Cabot Prime Pro Week Ending March 3, 2017
Cabot Growth Investor
Other Stocks of Interest March 3: Follow ups to stocks featured September 28, 2016 (issue 1352) to March 1, 2017 (issue 1362). 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 IssueMarch 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 3: We’ll keep the market monitor where it is for now, which is well into bullish territory. Buy ideas include Charles Schwab (SCHW), Micron Technology (MU), Shopify (SHOP) and Western Digital (WDC). We have only two sells today, Cliffs Natural Resources (CLF) and Portola Pharmaceuticals (PTLA).
Weekly Issue February 27: The overall market remains in fine shape, though we have seen some selling pressure crop up in leading stocks and money flow into some defensive sectors. We’re nudging our Market Monitor down one notch; being selective on the buy side makes sense. Going along with the shift in money flows, this week’s Top Ten has a broader array of stocks and sectors than we’ve seen in a while. For our Top Pick, we’re going with recent earnings winner, Square (SQ).
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.
Trade Alert March 3: Buy Nasdaq ETF (QQQ) September 129/119 Bear Put Spreads (exp. 9/15) for $3.20 or less. Jacob is adding this hedge to the portfolio because he feels most comfortable trading our bullish positions aggressively with an insurance policy in place.
Education March 3: Two research houses wrote notes this morning weighing in on whether General Mills (GIS), Kellogg (K), Colgate Palmolive (CL), Coca-Cola (KO) and others would be bought. And late yesterday afternoon, options traders aggressively bought Kimberly Clark (KMB) calls, likely playing a potential takeover. What was so interesting about these trades was the way that the volatility/price skyrocketed when the trader started buying the July 150 Calls.
Position Update March 2: Astra Zeneca (AZN) is making more new highs today, and my options scanner is picking up on unusual call activity. But regardless of today’s unusual trading, Jacob will continue to hold the position, awaiting the much anticipated drug announcement expected this summer.
Market Update February 28: Trading has been very quiet both yesterday and today ahead of President Trump’s address to a joint session of Congress tonight, and I expect the quiet trading to continue this afternoon. But while traders are anxious about tonight, the options market is implying a move of less than 1% in the S&P 500 this week.
Stocks on Watch February 27: Jacob highlights two Cisco (CSCO) option trades to illustrate how cheap calls are in many stocks.
Weekly Update February 27: Jacob sees two trades on his bullish watch list that are betting on takeovers and two trades trying to buy the dip following earnings drops—not the type of widespread aggressive call buying that tells him the big market players are looking for significant market upside. That said, his bearish list, which had picked up on a bit more put buying recently, is also not pointing to a big pullback.
Cabot Undervalued Stocks Advisor
Special Bulletin March 3: Today’s special bulletin brings news on GameStop (GME), followed by brief comments on additional portfolio stocks.
Weekly Update February 28: The stock market is still showing a lot of strength, despite an approximate 4% run-up since a breakout in mid-January. It’s perfectly normal for stock markets to rise and to have pullbacks. However, Crista doesn’t see the stock charts signaling an imminent pullback. Today’s portfolio changes: Boise Cascade (BCC) moves from Hold to Buy, Quanta Services (PWR) moves from Strong Buy to Buy and Whirlpool (WHR) moves from Buy to Strong Buy.
Monthly Issue February 7: Today’s featured stocks include Vertex Pharmaceuticals (VRTX), Exxon Mobil (XOM) and a new addition to the Growth Portfolio, Martin Marietta Materials (MLM). Crista also mentions four additional growth stocks, which she encourages you to research on your own and ask her about.
Cabot Stock of the Week
Weekly Issue February 28: All of our market timing indicators remain positive, telling us that you should be heavily invested in stocks that suit your risk/reward profile. Yes, the market is overvalued but it can go higher still. Today’s stock is Banco Santander (BSBR), a Brazilian stock. But it’s also a bank, and that brings a certain level of safety. Portfolio changes: HealthEquity (HQY) to Sell, Schlumberger (SLB) to Hold and Square (SQ) to Buy.
Cabot Small-Cap Confidential
Monthly Issue March 3: This month 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.
Special Bulletin March 1: We’re enjoying better-than-expected results from reporting companies this week. Here’s Tyler’s quick take on three Cabot Small-Cap Confidential positions that have recently reported: Everbridge (EVBG), LogMeIn (LOGM) and U.S. Concrete (USCR).
Cabot Emerging Markets Investor
Bi-weekly Update March 2: The Emerging Markets Timer continues to flash a buy signal, although the iShares Emerging Markets Fund (EEM) has weakened somewhat. The only change in the portfolio today is selling VanEck Vectors Russia ETF (RSX).
