The webinar was recorded January 21, 2021.
You can
find the slides here.
Chris Preston [00:00:05] Hello and welcome to today’s Cabot Wealth webinar, the best stocks to buy in 2021. I’m your host, Chris Preston, Chief Analyst of the Cabot Wealth Daily Advisory and managing editor here Cabot Wealth Network. With me today is Mike Cintolo, our Vice President of Investments, as well as Chief Analyst of our flagship Cabot Growth Investor advisory and our Cabot Top 10 Trader newsletter. Today, Mike is here to tell you about what he’s seeing from the market right now, what he expects for the coming months based on some of his time tested and award winning market timing indicators and as the title of today’s webinar suggests he’s going to let you know what stocks he likes best for the coming year. This is an interactive webinar, which means we’ll be fielding your questions after Mike’s presentation concludes. So if you have a question, feel free to ask it at any time, and we will try to get to as many of them as time allows once Mike wraps things up. Just keep in mind that we cannot offer advice in regards to your own personal investing situation or portfolio.
Chris Preston [00:01:07] First, let me introduce Mike. Mike is a growth stock and market timing expert who has been with Cabot for more than two decades. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules by buying and selling stocks. Perhaps most notable was 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. And Mike has been named one of the top 10 market timers by Timers Digest numerous times, including this past year. Bottom line, Mike knows what he’s talking about when it comes to growth investing and how to time the market so I’ll let him do just that. Mike, take it away.
Mike Cintolo [00:01:49] Thank you, Chris. Thanks, everyone, for being here. I love that introduction. I could listen to it all day. Thanks for that.
Chris Preston [00:01:57] I can do it again if you want.
Mike Cintolo [00:01:58] Maybe we’ll do it at the end. We’ll finish with it. Yeah. Obviously best stocks to buy in 2021. Kind of like to kick this off, I did this last year too, sort of our first webinar of the year. It’s going to be a lot of market outlook. And for those of you attended the Cabot Wealth summit in the summers, either in person or last year virtually, it’s got a little bit of the same flavor, although I’m obviously focused more on the upcoming year. So let’s let’s kick it off here, gazing into the crystal ball. I’m not going to spend too much time talking about the quote unquote, very big picture, but we’re about eight years into a secular bull and I’ll explain what that means. It’s nothing you trade off of, but it’s just something to keep in the back of your mind.
Mike Cintolo [00:02:38] 2021. Listen, the signs point to the current bull move having legs, the bull market. OK, I think there’s a lot of signs technically - obviously trend wise to blast off indicators and a lot of what I think is the most bullish factor out there, which I’ll get get into - that tell us it’s going to be a pretty good year in general. But right now we’re probably not early in this intermediate term, advance that you could say kicked off with the election. There’s a lot of speculation and whatnot, and we’ll touch on that. And, of course, we’ll end with three early stage opportunities, which I think is the key right now. You want to look for stocks that are yeah, maybe they’ve been running for three or four months, but they just kind of got going from a long period of rest and can really drive higher.
Mike Cintolo [00:03:19] OK, so let’s get into it. Just a couple of slides on the secular trend. So for those who don’t know, it’s the market tends to move in these 10 to 20 year cycle sideways and then up and the side. The last sideways period was 2000 to 2013. Thirteen years of no progress. So now we’re about from March 2013, we’re almost eight years into this current move. You know, ten to twenty years is intentionally broad. You know, I’m not trying to, like, pick the thing, but I would just say we’re probably in something like the sixth inning of the secular bull market. I know a lot of people are, you know, how can the market keep going up if it’s the valuations and all this? Well, it’s just a long term pattern of investor perception going up. Valuations go up and then eventually they kind of come back down like they did in the 2000s and early 2010s. All right. Maybe one driver is going to be very low interest rates for a long time. Maybe if the 10 year note being really high means it’s at two percent, that will cause a revaluation. But that’s just speculation. The bottom line is we’re eight years into what’s probably going to end up being, you know, like I said, ten to twenty years. But call it last cycle was thirteen years. So we’re probably kind of in the sixth inning.
