Cabot Prime Pro Week Ending June 8, 2018
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Cabot Weekly Review (Video)
In this week’s stock market video, Paul Goodwin looks at the major indexes and sees that the intermediate-term trend of the market is up. It’s not a screaming bull market, but it’s positive enough that it’s okay to do a little buying. Emerging markets as a whole aren’t especially strong, but the Chinese portion of the EM universe is actually doing quite well. Paul gives some examples of stocks with strong charts, including a few whose stories give them special appeal.
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Advisory Services
Cabot Growth Investor
Other Stocks of Interest June 8: Follow ups to stocks featured January 3, 2018 (issue 1384) to June 6, 2018 (issue 1395). 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.
Special Bulletin June 7: Mike says today’s action did raise a couple of yellow flags with two of our stocks. One was Okta (OKTA), which initially gapped up on earnings but ended up closing sharply lower on huge volume, while many cloud software peers also got nailed. He’ll put OKTA on Hold tonight. While not as dramatic, Grubhub (GRUB) is also being switched to Hold, as the stock’s breakout attempt has failed. The major trend is still up but the recent action indicates the stock probably needs more time to consolidate.
Bi-weekly Issue June 6: Mike says to do a little buying. In the Model Portfolio, he’s buying Alibaba (BABA), which has just broken out. That will leave us with 20% in cash, some of which we’re aiming to put to work in the days ahead.
Bi-weekly Update May 30: Mike says to continue to lean bullish. The market’s rebound today after yesterday’s Italy-induced selloff was very encouraging, and both of our trend-following indicators remain bullish.Tonight, he’s moving Grubhub (GRUB) back to Buy. The cash position is still 30%.
Cabot Top Ten Trader
Movers & Shakers Weekly Update June 8: The market in general and growth stocks in particular hit a pothole during the past two days. That said, while it was a disappointing end to the week, the indexes haven’t done poorly—as Mike writes this (late morning Friday), the S&P 500 and Nasdaq are up 0.5% to 1.0% for the week. Today’s Buy Ideas: Autohome (ATHM), Carvana (CVNA), Illumina (ILMN), Kirby (KEX), and Shutterfly (SFLY). Mike has four sells: Energen (EGN), Melco Resorts (MLCO), Oil States Int’l (OIS) and RealPage (RP).
Weekly Issue June 4: This week’s list has a ton of growth-y stories, and even those that have more sturdy stories have recently staged excellent breakouts. Mike’s Top Pick is GDS Holdings (GDS), a smaller Chinese firm with an excellent story. The recent pullback looks like a decent entry point.
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 June 8: Boston Scientific (BSX) has popped on Jacob’s scanner twice this week. If the market can strengthen, following a somewhat ugly day yesterday, BSX is at the top of his watch list for a new position.
Position Update June 8: While the market, and especially growth stocks, wobbled yesterday, iQIYI (IQ) rose by another 6%. This morning, with the market marginally lower, IQ is again higher by 5%. While Jacob is going to continue to take the risk, there is no question the market has gotten a bit dicey, and if you want to take some profits, that is a good strategy as well.
Position Update June 7: PagSeguro (PAGS) is trading lower today by 11%. This is likely due to the declines in Brazil (EWZ) which is down 6.5%. For now Jacob is going to stick with his original position.
Trade Alert June 7: Sell Remaining Position: Sell the balance of your Axon Enterprises (AAXN) September 45 Calls for $19 or more.
Trade Alert June 7: Hedge: Buy the Nasdaq ETF (QQQ) December 170 Puts (exp. 12/21/2018) for $6.70 or less.
Position Update June 6: Last week our Axon Enterprises (AAXN) calls neared a 400% profit. And this morning our calls originally purchased for $4.10 are worth $24.50, or an open profit of 500%. Jacob is raising his mental stop again, this time from $17 to $19.
Position Update June 5: Jacob was filled on the second half of his PagSeguro (PAGS) trade at $4.60. Combined with the purchase at $5.10 on Friday, his price going forward is the average of these buys, or $4.85.
Trade Alert June 5: Buy Second Half of Position: Buy the PagSeguro (PAGS) November 35 Calls for $5 or less.
Position Update June 4: iQIYI (IQ) is trading higher by another 3% this afternoon. Interestingly the stock exploded higher on the open today, briefly trading as high as 32.40 before pulling back to 29.25 this afternoon. Coming off a week in which the stock rose 25%, Jacob would expect IQ to continue to trade wildly in both directions. Because of this, if you want to reduce risk, taking some more profits is certainly an option, though he is sticking with our remaining contracts right here.
Weekly Market Update June 4: Jacob writes we have many bullish positions, and several of them are doing exceptionally well. And because of their sensitivity to price movement, a hedge may be the right move this week if the price is right.
