Cabot Prime Pro Week Ending August 25, 2017
Quarterly Prime Market Report
In this Q2 2017 Prime Market Report, Cabot President Timothy Lutts gives his read on the stock market, looking back at the most recent quarter.
Quarterly Prime Analyst Teleconference
Listen to the Q2 2017 quarterly teleconference where Cabot Analysts answer members’ questions live.
Cabot Weekly Review
In this week’s stock market video, Mike Cintolo talks about the good (big-cap indexes not far from their highs, leading growth stocks are resilient) and bad (intermediate-term trend is sideways-to-down, broad market is unhealthy) of the current market. Thus, Mike advises playing it in the middle--holding strong, profitable stocks, but also holding some cash. Mike also touches on some rotation he’s beginning to see under the surface, as well as diving into many resilient stocks he’s tracking.
Cabot Growth Investor
Special Bulletin August 25: This afternoon’s special bulletin is in regards to Veeva Systems (VEEV), which reported a decent quarter last night, but the shaky market environment overwhelmed the results, causing the stock to get hit hard today—as we write, the stock is more than a point below our mental stop near 58 in volatile trading. Mike is going to hold for the rest of the day, but is sending this message as a heads-up—should VEEV close below 58, we’ll follow the plan and sell our shares Monday.
Bi-weekly Update August 23: The Cabot Tides and Two-Second Indicator are both negative, which tells us to hold some cash and cut back on new buying. At the same time, many growth stocks (including a few we own) continue to act well, so we’re also sitting tight with our strong, profitable stocks. Mike has no changes in the Model Portfolio tonight; our cash position stands at 32%.
Other Stocks of Interest August 18: Follow ups to stocks featured March 15, 2017 (issue 1363) to August 16, 2017 (issue 1374). Since they’re not in the Model Portfolio, you don’t see them followed on a regular basis. However, we are monitoring these stocks, and this listing gives their current momentum status.
Bi-Weekly Issue August 16: Mike reviews all our stocks and writes about the “whipsaw buy signal.” He also tells you to “Let the Stock Make the Decision For You.”
Cabot Top Ten Trader
Movers & Shakers Weekly Update August 25: Mike doesn’t advise rushing for the exits or swearing off the market; he still thinks the overall bull market is intact. That’s why you should still hold on to your resilient, profitable stocks. Right now, though, the onus is on the bulls to help the market resume its longer-term uptrend.
Weekly Issue August 21: The market’s late-week selloff pushed all the major indexes back below their 50-day lines, which is a clear sign the bulls are no longer in control. We’re moving our Market Monitor to a level 5 and advise using some caution here. We’re not overly bearish, but after a long run, the sellers have stepped up and many stocks have broken down, so it’s best to raise some cash and cut back on new buying until the evidence improves. We’re still impressed, though, by the number of decent-looking growth-oriented stocks that are showing up in Top Ten each week. Our Top Pick is DXC Technology (DXC), a huge company (but little known stock) in the IT services field.
Cabot Options Trader and Cabot Options Trader Pro
Note that the current week’s Weekly Update, earnings updates, position updates and stocks on watch are posted on the website in the Market Update section, which is deleted each week.
Stock on Watch August 25: One of Jacob’s favorite strategies is combining bullish option order flow with bullish commentary from fellow Cabot analysts. Cabot Benjamin Graham Value Investor chief analyst Roy Ward and Cabot Undervalued Stocks Advisor’s chief analyst Crista Huff are each following Johnson Controls (JCI).
Trade Alert August 24: Buy-Write: Buy Bank of America (BAC) Stock and Sell October 24 Calls (exp. 10/20) for a net price of $23.16 or less.
Stocks on Watch August 22: Twitter (TWTR) and FireEye (FEYE) seem to hit Jacob’s radar every day for unusual option activity, though he has stayed away because the stocks’ performances have been dreadful.
Stocks on Watch August 21: Two trades are standing out today; one in a former leading stock, Starbucks (SBUX), and one in a current market leader, Nvidia (NVDA).
Trade Alert August 21: Adjust Existing Position: Sell Anheuser Busch (BUD) September 125 Calls (exp. 9/15) for $0.45 or more.
