During the past two months we’ve seen big Fed rate hikes (with another likely next week), multi-decade highs in inflation, some earnings duds and leading economic indicators heading sharply south, but the market has held its own, and this week, if all goes well, we could get an intermediate-term green light. That means you should have your eyes open and shopping list ready, but we’re not ready to go nuts quite yet, as we don’t anticipate signals, there’s still plenty of damage to repair and earnings season is just revving up. For now, our Market Monitor remains at a level 3.
This week’s list has another batch of biotech names (including some speculative high-flyers), though for our Top Pick, we’re going with a medical services provider that offers both growth and reliability.
Cabot Top Ten Trader Issue: July 18, 2022
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A Key Test this WeekDuring the past two months we’ve seen big Fed rate hikes (with another likely next week), multi-decade highs in inflation, some earnings duds and leading economic indicators heading sharply south. But the market has held its own, with more stocks are at least building bottoms if not rounding out launching pads—and this week, if all goes well, we could get an intermediate-term green light. That means you should have your eyes open and shopping list ready, but we’re not ready to go nuts quite yet: First, of course, we don’t anticipate signals, so we’ll have to see if the trend can actually turn up (oftentimes signals get close before the market turns tail); second, if it does happen, we’ll take a couple steps in the water but will look for further confirmation, as there’s still plenty of damage to repair; and third, earnings season is just revving up, so at least when it comes to individual names, that will be another thing to watch. All told, the action has improved, and we’ll adjust should that continue—but for now, our Market Monitor remains at a level 3 as we wait to see the bulls flex their muscles.
This week’s list has another batch of biotech names (including some speculative high-flyers), though for our Top Pick, we’re going with Acadia Healthcare (ACHC), which offers both reliability and decent growth, and the chart looks ready to run if the market cooperates.
| Stock Name | Price | Buy Range | Loss Limit |
| Acadia Healthcare (ACHC) ★ TOP PICK ★ | 75 | 73-76 | 66-68 |
| Axonics (AXNX) | 62 | 60-62 | 53-54 |
| Axsome Therapeutics (AXSM) | 41 | 38.5-40.5 | 33.5-35 |
| Chewy Inc. (CHWY) | 43 | 39.5-42 | 33.5-35.5 |
| Consol Energy (CEIX) | 58 | 53.5-56.5 | 46.5-48.5 |
| CRISPR Therapeutics (CRSP) | 79 | 75.5-78.5 | 66-68 |
| Day One Pharmaceutical (DAWN) | 18 | 16-17.5 | 13.8-14.8 |
| Dollar Tree (DLTR) | 170 | 167-171 | 153-155 |
| Lantheus (LNTH) | 67 | 65-67.5 | 58-60 |
| Li Auto (LI) | 39 | 37.5-40 | 32-33.5 |
Stock 1
Acadia Healthcare (ACHC) ★ Top Pick
| Price | Buy Range | Loss Limit |
| 75 | 73-76 | 66-68 |
Why the Strength
Behavioral disorders have become a public health crisis of late, with mental and substance abuse cases surpassing physical diseases in the U.S. Acadia is a leader in this field, operating 230 facilities across 40 states that offer treatments for a broad spectrum of behavioral problems, as well as providing acute psychiatric inpatient hospitalization, medication-assisted treatment and an array of outpatient options. Since the pandemic, studies have shown that nearly a third of Americans have experienced depressive symptoms, compared to just 9% prior to the pandemic, while more than 55% of adults with mental illness received no treatment for their condition. Acadia sees this as a “significant opportunity” for growing its footprint to meet these critical needs. To that end, the company just announced a joint venture with Tufts Medicine, one of Massachusetts’ elite health systems, resulting in a new 144-bed behavioral health hospital for patients of all ages (a reason for the strength). Acadia also added 28 beds to its facilities in Q1 and expects to add approximately 300 beds through facility expansions this year, including via the purchase of three non-operational facilities in Chicago, with one opening as a 60-bed children’s hospital. Further plans include the opening of two more facilities later this year in partnership with health providers in Tennessee and Indiana. All told, Acadia’s plans will add 600 new beds, two facilities with JV partners and at least six comprehensive treatment centers in 2022. On the financial front, Acadia sailed past Q1 estimates with revenue growing 12% from a year ago (slightly accelerating from the prior two quarters), at $617 million, while EPS of 67 cents was 43% higher. When the firm reports Q2 on July 27, analysts expect top- and bottom-line growth of around 10%, with reliable 10% to 20% growth likely for a long time to come.
