our Model Portfolio holdings.
In tonight’s issue, we’re putting another chunk of money to work by adding two half-sized positions (one in a stock we already own). That will leave us with 25% in cash.
Elsewhere in the issue, we write about a couple of additional positive longer-term signs for the market (one based on money flows, one based on the market itself), look at some new ideas and review all of our Model Portfolio holdings.
The market contributed to the bullish mien of the show, with the Dow Jones Industrial Average kicking in an 8.5% gain since our last issue. The economy also did its part; rates are stable right now, and the job market continues to improve. There is currently, on average, less than one potential employee for every job opening in our country.
Our contributors continue to be bullish, although with a cautious stance, as you’ll see reflected in our Advisor Sentiment Barometer and Market Views.
Our contributors continue to be bullish, although with a cautious stance, as you’ll see reflected in our Advisor Sentiment Barometer and Market Views.
Market trends remain quite positive, and I continue to recommend that you work to get more invested. According to our market timing indicators, the odds are still very good that months from now, the market will be higher.
With today’s recommendation, I jump back on the growth track, with a stock that we sold for a 61% profit last year. The company has one of Mike Cintolo’s favorite growth stories, and if you owned it then, maybe you’d like to own it again, too.
As for the current portfolio, overall, we’re making great progress as the bull market pulls our stocks along; four are hitting new highs! But not all stocks are participating, and now it’s time to sell one. Details inside.
With today’s recommendation, I jump back on the growth track, with a stock that we sold for a 61% profit last year. The company has one of Mike Cintolo’s favorite growth stories, and if you owned it then, maybe you’d like to own it again, too.
As for the current portfolio, overall, we’re making great progress as the bull market pulls our stocks along; four are hitting new highs! But not all stocks are participating, and now it’s time to sell one. Details inside.
Current Market OutlookMost major indexes have finally taken a bit of a breather during the past few trading days, with the 200-day moving average providing a bit of logical resistance. So far, the damage has been very limited and, in fact, many leading growth stocks actually hit new highs today. Without predicting any specific path, the big prior run, overhead resistance and still-iffy longer-term trend probably means more choppiness and potholes are on the way, especially as earnings season continues. But the overall evidence (which, by the way, includes a lack of meaningful pullbacks so far) continues to impress. We still think the next big move from here is up, but be sure to pick your spots (and your stocks) on the buy side, and practice patience with your strongest performers, giving them a chance to continue advancing.
This week’s list sports a bunch of recent earnings winners from a variety of industries. Our Top Pick is Array Biopharma (ARRY), which has shown fantastic accumulation pre- and post-earnings as it lifted to all-time highs.
| Stock Name | Price | ||
|---|---|---|---|
| Array Biopharma (ARRY) | 46.35 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| Columbia Sportswear (COLM) | 102.15 | ||
| Glaukos Corp. (GKOS) | 67.84 | ||
| Kirkland Lake Gold (KL) | 51.30 | ||
| LPL Financial Holdings (LPLA) | 85.22 | ||
| Palo Alto Networks (PANW) | 236.92 | ||
| Paycom Software (PAYC) | 0.00 | ||
| Spirit AeroSystems (SPR) | 92.54 | ||
| Zendesk (ZEN) | 82.19 |
Emerging market stocks remain in an uptrend, though like most stocks around the globe, a little resting wouldn’t be uncalled for after the recent run-up. Even so, with our Emerging Markets Timer still green, we’re looking to add exposure at opportune times.
Tonight, I see two opportunities—one from the less-followed area of Southeast Asia, and one from China, as one of our watch list stocks is being upgraded to buy. Many of our recommendations are making solid progress, and I’m optimistic both of these can be leaders going forward.
Tonight, I see two opportunities—one from the less-followed area of Southeast Asia, and one from China, as one of our watch list stocks is being upgraded to buy. Many of our recommendations are making solid progress, and I’m optimistic both of these can be leaders going forward.
I’m happy to say that the market is looking better, with the Dow Jones Industrial Average seeing a 6.8% improvement since last issue. I think investors were relieved that the government shutdown was over (although, we don’t know if that will last!). As well, unemployment (not counting the shutdown consequences) is still steady, consumer confidence is up, and housing prices look pretty stable right now. All of that positive news is reflected in our contributors’ market sentiment, as you’ll see in our Market Views section.
Today I’m highlighting three different types of trading opportunities: buying stocks in the days leading up to earnings reports, buying stocks when they fall a silly amount on neutral or good news, and putting great stocks on watch as we await pullbacks. There are many changes in Buy recommendations today, reflecting both dramatic changes in year-to-date price action and significant earnings revisions as Wall Street contemplates final 2018 numbers and solidifies their 2019 earnings projections. I’m not trying to be fickle! I’m just trying to stay on top of the facts so that you can have a clear idea of where tomorrow’s profitable opportunities can be found.
