Cabot Prime Week Ending March 10, 2017
Cabot Growth Investor
Bi-weekly Update March 8: Remain bullish, but keep your eyes open. For the first time in months, we’re seeing some yellow flags, including from our Two-Second Indicator. That said, the trends of the market and most stocks are still positive, and pullbacks have been normal thus far. We have no changes in the Model Portfolio tonight, which continues to hold about 18% in cash.
Bi-weekly Issue March 1: Despite a couple of short-term yellow flags, the market looks good—Trend Lines and Tides are bullish, and the Two-Second Indicator is healthy, so we continue to advise that you stay heavily invested. Mike discusses a new leading theme he sees in the market—mass market for businesses—and highlights three leaders: Shopify (SHOP), Wix.com (WIX) and Square (SQ).
Cabot Top Ten Trader
Movers & Shakers Weekly Update March 10: For the first time since the market kicked off after the November elections, we’re seeing price/volume action that tells us the sellers are stepping up. Buy Ideas: Broadcom (AVGO), Cavium (CAVM), Skyworks (SWKS), Dave & Buster’s (PLAY) and Paycom Software (PAYC). We have seven sells, mostly because they tripped their stops: Box Inc. (BOX), Century Aluminum (CENX), Cheniere Energy (LNG), KLX Inc. (KLXI), Thor Industries (THO) and Yandex (YNDX).
Weekly Issue March 6: Today’s Top Ten offers strong selections in semiconductors, medical technology, basic chemical, financial services, REITs, and other attractive stocks. Our Top Pick, NetEast (NTES), gapped up to new highs on its earnings report in mid-February and has since pulled back to support. This looks like a good opportunity to buy well.
Cabot Undervalued Stocks Advisor
Special Bulletin March 10: Crista recommends selling D.R. Horton (DHI) and moving your capital into a stock with strong earnings growth and a price chart that displays near-term upside opportunity. She names two: PulteGroup (PHM) and Buy BP plc (BP).
Special BulletinMarch 9: Crista reports important news on American International Group (AIG) and H&R Block (HRB), and comments on PulteGroup (PHM) and D.R. Horton (DHI).
Monthly Issue March 7: Today’s featured stocks include Dollar Tree (DLTR), a guest appearance by Assurant (AIZ) and a new addition to the Buy Low Opportunities Portfolio, Thermon Group Holdings (THR).
Special Bulletin March 6: Ongoing problems in China’s travel industry are concerning Crista enough that she is moving Royal Caribbean Cruises (RCL) from Strong Buy to Hold.
Cabot Stock of the Week
Weekly Issue March 7: This week, Tim recommends Martin Marietta Materials (MLM), a stock that is destined to benefit from the renewed vitality (actual and expected) in the housing and infrastructure markets. He’s also selling two stocks, Schlumberger (SLB) and Pillow (Z), to make room for stronger candidates.
Cabot Emerging Markets Investor
Bi-weekly Issue March 9: Featured stocks Autohome (ATHM) and Momo (MOMO) are rated Buy a Half. We’re selling Vale (VALE), which has broken down with many commodity stocks, we’re dropping ZTO Express (ZTO) from coverage, and moving Banco Santander (BSBR) from Buy to Hold.
Cabot Benjamin Graham Value Investor
Weekly Update March 10: Roy’s Weekly Update includes just one summary, Ulta Salon ULTA), which reported quarterly financial results during the past week. He also includes questions from subscribers along with his answers.
Monthly Enterprising Issue March 9: Roy introduces two new stocks this month that hold great promise: Eastman Chemicals (EMN) and Western Digital (WDC). Blackstone Group (BX), LKQ Corp. (LKQ) and Toll Brothers (TOL) are also featured, and there are six new ratings changes.
Weekly Update March 6: This Weekly Update includes summaries for the 10 Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other noteworthy news during the past week and were not reported in Roy’s March 3 Weekly Update.
Monthly Value Issue March 2: No one knows when this stock market rally will end. According to Roy’s evaluation models, stocks are overvalued and due for an extended rest, but now that they’re “free-wheeling” in uncharted territory, it’s also possible that stocks will considerably higher.. Four new stocks are added this month: Danaher (DHR), Nike (NKE), Schlumberger (SLB) and Williams-Sonoma (WSM), and four stocks transition out of the Model and now rated Hold: Alliance Data Systems (ADS), Celgene (CELG), Walt Disney (DIS) and Johnson Controls (JCI).
