Here are a few things that I’m noticing among various stock sectors. Semiconductor stocks look extremely bullish. Make sure you have one of those in your portfolios! Good choices today include Applied Materials (AMAT) and ASML Holdings (ASML).
Energy-related stocks are pulling back after a recent run-up. Tesoro (TSO) and ExxonMobil (XOM) just fell to price support, so now is a good time to accumulate shares.
Retail stocks are weakening, but discount retailers’ stocks seem to have held onto their normal trading ranges, with most of them sitting at the bottom of those ranges. Think for a moment about huge institutional portfolios. Portfolio managers need to have a presence within each industry, and retailers are a significant sector. If traditional retail stocks are suffering, but discount retail stocks are showing more strength, the portfolio managers are going to shift portfolio dollars into discount retailers. I recommend buying low on Dollar Tree (DLTR).
Insurance stocks rose in November then flattened out in December, without significant pullbacks. There’s a lot of price strength there. The sector is extremely undervalued across the board, with opportunities in life, health and property & casualty insurance companies. The ones I’d buy today are American International Group (AIG) and Molina Healthcare (MOH).
Many other types of financial stocks have attractive valuations, but the insurers are the ones with the most inspiring price charts. And despite strong fundamentals, the price charts on housing and building stocks are not making a bullish statement today.
Got questions? Contact me at Crista@CabotWealth.com.
Best Stocks to Buy Today:
• American International Group (AIG)
• Applied Materials (AMAT)
• ASML Holdings NV (ASML)
• Molina Healthcare (MOH)
• Vertex Pharmaceuticals (VRTX)
Today’s Portfolio Changes:
• Amazon.com (AMZN) moves from Buy to Hold.
Last Week’s Portfolio Changes:
• ASML Holdings NV (ASML) joined the Growth Portfolio.
• Exxon Mobil (XOM) joined the Growth & Income Portfolio.
• Goldman Sachs (GS) moved from the Growth & Income Portfolio to the Growth Portfolio.
• Johnson Controls (JCI) moved from Strong Buy to Hold.
• Molina Healthcare (MOH) joined the Buy Low Opportunities Portfolio.
• Whirlpool (WHR) moved from Strong Buy to Hold.
Updates on Growth Portfolio Stocks
ASML Holdings NV (ASML – yield 1.1%) was featured in the January issue of Cabot Undervalued Stocks Advisor. ASML is expected to report fourth-quarter EPS of $1.05 on the morning of January 18. When ASML breaks past 112, it will be reaching new all-time highs. Strong Buy.
Adobe Systems (ADBE) Jim Cramer talked about cloud stocks last week, saying that ADBE and Salesforce (CRM) are the ones to buy. He’s half right. ADBE is very attractive, but CRM’s P/E is more than double ADBE’s P/E, so I’d leave CRM on the sideline. Undervalued aggressive growth stock ADBE is rising toward short-term upside resistance at 111, which it could surpass this winter. Strong Buy.
Amazon.com (AMZN) is a fairly valued aggressive growth stock. There’s 5% upside as AMZN rebounds to short-term upside resistance at 840. I’m moving AMZN from Buy to Hold due to valuation. Hold.
American International Group (AIG – yield 1.9%) This aggressive growth stock could break past 67 and begin a run-up at any time. Strong Buy.
Applied Materials (AMAT – yield 1.2%) is an undervalued aggressive growth stock with a bullish chart and no upside resistance. Buy.
Dollar Tree (DLTR) is quite cheap and seems to be at the bottom of its trading range. A retracing of August highs would give new investors a 30% capital gain. Buy.
Goldman Sachs Group (GS – yield 1.0%) is expected to report fourth-quarter earnings of $4.80 per share on the morning of January 18. GS is an undervalued aggressive growth stock. January might bring investors an upside earnings surprise, another run-up in the share price, a dividend increase and/or a new share repurchase authorization. The Hold rating represents caution after the huge 2016 run-up, but the fundamentals and news remain attractive. Aggressive investors could certainly buy GS right now. Hold.
Johnson Controls (JCI – yield 2.3%) is a very undervalued growth stock. JCI is in the midst of a price correction, which is likely quite temporary. Hold.
Quanta Services (PWR) is a very undervalued aggressive growth stock with a low debt ratio. PWR is trading sideways between 34 and 37. Strong Buy.
Vulcan Materials (VMC – yield 0.6%) has increased its quarterly dividend four times since February 2014, from one cent to five cents to six cents to 10 cents to 20 cents per share. Watch for another hefty dividend increase in mid-February. This undervalued aggressive growth stock is in the midst of a temporary pullback, with price support at 123. Strong Buy.
XL Group Ltd. (XL – yield 2.1%) is an extremely undervalued aggressive growth stock. The stock could break past upside resistance at 38 this winter. Strong Buy.
Updates on Growth & Income Portfolio Stocks
BP plc (BP – yield 6.3%) Forbes wrote favorably last week about BP’s recent acquisitions and investments. The price chart is bullish, with some resistance at 39 and again at 43. Strong Buy.
Cardinal Health (CAH – yield 2.4%) is fairly valued. The price chart is bullish, with upside resistance at 78. Hold.