Technical Analysis
ACHC broke out from a multi-month basing pattern in November 2020, rising from 29 and finally hitting strong resistance at 67 last June. Eight-and-a-half months of consolidation followed, with the next breakout coming in April—but the market got in the way, causing ACHC to pull in and form a tighter, more well-controlled launching pad. And now the stock looks ready to go again, with shares marching higher from mid June and kissing new high ground today before reversing. Earnings are a risk here, but we’re OK with a small buy here or on dips.
| Market Cap | $6.89B | EPS $ Annual (Dec) | |
| Forward P/E | 25 | FY 2020 | 2.43 |
| Current P/E | 27 | FY 2021 | 2.56 |
| Annual Revenue | $2.38B | FY 2022e | 3.03 |
| Profit Margin | 9.9% | FY 2023e | 3.32 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 617 | 12% | 0.67 | 43% |
| One qtr ago | 594 | 10% | 0.67 | -14% |
| Two qtrs ago | 588 | 7% | 0.72 | 6% |
| Three qtrs ago | 582 | 18% | 0.71 | 31% |
Stock 2
Axonics (AXNX)
| Price | Buy Range | Loss Limit |
| 62 | 60-62 | 53-54 |
Why the Strength
Axonics is a small medical device name that’s aiming to be the global leader in bladder and bowel disfunction, which is a giant market—in the U.S. alone, 40 million adults suffer from some sort of overactive bladder, with another 18 million having fecal incontinence, while 20 million women have stress urinary incontinence. There are products in the market from big players like Medtronic, but (a) only half of those with severe symptoms seek treatment, and (b) Axonics has come up with a better mousetrap. Like its competitors, Axonics uses sacral neuromodulation (commercially available in the U.S. for 20 years), where a stimulator delivers mild electrical impulses between the sacral nerves (lower part of the spine) that can restore more normal communication between the brain and bladder. Unlike its peers, though, Axonics’ neurostimulator is 60% smaller (peers’ are larger and can cause pain), has a 15-year life (others have to be replaced every three to five years), can be recharged and controlled wirelessly (charged just once per month for one hour) and patients can have full-body MRI scans with it (vs. only head MRIs for Medtronics’ offering). Most important, the results are great, with no side effects and with 80%-ish of respondents reporting a 75%-plus reduction in leaks after two years. All in all, the sacral neuromodulation market should grow nicely in the years to come, and Axonics should take a lot of share. The company also has a urethal bulking agent (an injection into the uretha that can prevent stress incontinence for a few years) that’s growing nicely (expected to rise 72% this year), but the sacral-related business makes up 80% of revenue and management sees revenue from there rising 26% this year, which is likely conservative. It’s a solid small-cap story.
Technical Analysis
AXNX had a long, choppy run higher for most of 2020 and 2021 before finally topping near 80 in September, when the bears took control—shares dipped to nearly 42 in January and then had a quick shakeout below that area (to nearly 38) in May, but now we’re seeing a change in character. It hasn’t been smooth, but AXNX has done a fine job repairing the damage, including a push above all its moving averages over the last three weeks. Like many names, there’s resistance around here, so we’ll set our buy range down a bit if you want in.
| Market Cap | $2.98B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2020 | -1.48 |
| Current P/E | N/A | FY 2021 | -1.86 |
| Annual Revenue | $194M | FY 2022e | -2.11 |
| Profit Margin | N/A | FY 2023e | -1.61 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 48.4 | 41% | -0.50 | N/A |
| One qtr ago | 53.1 | 53% | -0.34 | N/A |
| Two qtrs ago | 46.9 | 33% | -0.38 | N/A |
| Three qtrs ago | 45.9 | 202% | -0.59 | N/A |
Stock 3
Axsome Therapeutics (AXSM)
| Price | Buy Range | Loss Limit |
| 41 | 38.5-40.5 | 33.5-35 |
Why the Strength
Axsome is a developer of drug therapies addressing problems with the central nervous system (CNS). In March, it bought the drug Sunosi (solriamfetol) from Jazz Pharmaceuticals for $53 million cash and a mid-single-digit royalty on U.S. sales. The acquisition gives Axsome its first approved drug – revenue started flowing to Axsome in May – which treats excessive daytime sleepiness in people with narcolepsy or obstructive sleep apnea. Axsome believes it bought a future blockbuster ($300 million to $500 million peak sales in current indications and possibly double that with label expansions) as the market for Sunosi is sizable: Up to 200,000 Americans have been diagnosed with narcolepsy, a figure believed to be well below the number of people who suffer from the sleep disorder. Since launch in 2019, Sunosi has sold modestly, with just $106 million of sales in the E.U. and U.S., but Axsome thinks it can change that. And that acquisition isn’t the only big news, with Axsome awaiting FDA approval of two of its home-grown treatments: AXS-05, to treat Major Depressive Disorder, and AXS-07, for migraines. Both are undergoing FDA new drug application (NDA) review, and that process has proceeded more slowly than Axsome management hoped, but they indicate no issues with completing the applications, and the recent proposed labeling from the FDA (a signal the drug is highly likely to be approved) for AXS-05 caused buyers to pounce. All told, some analysts see that drug being another $500 million seller down the road. The bottom line is deep in the red, but analysts see sales notching $58 million this year and $215 million next, which could be very conservative.