Cabot Dividend Investor
Special Bulletin March 10: We’re going to book our profits in Costco (COST) today. Today’s sale will likely net us a profit of about 48%, for a total return, including dividends, of about 49%.
Weekly Update March 8: For longer-term high yield investors, General Motors (GM), Pembina Pipeline (PBA) and Verizon (VZ) are all trading at reasonable entry points today. For investors seeking income plus capital appreciation, Carnival (CCL), Prudential (PRU), US Bancorp (USB) and Home Depot (HD) are all poised for further gains. And for safe income investors looking to establish low-volatility long-term positions, PowerShares Preferred Portfolio (PGX) and Xcel Energy (XEL) are both buyable today.
Special Bulletin March 6: GM has officially agreed to sell its European business to Peugeot. The deal was announced this morning and GM is trading slightly higher pre-market. High yield investors who don’t own GM yet should try to buy on pullbacks.
Monthly Issue February 22: You’ll find plenty of great potential portfolio additions in today’s issue. Chloe adds a new 4.7% yielder Verizon (VZ) to the High Yield Tier, and moves Xcel Energy (XEL) to Buy.
Wall Street’s Best Investments
Daily Alert March 10: Thermo Fisher Scientific (TMO) from The Complete Investor
Daily Alert March 9: Conduent (CNDT) from The Turnaround Letter
Daily Alert March 8: iShares US Home Construction (ITB) from Positive Patterns
Daily Alert March 7: GNC Holdings (GNC) and SELL Synchronoss Technologies (SNCR) from Cabot Benjamin Graham Value Investor
Daily Alert March 6: Moog Inc. (MOG-A) from The Cutting Edge
Monthy Issue February 15: In this issue, you’ll see that Growth Stocks are making a huge comeback, starting with our Spotlight Stock, Shopify (SHOP.TO and SHOP). The company operates in one of the fastest-growth sectors—online shopping—and is gathering up customers at a heady pace.
Wall Streets Best Dividend Stocks
Daily Alert March 10: Travelers Companies (TRV) from The Prudent Speculator
Daily Alert March 9: Union Pacific (UNP) from DirectInvesting.com
Monthly Issue March 8: Sentiment remains bullish, as you’ll see in our Market Views, although advisors are turning a bit more cautious. Our contributors continue to find good dividend payers with a long history particularly attractive. And that includes our Spotlight Stock, Xerox (XRX).
Daily Alert March 8: Microsoft (MSFT) from DRIP Investor
Daily Alert March 7: Western Gas Partners LP (WES) from Capitalist Times
Daily Alert March 6: Digital Realty 3.625%-BBB-rated Bonds from Envision Capital Management
This Week’s Q&As
Cabot Undervalued Stocks Advisor
Question: I have two stocks that I am thinking of getting out of and grabbing the profit: AT&T (T) is +56.2% since purchase and Wells Fargo (WFC) is +33.8% since purchase. Should I get out of then or keep holding?
Crista Huff: AT&T (T) is a slow-growth, overvalued stock with a big dividend. If I owned it, I would look to the price chart to time my exit, because I prefer to own stocks with strong earnings growth, on the theory that strong earnings growth leads to growth in the share price.
The price chart looks more attractive than it should, for such a slow-growth stock. It could actually break past 42.50 and rise again. However, I would use a stop-loss order at 41.50. I really don’t like owning overvalued stocks.
Wells Fargo (WFC) is expected to have slow and moderate earnings growth in 2017 and 2018 (December year-end). It’s fairly-valued, with a decent dividend. The company has been mired in a scandal, and such situations tend to affect a company’s bottom line for many more months than investors want to believe. The fair valuation, combined with the scandal, would cause me to sell the stock.
Bank stocks have been faring well recently. I would use a stop-loss at 57, and increase it after WFC breaks past 60.
Question: Crista, are you watching TEVA as a possible undervalued stock?
Crista Huff: Teva Pharmaceuticals (TEVA) is not on my buy list this year because EPS are expected to fall from $5.14 in 2016 to $4.76 in 2017. At this point, EPS are only expected to grow 3% in 2018.
Question: Would it be a good time to use a stop-loss order on AMAT and MU?