Weekly Market Update August 21: The VIX closed the week at 14.26, lower by 8% on the week. However, while the VIX closed lower on the week, the story was again an explosive move higher mid-week.
Daily Watch List: Order Flow Reading is a strategy Jacob uses to follow the biggest hedge funds or traders into their trades. These are recent large order flows that Jacob has spotted, plus two covered call ideas.
Cabot Undervalued Stocks Advisor
Special Bulletin August 25: GameStop (GME – yield 8.0%) is down 12% this morning after reporting another mixed-but-good quarter yesterday afternoon. GME is rated Hold.
Special Bulletin August 24: Dollar Tree (DLTR) and KLX Inc. (KLXI) reported strong quarterly results. DLTR is rated Buy, and KLXI is rated Strong Buy.
Weekly Update August 22: Last week, Jim Cramer did a TV segment on “broken companies” vs. “broken stocks,” and Crista elaborates on his point. Today’s portfolio changes: Ameriprise Financial (AMP) moves from Hold to Buy, and Andeavor (ANDV) moves from Buy to Strong Buy.
Monthly Issue August 1: Today’s featured stocks include Quanta Services (PWR) and two new additions to the portfolios: Weyerhaeuser (WY) and Alexion Pharmaceuticals (ALXN). Also, Tesoro (TSO) has officially changed its name to Andeavor (ANDV), and TiVo (TIVO) is a Sell.
Cabot Stock of the Week
Weekly Issue August 22: Tim’s pick this week is PulteGroup (PHM), a resilient stock with great growth, a reasonable valuation and is part of a sector that’s holding up well. We think it offers both low risk and solid returns, especially once the market resumes its longer-term advance.
Cabot Emerging Markets Investor
Bi-weekly Issue August 24: While U.S. indexes have been choppy-to-down during the past few weeks, emerging market stocks remain in good shape and our Emerging Markets Timer is positive. Many of our stocks are doing great, but we are cutting our loss in our half position in NetEase (NTES), which is now a Sell. On the flip side, our new recommendation, Sociedad Quimica (SQM) looks like one of the best ways to play the general boom in electric vehicle production in the years ahead.
Bi-weekly Update August 17: The iShares EM Fund has been jumpy, but is still well above its 50-day moving averages, keeping our Buy signal in place, if a little bruised. Paul has one portfolio move tonight: JD.com (JD) to Sell.
Cabot Benjamin Graham Value Investor
Weekly Update August 25: Roy feels investors have become nervous anew as Congress will need to raise the nation’s borrowing limit and, separately, keep the government running when funding runs out at the end of September. Updates on Big Lots (BIG), Blackstone (BX), Johnson Controls (JCI), Lowe’s Companies (LOW), Royal Bank of Canada (RY.TO), Toll Brothers (TOL), Ulta Beauty (ULTA) and Williams-Sonoma (WSM).
Enterprising Model Issue August 10: In this month’s Enterprising Model Issue, Roy highlights five interesting companies that offer great promise, including Citizens Financial Group (CFG) which is the first bank in a very long time that he find’s truly undervalued. Ratings changes: Alliance Resource (ARLP) Buy to Hold, Avigilon (AVO.TO) Hold to Buy, Big Lots (BIG) Buy to Hold, Chicago Bridge & Iron (CBI) Buy to Hold, GNC Holdings (GNC) Buy to Hold, Greenhill & Co. (GHL) Hold to Sell, Spectra Energy (SEP) Hold to Buy, Stifel Financial (SF) Buy to Hold, Ulta Beauty (ULTA) Hold to Buy and WestJet Airlines (WJA.TO) Hold to Buy.
Monthly Value Model Issue August 3: This month’s Cabot Value Model contains a wide variety of stocks as usual, with a slight focus on companies in the technology and financial sectors. This month’s Buy recommendations include conservative stocks that will perform well if the stock market falters a bit during the next couple of months. One new Buy-rated stock: Facebook (FB), and one stock transitions out of the Model: Alliance Data Systems (ADS).
