Cabot Prime Pro Week Ending July 7, 2017
Cabot Wealth Summit
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Cabot Weekly Review
In this week’s video, Paul Goodwin looks at the state of the market, which is dicey, but not dire. The major indexes are reflecting a rotation away from growth stocks, and emerging market indicators show more weakness in China than in the broad emerging markets universe. The FAANG stocks (Facebook, Amazon, Apple, Netflix and Alphabet), which have delivered so much of the year’s gains in the Nasdaq, have all flattened out. Paul councils caution, but not panic. Keep your loss limits tight and reduce new buying. He also names a few stocks that are resisting the general trend of the major indexes, which is a good indicator of strength.
Cabot Growth Investor
Bi-weekly Issue July 5: We’re selling Tesla (TSLA), taking our small profit and holding the cash. Mike also writes about what we’re seeing in the market’s recent rotation as well as another batch of studies that portend higher prices for the market down the road. We also dive into all our recommendations and present some of our favorite ideas for the next market upleg.
Update on Other Stocks of Interest July 7: Follow ups to stocks featured February 1, 2017 (issue 1360) to July 5, 2017 (issue 1371). 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.
Cabot Top Ten Trader
Movers & Shakers Weekly Update July 7: We still see more positive than negative evidence, though the gap has shrunk a lot during the past week. At this point, we still think the onus is on the bulls to step up after this three-and-a-half-week retreat. Mike gives five buy ideas: Bob Evans Farms (BOBE), ILG Inc. (ILG), RingCentral (RNG), WellCare (WCG) and Zillow (Z), and four sell ideas: Dave & Buster’s (PLAY), Grand Canyon Education (LOPE), Tesla (TSLA) and Yum China (YUMC).
Weekly Issue July 3: This week’s Top Ten contains a mix of resilient growth stocks and new leadership, though for our Top Pick, Mike is going with Citigroup (C), a mega-cap stock that we think has surprisingly large potential if financial stocks continue their recent upmove.
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.
Education – Put Sales July 7: With the Nasdaq down approximately 5% in the last several weeks and many stocks dow by much more, Jacob give some ideas on how to get long at these depressed levels. He typically recommends a Call or Bull Call Spread, with a couple of months until its expiration, just slightly out-of-the-money. This strategy buys some time for the storm to pass. Another way to play a bounce, while at the same time selling insurance and collecting a premium, is to sell puts.
Market Update July 6: The market is seeing a wave of selling pressure again today. Our positions are holding up relatively well but Jacob is seriously debating selling a position as the bears continue to sell into any strength.
Stock on Watch July 5: Jacob’s watch list from the growth/technology sectors has only one stock on it: Alibaba (BABA). Traders continue to add bullish options positions, and the stock has held up remarkably well when compared to the countless other growth stocks that are down 5% to15% in the last couple weeks.
Weekly Update July 3: It’s possible that this week will be quiet because we’re still a couple of weeks away from earnings season and economic data reports will be light this week. However, given the volatility of last week, there’s also the potential for more big moves as the new quarter begins.
Cabot Undervalued Stocks Advisor
Monthly Issue July 5: Today’s featured stocks include Bank of America (BAC) and its CCAR results, Dollar Tree (DLTR) and its prognosis in the wake of the Amazon-Whole Foods merger, and a new addition to the Growth & Income Portfolio, Commercial Metals Company (CMC).
Cabot Stock of the Week
Weekly Issue July 3: Tim’s stock this week is Canadian clothing company Canada Goose (GOOS), which has a chance to be one of the next big brands in high-end retail, which, combined with a shift to more direct-to-consumer business model, should drive earnings significantly higher for many years. Two ratings changes today: Facebook (FB) to Hold, and Weibo (WB) to Sell.
Cabot Emerging Markets Investor
Bi-weekly Update July 6: The iShares EM Fund has been trading mostly sideways since the middle of May, and that has kept the Emerging Markets Timer above its moving averages, but just barely. Paul has two portfolio moves tonight: Tencent Holdings (TCEHY) is now a Hold and Yum China (YUMC) is a Sell.
Bi-weekly Issue June 29: While the Cabot Emerging Markets Time remains technically positive, there’s no doubt that all EM stocks, including many of our own holdings, have been under pressure in recent weeks. Paul is taking steps today to lower our exposure by selling Weibo (WB) and half our JD.com (JD) position, but he’s also adding a strong Korean stock, LG Display (LPL), to the portfolio.
