Unsurprisingly, the market has been pretty mellow since our last update, with much of Wall Street away for the Memorial Day holiday. Reopening after the long weekend yesterday, the S&P 500 hit its highest level since April 20, although it pulled back slightly intra-day.
Cabot’s market timing indicators show that the intermediate- and longer-term trends of the market are both up, so you can continue to put money to work judiciously. We have one ratings change today—PGX to Hold—but most of our holdings were very quiet over the past week.
HIGH YIELD TIER
BUY – General Motors (GM 31 – yield 4.9%) – GM reported solid April sales growth from China this week. The automaker’s stock is consolidating between its 50- and 200-day moving averages, and trading at a P/E under 5. GM looks buyable here.
Next ex-div date: June 8, 2016
BUY – Mattel (MAT 32 – yield 4.8%) – MAT is trading just under its 50-day moving average. Two analysts have raised their EPS estimates for next quarter in the last 30 days. MAT appears to have solid support around 30, and is a Buy for high yield and total return investors.
Next ex-div date: August 15, 2016 est.
BUY – Pembina Pipeline (PBA 29 – yield 5.0%) – PBA looks solid, trading between its 50-day moving average and its late-April high of 30. Two analysts have raised their 2016 and 2017 estimates in the last 30 days. PBA is buyable here for risk-tolerant high yield investors.
Next ex-div date: June 22, 2016 est.
DIVIDEND GROWTH TIER
BUY – Amgen (AMGN 158 – yield 2.5%) – Amgen will be added to our portfolio at today’s average price (our practice is to add new recommendations to our portfolio on the first trading day of the month.) The company was the subject of a glowing Barron’s article over the weekend, with particular emphasis on two Phase 3 trials to be completed this fall. Already-approved cholesterol drug Repatha could see sales balloon if trial data shows it helps prevent heart attacks in addition to lowering cholesterol. Amgen’s other drug in Phase 3 trials, AMG 334, could become the first FDA-approved treatment to prevent migraines later this year. AMGN is rebounding nicely from May’s pullback and remains a Buy for investors with moderate risk tolerance seeking dividend growth and total return.
Next ex-div date: August 10, 2016, est.
HOLD – Costco (COST 149 – yield 1.2%)
– Costco popped after reporting earnings last Wednesday. EPS of $1.24 were one cent above the consensus estimate and almost 6% higher than in the same quarter last year. However, revenue of $26.5 billion fell short of estimates, and same-store sales were flat year over year, due in part to cold weather and the switch to Visa as Costco’s credit card partner. Excluding the impact of gas price and exchange rate fluctuations, comp sales rose 3%, but still came in below analysts’ estimates. However, revenue from membership fees rose 5.8%, relieving some fears that customers are leaving Costco for Amazon. And analysts are looking forward to the completion of the credit card switch next quarter, and a potential membership fee hike in the near future. The stock is looking a little healthier but still weak, so with data mixed, we’ll keep COST on Hold.
Next ex-div date: August 10, 2016, est.
BUY – CVS Health (CVS 96 – yield 1.8%)
– Odds are good that CVS is bottoming out this week, just above 95. Growth at the company remains strong, and five analysts have raised their current year estimates in the last 30 days. I’m going to keep CVS on Buy for now for medium- and long-term investors interested in dividend growth.
Next ex-div date: July 20, 2016 est.
BUY – Equifax (EFX 126 – yield 1.0%) – EFX continues to power steadily ahead, hitting new highs weekly. Hold it if you own it; feel free to Buy a little if you don’t.
Next ex-div date: August 19, 2016 est.
HOLD – Reynolds American (RAI 50 – yield 3.4%)
– RAI remains in consolidation mode. We’re waiting for the stock to develop solid support above its 50-day moving average before putting it back on Buy.
Next ex-div date: June 8, 2016
HOLD – U.S. Bancorp (USB 43 – yield 2.4%) – USB has held its gains from last week, buoyed by higher expectations of a summer rate hike. The stock next test will be surmounting multi-month resistance around 44. USB is a Hold.
Next ex-div date: June 28, 2016 est.
BUY – Wynn Resorts (WYNN 96 – yield 2.1%)
– WYNN spent this week trading calmly above its 50-day moving average. The casino company’s stock can be volatile but has potential for a strong rebound if Macau’s recovery continues. WYNN is a Buy for risk-tolerant dividend growth and total return investors.
Next ex-div date: August 11, 2016 est.
SAFE INCOME TIER
Next ex-div date: August 8, 2016 est.
HOLD – Guggenheim BulletShares 2016 High Yield Corporate Bond ETF (BSJG 26 – yield 2.6%)
BUY – Guggenheim BulletShares 2017 Corporate Bond ETF (BSCH 23 – yield 1.3%)
BUY – Guggenheim BulletShares 2018 High Yield Corporate Bond ETF (BSJI 25 – yield 4.5%)
BUY – Guggenheim BulletShares 2019 Corporate Bond ETF (BSCJ 21 – yield 1.8%)
No news.
Next ex-div dates: all July 1, 2016, est.
BUY – Home Depot (HD 132 – yield 2.1%) – HD is in consolidation mode after the first quarter’s decelerating same-store sales spooked investors, but I don’t think we have anything to worry about long term. The company is benefiting from a strong U.S. housing market, which is boosting demand for appliances and other home goods. HD is a Buy for all investors.
Next ex-div date: May 31, 2016
HOLD – PowerShares Preferred Portfolio (PGX 15 – yield 5.7%)
– I’m going to officially put PGX in Hold today, since the preferred share ETF is still trading at a premium to its net asset value. With very limited potential for price appreciation, it’s best to buy PGX on dips below 15. We’ll put it back on Buy once it pulls back again.
Next ex-div date: July 15, 2016 est.
BUY – J.M. Smucker (SJM 129 – yield 2.1%) – SJM is consolidating just above its 50-day moving average ahead of earnings. The grocery products company will report earnings June 9, and analysts are currently expecting EPS of $1.19, up 21.4%, on revenue of $1.74 billion, up 20.5%. SJM is a Buy but remember to keep new positions small ahead of earnings.
Next ex-div date: August 10, 2016 est.
HOLD – Xcel Energy (XEL 41 – yield 3.3%) – Xcel remains a solid long-term Hold for regular income, but rate hike news may create volatility in the short term.
Next ex-div date: June 14, 2016
Closing prices as of May 31, 2016.