Cabot Small-Cap Confidential
Weekly Update August 25: On average, Tyler’s portfolio was unchanged over the past week. He had a few risers, but also a few underperformers. The portfolio has four positions rated Buy after moving Asure Software (ASUR) to Hold this week.
Monthly Issue August 4: No analysts are following today’s recommendation, Globalscape (GSB), but it has big clients for which its products are absolutely critical. The stock has been on a wild ride this week. Tyler has a hunch he knows why, and we’re going to step in and to try and grab shares at a discount, starting with half a position. One rating change: Asure Software (ASUR) to Buy.
Cabot Dividend Investor
Special Bulletin August 25: Chloe moves GameStop (GME) to Hold, after the company reported earnings last night, and although sales were stronger than expected, EPS fell one cent short of estimates, and the stock is trading nearly 6% lower pre-market.
Weekly Update August 23: Chloe moves Ecolab (ECL) to Hold, leaving us with three Buy-rated stocks: Welltower (HCN), Broadridge (BR) and Carnival (CCL), plus three funds in our bond ladder.
Monthly Issue July 26: Chloe adds Ecolab (ECL), a 94-year-old company with a 31-year history of dividend growth, to the Safe Income Tier. Be sure to read Important Information for REIT Investors in the educational section. One rating change: 3M (MMM) moves to Hold.
Wall Street’s Best Investments
Daily Alert August 25: Marten Transport Ltd. (MRTN) from 2 for 1 Stock Split Newsletter
Daily Alert August 24: Molina Healthcare (MOH) from Cabot Undervalued Stocks Advisor
Daily Alert August 23: ICON Public Limited Company (ICLR) from Dow Theory Forecasts
Daily Alert August 22: Sprint (S) from Top Stocks Under $10
Daily Alert August 21: eBay (EBAY) from The Chartist
Monthly Issue August 16: In this monthly issue, Nancy’s Spotlight Stock is Aegean Marine Petroleum Network (ANW), a company that operates in the Oil Services area. Beaten down by low oil prices, this company is pulling out all the stops to cut costs and expand into new geographical arenas—efforts that are attracting some very interesting institutional interest in its stock. Her Feature article further explores the strategies that the company and its new management team are applying to manage—and expand—the company’s footprint.
Wall Streets Best Dividend Stocks
Daily Alert August 25: Brookfield Renewable Energy Partners (BEP) from The Income Investor
Daily Alert August 24: XL Group (XL) from AlphaProfit Sector Investors’ Newsletter
Daily Alert August 23: Peak Resorts (SKIS) from The Wealth Advisory
Daily Alert August 22: AGL Energy (AGLNY) from Conrad’s Utility Investor
Daily Alert August 21: POSCO (PKX) from Weiss Stock Ratings Heat Maps
Monthly Issue August 9: Nancy’s contributors have found a very nice variety of investments for your consideration this month, beginning with our Spotlight Stock, AT&T (T), which has seen many economic and market cycles, and managed—even with a huge footprint—to keep up with technology and sector innovation and revolution. Nancy’s Feature discusses the coming disrupters in the telecom industry and focuses on the advantages that AT&T offers in this next cycle of change.
This Week’s Q&As
Cabot Growth Investor
Question: You’ve written recently about some stocks that “aren’t early in their overall runs” or “are early in their overall runs.” How do you know this?
Mike: Good question. First, of course, you never know for sure—there’s no surety in the stock market, so something that appears early in its run can always crap out.
Still, the market is an odds game, and by examining longer-term charts you can usually get a sense if a leader is relatively early, or relatively late, in its run. Shopify, for example, broke out from a huge post-IPO structure (about 18 months long) in January and ran straight up to 100 in early June. Historically, an institutional-quality leading stock (i.e., not a two dollar stock or something that trades no volume) won’t top out in five months, as big investors haven’t had a chance to accumulate all the shares they want. Thus, the odds favor the stock having another leg up, assuming we don’t run into a bear market (which I’m not expecting soon).
Conversely, if a stock originally broke out, say, back in July 2016 and has been cranking ahead since then, the odds aren’t as good because it’s been advancing for more than a year. Note: That doesn’t mean the stock is set to top out, but you have to be more on the lookout for red flags, abnormal action and the like the further a stock is into its run.