Cabot Benjamin Graham Value Investor
Weekly Update July 7: Roy summarizes the latest news for Alphabet (GOOG), Celgene (CELG), General Motors (GM) and SPDR Gold Trust ETF (GLD).
Enterprising Model Issue June 15: Roy initiates coverage on Thor Industries (THO), which is thriving in the recreation vehicle sector. Demand far exceeds supply in this industry, and Thor is adding two new manufacturing facilities to meet record new orders which have nearly doubled from a year ago.
Monthly Value Model Issue June 8: This month’s Cabot Value Model contains a wide variety of stocks, with a slight focus on companies in the technology and financial sectors. Roy features four companies and one ETF (exchange traded fund): Walt Disney (DIS), Facebook (FB), T. Rowe Price (TROW), UnitedHealth (UNH) and WisdomTree International Hedged Quality Dividend Growth ETF (IHDG).
Cabot Small-Cap Confidential
Monthly Issue July 7: Tyler’s selection this month is a small company in the health care space, given the strength in this group of stocks. The company, AxoGen (AXGN), has a very specific focus on products to treat peripheral nerve injuries, and it’s growing revenue north of 50% annually. One ratings change today: Q2 Holdings (QTWO) moves from Hold to Sell Half.
Cabot Dividend Investor
Weekly Update July 5: Since Chloe’s last update, financials have gained 3.7%, energy stocks are up 3.2%, tech stocks are down 1.3% and utilities have fallen 2.4%. It’s hard to say how much of the rotation is end-of-quarter window dressing and how much represents the new status quo, so I don’t recommend overreacting until we have a little more evidence. Accordingly, Chloe is not making any rating changes today, although she does suggest a few profit-taking opportunities.
Monthly Issue June 28: Chloe is adding Welltower (HCN), a very income-focused play on the healthcare sector, to the High Yield Tier. There are no rating changes in the portfolio, although Verizon (VZ) has weakened and could be sold soon. On the buy side, Broadridge (BR), Carnival (CCL), and Wynn Resorts (WYNN) still look strong, and 3M (MMM), Cummins (CMI) and Pembina (PBA) are offering good buy points.
Wall Street’s Best Investments
Daily Alert July 7: ANI Pharmaceuticals (ANIP) from The Periscope Report
Daily Alert July 6: Edwards Life Sciences (EW) from Shortex Market Letter
Daily Alert July 5: Anavex Life Sciences (AVXL) from BI Research
Daily Alert July 3: Crocs (CROX) from The Turnaround Letter
Monthly Issue June 21: While the Dow Jones Industrial Average has gained some 700 points since our last issue, our contributors and advisors, in general, remain bullish. Our Spotlight Stock is Extreme Networks (EXTR) and Nancy’s feature further examines the networking industry and the phenomenal potential of the company as applications continue to expand for its products and services.
Wall Streets Best Dividend Stocks
Daily Alert July 7: BAE Systems plc (BAESY) from Global Investing
Daily Alert July 6: RLJ Lodging Trust (RLJ) from Sound Advice
Daily Alert July 5: Cardinal Health (CAH) from Sure Dividend
Daily Alert July 3: Bank of Montreal (BMO) from The Income Investor
Monthly Issue June 14: Our issue this month is packed with a variety of great investing ideas, beginning with our Spotlight Stock, Western Digital (WDC), a company that is helping to manage Big Data requirements around the world. My Feature examines the opportunities ahead for this industry and company in more detail.
This Week’s Q&As
Cabot Growth Investor
Question: I own Tesla (TSLA) and of course the stock has fallen out of bed during the past few days. I know you have it as a Sell in Cabot Growth Investor, but don’t you think it can bounce, and should I wait to sell on a rally?
Mike: Yeah, TSLA was a bad situation—the stock literally looked resilient Monday morning as it gapped at the open to 370; three days later, it was down to around 310.
Thus, on a short-term basis, yes, TSLA is “oversold” and could easily bounce, but we’d be careful just holding and hoping. Remember that TSLA and the overall market have had a huge run since the start of the year, so the fact that the stock decisively pierced its 50-day moving average (on huge volume) is a sign of a trend change.