Technical Analysis
AXSM had been flopping around since a huge gap down in late 2021, with massive swings between the low 20 sand the mid 40s over the past year. But this latest upswing looks like more than that—the stock soared on its heaviest weekly volume in at least a couple of years when AXS-05 received proposed FDA labeling, and the stock has rallied nicely since then, surging to 47 before finally pulling in. It’s obviously speculative, but we’re intrigued—further weakness could provide an opportunity.
| Market Cap | $1.70B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2020 | -2.46 |
| Current P/E | N/A | FY 2021 | -3.47 |
| Annual Revenue | Nil | FY 2022e | -4.18 |
| Profit Margin | N/A | FY 2023e | -2.40 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | N/M | N/M | -1.03 | N/A |
| One qtr ago | N/M | N/M | -0.90 | N/A |
| Two qtrs ago | N/M | N/M | -0.93 | N/A |
| Three qtrs ago | N/M | N/M | -0.86 | N/A |
Stock 4
Chewy Inc. (CHWY)
| Price | Buy Range | Loss Limit |
| 43 | 39.5-42 | 33.5-35 |
Why the Strength
Chewy was always an easy story to love, not just because it’s the Amazon of pet products, making it painless for the family to get food and toys and medicines for Pumpkin and Whiskers, but because it combined long-term growth prospects (online pet-related sales are still somewhat small compared to most industries, and Chewy is the hands-down leader) and defensive characteristics (pet items and food are very recession-resistant, and most of this firm’s revenue comes from Autoship orders, providing a steady base of recurring revenue). The firm boomed during the pandemic, then saw growth slow as the world turned right side up … and then, just as the bottom line was turning the corner, supply chain issues and inflation took a bite out of profits and margins. But Chewy is again strong today because (a) Wall Street thinks cost and margin issues are in the past and (b) its defensive nature should keep business strong even if the economy tips into a recession. In Q1, sales rose 14% while both EBITDA and free cash flow were positive despite a step up in investments (including the launch of new pet insurance products and money put toward automated fulfillment centers), and analysts see a slight pickup in revenue growth (mid- to upper-teens) and improving margins going forward, partially thanks to higher-margin products taking a bigger share of the pie. Moreover, underlying metrics were also solid, with a modest (4%) gain in total users and revenue per customer lifted 15%. It’s not changing the world, of course, but after going through the wringer, it looks like Chewy is back on track and should see better days ahead no matter what the economy does.
Technical Analysis
CHWY topped with most glamour names in February 2021, topped out for many months and then began a long, deep slide; in total, shares fell from a peak of 120 to a low under 23 in May of this year. But then support showed up, with the Q1 report really changing the landscape—not only did CHWY gap up on the news, but volume was out of this world (more than seven times average on the day; weekly volume was an all-time record) and shares kited higher into their 40-week line before pausing. We like the action, but given the resistance, we’ll set our buy range down a couple of points, thinking a retrenchment is possible.