There’s no magic formula, it’s really just putting the odds more in your favor.
Cabot Small-Cap Confidential
Question: Just talked with Mike Cintolo. He said you may have an opinion on Kopin Corp. (KOPN). I know Cabot followed it in the past and may have made a comment on it a year or so ago.
Tyler: My predecessor followed KOPN years ago, but I never have, formally. I’ve monitored it from a distance just out of curiosity, but have never had quite enough confidence in it to recommend to subscribers. I believe most of the business is with the military, which is tough to gauge for such a small company. While there are always rumors of consumer devices out there, thus far none have gained traction (to my knowledge).
To date, I just haven’t felt like there’s enough momentum to warrant jumping in. That said, I haven’t done a deep dive into the company. I’ve just been watching from the sidelines for years, and feeling glad that that’s where I’ve stayed.
Cabot Dividend Investor
Question: We have a 12 year old grandson who owns 3 shares of DIS. He would like to sell one share and purchase an alternative energy stock with a high dividend because he wants to diversify. Do you have any thoughts which would help him? Thanks for your time.
Chloe: Nice to hear that your grandson is into investing so early!
One option for high-yielding alternative energy stocks is to look at yieldcos, which are holding companies for utility-scale clean energy assets. My favorite right now is NextEra Energy Partners (NEP), which mostly owns wind farms and currently yields 3.8%.
But since your grandson is still young, maybe he doesn’t need such a high yield—lower yields are often more sustainable, and can grow nicely over time. You could look at NEP’s parent company, NextEra Energy (NEE), which yields 2.7%.
NEE is not very volatile, has a solid seven-year history of dividend increases, and generates most of its power from solar and wind installations. (They also own a large rate-regulated Florida utility, which contributes good stability to earnings.) Revenues declined slightly last year, but improved operating margins (they’re at a 10-year high) kept EPS up. Analysts expect high single-digit EPS growth going forward. It does cost a little more than DIS, which might be a problem if he’s only selling one share. Maybe you can make a $47 investment alongside him, and he can learn about joint ventures
Cabot Benjamin Graham Value Investor
Question: I looked over your value call to buy Fleetcor Technologies (FLT) at a max buy price of $148.63 particularly with all the negative headlines around the stock. Are you not concerned about management’s excessive compensation practices or the alleged deception when it comes to fees?
Please see the below Bloomberg article:
https://www.bloomberg.com/news/articles/2017-06-06/fleetcor-called-ceo-s-personal-atm-after-paying-him-300-million
I would appreciate your thoughts on this matter. I am trying to reconcile these things (the cheap valuation and the validity of the claims against the company) in my mind.
Roy: Fleetcor Technologies (FLT 142.45) has struggled during the past 3 years even though sales and earnings have been advancing at a rapid clip. During the past 5 years, FLT has produced annual growth of 21% in sales and 31% in EPS. That’s impressive.
The Bloomberg article that you sent to me (thank you!) explains why investors have been avoiding FLT. I was unaware that CEO Ronald Clarke is a problem.
Mr. Clarke’s heavy-handed style is is a turn-off for many investors. However, the company is dealing with big oil companies and trucking companies, which requires a tough business approach. Charging ancillary fees has become commonplace these days, as evidenced by the myriad of fees charged by airlines. I believe the complaints about fees by short sellers is unwarranted, and is aimed at pushing FLT’s stock price lower to enhance their short sales.
I am concerned about Mr. Clarke’s compensation, though. His greed is apparent, but shareholders voted to keep members of the compensation committee on the board of directors at the annual meeting in June. It appears that Mr. Clarke’s huge compensation package will continue for another year at the least. The only good thing is that the company continues to produce a high profit margin (30%) and return on equity (20%).
I recommend avoiding Fleetcor if you are uncomfortable with Ronald Clarke’s management style and his excessive pay. I will probably continue to recommend FLT in my Cabot Value Model, though, because sales and profits continue to rise under Mr. Clarke’s administration. A majority of Wall Street analysts maintain a buy rating for the stock, and EPS estimates continue to rise.