Cabot Prime Pro Week Ending March 24, 2017
Cabot Growth Investor
Bi-weekly Update March 22: Our Two-Second Indicator remains negative, our Cabot Tides are now on the fence, and the breadth-related yellow flags have led to some strong selling this week. Short-term, it’s best to pare back on any stocks that break down; longer-term, though, we remain optimistic.
Special Bulletin March 21: We’re making four moves tonight. First, we’re going to sell Texas Capital Bancshares, which has decisively broken down due to the sudden weakness in financial stocks. We’re also placing Charles Schwab (SCHW), Netflix (NFLX) and XPO Logistics (XPO) on Hold.
Other Stocks of Interest March 17: Follow ups to stocks featured October 12, 2016 (issue 1353) to March 15, 2017 (issue 1363). 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 March 15: The market’s primary evidence (market’s trend, action of leading stocks) remains bullish, so we do, too. In the Model Portfolio, we have no changes tonight, with a cash position near 18% but all eight of our stocks rated Buy.
Cabot Top Ten Trader
Movers & Shakers Weekly Update March 24: The combination of us tightening our stops in recent weeks and the market’s weakness on Tuesday has led to a bunch of sells this week. Buy ideas include Applied Optoelectronics (AAOI), Cope Holdings (CPA), Royal Caribbean (RCL), Square (SQ) and Wix.com (WIX 67).
Weekly Issue March 20: This week’s Top Ten has another batch of strong stocks with good growth stories from a variety of industries. Our Top Pick is Adobe Systems (ADBE), a liquid leading growth stock that just reacted well to earnings last week.
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.
Position Update March 23: Astra Zeneca (AZN) is making a new multi-month high this morning at 31.30. Our July 30 call position is now at a profit of nearly 100%, but Jacob isI going to set a mental stop at $1.95, a profit of 50%, and go for more upside.
Market Update March 22: Traders looking for a reason for the weakness yesterday and the choppiness today are largely pointing to the uncertainty over the Republican bill to repeal and replace major parts of Obamacare, and whether a failure to do so would delay efforts on tax reform.
Stocks on Watch March 22: Jacob is very intrigued by the relentless call buying in Weatherford (WFT). The trader has been building a massive position for the past two weeks, and is targeting a move higher in this expiration cycle.
Options Education March 22: Yesterday, as the S&P 500 was heading to a 1.2% loss, a trader was aggressively selling April puts in many retailers. Here’s an explanation of put-selling.
Trade Alert March 21: Sell Existing Position: Sell your Symantec (SYMC) April 24 Calls for $5.80 or more.
Market Update March 21: There are strong crosscurrents in the market right now. Here’s what has Jacob bullish and bearish at the same time.
Trade Alert March 21: Adjust Existing Position: Buy back your Microsoft (MSFT) April 67.5 Calls and Sell the April 66 Calls (exp. 4/21).
Weekly Update March 20: The VIX closed the week at 11.28, virtually unchanged on the week. On Friday, many traders I spoke with were chatting about the highest reading ever in the CBOE Skew Index, which measures the price of low strike priced puts, in relation to at-the-money puts.
Cabot Undervalued Stocks Advisor
Special Bulletin March 24: Crista reviews the GameStop (GME) earnings report and concludes that there is far more good than bad happening at GameStop, and we’re getting paid a hefty dividend to wait patiently for future capital appreciation.
Special Bulletin March 23: Crista changed a number in yesterday’s Special Bulletin discussion about the S&P 500, and she failed to subsequently adjust the percentages, so she wanted to issue an update with the correct percentages as they pertain to increases in the S&P’s value.
Special Bulletin March 22: There’s nothing abnormal happening in the market. Stocks don’t go straight up, rather, they bounce around, whether the general trend is up, down or sideways. That said, it’s a little premature to buy low now because most stocks that are having pullbacks have not bottomed yet.
Weekly Update March 21: These Buy-rated stocks most likely to rise more than 5% near-term: BP plc (BP), Blackstone Group (BX), Boise Cascade (BCC), Johnson Controls (JCI), PulteGroup (PHM) and Schnitzer Steel (SCHN).
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).
Cabot Stock of the Week
Weekly Issue March 21: This week’s new stock, Wynn Resorts (WYNN), looks like an emerging winner. After a tough year, the stock has come to life, has plenty of fuel for an impressive rally, and offers rising dividends to boot. As for the current portfolio, Tim is selling Banco Santander Brazil (BSBR) and Texas Capital Bancshares (TCBI), while switching NetEase (NTES) and Berry Plastics (BERY) to Hold. He’s also moving Biogen (BIIB) to Buy.
