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Stock of the Week
The Best Stock to Buy Now

Cabot Stock of the Week 231

Last week I mentioned that two of our trend-following indicators had turned positive (the Cabot Emerging Markets Timer and the Cabot Tides), and now we can add one more indicator, the Blastoff Signal—a rare but powerful signal that occurs when the NYSE daily advance-decline line averages twice as many advancers as decliners over a 10-day span. As a result, I continue to advise you to get more heavily and aggressively invested. Months from now, the market will be higher.

Cabot Stock of the Week 231

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Last week I mentioned that two of our trend-following indicators (Cabot Emerging Markets Timer and Cabot Tides) had turned positive, and now we can add another indicator to the positive camp, our 2-to-1 Blastoff Indicator, which occurs when the NYSE daily advance-decline line averages twice as many advancers as decliners over a 10-day span. This signal, flashed last week, is rare but powerful, and one more reason to work to get the portfolio more heavily and aggressively invested. Which brings me to today’s selection. It’s a stock we owned for five months last year, but that we sold in September (for a profit of 62% in the exact week the stock hit its high!) when I wrote that the stock, along with one other, had “shown some signs of topping recently, and both are due for a period of underperformance, simply to let the fundamentals catch up to the stocks.” After that the stock pulled back 32% with the market, but now it’s acting well, and was recently recommended by Mike Cintolo in Cabot Top Ten Trader. Here are Mike’s latest thoughts.
Everbridge (EVBG)

Everbridge is a $1.7 billion market cap company that sells a suite of SaaS-based critical communication solutions. These solutions help organizations respond quicker and more effectively to significant disruptive events, thereby keeping people safe and businesses running.

The types of events the platform covers span the gamut from terrorist attacks, active shooter events and severe weather incidents to missing person situations, supply chain disruptions and traveling employee monitoring. All in, Everbridge’s critical event management (CEM) platform can send automated real-time threat detection alerts for over 100 different types of risks.

The company’s apps quickly collect, aggregate and analyze data to help customers asses threat levels, locate people at risk, deploy resources to help and execute pre-defined communications processes.

The platform also delivers contextual messages via voice, text and email, to residents, businesses and visitors, in near real-time, in many languages, and on virtually any type of device. To help with response efforts, the platform can also prompt receivers to reply to questions like “Are you safe?” or “Do you need medical help?”

One of the reasons Everbridge is doing so well is that it’s been able to introduce new solutions to the platform that customers are willing to pay for. Back in 2004 the company estimated it had an addressable market of $6.4 billion. Today, that has grown to over $24 billion.

Among the nine solutions gaining traction are two new ones, IT alerting and Safety Connection, which grew by over 40% and 100%, respectively, in the third quarter of 2018. With over 96% of revenue coming in the form of recurring subscriptions, a 110% revenue retention rate (indicating high renewal rates and that current customers are ordering more), and a revenue growth rate that likely accelerated from 36% in 2017 to over 40% in 2018, it’s easy to see why Everbridge’s stock is performing well.

Just over half of revenue comes from corporate customers, while healthcare and government make up 14% and 32% of sales, respectively. Around 20% of revenue comes from outside the U.S. where Everbridge has a massive opportunity to grow.

The growth profile is undeniably attractive, with revenues expecting to grow another 27% in 2019. The company isn’t yet profitable (expected EPS in 2019 is -$0.34), but it’s moving in the right direction and with greater scale Everbridge should get there in a few years.

We’re also impressed with the stock’s strength given that Everbridge just raised around $120 million by selling stock at 55.25. A ton of investment banks were involved in the deal, including J.P. Morgan, BofA Merrill Lynch and Credit Suisse, implying demand for shares was very high. The offering means Everbridge has a pro-forma cash balance of around $260 million, which could go toward acquisitions, paying down debt ($93 million in senior convertible notes at 1.5% due 2022) or a big investment in internal R&D.

Tim’s note: The stock trended higher through 2017 and most of 2018 until we sold on the peak week of September. It bottomed in November (a month before the broad market), and now it’s trending higher again. If you held through the big correction, congratulations. If you sold at the top, it’s time to get back on board.