Cabot Undervalued Stocks Advisor
Special Bulletin June 7: Crista writes about an important stock sector reclassification that has begun that can affect your shares prices. Also, she’s recommending that Alphabet Cl. A (GOOGL) be sold and to Buy Guess (GES) on pullbacks.
Monthly Issue June 5: Crista, with her expertise on trade issues, discusses international trade negotiations and NAFTA. Today, DowDuPont (DWDP) joins the Growth & Income Portfolio as a Strong Buy. Martin Marietta Materials (MLM) moves from Buy to Hold, Schlumberger (SLB) moves from Buy to Strong Buy and Supernus Pharmaceuticals (SUPN) moves from Buy to Strong Buy.
Cabot Stock of the Week
Weekly Issue June 5: Tim’s stock this week is Weight Watchers (WTW), a well-known brand that has great growth prospects as it tackles a major factor in the sphere of public health, both in the U.S. and internationally. The stock was originally recommended by Mike Cintolo in Cabot Top Ten Trader. There are two portfolio changes, Teladoc (TDOC) moves from Buy to Hold and Wingstop (WING) from Buy to Sell.
Cabot Emerging Markets Investor
Bi-weekly Update June 7: Emerging market stocks have had a volatile week, with the iShares EM Fund (EEM) popping above its 25- and 50-day moving averages on Wednesday, but slipping back to the 50-day today. Paul has one move in the portfolio today: he’s selling PagSeguro (PAGS), which is being dragged down by weakness in Brazilian stocks.
Bi-weekly Issue May 31: This issue’s featured stock is ZTO Express (ZTO), a stock Paul recommended early last November and held on until January 12, and then got out of the stock with just a small loss. There are no changes to the portfolio.
Cabot Benjamin Graham Value Investor
Weekly Update June 7: Crista has several rating changes today: Alphabet Cl. C (GOOG) moves from Hold to Sell, Lowe’s Companies (LOW) moves from Hold to Sell at 106 and Ross Stores (ROST) rose to her price target of 84: Sell.
Cabot Small-Cap Confidential
Weekly Update June 8: Same as in recent weeks, Tyler is keeping most stocks at buy, but recommends averaging in with smaller position sizes at current levels. There are no rating changes today.
Monthly Issue June 1: Tyler’s new recommendation is IntriCon (IIN), a $218 million market cap company that designs and manufactures body-worn devices for the hearing, bio-telemetry and professional audio communications markets. There are no changes to the portfolio.
Cabot Dividend Investor
Weekly Update June 6: Given the market’s strength, Chloe is moving one stock back to Buy today. American Express (AXP) has demonstrated it has solid support by bouncing off its 50-day line once again, and is thus a Buy for dividend growth. There is one other change, Chloe is selling the second half of our position in Carnival (CCL), after the stock dropped (like a rock) to a new low yesterday.
Monthly Issue May 30: This month’s featured buy, Community Healthcare Trust (CHCT) is a real estate investment trust (REIT) that owns healthcare facilities in non-urban areas. It’s being added to the High Yield Tier. Chloe is placing Ecolab (ECL) back on Hold today. In addition, Carnival (CCL) is on the chopping block if it doesn’t shape up soon.
Cabot’s 10 Best Marijuana Stocks
Summer Issue May 24: With this issue, Tim is replacing two of the portfolio stocks—Emerald Health (EMHTF) and CannaRoyalty (CNNRF)—with new recommendations—Hydropothecary (HYYDF) and iAnthus Capital (ITHUF).
Wall Street’s Best Investments
Daily Alert June 8: Halliburton Company (HAL) from Energy & Income Advisor
Daily Alert June 7: PowerShares Dynamic Building & Const ETF (PKB) from The Personal Capitalist
Daily Alert June 6: Applied Materials (AMAT) from Dow Theory Forecasts
Daily Alert June 5: Jones Lang LaSalle Incorporated (JLL) from Barclays Capital Equity Research
Daily Alert June 4: The Green Organic Dutchman (TGOD.TO, TGODF) from Ian Wyatt’s Million Dollar Portfolio
Monthly Issue May 16: Our May Spotlight Stock is, Zayo Group Holdings (ZAYO), a cutting-edge technology stock. Nancy’s Feature article its focus on a specific niche within the much-anticipated 5G network arena.