Mike Cintolo [00:04:34] OK, and, you know, when you look at long term sentiment, so the chart on the left is the blue line is a 40 week moving average of the percent of bears. So high would mean there’s a lot of people who are bearish from the AAII survey. And you can see that this is a 10, I don’t even know, this is like a fifteen year chart I pulled up. It is just coming down now. I pulled that this weekend. It’s just coming off from highs that haven’t been seen since 2009. So, you know, a lot of individual investors have been pretty bearish on the market, the news obviously has been bad, whether it’s a couple years ago with the trade war, obviously the pandemic recession and so on, so forth. Same thing with the money flows. It’s just been a little stabilization here recently. This is kind of from our Real Money Index in Cabot Growth Investor. But you can just see it’s been, money’s being yanked out, billions, hundreds of billions of dollars a year, really. Now, I know there’s some demographics there, but doesn’t - retiree can still buy an ETF? You know, so I just think in general, there’s not a lot of people in the market you’re starting to see now, which kind of makes sense. We’re - call it the sixth inning of the secular bull. You’re starting to see some more individuals get involved. You got Dave Portnoy from Bar Stool, you know, stuff like that, the the Robin Hood traders. To me, that’s kind of typical of this stage of it, the fears and the disgust of obviously 2009 but hundred dollar oil prices, all that stuff to be worried about. People are starting to forget some of that and they’re starting to become a little bit more risk tolerant. All right. And last but not least, I do use this chart in our - wealth summit. I like it. It’s from dshort.com just to give them credit. But it’s just the 15 year annualized return of the S&P after inflation going back one hundred years or whatever, more than that. And you can see at the peaks, if you really look at it and maybe we can, I think we can shoot out the slide deck if you requested, you know, the peaks in the twenties and thirties in the 60s and the two thousand of the major peaks before the secular sideways phases tend to be 13, 14, 15, 16 percent annualized returns today as of January or whatever, at seven point six percent. But just, you know, it’s the same thing. It’s kind of in the middle of the range. So anyway, I don’t spend too much time on it, but I just think we’re in the secular bull market. Usually that means is when you do have corrections, they’re short, sharp, short and sharp, beating three months and 20 percent, or obviously last year was even more extreme or they tend to be shallow and go on for a year or two, like twenty fifteen, twenty sixteen. You don’t usually get into these bubble tops that decline 50, 60, 70 percent during the secular bull phase. So that’s obviously a good thing.
Mike Cintolo [00:07:15] Now heading into more timely stuff, Carlton Lutts, who’s the founder of the company, the late, great Carlton Lutts, taught me a lot. And one of the things he used to write a lot as a title to market letter back then. Now Cabot Growth Investor is what’s the most bullish thing a market can do, and that’s to go up OK. And that’s what’s going on. Now, it’s simple. You don’t turn on CNBC and they say, well, the market’s going up and that’s all they say. But usually it’s just to keep things simplest. And these are just charts of the major indexes. The bottom, middle and bottom right are the advanced decline lines of the New York and the Nasdaq. And I pulled again, I pulled this two days ago or whatever, I think over the weekend. So, you know, it’s just the market is going up and that’s it’s painfully simple to say, but that’s the most bullish thing the market can do. A lot of people tend to be more excited when the market sort of is having trouble, pulling back. But usually these trends, as we’re seeing, can go on longer than expected.
Mike Cintolo [00:08:12] One thing that’s not really, in my opinion, talked about, especially as people are, you know, talking about bubbles and all that sort of thing, we just went from the beginning of 2018 through June of May or June, basically in the S&P of 2020 without making any progress. Now we you know, we kind of broke out there in late 2020. And actually in my webinar a year ago I was very bullish, you know, things were looking great. And then of course once in one hundred year pandemic came around. So net net it ended up being almost two and a half years of no progress. Now, obviously, we’re up a lot since then. I’m not saying we just got going like two weeks ago, but the point is, you know, that’s not usually conducive two and a half year sideways and then six months up or seven months up. That’s not usually conducive to like a major top that will contain the market for a long time. So it plays into the bullish thesis that the chart on the right is just a longer term chart that shows these sorts of things are normal. 2011 to 2012 was like eighteen months, ballpark of no net progress. Then we went up for a couple of years and then 2015 and 2016 was kind of a stealth bear market. And then we kicked off after the 2016 election and went up for I think like sixteen, seventeen months. It ended up being so it wouldn’t surprise me if we’re basically six months into a year and a half tight move. We’ll see how it plays out.
