DO YOU NEED DAILY TRADING IDEAS?
Each day during this market downturn, I am active in my stock portfolio. At first, I was just buying low with the cash I’d accumulated in anticipation of a market downturn. But after mid-March, some of my stocks and options were rising so quickly that I began cashing them in, then buying low on other opportunities that were just beginning to rise. At this point, I’m into a daily rhythm where I review a long list of stocks, then proceed to sell at the tops of trading ranges on a few and buy as a couple others are beginning new run-ups. If you send me an email in the middle of the trading day (or later), I can tell you which trading opportunities look best that day.
Yesterday, while reviewing my entire Buy List, I noticed that the insurance/annuity and investment stocks appear ready to begin new run-ups, after resting for a few days. I know I’ve mentioned this category of stocks frequently this year, but since they’re still presenting good buying opportunities, I’m going to keep pointing them out until another industry’s stocks catch my eye. Additional stocks that appear immediately ready to rise include Avnet (AVT), Brunswick Corp. (BC), Boise Cascade (BCC), Chart Industries (GTLS), FedEx (FDX) and Kansas City Southern (KSU).
As we enter earnings season, I’m going to approach it differently than usual. I’m normally focused on earnings estimates, and how the companies perform compared to Wall Street’s expectations. However, the virus pandemic has screwed up business plans at every company around the globe. Analysts’ estimates are now akin to dart-throwing. There will be a reset in the financial community as companies report quarterly results, and far more importantly, describe their future outlooks. Therefore, I won’t be reporting consensus earnings estimates for the quarter, because those numbers will frankly be irrelevant.
For more thorough descriptions of our portfolio stocks, please refer to the April issue of Cabot Undervalued Stocks Advisor.
QUARTERLY EARNINGS RELEASE CALENDAR
April 21 pm: Netflix (NFLX) – 1Q
April 22 am: Baker Hughes (BKR) – 1Q
April 30 am: Dow Inc. (DOW) and Total SA (TOT) – 1Q
second half April: Amazon.com (AMZN), MKS Instruments (MKSI) and Universal Electronics – 1Q; Apple (AAPL) – 2Q
May 4 am: Mercury General Group (MCY) – 1Q; Tyson Foods (TSN) – 2Q
May 5 am: LGI Homes (LGIH) and Marathon Petroleum (MPC) – 1Q
May 5 pm: Voya Financial (VOYA) – 1Q
May 6 am: Alexion Pharmaceuticals (ALXN) and General Motors (GM) – 1Q
May 7 am: Bristol-Myers Squibb (BMY) – 1Q
First half May: Equitable Holdings (EQH), NV5 Global (NVEE), Nvidia (NVDA), Quanta Services (PWR) – 1Q
Second half May: Abercrombie & Fitch (ANF) and Designer Brands (DBI) – 1Q
First half June: Guess? Inc. (GES) – 1Q; Adobe Systems (ADBE) and Broadcom (AVGO) – 2Q
Today’s Portfolio changes
Alexion Pharmaceuticals (ALXN) moves from Buy to Hold.
Recent Portfolio changes
Broadcom (AVGO) moved from Buy to Hold.
Equitable Holdings (EQH) moved from Hold to Strong Buy.
Guess?, Inc. (GES) moved from the Growth & Income Portfolio to the Special Situation and Movie Star Portfolio.
NV5 Global (NVEE) joined the Growth Portfolio as a Strong Buy.
Voya Financial (VOYA) moved from Hold to Strong Buy.
BEST STOCKS TO BUY TODAY
Stock Comment*
Abercrombie & Fitch (ANF) DIV
Equitable (EQH) T DIV
Dow Inc. (DOW) DIV
Guess? (GES) T
Marathon Petroleum (MPC) T DIV
Mercury General (MCY) G T DIV
MKS Instruments (MKSI) G T
Quanta Services (PWR) G T
Universal Electronics (UEIC) G T
VanEck Oil Refiners ETF (CRAK) G T
* A good choice today for investors looking for growth (G), growth & income (DIV) or trading (T).