Wall Streets Best Dividend Stocks
Daily Alert June 8: Sell PBF Energy (PBF) from Cabot Undervalued Stocks Advisor
Daily Alert June 8: Sell Delek U.S. Holdings (DK) from Cabot Undervalued Stocks Advisor
Daily Alert June 8: Guess, Inc. (GES) from Cabot Undervalued Stocks Advisor
Daily Alert June 7: Delta Air Lines (DAL) from AlphaProfit Sector Investors’ Newsletter
Daily Alert June 6: Seagate Technology PLC (STX) from Schaeffer’s Investment Research
Daily Alert June 5: Nokia Corporation (NOK) from The Wealth Advisory
Daily Alert June 4: Goodyear Tire & Rubber Company (GT) from Stock Pickers Digest
Monthly Issue May 9: The Spotlight Stock is Discover Financial Services (DFS). While best known for its credit card business, Discover offers a variety of services, from home-equity and student loans to deposit products. Nancy’s Feature explores its benefits.
Premium Reports
Cabot’s 10 Best Takeover Stocks
Special Report May 3: There are a variety of reasons that a corporation might want to purchase another company. They might want to acquire a company’s patents or products to enhance their product lines; access the company’s distribution network and sales relationships; or simply aim to increase their earnings growth rate by purchasing a very profitable company within a related industry. After all, stronger earnings growth leads to better share price appreciation—a topic that boards of directors care very much about. Crista’s investment strategy, which combines both growth and value criteria, inadvertently identifies potential takeover targets. That’s because big companies and she often seek the same thing: stock investments in undervalued, financially thriving companies that can deliver profits to investors. The ten companies are all undervalued growth stocks. What’s more, they’re small enough that big competitors and peers within their sectors could easily finance their acquisitions, often through current cash flow.
Cabot’s 10 Best Covered Calls on Dividend Stocks
Special Report April 12: With interest rates just coming off of historically low levels, income investors have been desperately searching for alternative sources of yield. Dividend stocks are the obvious answer. But there’s an even better way to create yield: by executing a covered call strategy on stocks that pay dividends.
Cabot’s 10 Best Small-Cap Cloud Computing Stocks to Buy Now
Special Report Updated April 15: If you’re a growth investor, you need to own cloud software stocks. It’s just that simple. Cloud computing is changing the world. It’s powering massive growth in companies across sectors, empowering digital transformations, enabling new generations of connected technologies and changing how people live their lives. Tyler Laundon lays out the landscape and names his 10 best small-cap cloud computing stocks.
A Richer Retirement
Special Report This handbook is designed to help you secure a better, longer, richer retirement for yourself by making the most of your savings both before and during retirement.
Ask the Experts
Cabot Emerging Markets Investor
Question: I am a subscriber of your “Cabot Emerging Markets Investor” Newsletter. I was interested in buying MOMO, but I have not seen it being selected by you in your newsletter in the recent past. I am wondering if you have any opinions on it. Appreciate your thoughts on it.
Paul: I have been interested in MOMO in the past. I had it in the portfolio starting in March 2017, but was shaken out by the stock’s downturn in June 2017. MOMO went on to a much larger correction through November 2017, but has been in an uptrend since then. My failure to feature the stock again isn’t really a judgement that anything is wrong with MOMO. Rather, it’s just that I find more attractive stocks each time I look through the investment universe of emerging market stocks. With its gap up to new highs on May 29, I will certainly be looking very closely at the stock when I begin researching the June 14 issue.
Question: What’s wrong with ATHM? One of the best stocks in my portfolio! Maybe take profit?
Paul: I think ATHM will probably be fine. The stock has made five small rallies since February, and followed each one with a few weeks of consolidation/correction. It’s also possible that there’s some profit-taking going on. But in any case, I wouldn’t sell a stock that’s still well above its 25- and 50-day moving averages. I’ll take an especially close look when I write tomorrow’s portfolio review.
Question: I bought some of the China’s stocks at higher prices, so a little bit worry about this kind of video saying that China’s companies are not giving Americans the truth of their income. So, they are attacking BABA, and BIDU.
Paul: There’s always some tension just after you’ve bought stocks, especially ones that have been going up for a while. I don’t think there’s any way around that problem. Your exposure is highest and you don’t have any profit cushion to protect you. But I certainly wouldn’t let negative stories about false reporting by Chinese companies add to your worry. I have been reading (and watching) this kind of story for many years, and very seldom has there been any negative effect. If you look around, you’ll also find stories about how the Chinese government is falsifying GDP growth numbers and other dire warnings about the unreliability of Chinese reporting. Most of the general warnings come from people who 1) want to scare you into reading their story, which will boost their online rankings or 2) want to sell you a report or other products. From my 13 years as Chief Analyst of an emerging market advisory, I can say that warnings about Chinese reporting practices have seldom had a real effect on either individual stocks or the general appetite for Chinese stocks. Every once in a while, a short seller (like Citron) will publish a negative story about a Chinese company’s accounting practices that produces a temporary dip in its stock. But general warnings are quite ignorable.
Question: I jumped into IQ a little early. I have a 71.88% return as a result. Is this a point when I should consider taking partial profits?