Everbridge (EVBG)





The portfolio has made great progress over the past few weeks, mainly, of course, due to the strong and broad market advance. And the new buy signal from our Blastoff Indicator says that stocks will be even higher in the months ahead—notwithstanding the usual bumps in the road. As for portfolio management today, I have only one downgrade to Hold. True, there are a couple of stocks that may be faltering, and that would be sold if I were managing a full portfolio, but that’s not the case today; I’m still working to fill this portfolio up, so I’d rather hold these laggards—which still have potential—than have cash. Details below.

Apollo Global Management (APO), originally recommended by Crista Huff for the Growth & Income Portfolio of Cabot Undervalued Stocks Advisor, has had a good run in the three weeks since I recommended it, and if you want to take a quick profit here, that would be fine. In her latest update, Crista wrote, “Apollo is expected to report fourth-quarter economic net income (ENI) of ($0.61) on the morning of February 1. Expect volatility. At 28.55, the stock is up 24% from its December low, currently heading to price resistance at 31. Traders should exit near 31, because a pullback will be normal. Growth investors and dividend investors should hold APO through any short-term volatility.” BUY.

Arena Pharmaceuticals (ARNA), originally recommended by Tyler Laundon in Cabot Small Cap Confidential, has been basing between 42 and 44 over the past two weeks. In his latest update, Tyler wrote, “ARNA is essentially flat over the last week, when there has not been any new news. Recall last week that management announced more good data for etrasimod for treatment of moderate to severely active ulcerative colitis (etrasimod is also being evaluate for Crohn’s and atopic dermatitis). The oral drug candidate showed long-term safety and efficacy in the open-label extension of the Phase 2 OASIS trial. Etrasimod addresses a potential market opportunity of $4 billion to $8 billion, but Arena also has valuable assets in ralinepag (out-licensed to United Therapeutics) and, potentially, early-stage assets APD418 (decompensated HF) and olorinab (IBS/IBD pain). The company is cash rich with around $1.3 billion on its balance sheet, but it will be a few years before any treatments hit the market (assuming approval). Phase 3 data for etrasimod is likely a 2021 event. Upside is significant for those that can be patient while downside should be limited.” BUY.

Canada Goose (GOOS), originally recommended by Mike Cintolo in Cabot Growth Investor, has continued to rally off its deeply oversold bottom so I’ll continue to hold. The stock is no longer a leader, but the company’s great fundamental prospects make me it easy to hold for now. HOLD.

General Motors (GM), originally recommended in Cabot Dividend Investor for the High-Yield Tier, has been doing great; yesterday the stock closed at its highest level since July. In his latest update, chief analyst Tom Hutchinson wrote, “The company raised its 2018 earnings guidance and also forecasted strong growth for 2019. The stock is in conflict. The company is doing great but the external environment for autos stinks. GM continues to hone its rising profitability with excellent cars and plunging costs. But it has to contend with trade issues, slowing global growth and a rapidly aging economic cycle. It’s winning this week and will rise further if news on any of those three things gets better.” HOLD.

Green Dot (GDOT), originally recommended by Mike Cintolo of Cabot Top Ten Trader, is the world’s largest prepaid debit card company as ranked by market capitalization as well as the payments platform company used by Apple, Uber and Intuit. So the long-term prospects are great. But the stock has faltered over the past week (after rebounding with the market since Christmas) and now the action of the past few months looks like a long digestion phase. If the portfolio were full (20 stocks) I’d kick it out in favor of a better prospect, but at the current time, as I’m working to fill the portfolio up one stock at a time, I’d rather hold GDOT than cash. HOLD.

Huazhu Group Limited (HTHT) (previously known as China Lodging Group) was originally recommended in Cabot Emerging Markets Investor and now it’s one of the Heritage Stocks in this portfolio, which means that I’ll hold through periods of poor performance to benefit from the positive long-term fundamentals. The stock bottomed in November, before the broad Chinese market, and has been working its way higher since, with the latest advance ending in a big spike up to 35 on Friday. From here a pullback to 30 is certainly possible, and if you get the opportunity, I recommend that you buy there. BUY. (MTCH), originally recommended by Mike Cintolo of Cabot Top Ten Trader, is the world’s largest company devoted to connecting single people. Its brands include Tinder, LoveScout 24, PlentyOfFish. OurTime, OkCupid, Meetic, Twoo, and Pairs. And growth is great, with revenues up 29% in the third quarter and earnings up 38%. As for the stock, it actually bottomed in November, well before the broad market and looks quite healthy now. If you don’t own it, you could buy on a pullback, ideally to 44. HOLD.