| Market Cap | $18.0B | EPS $ Annual (Jan) | |
| Forward P/E | N/A | FY 2021 | -0.23 |
| Current P/E | N/A | FY 2022 | -0.18 |
| Annual Revenue | $9.19B | FY 2023e | -0.36 |
| Profit Margin | 0.8% | FY 2024e | -0.12 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 2.43 | 14% | 0.04 | N/A |
| One qtr ago | 2.39 | 17% | -0.15 | N/A |
| Two qtrs ago | 2.21 | 24% | -0.08 | N/A |
| Three qtrs ago | 2.16 | 27% | -0.04 | N/A |
Stock 5
Consol Energy (CEIX)
| Price | Buy Range | Loss Limit |
| 58 | 53.5-56.5 | 46.5-48.5 |
Why the Strength
Coal prices are at record levels, led by Europe’s need to keep energy flowing to homes and factories (both today but especially this winter) after reduced natural gas supplies from Russia. Consol (covered in the May 9 report) is a Pennsylvania-based producer and exporter of high-BTU bituminous thermal and metallurgical coal. The company owns and operates some of the most important productive longwall mining operations in the U.S., and with a lot of exports, it’s become one of the big beneficiaries of the fallout from the Russian invasion. Before the Russia/Ukraine war, the E.U. obtained over 30% of its natural gas supplies from Russia, but now it’s trying to wean itself away from Russia’s gas, forcing utilities on the continent to turn to coal. Moreover, Russia temporarily halted gas flows via a major pipeline into Germany last week (for maintenance work, supposedly). The recent developments have forced many European countries, including the U.K., to turn to coal in the face of gas shortages, reversing long-standing coal reduction policies. Meanwhile in the U.S., coal stockpiles at power plants recently fell to their lowest levels in over 40 years due to increasing demand and (relatively) limited supply. All of these factors bode well for Consol and explain the company’s strength in the midst of the energy crisis: The firm just sold its first cargo into Turkey and is increasing sales into Europe, and this won’t be a just a one- or two-quarter bump, as Consol is also fully contracted for 2022 and has over 16 million tons contracted for 2023. Plus, the company is expanding its supply with its Itmann (West Virginia) project expected to come online later this year, allowing it to increase its exports. Wall Street expects 55% sales growth for Q2, with the report due out August 4, and analysts see earnings going vertical in 2023 as higher-priced deals hit the bottom line.
Technical Analysis
After a massive post-pandemic rally that pushed shares to 35 in October, a deep correction unfolded for CEIX, with shares nearly being cut in half. But the situation with Russia helped turn things around, kicking the stock higher into early June when sellers finally made a stand, causing yet another sharp downturn (about 30%) in short order as most commodity stocks cracked. But look at the recent action—CEIX stormed back to its old highs on solid (not amazing) volume and tested new high ground today. Earnings will tell the tale, but we’re not opposed to a small buy on pullbacks.
| Market Cap | $1.99B | EPS $ Annual (Dec) | |
| Forward P/E | 3 | FY 2020 | -0.37 |
| Current P/E | N/A | FY 2021 | 0.96 |
| Annual Revenue | $1.28B | FY 2022e | 7.66 |
| Profit Margin | N/A | FY 2023e | 19.51 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 359 | 5% | -0.13 | N/A |
| One qtr ago | 481 | 48% | 3.30 | 573% |
| Two qtrs ago | 149 | -39% | -3.30 | N/A |
| Three qtrs ago | 287 | 77% | 0.12 | N/A |
Stock 6
CRISPR Therapeutics (CRSP)
| Price | Buy Range | Loss Limit |
| 79 | 75.7-78.5 | 66-68 |
Why the Strength
Most biotechs develop medicines to treat diseases, but what makes CRISPR stand out is its use of “molecular scissors” to fix problems on the genetic level. Specifically, the company uses a unique gene-editing technology (dubbed CRISPR/Cas9) for creating therapies to treat cancer, blood diseases, diabetes and more. The company’s platform identifies DNA anomalies, then employs the protein Cas9 to remove the gene sequence “problem” and replace it. CRISPR’s pipeline includes several clinical-stage trials, including VCTX210 (for type 1 diabetes), CTX110 (for B-cell tumors), CTX120 (for multiple myeloma) and CTX130 (for tumors and blood cancers), as well as research-stage in vivo approaches for treating Friedreich’s Ataxia, hemophilia and Amyotrophic Lateral Sclerosis. Along with its partner Vertex Pharmaceuticals, CRISPR is developing Exa-Cel, which edits a patient’s own stem cells. Both companies released Phase III clinical study data that showed Exa-Cel has the potential to be a one-time “functional cure” for both transfusion-dependent beta-thalassemia (TDT) and severe sickle cell disease (SCD) patients—a reason for the stock’s strength—and CRISPR expects to submit regulatory filings for Exa-Cel for both of those indications later this year. The numbers at this point are basically irrelevant, as the stock trades on clinical data and the potential of its pipeline and technology. At its recent Innovation Day presentation, the company said its long-term focus is to be a leader in gene editing, with a major Wall Street bank observing that CRISPR’s pipeline is now among the “richest and most diverse in the gene-editing space.” Granted, it’s very early stage, though we’re intrigued that nearly 400 funds have stakes already.