Paul: Congratulations! I understand the impulse to take profits, but I don’t have a strong opinion one way or the other. This kind of volatility can certainly lead to rapid declines, and booking some profits would be the prudent thing to do. On the other hand, IQ’s rally shows no signs of slowing. I guess it’s just a matter of risk tolerance. You might also consider trailing a stop at 10% to 15% below the current price. My choice for the portfolio was to take a half position as a way of reducing exposure in the face of possible volatility. I doubt that I will take profits on the way up unless I get a signal from the market that bad weather is on the way.
Question: Paul, I just joined your newsletter as I’ve been a member of Growth Investor for a few years. I’m sending you a quick note tonight per your instructions on the welcome message because I am a little dismayed at your #1 stock to buy now. I think it is dated. Autohome WAS a great stock to purchase a few months back when it was selling at 77 like your report highlighted but today it is over $111 and has peaked over 119. I have read your update from today so was wondering what would be your #1 stock “NOW” in early June 2018 based on current market conditions, Q1 results having been reported, etc. What will be the NEXT ATHM that is currently well above its 25 day moving average and has already popped almost 50% from when you recommended it...or do you honestly see it rising to 150+ in the next few months (and if so, on what data)? Thank you so much for your insight and I look forward to your research and next recommendations.
Paul: It’s an interesting objection you raise. And you’re right, of course, that ATHM has had a great run. I suppose if I were to look at the stock in the portfolio I might say that recent IPOs like ZTO or IQ or GDS are the hottest stocks right now. But JOBS is also in a strong uptrend, as is BGNE. But the #1 stock pick for the year (which is more of a marketing tool than an actual recommendation) is a stock that I think has a chance to do well all year. That kind of designation includes a consideration of scale and potential, something the three IPOs just don’t have. I would point out that you could have made the same objection to TAL, the stock that’s been in the portfolio for the longest time, but it just keeps advancing and is now up over 400%. If you cut the chart off anywhere during its advance, you might think that it was a bad bet because it had already made such a long run. And that example makes me reluctant to avoid any stock because of a long period of appreciation. The reason I don’t like the “#1 stock to buy now” idea is that I don’t have any real data to make a responsible choice. I believe strongly that spreading risk around is a crucial aspect of investing in emerging markets. I use a portfolio with ten stocks to spread risk around and go to cash when markets are threatening. I wish I had a simpler answer to your question, but it addresses a fundamental issue. The fact is that I have no idea what the next ATHM will be. But right now, ATHM is still doing its job, so I’ll stick with it until it gives me a clear signal that it’s time to sell.
Cabot Dividend Investor
Question: I suppose that you have read James Mackintosh’s Streetwise column in the May 4 Wall Street journal. He says that junk bond holders are in some cases losing priority of creditors. Is this something we should be concerned about in owning PowerShares BulletShares? As for those that we already own, for example BSJI the turnover is a industry low 38%, so if this phenomenon is true and if it is more true of newer issues then there might be less concern but neither of these suppositions may be true at all. What do you think? In one of your bond fund ladders (which I really like), should we only buy half as much in the high yield funds or should we keep on as is?
Chloe: Thanks for your question. The covenant changes you read about only affect (a small number of) recently issued bonds. It’s not something you have to worry about affecting the bonds in the BulletShares funds in our bond ladder. Our bond ladder is constructed of bond funds with maturities in the next four years, so all the bonds in them were issued some time ago.
Question: I am a new subscriber since I am semi-retired and investing in REITS and dividend stocks for income, and was intrigued to see what Cabot offers. I follow a lot of REITS and had never heard of CHCT. Thanks for the heads up. I already own Physicians Trust (DOC), in the MOB space, and MPW, which owns hospitals. I figure these are relatively safe areas (unlike retail) with tailwinds, though Washington is always worth keeping an eye on. Sounds like CHCT is sort of a hybrid of DOC and MPW, in terms of what it owns, so will definitely check it out. I was curious if you considered DOC and MPW both of which have higher yield, with DOC right now in a slump as it works to take a breather after a lot of acquisitions. Both have excellent CEOs and management, which counts for a lot in this specialized field.
Chloe: It’s interesting that you already own DOC, that was my runner up for this month’s recommendation. MPW was another option, they have higher debt but a constructive chart. So good picks! For more on both stocks, see my free article from Tuesday, where I covered a few more healthcare REITs that I like.
Cabot Options Trader
Question: My question is how much should I allocate for this hedge?
Jacob: It’s the classic trading issue. If you over allocate to a trade, it will be a mistake. Or if you under allocate, it will be a mistake. Because of this, I always stick to my 2%-5% of options capital to each trade rule. That way, there is no second guessing.
Guide to Cabot Prime Pro
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