MedMen (MMNFF), originally recommended by me in Cabot Marijuana Investor, is the leading marijuana retailer in the U.S. today—last quarter’s revenues were $59 million—and it has the potential to remain the biggest if the management pulls the right levers. But the stock has been sluggish over the past few weeks—as have the three other U.S. competitors that I have in the Marijuana Portfolio. I don’t like seeing the big loss, but as with GDOT, I’d rather have the stock today than cash. HOLD.

STAG Industrial (STAG), originally recommended by Cabot Dividend Investor for the High Yield Tier, has rallied powerfully since bottoming with the market in December and now sits just 6% off its old high. I wouldn’t buy this close to the old high, because the odds are high that it will serve as resistance, but I’m certainly holding strongly. In Chief Analyst Tom Hutchinson’s latest update, he wrote, “This is a solid industrial REIT that has outperformed other REITs in recent years. Demand for industrial real estate has been off the charts. The fact that industrial properties tend to be more cyclical hurt it a little in the downturn but is serving it well in the rebound. Stay tuned.” HOLD.

Teladoc Health (TDOC) originally recommended by Mike Cintolo in Cabot Growth Investor, is a company that anyone who has wasted time in a doctor’s waiting room can cheer for, and I’m very bullish on the company’s prospects as it leads the telemedicine movement. As for the stock, it‘s rallied powerfully since bottoming with the market in December and is now above all three of its major moving averages. HOLD.

Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, is the second Heritage Stock in the portfolio, and I’ll continue to hold as long as I believe the company has great growth potential. This is a huge global industry and Tesla continues to lead the revolution away from fossil fuels. In last week’s Cabot Growth Investor, Mike wrote, “Sales growth has accelerated over the past three quarters (26%, 43% and 129%), earnings were hugely positive in Q3 ($2.90 per share) and Q4 appears to have continued with good vibes; the firm preannounced that production and deliveries both grew 8% sequentially in the quarter, including a 15% sequential bump in Model 3 output. Analysts see earnings of $6.42 per share this year, though if Tesla keeps executing, we think that will prove very conservative.” This week, however, Tesla announced it was cutting its workforce by 7% in an effort to lower costs and get the price of its “affordable” Model 3 down—and the market didn’t like the news—so now the stock is back at support. If you don’t own it, you could buy here. HOLD.

Twilio (TWLO), originally recommended by Mike Cintolo in Cabot Growth Investor, hit another new high last Friday before pulling back with the market today. In his latest update, Mike wrote, “There weren’t many stocks that held up well during the entire market decline, but TWLO was one of them, and so it’s not surprising to see shares hit new highs in recent days. Granted, there has been some resistance around 100 in recent days and the volatility of the stock has been extreme; thus, like many names, it wouldn’t surprise us if the stock pulled back a few points (the 50-day line is down around 89) to shake some people out. Obviously, if we see a real implosion while the market continues higher, we’ll rethink our outlook, but right now, the story, numbers and overall chart picture look great. The next big event will be earnings, which are due out in just under a month (February 12).” BUY.

Van Eck Rare Earths/Strategic Metals (REMX), originally recommended by Carl Delfeld in Cabot Emerging Markets Investor, and featured here last week, is a diversification play with potential for great growth as technology requires more rare earths. Plus, it has a large yield (north of 13%), though that’s based on the fund’s irregular one-time payout around year-end. If you haven’t bought yet, you can buy here. BUY.

Voya Financial (VOYA), originally recommended by Crista Huff of Cabot Undervalued Stocks Advisor for her Growth Portfolio, recorded eleven consecutive days of advances—and on heavy volume—before pulling back with the market today. That’s a strong sign of sponsorship! In her latest update, Crista wrote, “VOYA is a retirement, investment and insurance company serving approximately 14.7 million individual and institutional customers in the United States. Analysts expect EPS to increase 106% and 35.1% in 2018 and 2019, and the 2019 P/E is 8.5. Management intends to increase the dividend yield to 1% in 2019. At a price of 45.35, VOYA is up about 22% from its December lows, and fast approaching price resistance at 46. I expect a subsequent pullback.” I’ll downgrade the stock to hold now and see what kind of correction develops. HOLD.


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