Technical Analysis
After a rocket ride in 2020, CRSP hit a major peak at 220 early last year and spent the rest of 2021 in retreat, and this year has followed suit, with the stock surrendering most of its pandemic-year gains (down 80%) before bottoming near 42. But CRSP has turned around impressively since then—there was no bottom building here, just a sharp rally off the lows, some volatility near the 40-week line, and now the last two weeks have seen shares get a head of steam going. Volatility here is very, very large (it’s been moving an average of five points per day from high to low!), but we’re OK nibbling on dips if you want in.
| Market Cap | $4.68B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2020 | -5.29 |
| Current P/E | N/A | FY 2021 | 4.70 |
| Annual Revenue | $916M | FY 2022e | -8.96 |
| Profit Margin | N/A | FY 2023e | -7.59 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 0.9 | 74% | -2.32 | N/A |
| One qtr ago | 12.9 | 999% | -1.84 | N/A |
| Two qtrs ago | 0.8 | 447% | -1.68 | N/A |
| Three qtrs ago | 901 | 999% | 10.12 | N/A |
Stock 7
Day One Pharmaceutical (DAWN)
| Price | Buy Range | Loss Limit |
| 18 | 16-17.5 | 13.8-14.8 |
Why the Strength
Day One is a small-cap, pre-commercial cancer drug developer focused on treatment for children. In June, the company announced positive initial data for its drug tovorafenib in treating relapsed pediatric low-grade glioma, a brain cancer. The data is from a small group of 22 patients – full topline results are expected in Q1 2023 -- but the positive results in treating relapses is enough for the company to proceed to Phase III trials this summer for using tovorafenib as the frontline treatment of glioma, too. Pediatric brain cancer is an underserved segment of the market, where Day One seeks to be a first mover by using small trials with clearly defined endpoints to facilitate rapid development and regulatory approval. Management says pediatric tumors tend to be genetically simple, which supports the approach. In the case of tovorafenib, the drug is designated as breakthrough therapy for relapsed pediatric low-grade glioma (pLGG) and has the FDA rare pediatric disease designation for pLGG. The FDA and European Union have also given it orphan drug designation for gliomas. Some 70% of pLGG patients will need systemic therapy, which tovorafenib should make more effective, reducing associated morbidities from existing treatments. Day One estimates there are 1,100 patients in the U.S. annually who have what is called a BRAF alteration, which the drug directly addresses. A further 26,000 have ongoing treatment for earlier gliomas. If all goes well, tovorafenib will be submitted for FDA approval in the first half of next year, which would be Day One’s on-ramp to revenue. Right now, the company has about $300 million in cash to fund research into 2025, and the $1.3 billion market cap should prove reasonable in relation to sales of the drug once it hits the market.
Technical Analysis
DAWN came public last May, gyrated for a few months and then sunk like a stone through May, bottoming just above 5. But that history likely doesn’t matter much now: June’s preliminary trial results sent the stock gapping from around 6 to 15, shattering the downtrend, and DAWN continued to ramp higher, running up to 20 before finally hitting a little resistance in recent days. We’re not big on chasing these situations, but rolling the dice on a retreat (with a loose stop) seems like a reasonable risk-reward.
