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Stock of the Week
The Best Stock to Buy Now

Cabot Stock of the Week 180

The market has been hot as a pistol in recent days, and today, after a hot open, stocks rolled over and finished down. Odds are that this downward movement could turn into a real correction. But it’s important not to predict; it’s much more profitable to simply observe the trends and invest in sync with them. Today’s recommendation is a hot little medical stock with a great service.

Cabot Stock of the Week 180

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The bull market remains alive and well. In fact, in Mike Cintolo’s next Cabot Growth Investor (being published tomorrow), he details a number of powerful technical signals that promise a very profitable 2018. Thus, I continue to recommend that you remain heavily invested.

Last week’s recommendation was a low-risk undervalued media company with good upside potential that everyone has heard of (Discovery Communications), but today’s recommendation is much higher on the risk spectrum—and most investors have never heard of it. But it’s young, small and growing fast—so even though the company is still losing money, investors are climbing on board. The stock was first recommended by Mike Cintolo in Cabot Growth Investor. Here are Mike’s latest comments.
Teladoc (TDOC)

Teladoc is a company with a very big idea. The company is the leading player in the so-called virtual care delivery movement (also called telehealth), which is using technology to break down access barriers to professional advice.

The company has formed an ecosystem that offers clients (through deals with more than 300 Fortune 1000 clients) virtual access to board-certified doctors (via partnerships with three dozen health plans, 200 hospitals and more). Teladoc got its start and is still best known for helping workers get answers to and, often, prescriptions for, common illnesses, thus providing a win-win situation; customers get quick, easy access, and employers boost productivity as workers don’t have to take half a day just to get some antibiotics.

Episodic treatment alone is a huge field, but Teladoc is thinking even bigger. Last summer, the company announced the acquisition of Best Doctors (for $440 million), a leading medical consultation firm that specializes in complex, critical and costly medical fields, including things like oncology, mental health and sexually transmitted diseases. The 50,000 doctors who work with Best Doctors are peer-rated as the top 5% in their field and cover more than 450 specialties.

Teladoc has just launched an integrated app for its traditional service and Best Doctors this month, and businesswise, the company thinks it has a $200 million revenue opportunity in cross-selling alone.

With Best Doctors in the fold, growth is just a matter of continuing to crank out more deals (Teladoc has recently inked deals with Tricare, a health program for active military service members, and CVS Minute Clinic) and increase engagement among members. Historically, people use the service more often over time, and there’s no question that as younger, more technology-savvy people come into the workforce, Teladoc’s potential market grows.

But this isn’t just a potential story, as the company is clearly on the right track today. The company pre-announced fourth-quarter results that looked great; revenues (driven by both membership fees and per-visit fees) rose 103% to $76 million, total “visits” totaled 460,000, up 48%, and cash flow (EBITDA) lifted into the black. Some of that growth was boosted because of the Best Doctors buyout, but similar growth trends have been in place for many quarters.

And there’s more where that came from! Management presented an initial outlook for 2018 that includes total membership of 23 million (up 20%), total visits of nearly two million (up 33%), revenues of around $355 million (up 52%) and EBITDA-positive by a bit under $10 million. Our guess is that the top brass is starting low and believes it can outperform; indeed, in a recent presentation, it said it has 90% visibility into revenue for 2018.

Exact numbers aside, our attraction is the big picture: Teladoc looks like the clear leader in a new, mass market field that yields major benefits to all parties. The fundamental winds are at its back, so as long as company management continues to pull the right levers, there’s no reason Teladoc can’t keep its top position and grow manyfold from here in the years ahead.

As for the stock, TDOC came public in June 2015 and proceeded to tank with the market, falling from 35 to 9 by the spring of 2016. Then shares started a long trek back, rebounding all the way to that old high early last summer. Since then, TDOC has consolidated calmly, with a couple of dips to the high 20s finding buyers, and all rallies to the mid- to high-30s attracting sellers.

Last week, the stock pushed out briefly to a new high, but once again, the sellers took charge, knocking the stock back down through its 25- and 50-day moving averages and right down to its long-term 200-day moving average on Friday (they’re all close together at this point). I think this looks like a low-risk entry point for a young hot stock that has a lot of potential, so I recommend buying here. BUY.
Teladoc (TDOC 33)
2 Manhattanville Road, Suite 203
Purchase, New York 10577







The broad market is extremely healthy and strong—so strong that a blow-off top (at least short-term) appears imminent. But it’s impossible to forecast these things. The best we can do is continue to work to hold a portfolio of the best stocks. Today, the addition of Teladoc (TDOC) brings the portfolio to 20 stocks, which is my self-imposed maximum, so I once again look around to see if any stocks deserve to be sold. And the answer is one. I recommend taking profits in GDS Holdings (GDS). Details below.