Cabot Small-Cap Confidential
Special Bulletin March 24: We learned this morning that U.S. Concrete (USCR) dismissed its auditing firm, Grant Thornton, and hired Ernst & Young to take over. Tyler is moving the stock to Hold and will continue to watch the stock carefully.
Weekly Update March 24: Big picture, the small cap index has now broken below its 50-day moving average, but small caps still haven’t given up their post-election rally. There are no ratings changes today.
Special Bulletin March 22: Tyler is closely watching our newest position, Asure Software (ASUR), which recently reported results and is now trading right around the 9.5 to 10 level. The current trading range should represent a nice entry point to add to existing positions, but we’ll need a little support from the broad market to prevent a drop into the low 9s.
Monthly Issue March 3: This month’s stock is Asure (ASUR), a micro-cap company poised to grow on the back of strong employment trends in the U.S. and select international markets. Four of our positions reporting results over the last five days. Three of them, Everbridge, LogMeIn and U.S. Concrete, went well. The fourth, NanoString, was disappointing, and the company’s outlook has caused Tyler to recommend selling your remaining stake in NanoString (NSTR). Everbridge (EVBG) moves to Hold.
Cabot Emerging Markets Investor
Bi-weekly Issue March 23: We have one sell today, Banco Santander Brazil (BSBR) but we’re adding a hot South American airline, LATAM Airlines Group (LFL) to the portfolio. Paul also offers some thoughts on how North Korea might bring the U.S. and China together on one issue.
Cabot Benjamin Graham Value Investor
Weekly Update March 24: This Weekly Update includes summaries for six companies—Alphabet (GOOG), FedEx (FDX), Johnson Controls (JCI), Nike (NKE), Penske Automotive (PAG) and Silver Wheaton (SLW)—that reported quarterly financial results or other important news during the past week.
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.
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 24: GameStop (GME) reported fourth-quarter and full-year 2016 results after the market closed yesterday. Earnings per share beat estimates, but revenues fell short and management’s 2017 EPS guidance disappointed analysts. Chloe is moving GME to Hold today, and we’ll watch what happens over the next few days.
Weekly Update March 22: Chloe is putting General Motors (GM) and Prudential (PRU) on Hold, and selling a third of U.S. Bancorp (USB) and changing its rating to Hold. She’s also going to sell a third of Xcel Energy (XEL) today, simply because our profit has gotten quite large.
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 24: MeetMe (MEET) from Top Stocks under $10
Daily Alert March 23: iShares U.S. Technology (IYW) and Sell T. Rowe Price New Era (PRNEX) from Bob Carlson’s Retirement Watch
Daily Alert March 22: Foot Locker (FL) and Sell LKQ (LKQ) from Dow Theory Forecasts
Daily Alert March 21: Advanced Micro Devices (AMD) from Canaccord Genuity Research
Daily Alert March 20: Arrow Electronics (ARW) from AlphaProfit Sector Investors’ Newsletter
Monthly Issue March 15: Our Spotlight Stock, John Bean Technologies (JBT), is a company that is a hybrid of two interesting sectors—both in the high-growth stage. Nancy’s Feature expands on the company’s winning technologies, focusing on the catalysts that are propelling its progress.
Wall Streets Best Dividend Stocks
Daily Alert March 24: Hormel Foods (HRL) from Sure Dividend
Daily Alert March 23: Hudson Pacific Properties (HPP) from Barclays Capital Equity Research
Daily Alert March 22: Public Storage 5.40% Cumulative Preferred Shares of Beneficial Interest, Series B (PSA.PRB) and Sell Public Storage 5.90% Cumulative Preferred Share of Beneficial Interest, Series S (PSA-S) from Jack Adamo’s Insiders Plus
Daily Alert March 21: British American Tobacco plc (BTI) from Argus Weekly Staff Report
Daily Alert March 20: Alliance Holdings (AHGP) from Richard C. Young’s Intelligence Report
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).
This Week’s Q&As
Cabot Growth Investor
Question: Five Below reported earnings and gapped up strongly on Thursday. I know you had followed this earlier in Cabot Growth Investor—is it a good buy here?
