WHAT TO DO NOW: Earnings season remains a landmine of sorts, though we have seen some names find support later in the week. This bulletin is in regards to MasTec (MTZ), which, frankly, reported a totally unexpected sour quarter and poor outlook, which is leading to a big break today. We’ll sell half of our shares and hold the cash for now, leaving us with around 41% on the sideline. Details below.
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Following this morning’s jobs report, the market is up modestly—as of 945 am, the S&P 500 is up 0.6% and Nasdaq is up 1.0%, though growth stocks remain mixed.
While it’s not all bad, the rough earnings season continues, with more and more names being dented on their reports, or solid initial reactions quickly fading. To be fair, though, we’re not sure the environment can be blamed for MasTec (MTZ), which released Q2 results last night: All signs (stock-wise and fundamentally) were pointed in the right direction heading into the report, but the firm ended up saying some customers were delaying projects and, as a result, cut guidance for the rest of the year as the backlog (while up 22% from a year ago) fell from the prior quarter.
The company still sees 30%-ish earnings growth this year, but obviously the market is worried about the loss of business momentum, leading to a sharp downmove today. We’ll follow our recent plan and sell half of MTZ and hold the rest. SELL HALF OF MTZ, HOLD THE REST
That will leave us with 41% in cash, which we’ll hold onto right now, though we’re staying flexible—this growth stock downturn could go on for a bit, in which case we could prune even further. On the other hand, all of our market timing indicators are generally in good shape and a lot of stocks are holding up reasonably well, with a few snapping back nicely from recent dips (like CFLT yesterday).
Right now, we’re still of the mind that growth stocks are in rough waters, and the overall market might be in the throes of its first “real” pullback—though, longer-term, the odds are still very much in favor of this resolving to the upside. If that changes, then we’ll change, but right now we think downshifting a couple of gears makes sense as we wait for the selling to finish up.
We’ll have more details on all our stocks in next Thursday’s issue. Don’t hesitate to email me directly at mike@cabotwealth.com with any questions.