Alphabet (GOOGL), originally recommended by Crista Huff of Cabot Undervalued Stocks Advisor and featured here two weeks ago, has been hot! In her latest update, Crista wrote, “Alphabet is the world’s largest internet company. Revenue is derived from Google’s online ads, with the balance coming from the sale of apps, digital content, services, licensing and hardware. GOOGL is an undervalued, large-cap aggressive growth stock. EPS are expected to grow 28.7% in 2018, with a P/E of 26.7. Consensus earnings estimates additionally point to 18%–19% annual EPS growth in 2019 and 2020. While I might eventually sell GOOGL if it becomes very overvalued—which absolutely happens from time to time—longer-term investors should feel comfortable ignoring the price chart and planning to own this stock for years to come. I expect GOOGL to continue ratcheting upward.” Try to buy on pullbacks. BUY.

BB&T Corp. (BBT), originally recommended by Chloe Lutts Jensen of Cabot Dividend Investor for her Dividend Growth Tier, has also been strong over the past two weeks, and that’s impressive behavior for a bank stock. Also, the stock has now been recommended by Crista Huff, who recently wrote, “Wall Street expects BB&T’s EPS to grow 28.4% in 2018, while the P/E is low in comparison at 14.4.” BUY.

Baidu (BIDU), originally recommended by Paul Goodwin in Cabot Emerging Markets Investor, was bought in early November after a sharp pullback, has been strengthening over the past month, and is now approaching its October high of 275. Traders might aim to take profits as the stock nears that level, but I’ll sit pat for now. It’s possible that growing strength in Chinese stocks will push BIDU right through that old resistance level. HOLD.

BioTelemetry (BEAT), originally recommended by Tyler Laundon of Cabot Small-Cap Confidential, rallied strongly last week, erasing the last of our loss, so now we can look forward to profits. In his latest update, Tyler wrote, “Things have been relatively quiet since the company announced its involvement in trials with both Onduo (diabetes) and Apple (heart). To see if anything was happening, I went to both of those companies’ websites. Nothing going on at Onduo. But when I went to the Apple Heart Study webpage, and scrolled down a bit, I saw this:


“Two things jump out at me about this. First, it’s nice to see a direct mention of BioTelemetry on Apple’s Heart Study webpage. Second, note how it refers to the ECG Patch! This form factor is a big deal for BioTelemetry because they didn’t have it, but iRhythm did. Now, BioTelemetry finally does. And it’s being used as part of this study (interestingly, I can’t find the product on the company’s website). You can download a guide for how to use the patch (image of step 3 below to give you an idea of the size).


“I think this is a big positive as this patch is much more aligned with the type of form factor that people are likely to want for continuous monitoring (the guide says for up to seven days). It will be interesting to hear management speak about this on the next conference call, which will likely be in late February. Given the huge upside potential in the stock, I’m keeping at Buy.” BUY.

Broadridge Financial Solutions (BR), originally recommended by Chloe Lutts Jensen of Cabot Dividend Investor for her Dividend Growth Tier, continues to hit new highs. In her latest update, Chloe wrote, “The stock’s long-term uptrend is healthy and steady, and dividend growth investors can Buy here. Broadridge provides technology and services, like portfolio management tools and proxy vote processing, to financial firms. The company has increased its dividend in each of the past nine years, with the last five increases averaging 16% each.” BUY.

China Lodging Group (HTHT), originally recommended by Paul Goodwin of Cabot Emerging Markets Investor, released preliminary results for its fourth quarter this morning. In the quarter, the company added 90 hotels, bringing its total to 3,746. Average daily room rate was 211 renminbi ($33), up from 186 a year ago. And occupancy rate was 88%, up from 85% a year ago. This is all good, but the stock sold off in response, (on modest volume), and as I write, it’s heading toward its 25-day moving average (at 140) and 50-day moving average (at 130). If you don’t own the stock, you could consider buying when the pullback ends. I’ve designated HTHT a Heritage stock, meaning I aim to hold through what might be normal sell signals, so I’m simply sitting tight, letting the long-term growth trend for China’s biggest hotel operator unfold. HOLD.