| Market Cap | $1.38B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2020 | -0.65 |
| Current P/E | N/A | FY 2021 | -1.78 |
| Annual Revenue | Nil | FY 2022e | -2.00 |
| Profit Margin | N/A | FY 2023e | -2.06 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | N/M | N/M | -0.48 | N/A |
| One qtr ago | N/M | N/M | -1.97 | N/A |
| Two qtrs ago | N/M | N/M | -0.33 | N/A |
| Three qtrs ago | N/M | N/M | -0.23 | N/A |
Stock 8
Dollar Tree (DLTR)
| Price | Buy Range | Loss Limit |
| 170 | 167-171 | 153-155 |
Why the Strength
Inflation just hit a 40-year high in the U.S., which largely explains why deep discount retailers like Dollar Tree (covered in the May 31 report) are outperforming. The retailer operates around 16,000 locations nationwide and also owns the Family Dollar brand where most items are priced under $10. Most of Dollar Tree’s offerings, by contrast, typically sell for around $1.25, and while this represents a 25% increase from its previous price average, it still represents a major bargain compared to most of its competitors, which is a reason for its buoyant financial performance. In a tough first quarter which saw bigger retail chains miss earnings estimates and report low single-digit comp sales, Dollar Tree beat top- and bottom-line estimates and delivered its best performance in company history. The firm saw revenue increase 7% while same-store sales surged 11% from a year ago—the best quarterly comp performance in 20 years!—which is proof the company is attracting tons of business from savings-conscious consumers. Further, as shoppers look for ways to blunt the impact of higher fuel prices, they have an incentive to avoid higher-end retailers that are usually located miles away and keep shopping at Dollar Tree (especially as the company has strategically located many of its stores within easy walking distance of densely developed neighborhoods). To be fair, the $1.25 price point isn’t sacrosanct; the firm has hiked prices on select items to the $3 to $5 range due to inflation and higher costs, but management reports customers are “responding favorably” to it so far while buying more of the new “greater value” products hitting Dollar Tree’s shelves. Looking ahead, analysts see 7% sales and 30% EPS growth in fiscal Q2, part of a 41% earnings boom likely this year.
Technical Analysis
DLTR’s romp higher late last year led to a three-plus-month consolidation, which then launched the stock on another run up to 177. A sector-wide retail crash followed in May (think Target and Walmart), which caused shares to plummet to 125, although earnings came to the rescue, leading to an unusual (but bullish) chart, with shares quickly jumping back to the pre-retail-crash level. Shares rested a bit longer, but July has been kind to DLTR, with shares perking up (on low volume) as the market has stabilized. We’re OK taking a swing at it here with a tight-ish stop percentage-wise.
| Market Cap | $37.7B | EPS $ Annual (Jan) | |
| Forward P/E | 21 | FY 2021 | 6.52 |
| Current P/E | 26 | FY 2022 | 5.80 |
| Annual Revenue | $26.7B | FY 2023e | 8.16 |
| Profit Margin | 7.8% | FY 2024e | 9.33 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 6.9 | 7% | 2.37 | 48% |
| One qtr ago | 7.08 | 5% | 2.01 | -6% |
| Two qtrs ago | 6.42 | 4% | 0.96 | -38% |
| Three qtrs ago | 6.34 | 1% | 1.23 | -23% |
Stock 9
Lantheus (LNTH)
| Price | Buy Range | Loss Limit |
| 67 | 65-67.5 | 58-60 |
Why the Strength
Lantheus has been one of the few growth-oriented names that’s been able to countertrend the market’s bear phase in recent months, and for good reason, as the company has a new product that’s driving sales and earnings through the roof. Lantheus isn’t a household name, but it’s one of the leading providers of medical imaging agents that improve the contrast in screens and, in turn, allow for more accurate diagnoses. Its Definity product has been a big draw for years, as it allows better imaging for echocardiograms, and there’s the potential for millions more of those screens to use that product in the years ahead (many of them are still “sub-optimal” in the firm’s words). Still, at this point, Definity is somewhat mature, so the big growth driver is Pylarify, which just hit the market in Q4 of last year: Pylarify is used for scans in patients with a suspected recurrence of prostate cancer or those with possible metastasis, which (unfortunately) is a giant market, north of 220,000 scans annually that management believes is a whopping $1.1 billion opportunity, which, by itself, was more than twice as much as Lantheus’ revenue before the launch! And the firm is quickly taking advantage of that, with revenues for this new product coming in at $35 million in Q4 and exploding to $93 million in Q2, driving massive sales and earnings growth for Lanthus as a whole. And all of that was with just 30,000 men having been imaged through Q1! (The Q1 tally was bolstered by a one-time supply deal with Novartis for a clinical trial, but even so, there’s little doubt the upside is big.) Analysts see earnings taking a step-function leap higher this year to more than $3 per share, with 20%-ish growth likely next year as well—and both of those could easily prove conservative. Earnings are likely out in two to three weeks.
