Cabot Prime Pro Week Ending May 5, 2017
Cabot Weekly Review
In this week’s video review, Mike Cintolo discusses his overall bullish view on the market, especially when it comes to leading growth stocks, which have been racing up the charts. That said, he is watching a couple of items closely, including the fact that most indexes haven’t hit new highs yet—an upside confirmation will probably be the sign to get fully invested. Mike also discusses a sector that could be ready to turn up and a batch of leading stocks that are set up nicely.
Cabot Growth Investor
Bi-weekly Update May 3: Most of the market’s evidence remains bullish, so we remain optimistic that higher prices are ahead; the Model Portfolio is more than 80% invested in nine strong stocks. That said, some key indexes are again testing their 50-day lines and we’re still in the thick of earnings season, so we’ll sit tight tonight and keep a close eye on the market and the earnings reactions of individual stocks.
Other Stocks of Interest April 28: Follow ups to stocks featured November 22, 2016 (issue 1356) to April 26, 2017 (issue 1366). 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 April 26: The market’s rally in recent days has turned our Cabot Tides positive, joining our Cabot Trend Lines and Two-Second Indicator. Because of that, we did some buying in a Special Bulletin last evening, which leaves us with around 19% in cash. Elsewhere in tonight’s issue, Mike writes about some confirming signs of the recent strength and the potential for the retail sector to provide some new leadership in the weeks ahead.
Cabot Top Ten Trader
Movers & Shakers Weekly Update May 5: We remain mostly bullish on the market because the evidence remains mostly bullish. All major indexes are above their 50-day lines, the Nasdaq has shot ahead to new highs and many Top Ten stocks are acting well—strong stocks are generally reacting well to earnings and following through on the upside. That said, there are a couple of things we’d like to see before we get fully bullish.
Weekly Issue May 1: Mike is nudging the Market Monitor up to level 8. This week’s Top Ten is chock-full of strong stocks with great stories, including a few earnings winners. Our Top Pick is PayPaL (PYPL), a big-cap firm that we’ve flirted with a couple of times in the past; it’s now finally lifted out of a long post-IPO base.
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.
Earnings Update May 5: ON Semiconductor (ON) will report earnings before the open on Monday. Our position is at a loss, as the stock has slowly drifted lower since our call purchase. Because the calls are now only worth $0.30, Jacob will hold his calls through earnings on Monday.
Trade Alert May 5: Adjust Existing Position: Sell your Nasdaq ETF (QQQ) September 129 Puts and Buy September 136 Puts, or sell your Nasdaq ETF (QQQ) September 129/119 Bear Put Spreads and Buy September 136/126 Bear Put Spreads.
Position Update May 4:Anheuser-Busch InBev (BUD) is making new highs this afternoon, trading higher by 6.25 at 119.25. Our calls can now be sold for $8.90—a profit of over 100%. I’m going to continue to hold the position for more profits. However, selling another piece of the position today is absolutely a smart play if you have a big position.
Position Update May 4: Anheuser-Busch InBev (BUD) reported higher than expected profit growth this morning. In early pre-market trade, BUD is trading higher by $4.50, at 117.50. If the stock were to open around these levels, our calls would be worth approximately $7, a profit of approximately 60%. If you want to sell another piece of your position shortly after the open for a nice profit and let the remainder run, that is a fine strategy, but for now, Jacob will hold his position.
Stocks on Watch May 3: Jacob highlights two very large trades he spotted today: buyer of 130,000 Apple (AAPL) June 155 Calls for $0.60, and buyer of 30,000 Noble Energy (NBL) June 32.5 Calls for $0.45.
Earnings Update May 3: Tesla (TSLA) will report earnings later today. Jacob digs into what the options market is projecting for the stock.
Trade Alert May 3: Sell HALF your Anheuser Busch (BUD) September 115 Calls for $5.50 or more. With our BUD position already at a profit of nearly 25%, Jacob will offer HALF his calls and hold the remainder for earnings and whatever else may be coming.
Earnings Update May 3: Facebook (FB) will report earnings later today. Jacob digs into what the options market is projecting for the stock.
Earnings Update May 2: Apple (AAPL) will report earnings later today, and because so many subscribers own AAPL, Jacob digs into what the options market is projecting for the stock.
Trade Alert May 1: Adjust Position: Sell your Visa (V) June 90 Calls and Buy V September 92.5 Calls (exp. 9/15).
Weekly Update May 1: It seems not a day goes by without a billionaire calling the stock market a bubble—yet higher and higher it goes. Leading the advance has been Amazon, Tesla and other leading technology stocks that David Einhorn of Greenlight Capital has put in his short “bubble basket.”
Cabot Undervalued Stocks Advisor
Special Bulletin May 5: Tivo (TIVO) reported non-GAAP $0.40 EPS vs. the consensus estimate of $0.27. News agencies reported all of the following incorrect EPS numbers: (0.29), $0.22, $0.29, $0.30 and $0.45. Crista give the full story.
Special Bulletin May 4: Updates on four of our stocks. American International Group (AIG), Quanta Services (PWR) and TiVo (TIVO) reported first quarter results and Boise Cascade (BCC) offers a great buying opportunity. All are Strong Buys.