Bi-weekly Issue February 23: The markets decided to remind us of what “risk” means, with many of our stocks correcting and Weibo (WB) taking a real beating. The Weibo move really caught our attention, as the stock’s pullback coincided with a pullback that specifically targeted Chinese ADRs. We’re also featuring a new stock from the Brazilian financial sector, Banco Santander Brazil (BSBR). VanEck Russia ETF (RSX) and Weibo (WB) are moved to Hold a Half.
Cabot Benjamin Graham Value Investor
Weekly Update March 3: Roy includes summaries for six Cabot Benjamin Graham Value Investor companies that reported quarterly financial results: Activision Blizzard (ATVI), Allergan (AGN), Chicago Bridge & Iron (CBI), Kroger (KR), Maiden Holdings (MHLD) and Priceline Group (PCLN). This is a partial summary of the companies providing results during the week. You’ll receive another email on Monday, March 6, with updates on the remaining stocks.
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).
Monthly Enterprising Issue February 16: Featured Buy Recommendations are Alliance Resource Partners (ARLP), Biogen (BIIB), GNC Holdings (GNC), Magna International (MGA) and Stifel Financial (SF). Rating changes: Blackstone Group LP (BX) from Hold to Buy, and Activision Blizzard (ATVI), LKQ Corp. (LKQ), Maiden Holdings (MHLD) and Ulta Salon (ULTA) from Buy to Hold.
Cabot Dividend Investor
Special Bulletin March 3: Costco (COST) moves to Hold. COST opened 4% lower today, after the company’s second-quarter results missed estimates but has traded sideways since. Chloe is putting the stock on Hold today, but a rebound looks likely.
Weekly Update March 1: If you’re underinvested, you should be looking for new portfolio candidates that meet your investing goals today. In the High Yield Tier, GameStop (GME) and General Motors (GM) are offering good buy points for more aggressive investors, while Pembina Pipeline (PBA) and Verizon (VZ) offer high yields with lower risk. For investors seeking income plus capital appreciation, Carnival (CCL), Costco (COST), Prudential (PRU), US Bancorp (USB) and Home Depot (HD) are all poised for further gains this year. 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 February 28: GameStop (GME) is about 5% lower today after Target (TGT) reported earnings that missed estimates and issued disappointing guidance. Other store-based retailers are also pulling back today. Analysts fear that Target stores’ lower traffic and comp sales are a bellwether for other brick-and-mortar retailers. For now, Chloe will keep GME on Buy because the stock is above its 50-day moving average and lows from November and January, and remains significantly undervalued.
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 3: Fiserv (FISV) from Argus Weekly Staff Report
Daily Alert March 2: Broadcom Limited (AVGO) from The Chartist
Daily Alert March 1: PulteGroup (PHM) from Cabot Undervalued Stocks Advisor
Daily Alert February 28: Finisar (FNSR) from Upside
Daily Alert February 27: Sierra Wireless (SWIR) from Canaccord Genuity Research
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 3: 3M Company (MMM) from Dividend Advisor
Daily Alert March 2: Simon Property Group (SPG) from The Intelligent REIT Investor
Daily Alert March 1: Great Plains Energy (GXP) from Dow Theory Forecasts
Daily Alert February 28: Moelis & Company (MC) from High Yield Wealth
Daily Alert February 27: ConocoPhillips (COP) and Partial Sale of Bunge Cumulative Convertible Perpetual Preference Shares (BGEPF) from Jack Adamo’s Insiders Plus
This Week’s Q&As
Cabot Options Trader and Cabot Options Trader Pro
Question: Why do you refer to mental stops, instead of actually placing them?
Jacob Mintz: In this era of high frequency trading, with many stock specific “flash crashes” a day, it is too easy to get bounced out of a position on a flash up or down. Because of that, I set my mental stop, and can use my own brain to evaluate a stock move. For example, SYMC could flash down a buck, we get stopped out, and then the stock comes back from that bad tick. With a mental stop, I can see the flash, evaluate, and then make the best decision possible.
Cabot Undervalued Stocks Advisor
Question: DLTR: SELL or HOLD?
Crista Huff: Dollar Tree (DLTR) had a generally good fourth-quarter earnings report. There are many variables affecting its future performance, but all-in-all, the company is expected to grow EPS at a faster rate than Target, Wal-Mart, Dollar General and Big Lots.
I think DLTR can climb toward 88 in the near-term.