Technical Analysis
LNTH blasted off after Q4 earnings in late February, and unlike so many names this year, shares followed-through beautifully, with the stock motoring up to 70 after Q4 earnings and up to 74 near the end of May. Then the stock finally broke (we took a profit then) with the market in early June, but impressively, the initial selloff didn’t gain steam; the 60 area held and now LNTH has pushed back toward its old high. The stock could have more wiggles in store (it was rejected near resistance today), but assuming the quarterly report is pleasing, the next big move should be up. We’re OK nibbling here or (preferably) on weakness.
| Market Cap | $4.85B | EPS $ Annual (Dec) | |
| Forward P/E | 23 | FY 2020 | 0.47 |
| Current P/E | 48 | FY 2021 | 0.49 |
| Annual Revenue | $542M | FY 2022e | 3.06 |
| Profit Margin | 32.5% | FY 2023e | 3.64 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 209 | 126% | 0.97 | 999% |
| One qtr ago | 130 | 38% | 0.25 | 257% |
| Two qtrs ago | 102 | 15% | 0.08 | 100% |
| Three qtrs ago | 101 | 53% | 0.11 | 10% |
Stock 10
Li Auto (LI)
| Price | Buy Range | Loss Limit |
| 39 | 37.5-40 | 32-33.5 |
Why the Strength
A major automaker made waves last week by announcing expectations for its electric vehicle (EV) sales to double in China this year despite Covid-related setbacks. This serves to highlight the booming conditions in that nation’s EV market. (Indeed, EV sales in China last year were nearly four times greater than in the U.S.!). Li Auto (covered in the June 21 report) is one of China’s leaders in this space, making and selling premium “smart” SUVs and pioneering extended-range, hybrid EVs, both of which are proving hugely popular. (The firm uses the phrase EREV, standing for extended range electric vehicle.) In June, Li saw deliveries of its flagship Li One—a luxury mid-size crossover SUV—increase an eye-opening 69% from a year ago and 13% from the prior month, for a total of just over 13,000, comparing favorably with the monthly sales of its nearest domestic EV competitor, NIO. In the second quarter, Li’s vehicle deliveries reached almost 29,000, up an astounding 63% and exceeding Li’s midpoint guidance by 25%. The company also just unveiled its Li L9, a “smart,” full-size EREV for families designed for extra space and comfort and a range of 684 miles, with deliveries expected by the end of August. However, pre-orders opened up recently and they were a hit—Li received record orders of more than 30,000 within three days of the launch (each required a $750 deposit), prompting management to predict its German EV rivals like Mercedes-Benz and Volkswagen will be forced to reduce prices in the coming years in order to compete with Li in China. With the firm running on all cylinders in the midst of a nationwide EV boom, Wall Street analysts are forecasting Q2 top-line growth of 77% and full-year sales of 85%. The Q2 report is likely out in late August.
Technical Analysis
We wrote up LI a few weeks back but missed our buy price as the stock never quite came in. But that strength wasn’t a bad thing, and now the stock has set up very nicely—like most Chinese shares, LI began bottoming out in March and took flight in May, rallying on huge volume for many weeks in a row before finally hitting resistance near its old peak. The stock has since etched a nice, relatively tight three-week range—and while the rest could go on longer, today’s action was encouraging. We’re OK nabbing a few shares here, but use a loose loss limit.
| Market Cap | $37.0B | EPS $ Annual (Dec) | |
| Forward P/E | N/A | FY 2020 | -0.05 |
| Current P/E | 174 | FY 2021 | 0.13 |
| Annual Revenue | $5.17B | FY 2022e | -0.03 |
| Profit Margin | 5.0% | FY 2023e | 0.27 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) |
| Latest qtr | 1.51 | 176% | 0.07 | N/A |
| One qtr ago | 1.67 | 163% | 0.11 | 450% |
| Two qtrs ago | 1.21 | 226% | 0.05 | N/A |
| Three qtrs ago | 0.78 | 183% | -0.01 | N/A |
Previously Recommended Stocks
Below you’ll find Cabot Top Ten Trader recommended stocks. Those rated HOLD are stocks that traded within our suggested buy range within two weeks of appearing in the Top Ten and still look good; hold if you own them. Stocks rated WAIT have yet to dip into our suggested buy range … but can be bought if they do so within the next week.