Crista Huff: I would suggest using a stop-loss order when you own an overvalued stock that’s rising, or any stock that’s recently risen a dramatic amount, because both situations contain more-than-average risk to the share price.
Regarding Applied Materials (AMAT), earnings per share (EPS) are expected to grow 51.4% in 2017, then grow just 7.2% in 2018 (October year-end). The 2018 P/E is 13.1, almost twice the earnings growth rate. So yes, I would suggest using a stop-loss to protect your downside, since the stock is now overvalued.
Micron’s (MU) situation is different. The company is expected to grow earnings at an attractive rate in both 2017 and 2018 (August year-end), and the stock remains undervalued through 2018. In addition, the share price has been repeatedly climbing and resting since November, which is a healthy chart pattern. If you use a stop-loss order on MU, you might easily be stopped out, only to see the stock continue to rise soon thereafter.
If I owned these stocks, I’d use a stop-loss on AMAT, but I’d let MU freely move without stop losses.
Question: Where does one find Wall Street’s consensus earnings estimates?
Crista Huff: I get mine from Morgan Stanley and from Charles Schwab.
Question: What do you think about General Electric (GE)?
Crista Huff: General Electric (GE) is expected to grow EPS by about 9% this year with a 3.2% dividend; stronger earnings growth is expected in 2018. That’s relatively attractive, especially for a large company.
In the near term, based on the price chart, I expect GE to trade between 29.75 and 31.75. There’s room for about 6% profit in the short term. Based on normal stock market trading patterns, GE could rise past 31.75 after it rests there a while, and that could happen this year.
Cabot Emerging Markets Investor
Question: How can I tell if a stock is “consolidating.?” It seems like a judgment call to me. Not based on observable facts. Is ANET consolidating? Volume is low. Does that mean there are few buyers? Yet the stock is not retreating. So there must be as many buyers as sellers.
Paul Goodwin: One big clue as to whether a stock that’s trading sideways is consolidating or not is that it should have something to consolidate. In the case of Arista Networks (ANET), the stock had a February 17 gap up on huge volume, followed by a follow-through day. So the stock’s calm trading in a tightening range means that buyers and sellers are in near agreement about the value of the stock right now. This is a perfect consolidation because it’s flat, because it followed a big move up and because it’s tightening up.
There’s no guarantee that the next move after a consolidation like this will be up. But if you’re in the market to buy the stock, watching for a breakout to the upside is a pretty good tool.
Cabot Benjamin Graham Value Investor
Question: I have been following your recommendations for a few years. I have done very very well (my portfolio is up 238% since a zero start in May 2010 with additional contributions through this month). I’m not really paying attention to the Models per se, but based on your record, I figure in order to match your performance, I should buy, sell and hold everything you recommend, when you recommend it. I presently have about 90 stocks.
I think I’m doing this right? Comments? (from subscriber D.L.)
Roy Ward: Congratulations! You are doing very well with your investments.
The goal of my presentation of two models with 16 stocks in each is to provide a list of stocks to choose from. Subscribers can then hold the stocks that they choose, whether it’s five stocks or all 32 stocks, and wait until I issue a sell recommendation either because the stock has reached its Min Sell Price or I have determined that the fundamentals and outlook of the company are deteriorating and a sale should be made.
I like your method of investing in all stocks because investing in a wide mix of stocks lowers your volatility.
Currently, I have 66 stocks on my Buy and Hold lists plus another six ETFs. The list of Buy and Hold stocks can be found each month in the Top 275 Google drive on the cloud along with a list of sell stocks with dates of when the buys and sells were made.
Question: In light of the multiple offers of class actions against CBI, do you still think CBI is ok? I was planning to add to my initial position. (from subscriber D.L.)
Roy Ward: I still like Chicago Bridge & Iron (CBI. 30.26; Max Buy Price 37.34). The class action suits occur for every company when there is bad news. The company reported terrible fourth-quarter results. The company’s customers are delaying engineering and construction projects until President Trump’s new policies begin to receive Congressional approval.
Management forecast a substantial increase in new contracts in the second half of 2017, which is good news. Exxon will begin several new projects in the U.S. before the end of 2017, which bodes well for CBI’s large energy division. In my opinion, the current price presents an excellent opportunity to add to your CBI holding.