Question: In a recent update (February 7), you said “stop loss orders are a fantastic tool for minimizing risk. I don’t use them often, but I definitely use them when I own stocks that climb into overvalued territory.”
Could you expand on the “I don’t use them often”? Is that mainly for trading undervalued stocks, say, rather than growth stocks?
Crista Huff: Since I invest almost exclusively in undervalued growth stocks, I don’t worry if their prices fall a bit after I buy them. Of course, the goal is that their prices rise, but realistically, some of them fall for a while before they commence their run-ups.
Sometimes my stock selections will climb so far that they become overvalued. Those are the situations in which I am most likely to use stop-loss orders, like I did with WellCare (WCG) last fall.
My #1 investing priority is minimizing risk, and one way to do that is to pare back overvalued stocks from a portfolio. The downside is that the stocks might continue to rise after they get stopped out. The upside is that I take the cash from the sales of stock, and reinvest into more undervalued growth stocks, thereby minimizing my overall portfolio risk.
There are many ways to approach stock investing. This is the strategy that works well for me.
Cabot Stock of the Week
Question: I have a question on your services for Cabot Stock of the Week newsletter. Based on the description, I understand that your firm will post email to subscribers with buy signals every week but what about sell signals? It’s not mentioned anywhere in the description that newsletter will provide tips on when to exit. Also I don’t see any sample newsletters to study what guidance your newsletter provides. So my questions are
1) Do you give advice only to buy the stocks and leave selling decisions to your subscribers?
2) Sometimes recommended stocks underperform and give signals about poor performance moving ahead. Do you advise in your newsletter to exit from such investments before they become worse?
3) Once I subscribe to your newsletter, am I free to use my trading account to buy and sell the recommended stocks? Or am I bound to do trading only through your firm’s trading account?
Tim Lutts: While Cabot Stock of the Week recommends 50 stocks a year, I don’t expect readers to buy every one—only those that are appropriate for their investment styles and goals. Furthermore, I limit the portfolio to 20 holdings at a time, which means I am continually pruning. Every week, the advisory contains updated advice on which stocks can still be bought, which should be held and which should be sold—and why.
With every issue, I explain this process, along with the goal of keeping the portfolio both high-performing and diversified.
You, of course, are free to follow the advice or not, as you believe is appropriate for your own situation. Lastly, we do not offer trading account services, only advice—you will need to use your own account for all trading.
Cabot Emerging Markets Investor
Question: Do you follow CYOU? Any opinion? I own some.
Paul Goodwin: Changyou.com (CYOU) was in the portfolio for a couple of months in 2015 and made a nice move from February to September in 2016. After a stiff correction from 30 to 21 as 2016 played out, the stock has bounced again, reaching 28 in recent trading.
I have three concerns about CYOU, the main one being that the company has experienced five quarters of declining revenue and four quarters of shrinking earnings. All in all, revenue contracted by 31% in 2016 and EPS fell from $4.20 in 2015 to $2.85 in 2016. My second concern is that with NetEase growing stronger in the online game space, CYOU may be losing market share. My third concern is that CYOU has a lot of overhead pressure from investors who owned the stock at higher prices, which may dampen the stock’s progress over time.
Taking all those concerns into account, I suspect that there are stronger stocks you could be owning now. If you’d like to tell me at what price you bought, I’d be happy to be more specific.
Question: I’ve been reading that the U.S. has outperformed foreign stocks for 4 years in a row. This is the as long as all previous streaks, so mean reversion says a shift is more likely. Also that the catalyst may be the reduction in uncertainly in the EU. Brexit fears and EU election fears/uncertainty will decline as the year progresses.
Any thoughts? Are you seeing any opportunities in EU stocks vs emerging markets? I see you’re overweight to China now. Is this your preferred market now?
Paul Goodwin: I have two answers, one procedural and one substantive.
Procedurally, I don’t pay much attention to EU stocks because my advisory is limited to consideration of emerging market stocks that trade as ADRs on U.S. exchanges. It’s the right size of investment universe for one person to keep track of.
But substantively, I don’t see much of an advantage from trying to anticipate future events and their possible consequences. The Cabot growth strategy is based on having a clear picture of what the market is doing right now, and which stocks are performing well in current market conditions. Mike Cintolo has had a recommendation of a leveraged S&P 500 ETF in his portfolio for many months, but generally we both concentrate on individual stocks, where we feel that our research can give us the most traction.
If you want to make a bet on Europe, there are plenty of ETFs to choose from. And if Brexit and EU election fears calm down, you might do well. But I’m afraid I don’t have much insight to offer.