Mike Cintolo [00:09:41] And then you have the studies for this year that happened last year, so that if you have questions, definitely shoot me an email just mike@CabotWealth.com That the two major blast off indicators or the 90 percent rule and the two to one rule, two to one from Walter Deamer, 90 percent was from the Chartist just to give them credit for it. And they have a spectacular long term history. The first group of arrows on the left hand side of the chart. These actually flashed in very early 2019. And they can often signal the start of multiyear advances. After we crashed, they flashed again in late May, early June, basically of last year. The point here, again, kind of like the last slide, it’s not like it just these things just happened two or three weeks ago. But they tend to have a shelf life and they’re a little dated here, but they’re usually good for one plus years. Meaning, you know, you don’t get a signal like this in May and then fall apart in January of the next year. Usually they’re good for at least a year where the market can correct it can have some choppiness like we saw September, October, a couple of 10 percent corrections. But you’re not going to get a real keeling over in the market, so to speak, for at least a year. And even that pandemic drop that started in February, that was a year after the signal. So I think they have a little bit of a shelf life.
Mike Cintolo [00:10:59] More important is what we saw to me is what we saw in November and December, unusual strength. The theory here actually Walter Deamer, who invented the two to one rule, he had a good quote. He says, the market gets the most oversold at the bottom and the market gets the most overbought at the beginning of a new advance. So it doesn’t work the same. It’s not a mirror image like you get the most overbought at the top. That’s not how the market works. And when you see unusual strength, which is what these I call them blast off indicators, some people call it a runaway momentum or whatever. When you see this sort of unusual strength, it usually actually has a very good history of boding well for the months ahead.
Mike Cintolo [00:11:47] So the three day thrust I wrote about this in Cabot Growth Investor excuse me, three straight days of one and a half gains, I don’t want to go through number you to death, but you can see the numbers there. Now, that was at thirty five hundred were already two or three hundred points above there. But you can see the returns, the max gains looking out three, six and 12 months. And I put in the S&P, I wouldn’t use this as targets. But you’re basically saying like, you know, by late this year it wouldn’t surprise me if we’re in the low to mid four thousand, something like that. OK, and the S&P. So it should be a bullish year. What’s also interesting, and this is a little bit of a backwards math, but it kind of reinforced on the next slide too. Two of the nine times this has happened since 1970. So it’s only happened nine other times since in 50 years. Only two of those actually occurred above the two hundred day line. In other words, usually it happened after a bear market. The market kicked off for three days in a row and then ended up being near the bottom like a bear market bottom. When it happened above the two hundred day line, the prior times as there was no draw down from that point. In other words, the market just went up from there and that’s what happened this time, too. Mike, what does this have to do with anything where, like you said, we’re up at thirty eight, thirty nine hundred? Well, the point is, is that if we do have a correction, you know, it tells you that there’s probably not that much downside, relatively speaking. We could pull back a few percent. Stocks could get hit. Don’t get me wrong, I’m saying when you look at the S&P fallen 20 percent or something, doesn’t seem like it’s in the cards. I’d be surprised if we fell back to where we were at after the election blastoff. So if we consolidate or something, that’s one thing. But I would guess corrections will be somewhat limited, at least in the indexes in the near term.