Bottom line, if you want to hold onto some shares, you could, but I would urge you to sell some here to respect the stock’s action; you want to make sure a bad situation doesn’t become very bad should TSLA continue to drop. Of course, this is all within the context of having a loss or no profit—if you own it from way back when (like Tim Lutts has) and have taken partial profits a few times, then you can ride through the correction and see what comes.
Cabot Undervalued Stocks Advisor
Question: Commercial Metals (CMC) is down about 2.5% early today. Is there something wrong or do you view this as a buy-low (or somewhat lower) opportunity? Should I consider it a short-term hold, or longer than 12 months?
Crista: My instinct tells me that today’s price action on Commercial Metals (CMC) is likely a shakeout, prior to a breakout above 20. All the steel stocks are down today, which means that there’s likely nothing specifically wrong, just random market sentiment. I would be very comfortable buying at today’s price.
The stock rose to 24 in December, then had a price correction. I expect it to head back toward 24, then rest before making its next move. That next move will depend on strength in the broader market and sentiment about basic industry stocks. I will often trade out of stocks when they retrace former highs, simply because I expect them to get stuck there or have pullbacks. Then I often re-buy the stocks on the pullbacks.
The company’s 2018 earnings growth prospects are fantastic, so there’s no reason not to anticipate benefiting from a 12-month hold.
Question: Do you have thoughts you’d be willing to share about Procter & Gamble (PG)?
Crista: Regarding Procter & Gamble (PG), I rarely own stocks of big food, pharma and packaged goods companies (e.g. Bristol Myers Squibb, Pepsico), because they’re usually characterized by slow earnings growth and high P/Es. Sure enough, PG fits that description, with EPS expected to grow 4.9% and 6.8% in 2017 and 2018 (June year-end). The 2018 P/E is 21.3. The 3.2% dividend helps that equation a bit, but not enough to make the case for owning the stock.
Just about the only time that I buy that type of stock is during the low point in market corrections. For example, PG fell dramatically during the August 2015 stock market correction, then rose 40% during the subsequent 18 months.
Question: What are your thoughts on Intercontinental Exchange (ICE)?
Crista: Intercontinental Exchange (ICE): Moderate 2017 EPS growth; good 2018 EPS growth; high P/E; 1.2% div. yield; low debt ratio. If I owned it, I’d look to extricate myself from the position because it’s overvalued. I don’t prefer to keep overvalued stocks, because I’m always looking to lower risk wherever I can.
Looking at the price chart, the stock’s been rising for years. I’d use a stop-loss order at 63.50, and raise it as the stock continues to rise. It would eventually sell, of course.
Cabot Benjamin Graham Value Investor
Question: What is your opinion for Celgene?
Roy: Celgene (CELG 131.95) was featured in Barron’s Magazine this week. The article highlighted several factors that could send CELG shares 20% higher during the next 12 months. Sales will likely double between now and 2020, and results from 17 late-stage trials are expected during the next 18 months.
Revlimid, used for the treatment of blood cancers and conditions, currently makes up 62% of Celgene’s total sales, but new drugs are providing considerably more diversification. The company possesses the most productive pipelines in the business. Celgene has treatments in trials for multiple myeloma, lymphoma, leukemia, bone-marrow diseases, solid tumors, and various inflammatory and immunological conditions.
Revlimid lists for more than $100,000 per year for patients and could be scrutinized further by Federal authorities, but President Trump has avoided going after companies producing high-priced drugs. The company has raised the price of Revlimid by an average of 8% a year since 2010.
Celgene’s earnings per share are expected to rise by more than 20% a year through the end of the decade. Shares of Celgene trade at 17.1 times projected earnings for the next four quarters compared to 18.1 times for the Standard & Poor’s 500 index. My two-year target for CELG shares is 177.34.
Cabot Small-Cap Confidential
Question: Is there any update with respect to BioTelemetry’s acquisition of LifeWatch AG? I haven’t seen anything announced, though I believe the deal is set to close soon.
Tyler: Yes! Just this morning, BioTelemetry announced the definitive results of the tender offer, which closed on June 28. Around 97% of LifeWatch’s total shares outstanding were tendered, which is a huge number. The deal will close on July 12. And we should get some insight into management’s plans for the combined company on the next quarterly conference call. This successful tender was expected, but it’s still good news that it’s almost a completely done deal.