Growth Portfolio
LGI Homes (LGIH) is the 10th-largest residential home builder in America. The company is currently building homes, primarily for first-time home buyers, in 19 U.S. states from coast-to-coast and the District of Columbia. LGI announced 795 homes closed in March 2020, up from 566 home closings in March 2019, representing year-over-year growth of 40.5%. In addition, the company announced record-breaking quarterly home closings of 1,835 during the first quarter of 2020 compared to 1,228 home closings in the first quarter of 2019, a 49.4% increase year-over-year.
Earnings estimates came down last week. Analysts now expect EPS to grow 0.7% and 11.0% in 2020 and 2021, respectively. The 2020 P/E is 6.5. LGIH is a small-cap stock that rose over 60% from its April low to its April high. This week, the stock fell 15% on Monday, then rebounded 7% by Tuesday midday. There weren’t any negative news stories, and other homebuilder stocks also moved in tandem. It was probably just traders taking profits. I believe there’s money to be made on LGIH in the coming weeks and months, however, I’m holding off on a Buy recommendation until we hear more about the company’s outlook during their first-quarter earnings conference call. Hold.
Marathon Petroleum (MPC – yield 9.0%) is an integrated downstream energy company. The company is profitable, undervalued, providing a big dividend yield (most recently increased in March), and under pressure by activist investors to continue improving operations and shareholder returns. Investors can stay abreast of Marathon’s corporate and financial plans on April 29, during the company’s online annual shareholder meeting. Earnings estimates have declined alongside the decline in oil prices. Consensus estimates currently point to $1.15 and $3.64 EPS in 2020 and 2021, respectively.
The stock is appropriate for risk-tolerant traders and dividend investors. Shares of energy stocks are on the mend. The MPC price chart exhibited a stable bottoming pattern in March, and continues to improve. At a share price of 26, I believe the stock could climb 34% to about 35 within a matter of weeks, influenced by both a rebounding stock market and the new OPEC agreement on oil production. Buy.
MKS Instruments (MKSI – yield 0.9%) – Yesterday, MKSI was featured in The Motley Fool’s 3 Top Stocks That Aren’t on Wall Street’s Radar. MKSI is an undervalued, small-cap growth stock, appropriate for growth investors and traders. The stock is ratcheting upward from its recent lows. At a share price of 89, there’s 18% upside to short-term price resistance around 105, where traders should exit and growth investors should hold. Strong Buy.
NV5 Global (NVEE) is a leading provider of professional and technical engineering and consulting solutions for public and private sector clients in the infrastructure, construction, real estate, and environmental markets. The company primarily focuses on construction quality assurance, infrastructure, energy, program management, and environmental. NV5 operates out of more than 100 offices nationwide and abroad. NV5 Global joined the Growth Portfolio last week. The stock was also featured in Cabot’s Top 10 Buy and Hold Stocks for 2020.
Profits are expected to grow 29% and 12% in 2020 and 2021, respectively, and the 2020 P/E is 10.4. NVEE is a micro-cap stock, appropriate for risk-tolerant growth investors and traders. The stock rose about 50% from its March low to its April peak. At a share price of 42, there’s 66% upside as NVEE travels back to its February high of 70. Expect volatility. Strong Buy.
Quanta Services (PWR – yield 0.6%) is a leading specialty infrastructure solutions provider serving the utility, energy and communication industries. Their infrastructure projects have meaningful exposure to highly predictable, largely non-discretionary spending across multiple end-markets, including 65% of revenue coming from regulated utility customers. The company achieved record annual revenues, operating income and backlog in 2019, and is pursuing a multi-year goal of increasing margins. Quanta Services was featured in the December monthly issue of Cabot Undervalued Stocks Advisor.
PWR is an undervalued, mid-cap growth stock, attractive for growth investors and traders. Earnings estimates came down a little in recent weeks, currently reflecting 9.9% and 10.7% EPS growth in 2020 and 2021. The 2020 P/E is 8.8. On March 26, a corporate insider purchased approximately $9.6 million of PWR shares. The stock is ratcheting toward upside resistance at 37, with additional resistance at 40. Buy.