Mike Cintolo [00:13:33] Then there’s this one, we have a slightly different measure of this call, we call it the new high buy signal, but this is from Dorseyy Wright, to give them credit for it, Dorsey Wright and Associates. It’s basically just the new high new low ratio on the New York Stock Exchange. OK, and the 10 day average of that hit ninety seven percent on call it Thanksgiving at thirty six forty, OK. Again, it’s relatively rare, 40 years, 13 times that’s happened and you can see the returns. So six months later, we would be at four thousand forty two hundred a year later. But again, kind of like what I was saying on the last slide, every single positive was excuse me, every single signal was positive, six and 12 months looking out. So again, if the S&P signaled this at thirty six hundred thirty six fifty, you know, you’d like to think that if we do correct, we’re not going to go down and stay down. OK, all of this is just each one of these signals wouldn’t cause you to be bullish, but you just try to put the odds in your favor. There’s nothing there’s no sure things, of course, but you start talking, obviously, the positive trends of the market, the AD Lines, the 90 percent rule, the two to one. Then you get these signals and all that. And the odds just seem to be building that, hey, it’s going to be a bull year in general. I do think it will be choppier than last year just because that’s how the market works. It’s very rarely straight up two years in a row. I hope I’m wrong, but that that’s that’s what I’m thinking here for some of these studies, they should bode well and they have multi month shelf lives.
Mike Cintolo [00:15:03] But what I really want to talk about and I was going to do this for one slide, and I actually ended up making it three or four. It’s the most positive factor I see today when looking at the market and that and I touched on this on yesterday’s prime call, if anybody was there listening to that. There are just a ton of indexes, major indexes, sectors and stocks from a variety of cyclical and growth that have recently, meaning in the last three to four months, recently broken out of very long term ranges. So the charts here, the one on the top left is the IWM. So that’s the Russell two thousand. And you can see it’s kind of like that chart from the S&P a few slides ago where it had made no progress for whatever it was, two and a half years. Same thing here, mid 2018 to this year’s election, basically. So call it two plus years of no progress. And that included two huge you know, there was a 20 something, I think a 30 percent correction in 2018 and then obviously last year’s crash. And now not only is it broken up, but it’s like smoke up a chimney. It’s straight up. It’s not like it hit it for a week and you say, oh, that’s a breakout. No - it’s up, up, up, up, up. There’s been no resistance. All the week hands are out. MDY same thing. New York Stock Exchange, not quite as powerful, but similar type of pattern. I mean that’s not something you see at the end of an advance. Doesn’t mean we can’t pull back a few percent. Don’t get me wrong. But that’s not something you usually would see at the end. Now maybe hey, last year there’s a pandemic, maybe 2021 has something in store. I hope not. That will throw all prior precedents out the window. But I think it’s just that type of longer term breakout is bullish. But it’s not just a couple indexes. I mean I could pull a bunch of these, but I just put up here’s the Dow transports. Same thing beginning at 2018 through the middle of last year, really through October, November, no progress. And now it’s free wheeling on the upside. I pulled the IHE. This is just pharmaceuticals ETF. You can see these are these are three or four year weekly charts, long time without any progress. XBI is the biotech. It actually did hit a new high earlier. I mean, it’s still had a big base. In fact, it really had a multi year base. I’m not even showing it on this chart. And it went up for a few weeks and then it spent another three or four months consolidating. And now obviously it’s free wheeling. So, again, you’re just seeing that there. Cyclical stocks, well, I’ll say old world cyclical, whatever theme you want to place there, Goldman Sachs, this is actually a breakout from like a 10 year pattern. But I’m just showing the last two years here, Caterpillar, GM just had - I don’t even show the volume here. GM had like one of its heaviest weekly volume weeks ever last week when it popped Applied Materials. You can see no net progress for two and a half years. Other chip equipment stocks, same sort of thing. And then this is growth. I wouldn’t say the bases here have been as long, but even so, this is far fetch big IPO base for like a year and a half. Roku I’ve written about spent a year going down, back up, consolidating, got going in September, so it’s been going for four months. We took partial profits in it last week. So I think it’s extended short term. But, you know, I’m definitely planning on holding through the next correction because I doubt it’s over Pinterest, big IPO base for a year or whatever that is a year and a half. And there’s Halozyme. Kind of look like the XBI chart the biotech chart, big, long consolidation. It hit a new high, but then rested for another three or four months. And now it’s free wheeling.