Special Bulletin May 3: Earnings Updates on Boise Cascade (BCC), Martin Marietta Materials (MLM), Archer Daniels Midland (ADM) and BP plc (BP), plus updates on Adobe Systems (ADBE) and Vulcan Materials (VMC), which have shown strong price action.
Monthly Issue May 2: Today’s featured stocks include ExxonMobil (XOM), Legg Mason (LM), and a new addition to the Growth Portfolio, Cavium (CAVM). Crista also compares the featured stocks and their peers in the integrated oil, asset management and semiconductor industries.
Cabot Stock of the Week
Weekly Issue May 2: Today’s selection is Aqua Metals (AQMS), a little-known small-cap stock with a revolutionary process that may change one of the world’s most noxious industrial processes. Tim thinks the stock is at a good entry point here.
Cabot Small-Cap Confidential
Monthly Issue May 5: Today’s candidate, BioTelemetry (BEAT), provides digital health solutions to people with chronic health issues. Its biggest market is people with heart conditions, but it is branching out to the diabetes market as well. For a short window of time, I believe we can establish a position while shares are “on sale.”
Weekly Update April 28: Tyler thinks it’s time to proceed with caution in terms of buying more of our cloud software stocks right now. These guys are going to have to deliver on revenue and earnings over the next two weeks, and given the recent run, the pressure is on. For this reason, he’s moving both Everbridge (EVBG) and Ooma (OOMA) to Hold until the companies report earnings.
Cabot Emerging Markets Investor
Bi-weekly Issue May 4: The Cabot Emerging Markets Timer continues to offer a green light, so we’re forging ahead as our stocks enter the heart of earnings season for emerging ADRs. We also welcome back Tencent Holdings (TCEHY), a mega-cap old friend into the portfolio.
Cabot Benjamin Graham Value Investor
Weekly Update May 5: This Weekly Update includes summaries for 11 Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other noteworthy news during the past week.
Monthly Value Issue May 4: This month’s Cabot Value Model contains a diversified list of buy recommendations, with a bias toward high quality companies in the Technology and Financial sectors. Roy adds Alliance Data Systems (ADS) to the model and moves Schlumberger (SLB) out of the model.
Monthly Enterprising Issue April 13: This month, Roy introduces Tech Data (TECD), which holds great promise. After reporting stagnant results during the past several years, the company recently acquired assets that will boost sales and earnings this year and next.
Cabot Dividend Investor
Special Bulletin May 4: Automatic Data Processing (ADP) reported strong first-quarter EPS but slightly weaker-than-expected revenue yesterday, and the stock has declined over 5%.
Weekly Update May 3: Chloe presents earnings updates and expectations on all our portfolio companies. She has no rating changes this week, and most of our holdings are acting quite well.
Monthly IssueApril 26: Chloe adds large-cap industrial stock Cummins (CMI) to the Dividend Growth Tier, reviews her sales from the past week, and explains how to write covered calls.
Wall Street’s Best Investments
Daily Alert May 5: Cimarex Energy (XEC) from Stock Pickers Digest
Daily Alert May 4: Forum Energy Technologies (FET) from Capitalist Times
Daily Alert May 3: Ryanair Holdings (RYAAY) from DRIP Investor
Daily Alert May 2: John Wiley & Sons (JWA) from Positive Patterns
Daily Alert May 1: Primerica (PRI) from Upside
Monthly Issue April 12: Our contributors found ideas with great potential in just about every sector this month, and our Spotlight Stock is Hologic (HOLX), a company that has taken the lead in women’s healthcare, particularly in the diagnostic, surgical and medical-imaging products sectors.
Wall Streets Best Dividend Stocks
Daily Alert May 5: NorthWest Healthcare Properties REIT (NWH-UN.TO) from Canadian Edge
Daily Alert May 4: iShares JPMorgan USD Emerging Markets Bond ETF (EMB) from Internet Wealth Builder
Daily Alert May 3: U.S. Bancorp, Fixed/Floating Depositary Shares Non-Cumulative Perpetual Preferred Stock, A (USB-A) from Jack Adamo’s Insiders Plus
Daily Alert May 2: Sanofi (SNY) from Argus Weekly Staff Report
Daily Alert May 1: Raytheon (RTN) from The Investment Letter
Daily Alert May 1: Sell Bar Harbor Bankshares (BHB) from The Investment Letter
Monthly Issue April 5: Contributors remain positive on a variety of industries, beginning with Spotlight Stock Verizon (VZ), a giant in the telecom sector that is poised to greatly benefit from cutting-edge tech developments like the mass-market adoption of the Internet of Things and the coming 5G rollout.
This Week’s Q&As
Cabot Growth Investor
Question: I’ve noticed the number of stocks hitting new lows on the NYSE has escalated in recent days, mainly due to the drop in energy stocks. Is this a sign to cut and run?
Mike: The number of new lows (we call it our Two-Second Indicator, because it takes two seconds to check every day) is one of our key indicators, but there are a couple of things to consider. First and foremost, we usually need to see many days in a row of greater than 40 readings with the indexes near their peaks to get worried. That could happen next week if it keeps up, but we’re not there yet.