Those stocks rated SELL should be sold if you own them; they will no longer be listed here. Finally, Stocks in the DROPPED category are those that failed to trade within our buy range within two weeks of our recommendation; that’s not a bad thing, we just never got the price we wanted. Please use this list to keep up with our latest thinking, and don’t hesitate to call or email us with any questions you may have. New recommendations each week are in bold.
| Date | Stock | Symbol | Top Pick | Original Buy Range | Price as of 7/18/2022 |
| HOLD |
| 6/13/22 | Academy Sports | ASO | ★ | 32-34 | 40 |
| 7/11/22 | Agilon Health | AGL | ★ | 24-25.5 | 26 |
| 7/5/22 | Alliance Resource Ptnr | ARLP | | 17.3-18.3 | 21 |
| 6/21/22 | Argenx | ARGX | | 345-355 | 364 |
| 7/5/22 | Autonation | AN | | 113-117 | 117 |
| 7/11/22 | Baidu | BIDU | | 141-145 | 141 |
| 6/27/22 | Biomarin Pharm | BMRN | | 83-86 | 86 |
| 6/27/22 | BJ’s Wholesale Club | BJ | | 62-64.5 | 69 |
| 7/11/22 | Braze | BRZE | | 40-42 | 44 |
| 5/23/22 | Bumble | BMBL | | 25.5-27.5 | 32 |
| 5/16/22 | Celsius | CELH | | 53-56 | 75 |
| 6/21/22 | CrowdStrike | CRWD | | 161-168 | 177 |
| 6/27/22 | Daqo New Energy | DQ | | 66.5-70 | 67 |
| 5/10/21 | Devon Energy | DVN | ★ | 25-26.5 | 55 |
| 5/31/22 | Dollar Tree | DLTR | | 155-161 | 170 |
| 6/6/22 | Enphase Energy | ENPH | | 197-205 | 206 |
| 7/11/22 | Fortinet | FTNT | | 59-61 | 58 |
| 4/18/22 | Halozyme | HALO | | 40.5-42 | 48 |
| 5/16/22 | Intra-Cellular Therapies | ITCI | | 54-57 | 54 |
| 6/27/22 | JD.com | JD | | 63-66 | 62 |
| 6/13/22 | Jinkosolar | JKS | | 56-58.5 | 64 |
| 7/11/22 | Karuna Therapeutics | KRTX | | 127-131 | 128 |
| 7/5/22 | Legend Biotech | LEGN | | 51-54 | 50 |
| 5/23/22 | Nexstar Media | NXST | | 173-178 | 170 |
| 6/13/22 | Neurocrine Bio | NBIX | | 89-92 | 94 |
| 7/5/22 | Northrop Grumman | NOC | | 477-485 | 449 |
| 6/21/22 | Ollie’s Bargain Outlet | OLLI | | 56-58.5 | 68 |
| 7/5/22 | Perrigo | PRGO | | 39.5-41 | 41 |
| 6/21/22 | Pinduoduo | PDD | | 59-62 | 55 |
| 7/11/22 | PTC Therapeutics | PTCT | | 41-43 | 43 |
| 6/27/22 | Royalty Pharma | RPRX | ★ | 41.5-43.5 | 44 |
| 6/13/22 | Scorpio Tankers | STNG | | 31-33 | 37 |
| 6/27/22 | Shockwave Medical | SWAV | | 185-195 | 203 |
| 6/21/22 | SolarEdge | SEDG | | 270-285 | 281 |
| 7/5/22 | Trip.com | TCOM | | 25-26.5 | 26 |
| 5/31/22 | United Therapeutics | UTHR | ★ | 224-230 | 234 |
| 7/11/22 | Vertex Pharmaceuticals | VRTX | | 288-296 | 286 |
| 7/11/22 | Xpeng | XPEV | | 28-30 | 28 |
| 7/11/22 | Zoom Communications | ZM | | 105-109 | 99 |
| WAIT |
| None this week | | | | | |
| SELL RECOMMENDATIONS |
| 6/6/22 | Alkermes | ALKS | | 27.5-29 | 29 |
| 7/11/22 | Duolingo | DUOL | | 106-108 | 95 |
| 5/16/22 | Funko | FNKO | | 18.8-19.8 | 23 |
| 5/31/22 | Ulta Beauty | ULTA | | 410-420 | 394 |
| DROPPED |
| 7/5/22 | Global Blood Ther. | GBT | ★ | 31-33 | 35 |
The next Cabot Top Ten Trader issue will be published on July 25, 2022.
About the Analyst
Mike Cintolo
A growth stock and market timing expert, Michael Cintolo is Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable is his development of the proprietary trend-following market timing system, Cabot Tides, which has helped Cabot place among the top handful of market-timing newsletters numerous times.