Market trends remain quite positive, and I continue to recommend that you work to get more invested. According to our market timing indicators, the odds are still very good that months from now, the market will be higher.
Today’s recommendation is a well-known medical stock that’s temporarily a bargain, chosen for both diversification and the fact that the broad market, which has surged higher since Christmas, is due for a real correction.
Today’s recommendation is a well-known medical stock that’s temporarily a bargain, chosen for both diversification and the fact that the broad market, which has surged higher since Christmas, is due for a real correction.
Current Market OutlookIt’s been six weeks since the market bottomed, and the evidence since then has steadily improved—whether it was the blast off from the lows (2-to-1 Blastoff Indicator), the lack of any sustained selling since, the amazing upside breadth or the increasing number of setups and breakouts among growth stocks, it’s all been going the bulls’ way. Of course, now that the market has basically marched ahead for six weeks, things could easily get trickier; even some intermediate-term measures (84% of NYSE stocks above their 50-day lines) are stretched. That’s no reason to worry (longer-term, such power is probably a good sign), but we’d be looking to buy mostly on dips, though we’re still interested in the occasional earnings breakout, too. And, as things head higher, don’t forget to book some partial profits along the way. We’re bumping up our Market Monitor another notch tonight.
This week’s list is another diverse set of stocks that are acting well. Our Top Pick is Entegris (ENTG), where an upcoming merger (and a uptick in the chip group) has investors piling in.
| Stock Name | Price | ||
|---|---|---|---|
| Boeing (BA) | 432.22 | ||
| Cree, Inc. (CREE) | 67.96 | ||
| CyberArk (CYBR) | 111.74 | ||
| Elastic (ESTC) | 86.17 | ||
| Entegris (ENTG) | 48.08 | ||
| ServiceNow (NOW) | 341.86 | ||
| Smartsheet (SMAR) | 44.12 | ||
| Spirit Airlines (SAVE) | 57.03 | ||
| Woodward (WWD) | 111.91 | ||
| Zscaler (ZS) | 126.22 |
Today I am fulfilling your dreams and profiling a company that specializes in tax collection. Three cheers for taxes!
Seriously, nobody likes taxes. With the exception of state treasurers. Taxes are just one of those parts of life that you’d prefer to ignore. But if you’re a retailer you can’t do that. In fact, retailers across the U.S. - and the world for that matter – have to devote more and more attention to sales tax compliance.
That’s the big picture trend powering one company’s growth. All the details are inside this month’s Issue. And I promise, it’s going to be more interesting than you think!
Seriously, nobody likes taxes. With the exception of state treasurers. Taxes are just one of those parts of life that you’d prefer to ignore. But if you’re a retailer you can’t do that. In fact, retailers across the U.S. - and the world for that matter – have to devote more and more attention to sales tax compliance.
That’s the big picture trend powering one company’s growth. All the details are inside this month’s Issue. And I promise, it’s going to be more interesting than you think!
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
Steel stocks are surging today, most likely triggered by the unfortunate news of corruption at Kobe Steel. The Cabot Undervalued Stocks Advisor portfolios currently hold two steel stocks.
The top five sectors in this fund are: Consumer Discretionary (27.8% of assets); Technology (18.9%), Financial Services (16.9%), Industrials (11.1%) and Consumer Staples (8.6/5).
The top three sectors in this fund are Technology (40.39% of assets), Financial Services (15.27%), and Consumer Cyclicals (11.47%).
After Madison Square Garden and Brink’s this fund’s next three largest holdings include: Twenty-First Century Fox Inc Class B (FOX, 8.36%); S&P500 Emini Fut Sep17 Esu7, 6.18%) and Encore Capital Group Inc (ECPG, 4.81%).
I want to point out a problem that I foresee, potentially on the scale of the technology bubble in 2001 and the housing bubble in 2007. I think we’re going to have an “inverse ETF bubble.”
Wall Street is expecting double-digit growth from this beverage company over the next five years, and the shares were just initiated at Macquarie, with an ‘Outperform’ ranking.
Two of our stocks are closing in on price targets, plus a list of great stocks to buy today.
I’m pleased to introduce myself as the new chief analyst of Cabot Benjamin Graham Value Investor. I look forward to serving you with the best value stock recommendations to help you reach your investing goals. But first, let me tell you a bit about myself and my investing philosophy.
Our first idea is an income-property owner whose shares recently crossed above their 50-day moving average—a bullish indicator. Our second recommendation is a sale of a financial company.
Our second recommendation is a sale of a financial company.
One of our stocks has reached medium-term upside price resistance, and tips on how to trade another.
The top five holdings of this ETF are Itau Unibanco Holding SA ADR (ITUB.SA, 9.00% of assets); Vale SA ADR (VALE.SA, 7.56%); Bank Bradesco SA ADR (BBD.SA, 7.09%); Ambev SA ADR (ABEV.SA, 6.00%) and America Movil SAB de CV Class L (AMXVF.MX, 4.89%).
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.