Mike Cintolo: Fundamentally, I continue to enthuse about Five Below’s (FIVE) growth potential—it’s aiming to boost its store count 15% to 20% annually, and when you add in a little same-store sales growth, overall sales should be able to lift 20% annually, with earnings growing a bit faster. Throw in the fact that the stock’s volume on its earnings gap this week was fantastic and I’m definitely keeping an eye on it.
However, I want to buy stocks in uptrends, and right now, you could argue that maybe FIVE is possibly emerging from a long bottoming effort, but that’s about it. Overall, the stock is still trading near its long-term 200-day line and isn’t much higher than it was months ago. Plus, it’s hard not to factor in the still-struggling retail sector and the likelihood that the group’s movements will be influenced by the eventual tax reform debate, which could include some sort of import tax.
All told, there are many positives here, so if you want to buy a tiny position (say, one-third of what you’d normally buy, dollar-wise) and use a stop near the recent lows of 37, that’s fine. But I’d advise holding off any major buying until the stock develops real, positive momentum, which hasn’t occurred for over a year.
Cabot Options Trader and Cabot Options Trader Pro
Question: I own several hundred shares of Altria, and would like to free up the cash, and replace it with something like $80 strike calls for Jan 2018 expiration. Any thoughts? Only downside is dividend right?
Jacob Mintz: Love the idea of a stock replacement. Though yes, you will not collect the dividend if you sell the stock.
The only issue with your strategy is that the strike you chose would take a fairly large move for a slow stock like MO for those calls to finish in the money. If it were my trade, I would probably go with buying the 77.5 calls. But it depends on how much upside you see for MO in the coming year. But you are spot on with the strategy
Question: You stated in your email today that you think all of the trades are being bought by one person or firm. Is there a way you can tell this or are you just assuming that it is one group/person?
Jacob Mintz: It’s an assumption. Though when the same option is bought every day, I think it is an easy deduction. In this case, I would say here’s probably a 60% to 70% likelihood of the same trader buying. In more illiquid stocks, when they buy the same call/put everyday, the odds go up to 90%.
Cabot Undervalued Stocks Advisor
Question: Do you happen to have a quick off-the-cuff opinion on whether or not General Electric (GE) is a good value play or dead money?
Crista Huff: GE is expected to have stronger earnings growth in 2018 than in 2017. The stock is undervalued based on 2018 earnings growth, with a big dividend yield. The debt level is higher than I would prefer, but it’s not alarming. The price chart indicates that the stock has been in a gently-upward-sloping trading range for about 18 months. I think we could see GE finally break past 32 this year, at which point it will still be undervalued, based on today’s earnings expectations.
Question: Do you look right now as a selling opportunity since you’re expecting stocks to drop in the short term? And then buy back when they drop more?
Crista Huff: I don’t generally do much selling during small market corrections. The most likely time that I sell, based on broader market movements, is when the market is becoming quite overvalued (which I don’t see right now). The overvalued market will signal me to begin using stop-loss orders throughout my portfolio. Then when the market correction finally arrives, some of my stocks will be sold. I use that money to buy low, once we’re a few days or weeks into the correction.
Right now, it just seems like a very normal pullback, so I won’t be selling any stocks. I’d also be perfectly comfortable buying stocks in the coming days.
Cabot Emerging Markets Investor
Question: Is ATHM looking sick?
Paul Goodwin: Hard to say if all is well. Emerging market stocks were every bit as hard hit as U.S. stocks by Tuesday’s big correction. And today’s rally in EEM (iShares MSCI Emerging Markets ETF) is hardly a big-volume bounce. We are taking things very much on a stock-by-stock basis, and most of our holdings have profit cushions that will allow us to hold until the direction of the market becomes clearer.
Autohome (ATHM), which we bought at 35, is especially vulnerable, as today’s pullback has put it right at our loss limit. We won’t bail out prematurely, because the Cabot Emerging Market Timer is still positive, but we are watching very closely. We should have a clearer picture tomorrow before we publish the new issue.
Cabot Dividend Investor
Question: I only have 15 shares of Xcel Energy (XEL), which I bought at $36. Should I still sell 1/3? [Here’s what you wrote: We sold one third of our XEL position Wednesday for a 45% profit; the stock is still rated Buy.]
Chloe Lutts Jensen: The number of shares you have is less important than your profit (25% is fairly large) and how large a percentage of your portfolio the position is. If it’s tiny relative to the rest of your portfolio, feel free to hang on, but if it makes up from than a couple percent of your holdings, sell some.