Tyson Foods (TSN – yield 2.7%) – TSN is an attractive stock for growth investors, dividend investors and traders. Analysts are now forecasting EPS to increase 12.6% and 11.4% in 2020 and 2021 (September year end). The 2020 P/E is 10.1. At a share price of 62, there’s 13% upside to short-term price resistance at 70. Strong Buy.
Universal Electronics (UEIC) – The stock is ratcheting upward toward short-term price resistance around 44, where traders should exit and growth investors should hold. Strong Buy.
Voya Financial (VOYA – yield 1.4%) is a U.S. retirement, investment and insurance company serving 13.8 million individual and institutional customers. Voya has $603 billion in total assets under management and administration. VOYA is a mid-cap growth stock. Earnings estimates reflect very aggressive growth rates of 32% and 36% per year in 2020 and 2021, respectively. The 2020 P/E is very low in comparison at 9.7.
VOYA is appropriate for growth investors. The stock is up 50% from its March lows, and could promptly advance further, but it has not taken time to rest and establish decent price support. VOYA could travel as far as the low 50s in the near term. Expect volatility, and have the confidence to accumulate shares on pullbacks. Strong Buy.
Growth & Income Portfolio
Bristol-Myers Squibb Company (BMY – yield 3.0%) – Last week, Bristol-Myers persuaded a judge to increase damages and interest against Gilead Sciences’ Kite unit by $422 million in its patent-infringement case over revolutionary treatments that use a body’s own immune system to fight cancer. Bristol-Myers was featured in the April issue of Cabot Undervalued Stocks Advisor. The company is expected to increase EPS by 32% and 19% in 2020 and 2021. BMY is appropriate for growth investors, traders and income investors. On April 9, Zacks upgraded BMY to a Buy rating based on rising earnings estimates. At a share price of 59, BMY has 13% upside to its February high of 67. There’s some short-term price resistance at 62. Strong Buy.
Broadcom (AVGO – yield 4.9%) is a global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions that serve the world’s most successful companies. CFO Tom Krause expects to both continue paying the dividend and paying down debt in 2020 (none of which is maturing this year), even under poor economic conditions. Share buybacks and M&A activity are now on the back burner. Broadcom was featured in the December 17 and January issues of Cabot Undervalued Stocks Advisor.
On March 30, a corporate insider purchased $2.3 million of AVGO shares. The stock is racing toward price resistance in the 270-280 range. Traders should sell there, and longer-term investors should watch for buying opportunities on pullbacks, at which time I’ll return AVGO to a Buy recommendation. Hold.
Dow Inc. (DOW – yield 7.8%) is a commodity chemicals company with manufacturing facilities in 31 countries. Dow derives roughly 50% of profits from its polyethylene business. Management is focused on cost-cutting, debt repayment and returning cash to shareholders. Last week, Dow declared their regular quarter dividend of $0.70 per share. The consensus earnings outlook came down dramatically in March due to business disruptions associated with the coronavirus. Analysts now expect full-year EPS of $2.16 and $2.92 in 2020 and 2021. The 2020 P/E is 16.3.
DOW is appropriate for dividend investors and traders. CEO Jim Fitterling bought 20,000 DOW shares on March 13, mere days before the stock’s low during the market’s downturn, and two Dow board members also made purchases that day. In recent days, Citigroup raised their price target on DOW from 32 to 38, and UBS raised their target from 30 to 37. A rebound in oil prices could benefit both the earnings outlook and the share price. The current run-up will likely pause around 42-42.50, where I will review DOW’s position in the Growth & Income Portfolio. Buy.
Total S.A. (TOT – yield 8.4%) is a French multinational integrated energy company that produces and markets fuels, natural gas and low-carbon electricity, operating in over 130 countries. Fourth-quarter results featured strong performance in all business segments. Oil prices and energy stocks are on the mend, partly because they were drastically oversold during the stock market downturn, and partly because oil-producing countries have agreed to production cuts that could stabilize oil prices. TOT is appropriate for dividend investors and traders. After recently rising from 24 to 40, TOT is now resting in the mid-30s, with 30% upside to short-term resistance at 47. Buy.