Mike Cintolo [00:18:39] So you can just see and I could have gone there’s just a ton if you go through a screen. I mean, if you just go through the S&P 500, there’s just a ton of stocks that really have just gotten going. Most of the market didn’t do anything for two or three years, and now it’s just kicked into gear here since the election, for whatever reason, you can say it’s the vaccine or whatever interest rates or the economy. But whatever it is, you’ve seen decisive breakout. So what I that’s the most bullish factor I see. And you combine it with all the the trends and the blast off type indicators and stuff like that. That’s why I’m really pretty bullish here for 2021. Now with that said, anyone who knows me, I’m not someone who goes all one way or the other. So intermediate term, listen, we’re probably not early, OK? And I could have printed out charts of some of these stocks that went up. You know, they they were at four bucks a little while ago and now they’re at forty dollars. And I’m getting emails on it and it’s fine. Send me the email. I know it’s a good question, but I would be careful with that stuff. To me, that’s a sign that there’s a little bit too much enthusiasm here near term. This is kind of the - I call it the sentiment pendulum pendulum excuse me, go back and forth between fear, panic and enthusiasm and greed. And this is just simply a chart of the new highs, minus new lows on the New York. So obviously the chart on the left is during the crash. But even after the crash, it wasn’t like there was a lot of stocks hitting new highs. I always tell the story. I was on vacation. We drove down to North Carolina in the summer for a little vacation. And I met someone at the at the beach and he was a nice guy. And I said, well, I gotta head back. I actually have to publish a letter of an issue of CGI tonight. And he wasn’t a subscriber or anything, but he just goes, oh, make sure you tell your subscribers not to buy anything. This market makes no sense. You know, this was in July. Right now, I’m betting he’s probably buying stocks, a nice guy, retired nothing against him. But now you’re seeing all the enthusiasm now that the good news is out in the vaccine and all that. So you just have to realize the best environment is kind of like the trend has turned up. We just had a decline. Stocks are hitting new leading stocks are going nuts, but there’s no enthusiasm. That was April, May, June, July, that sort of thing. Now, don’t get me wrong, like I said earlier, up is good. I want to trademark that phrase up is good. But there’s a lot of enthusiasm and a lot of buying has already been done. Same sort of thing on this chart. This is just the percent of stocks above their two hundred day lines. I don’t use this as a specific indicator, but again, it’s kind of it’s descriptive. And here you go. We’re at the one left is New York, one in the middle of the Nasdaq. The one on the right is S&P. And the percent of these stocks was basically nothing in March. And even months after that, it was still middle of the road. But now it’s been stretched up here to multi-year highs and all these areas for a few weeks. So, you know, you’re not you’re not early in this intermediate term advance, OK?
Mike Cintolo [00:21:37] And then this this actually surprised me, I sort of was just poking around and running through charts and sort of ideas for the webinar late last week and what these charts are, these are relative performance lines of the Nasdaq versus a bunch of kind of, you know, again, those cyclical areas. And the one on the left is XOP. That’s oil and gas exploration, transports is the one in the middle and financials. So this is the Nasdaq versus those. And what’s interesting is all three of them and some others, too, I looked at. They’re below their forty week long term 40 week - it’s like a two hundred day line moving average. It’s not predictive, it’s just descriptive and telling you there’s just a changing landscape going out there where there is not really money pouring out of growth. It’s just really focused on some of these cyclical areas. And we’re seeing more stocks begin to churn a little bit. Nothing to freak out about, but just something to keep your eye on. OK, I will say big picture, if you took off the arrows and the moving averages and just looked at the lines, the Nasdaq had outperformed so much that this looks like a normal kind of correction consolidation in all three of these charts. But I just thought it was interesting to notice there’s just there’s still a decent amount of crosscurrents out there. And my guess is during earnings season that will continue. So I’m just saying, intermediate term, you got to keep your feet on the ground. Don’t get too far in front of your skis. Pick your cheesy saying to go off of. But I just think risk is relatively high here. And usually when risk is high, it can keep going for a week or two or three or four or five. But eventually the market finds something to worry about. Stocks or sectors find something to worry about. So you just want to try to be getting good entry points and not be buying a bunch of lottery tickets with with the rent money. That’s all. OK.