Discovery Communications (DISCA), originally recommended by Azmath Rahiman of Cabot Benjamin Graham Value Investor and featured here last week, has been strong in recent days, breaking out above its December high, though volume on the advance has been fading. If you haven’t bought yet, wait for the next pullback. BUY

Facebook (FB), originally recommended by Mike Cintolo in Cabot Growth Investor, sold off late last week after management announced changes that would increase content from friends on people’s news feeds and decrease content from others (including advertisers). The selloff took the stock precisely down to its 25 and 50-day moving average, and if you haven’t bought yet, that’s a good entry area. Fourth-quarter earnings are due on January 31. HOLD.

GDS Holdings (GDS), originally recommended by Paul Goodwin of Cabot Emerging Markets Investor, is a little-known but critical operator of data centers in China, and the stock’s current pullback toward its 50-day moving average could be a decent entry opportunity. After all, there’s no bad news; in fact, in his latest update, Paul wrote, “The company just inked a non-binding letter of agreement to help build new data centers for the Chinese government, China Unicom and China Telecom.” However, GDS has run up from 8 to 25 since June, and the risk now is that with sellers gaining control, the stock will retrace more of its previous advance. Already, it’s taken away more than half of our quick one-month profit and that’s one of the yardsticks I like to use to get out so that a winner doesn’t turn into a loser. SELL.

Insulet (PODD), originally recommended by Mike Cintolo in Cabot Growth Investor, has been consolidating last week’s big surge higher. If you haven’t bought this fast-growing manufacturer of superior insulin delivery systems, you can buy some here. I think this is an excellent entry point. BUY.

Nucor (NUE), originally recommended by Crista Huff of Cabot Undervalued Stocks Advisor for her Buy Low Opportunities Portfolio, continued even higher last week, flying well above all its trend lines. Last week, I told you taking profits was acceptable and that remains the case; Crista mentioned that she would welcome a pullback that enabled buying in the low 60s. But long-term, she remains very bullish on the stock as earnings are expected to grow 26.5% in 2018 and the P/E is just 15.0. HOLD.

PayPal (PYPL), originally recommended by Mike Cintolo of Cabot Growth Investor, broke out to a new high two weeks ago and has climbed higher every day since. Looking at the longer-term chart, it’s clear that PYPL has had a big run (the stock basically doubled in 2017), so a cooling off phase is ahead somewhere. HOLD.

Pembina Pipeline (PBA), originally recommended by Chloe Lutts Jensen of Cabot Dividend Investor for her High Yield Tier, remains on a slow and steady uptrend, and can be bought on the current pullback. In her latest update, Chloe wrote, “The company has been growing steadily through acquisitions and capital investment and analysts expect EPS to grow by double-digits this year and next.” BUY.

Planet Fitness (PLNT), originally recommended by Mike Cintolo in Cabot Top Ten Trader, continues to consolidate its previous gains; it’s now pulled back to 32, where’s it’s met the uptrending 50-day moving average. PLNT is expensive (the stock’s forward P/E is 32), but that’s the price of fast growth. BUY.

Quanta Services (PWR), originally recommended by Crista Huff of Cabot Undervalued Stocks Advisor for her Growth Portfolio, continues to build a base in the 39 area, prepping for a resumption of its uptrend. In her latest update, Crista wrote, “Analysts expect EPS to grow 26.0% in 2018, with a P/E of 16.0.” BUY.

Tesla (TSLA), a recommendation of Cabot Top Ten Trader, is another Heritage Stock for the portfolio; there are still years of great growth likely ahead as the company leads the electric car revolution. But as every automobile manufacturer in the world jumps on the electric car bandwagon (finally), competition will increase for Tesla. HOLD.

WestRock (WRK), originally recommended by Crista Huff of Cabot Undervalued Stocks Advisor for her Growth & Income Portfolio, may be an unglamorous manufacturer of cardboard boxes and other packaging, but the stock has been hot; it hit another new high today! In her latest update, Crista wrote, “Analysts expect EPS to grow 40.8% in 2018, with a P/E of 18.2. Buy on pullbacks.” BUY.

Wingstop (WING), originally recommended by Mike Cintolo in Cabot Top Ten Trader, has also been hot in the week since management pre-announced fourth-quarter results; the stock has been hitting new highs frequently. Management’s goal is to be one of the top 10 restaurant brands in the world. Try to buy on pullbacks. BUY.

Wynn Resorts (WYNN), originally recommended by Chloe Lutts Jensen of Cabot Dividend Investor for her Dividend Growth Tier, gapped up to a new high today after an analyst released a bullish forecast on gaming in Macau. Buy on pullbacks. BUY.


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