Buy Low Opportunities Portfolio
Abercrombie & Fitch (ANF – yield 7.3%) – This week, investment firm B. Riley reiterated a Buy rating on ANF and raised their price target to 13. I have a Buy recommendation on ANF for traders and income investors. The next ex-dividend date will be in June. Be aware that all retail stocks carry magnified risk this year, as the private sector economy has been assaulted by the coronavirus lockdowns. Growth investors should stick with companies that are still expected to grow their profits in 2020 and 2021. ANF rose about 40% from its recent lows. There’s additional upside to price resistance near 14. Buy.
Alexion Pharmaceuticals (ALXN) – I’m moving ALXN from Buy to a Hold recommendation. The stock rose over 30% from its March lows, and is quickly approaching price resistance at 105. Hold.
Apple Inc. (AAPL – yield 1.1%) – Yesterday, TimesNowNews.com reported, “Mobile phone shipments in China in March totaled 21 million units, according to data from the China Academy of Information and Communications Technology (CAICT), a government think tank. That was a more than three-fold increase from February, yet still down roughly 20% compared with March 2019.” Apple’s March market share in China amounted to 2.5 million iPhones. Apple Insider reported this week on new design, size and camera features of upcoming iPhone 12 prototypes. Last week, investment bank Piper Sandler raised their AAPL price target to $300. TheFly.com reported, “Piper’s latest survey of 5,200 teens shows that 85% have an iPhone, the highest percentage ever in the survey… Apple Watch was the top smartwatch among teens, garnering 25% share, up from 20% in the fall survey.”
The company typically announces a dividend increase and a new share repurchase authorization annually, in late April. The last quarterly dividend increase was 5.5%, from 73 cents to 77 cents, and the last two repurchase announcements amounted to $75 billion and $100 billion.
AAPL is a great long-term growth stock, currently expected to grow profits 6.6% and 19.1% in 2020 and 2021 (September year end). AAPL has exhibited a very orderly recovery on the price chart. The stock launched upward from a double-bottom chart pattern last week, now racing toward price resistance at 300. Watch for opportunities to buy on pullbacks. Strong Buy.
Baker Hughes Company (BKR – yield 5.5%) – Baker Hughes expects to take a $15 billion non-cash Goodwill impairment charge within their first-quarter results, which will be reported on April 22. Investors can read details within the April 13 press release. Oil prices and energy stocks are on the mend, partly because they were drastically oversold during the stock market downturn, and partly because oil-producing countries agreed on production cuts in recent days. Share prices of oilfield service companies will likely recover from the economic impact of the virus pandemic more slowly than those of oil majors and oil refiners, as integrated oil companies slash their capital expenditure budgets and oil demand lags previous levels. On April 6, investment firm Bernstein (AB) raised BKR from underperform to an outperform rating with a $15 price target. BKR continues to recover from the downturn, resting now at 13. There’s upside price resistance at 16-17. Traders could make money in the short term. Hold.
Designer Brands Inc. (DBI – yield 7.3%) – Be cautious. Designer Brands is a fantastic company, but retailers have been greatly wounded by the global business shutdown. Dividend and growth opportunities will fade, the longer the quarantines remain in place. Nimble traders can likely profit this month as the share price likely bounces between 4 and 7. Buy.
General Motors (GM – yield 6.6%) — Earnings projections continue to decline. Analysts now expect EPS of $3.27 and $4.81 in 2020 and 2021. The annual dividend payout is $1.52, with a current yield of 6.6%. My Buy recommendation on GM is for traders. The stock rose from its March low of 17 to an April peak of 24, and it’s now resting. The next upswing could take GM to 27. I don’t think buy-and-hold investors or income investors should be buying GM right now, because the auto industry could be harmed for several years as a result of this economic shutdown. Millions of families in the private sector have been thrown into a financial tailspin from their inability to go to work and earn their normal incomes as a result of the virus pandemic. It’s going to take a long time for their family budgets to recover well enough that they’ll be in the market for new cars. Buy.
Mercury General Group (MCY – yield 6.1%) — Last week, Mercury Insurance announced the company would be giving back 15% of monthly auto insurance premiums to customers in April and May. That’s because people are driving less during the pandemic-induced quarantine, and therefore causing fewer car accidents. I think we can infer that the dividend is safe, since the company is voluntarily giving away money to customers! Last week, Seeking Alpha featured MCY as the best property & casualty stock to own in Unintended Consequences Of Corona - Positive View For Income Investors. Mercury General Group was featured in the April issue of Cabot Undervalued Stocks Advisor.