Second, the Two-Second Indicator, while important, is secondary to the trend of the major indexes and the action of leading stocks. Really, then, it’s not as much about using one single indicator to drastically change your stance but looking at the evidence as a whole.
Right now, the major trend is up and leading stocks look good, but the intermediate-term trend is basically sideways and the broad market (Two-Second Indicator) is iffy. Probably a good reason not to floor the accelerator at this point, and if new lows don’t improve, to hold a bit more cash.
Cabot Options Trader and Cabot Options Trader Pro
Question: What are your thoughts on Walt Disney (DIS)? I have 400 shares—is it worth looking at the longer term calls for Jan. 18?
Jacob: DIS has popped on and off my radar quite a bit in the last couple of months. The call buying explodes every couple of weeks, then dies down. If you’re looking for a January 2018 call, you could target the big trade made yesterday from my Daily Order Flow list: Buyer of 5,000 Walt Disney (DIS) January 120 Calls for $4.15 – Stock at 114.30
Question: Great Visa trade that you sent out to the members. Would like to know what you have in mind regarding MasterCard (MA) considering both AXP and V have beaten on each earnings? Any options or covered play here for MA?
Jacob: I’ve looked into MA options and there haven’t been any trades of any significance made in the past month, so its difficult for me to get a read on it and may pass on a position. That said, if I was bullish, I might Buy the July 115 Calls for around $3.80 or Buy the July 115/125 for around $3.20 or Buy stock and Sell the May 115 for $2.30.The day before earnings, email me again, and I’ll take another look to see how options traders have positioned themselves.
Question: Are you planning to hold Coca-Cola (KO) over earnings? I saw some bearish activity below.
Jacob: Not sure yet. Depends if I see more of that bearish activity in the coming days. (we closed half of our calls for a profit of 25%).
Cabot Undervalued Stocks Advisor
Question: What are the most relevant earnings to consider: GAAP, non-GAAP, adjusted earnings or net earnings?
Crista: The financial industry, in its analyst reports and consensus earnings estimates, commonly uses non-GAAP adjusted earnings numbers when making projections and citing results. Therefore, those are the numbers that I use as well.
Cabot Small-Cap Confidential
Question: What is your definition of small cap?
Tyler: Broadly speaking, anything that fits within the S&P 600 small cap index. At the moment, that means companies with around $50 million market cap up to $5.5 billion. That said, anything over $3 billion is, in my opinion, pushing more into the mid-cap market cap territory. I’ll cover a number of companies in the $1 billion to $2 billion market cap range since I think there is a lot of money to be made with those, especially the ones that are gaining institutional support and have somewhat proven business models. I’ve strayed near $3 billion occasionally if I see a real opportunity, as was the case with LogMeIn (LOGM), which now has a market cap of $6 billion. I’ll stick with a stock (like LOGM) if it’s moved into mid-cap territory if I think it’ll keep delivering returns. One of the issues I have with small cap ETFs is that they end up selling out of their biggest winners due to index migration (small cap moving into a mid-cap fund).
Question: Can you help me understand the negative reaction to positive earnings for Airgain (AIRG)?
Tyler: It’s a very good question, without a clear answer. Today’s update will cover some details from the report. But more specific to the stock’s reaction, I think it’s a mix of short selling and the stock not being all that well known. Management was asked about the short selling on the earnings conference call and the analyst asking suggested they put some of their cash to work by initiating a dividend or a share buyback program to help drive down the short interest. Management actually seemed open to the idea. Though they did say they thought the best way was to simply keep executing and let market forces take care of themselves.
It’s frustrating. Especially when the stock initially jumps higher after a good quarter, then falls. But, these little stocks don’t always react rationally. While tough to stomach, I think the best plan of action is to keep holding the stock and maybe buying a little more on the drops to even out cost basis. Provided AIRG keeps churning out the results, demand for shares should begin to overpower the shorts. That said, I would also be in favor of some financial engineering on the part of management to combat the shorts. And a buyback program makes the most sense to me, since the company would be able to offer those shares up to the market, or to an acquisition target, at some point down the road.
Wall Street’s Best Investments
Question: I’ve owned the fund recommended in your April 20 Daily Alert, FPA Cresent Fund (FPACX), for years in my personal trust, but I recently tried buying it in my IRA but it’s closed to new investors. I wish it would accept new investors—I should have bought it in my IRA years ago, but didn’t.
Nancy: Our contributor, Chartist Mutual Fund/ETF Letter, didn’t mention that the fund was closed to new investment, so I did some research. I did see a notation on Morningstar’s site, but nowhere else. I reviewed FPA’s website and did not see anywhere on their site that the fund was closed to new investment.
Note: Our subscriber tried again to buy shares, and here is the message he received: “This fund is closed to new investors. Only accounts which currently have a position in this fund may place a buy order at this time. " He then asked if—since he owned the fund in another account outside his IRA—he could be considered an existing shareholder, and the answer was no. So, I guess when they say it is closed to new investments, they mean just that!