D.R. Horton (DHI – yield 1.4%) is undervalued and trading at price support. Patient bargain hunters should buy now. Buy.
Exxon Mobil (XOM – yield 3.4%) was featured in the January issue of Cabot Undervalued Stocks Advisor. Buy now for a potential 20% capital gain as XOM retraces its 2014 high near 104. Strong Buy.
Federated Investors (FII – yield 3.5%) is currently overvalued and appears capable of rebounding to 31 this winter. Hold.
GameStop (GME – yield 6.0%) Buy this volatile, undervalued stock for a potential winter rebound to 28 or 31. Buy.
H&R Block (HRB – yield 3.7%) is overvalued and appears ready to break past 24 toward upside resistance at 27. Hold.
Kraft Heinz (KHC – yield 2.8%) rose from 80 to 88 in December, and will now likely trade between 86 and 89 for a short while, with a subsequent breakout above 89. Buy.
Royal Caribbean Cruises (RCL – yield 2.3%) is ratcheting upwards since September, and could rise to its December 2015 high around 102. Buy.
Whirlpool (WHR – yield 2.1%) has teamed up with Amazon (AMZN) to introduce appliances that respond to voice commands. These exciting new products are likely to lead to increased sales and profits at WHR. Watch for analysts to increase earnings estimates in the coming months. WHR is rising toward price resistance at 190. Hold.
Updates on Buy Low Opportunities Portfolio Stocks
Archer Daniels Midland (ADM – yield 2.7%) Here’s a Zacks review of agricultural operations stocks, including a buy recommendation on ADM. When ADM breaks past 47.50, there’s additional upside resistance at 51. Strong Buy.
Boise Cascade (BCC) is resting after a huge post-election run-up. Hold.
BorgWarner (BWA – yield 1.3%) is trading between 39 and 42. Hold.
Legg Mason (LM – yield 2.8%) has been trading sideways for almost a year, with upside price resistance at 34.50. Strong Buy.
Mattel (MAT – yield 5.0%) introduced Aristotle, a voice-control smart baby monitor, at the Consumer Electronics Show. The device is designed to evolve as children grow, providing a variety of parent-friendly and age-appropriate services. This undervalued aggressive growth stock reacted promptly by spiking upwards. Now that investors’ and media attention is being drawn to the stock, they’re going to be somewhat shocked at the combination of Mattel’s aggressive 2017 earnings growth projections, the low P/E and the huge dividend. In addition, Aristotle will likely cause analysts to raise earnings estimates, which in turn will encourage more share-buying activity. Nobody has missed their chance to buy MAT and potentially earn outsized capital gains this year. Buy.
Molina Healthcare (MOH) was featured in the January issue of Cabot Undervalued Stocks Advisor. This undervalued aggressive growth stock is rising, with upside resistance at 60, the upper 60s, and again near 80. Buy.
Tesoro (TSO – yield 2.6%) Wall Street’s consensus earnings estimate came down for TSO in the last week, as analysts contemplate the effect of changes in tax policy on the energy industry. A new 20% “border adjustment tax” on imports would have a modest negative affect on TSO’s earnings, according to a January 9 report from a major Wall Street firm. Current estimates show EPS growing 19.6% in 2017, with a P/E of 13.3. Clearly, the stock remains undervalued. Zacks wrote extensively about TSO’s attractive valuation last week. TSO is having a pullback, and could easily rise to upside resistance at 115 in 2017. Buy.
Toll Brothers (TOL) has traded between 31 and 33 since an early December run-up. Buy.
Total SA (TOT – yield 5.3%) Zacks wrote favorably about TOT’s attractive valuation last week. TOT had a quick run-up since joining the portfolio in November. It could easily stop rising and rest for a while. If it pulls back to 49, add to your position. Strong Buy.
Universal Electronics (UEIC) has upside resistance at 70, and again at 78. Buy.
Vertex Pharmaceuticals (VRTX) issued a lengthy report on the outlook for its cystic fibrosis treatments, along with estimated year-end 2016 financial results, on January 8. Final results will be reported on January 25. Here are the highlights:
• Pre-reported fourth quarter 2016 revenues came in slightly above expectations
• Pre-reported full-year 2016 expenses came in slightly below expectations.
• U.S. sales of Orkambi were below analysts’ estimates, while more European countries’ sales were included than expected. 2016 French sales of Orkambi will not be included in the total until a formal reimbursement agreement is reached.
• The company expects 2017 revenues of $690 million to $710 million for Kalydeco, slightly below consensus estimates.
• The company expects 2017 revenues of $1.1 billion to $1.3 billion for Orkambi, below consensus estimates. This number is dependent on the finalization of reimbursement agreements with European countries.
• 2017 R&D and SG&A expenses are projected at $1.25 billion to $1.3 billion.
• Initial data from VX-440 and VX-152 Phase II triple combination trials are expected in second-half 2017.
• Two additional treatments are in the trial dosing stages, with data expected in second-half 2017.
In the coming months, the market will be focused on the European reimbursement levels, and the progress of this year’s drug trials.
VRTX and most biotech stocks are now rising after the sector had a big post-election price correction. The best-case scenario in the short term is that VRTX climbs all the way to the mid-90s before resting. Buy.