MCY is appropriate for growth investors, dividend investors and traders. The stock is now recovering from the downturn in a very organized pattern on the price chart (as opposed to erratically). The stock is resting at 41. The next run-up should take MCY to price resistance at 45. Strong Buy.
Special Situation AND MOVIE STAR PORTFOLIO
Adobe Systems (ADBE) is a growth stock in the software industry, appropriate for long-term growth investors and traders. The stock traded sideways in an orderly fashion in recent weeks, and is now actively rising toward price resistance at 360. Strong Buy.
Amazon.com (AMZN) was featured in the April issue of Cabot Undervalued Stocks Advisor. AMZN is appropriate for long-term growth investors. The stock blew through its February all-time high near 2,170 yesterday, trading up to 2,263 midday. If you’re upset that you missed the buying opportunity, set an alert in your stock account to give you notice when the stock pulls back to about 2,150, and then buy. There’s no reason to believe that AMZN will cease its long-term uptrend. Strong Buy.
Equitable Holdings (EQH – yield 3.6%) — The company pre-announced that the second quarter dividend, with an ex-dividend date in late May, will increase from 15 cents to 17 cents per share, which hikes the current yield to 4.1%. EQH is appropriate for dividend investors and traders. EQH continues to recover steadily from the market drop. Last week it rose to 16-17, where it rested a bit. The next move could take EQH to 21, where there’s some more price resistance. Strong Buy.
GUESS?, Inc. (GES) – I moved Guess from the Growth & Income Portfolio into the Special Situation and Movie Star Portfolio, because the company suspended the dividend. Additionally, accurate earnings estimates will not be available until Guess stores reopen and management can assess the financial damage and future outlook. I’m leaving the Buy rating intact for traders. The stock has been resting at 8, and appears capable of climbing to the mid-teens shortly. I’ll remove the stock from the portfolio when prospects for a continued run-up cease, then await second-quarter results, which should provide more clarity. Buy.
Netflix (NFLX) — The company will report first-quarter results on the afternoon of April 21. I expect another good year for Netflix revenue and profits. Global quarantine behaviors are resulting in much more home entertainment activities among the populace, especially movie watching and gaming. I therefore expect a first-half 2020 surge in international subscriber growth, which was already moving along at a brisk pace.
NFLX is appropriate for long-term investors. The stock is trading near its all-time high of 420. Traders can sell a portion of NFLX and buy low on a stock that’s just beginning a new run-up. Everyone else should hold NFLX for future capital gains. I intend to move NFLX back to a Buy recommendation upon either a pullback or the eventual breakout. While I do believe that 2020 will hand investors a trader’s market, NFLX is one stock that I would suggest holding, and adding to on pullbacks. Hold.
NVIDIA (NVDA – yield 0.2%) – Yesterday, Nvidia reported “Millions of Minecraft gamers across the globe will get to experience their self-created worlds more vividly than ever before when Minecraft with RTX moves to open beta on Windows 10 this week and introduces realistic shadows, lighting and vibrant colors to the best-selling videogame of all time.” Read more in the press release. NVDA is an aggressive growth stock, great for growth investors and traders. The stock is racing toward its February all-time high of about 315, where it will surely come to a halt and rest. Strong Buy.
VanEck Vectors Oil Refiners ETF (CRAK) – Oil prices and energy stocks are on the mend, partly because they were drastically oversold during the stock market downturn, and partly because oil-producing countries have negotiated production cuts in order to stabilize oil markets. CRAK is appropriate for traders. There’s immediate upside in CRAK. Expect volatility. Strong Buy.
Strong Buy and Buy – This stock meets most of my fundamental investment criteria.
Hold – Do not add to your position in this stock until a particular issue is resolved.
Retired – This stock has been removed from the portfolio for a specific reason,
yet remains an attractive holding for long-term investors who would rather minimize portfolio turnover.
Sell – This stock has a problem that increases portfolio risk. Sell it.