Mike Cintolo [00:23:20] So, yeah, 2021, just review. The megatrends still intact, it’s a secular bull market. You know, if anyone’s familiar with the turkey story from Reminiscences of a Stock Operator. The megatrend is up. And I do think the next few years will be good for what it’s worth doesn’t mean every year is going to be up 20 percent. But just it should be a good a good period of time. And then again, up is good. Trends, breadth and the unusual strength, I think all bode well. So I do have a pretty high degree of confidence 2021 is going to be a bullish year. I mean, there’s just the odds favor it. It doesn’t mean it has to happen, but I’d rather be with the odds than against it. And of course, the big picture breakouts from all the different stocks and sectors. I really do. If it wasn’t for that, I’d be positive. I’d be following the trend, but I wouldn’t have nearly as much confidence that looking out a year or nine months or pick your time frame, you know that a lot of these names are probably going to be higher. But just based on that alone, maybe they cool off for a month or two, who knows? But I just think it would be very unusual to see all these long term breakouts among growth, cyclical sectors and indexes and then for the market to just kind of keel over and do nothing. We’ll see what happens. But again, don’t leave your brain at the door. You’re not in the early innings here. We’ve been running for about three months since November, obviously more than that and a lot of stocks that really took off from the pandemic lows. So you just want to be discerning on the buy side. OK, what does that mean? Discerning on the buy side? To me, like I mentioned earlier, I’m looking for some of these earlier stage names that are relatively fresh. And obviously I always look for the snack approach, as my former colleague Paul Goodwin put it, story numbers and chart. OK, but I’m looking for names that have really gotten going, hopefully just in the last three or four months, haven’t necessarily been running for like two or three years, like some of these cloud software stocks. Maybe they have another run in them. I hope they do. But they’re kind of tired like Koopa. They’ve gone up so much in the last two or three years they seem a little overplayed where some of the fresher things, even if they have pulled back recently, seemed peppier. OK, so let’s get to the stocks. Yeah, that’s what that’s what we all want to talk about.
Mike Cintolo [00:25:31] OK, the first one is Farfetch. This has to me, this looks and smells like a new leader. It’s a leading online luxury platform. And I think the big perception changer like the pandemic helped. Obviously, it’s like everything’s going online. OK, we all know that story. The deal with they have a deal with Alibaba. And I want to say Rich or Richemont, I forget how you pronounce it, a European luxury giant who and both of them bought, I think, combined twenty five percent stake in Farfetch’s Chinese operation in China is the big driver of luxury sales. It’s almost like China with oil a few years ago. They’re the big buyer on the margin. So Farfetch - it’s up huge from the lows. OK, but they’ve rapid sales growth, I guess cash flow break even this year. That’s a plan. My guess is they’ll do better than that. But the stock just got going from that big IPO base in November. If you kind of look at that whole structure and the volume on the upside was eye opening. It was four or five weeks in a row of gigantic volume. And then it kind of tailed off there toward the end of the year and now it’s pulled back. This chart was from, I think this weekend or maybe earlier this week. It has bounced a couple of points here, I think. But in general, it’s kind of the first test of the ten week line. Maybe it needs more time. Maybe it needs to correct further. It’s obviously had a big run. Maybe it needs more time for the longer term moving averages to catch up. But I think this really looks and smells like a new leader. I think institutions are buying it. I think it’s going to be something that’s going to be a big position, some of their funds. And I think the stock’s going to have a good year. So short term. Like a lot of things, I am a little it’s on my watch list. We haven’t added it yet, but I think it’s got a great future. And I, I would like to own it at the right time. And if it wants to take another few weeks to rest, that would be fine by me. I think that would actually create a better set up, but we’ll see how it goes. But the bigger picture this year, I think Farfetch will be a winner.
Mike Cintolo [00:27:23] The second one you guys are I try not to put everything like I own in here just because what’s the point of that? Halozyme is one that we have, though I had not to go on too much of a tangent like I like to do on these webinars, but we own Ligand Pharmaceuticals or Ligand (LGND) two or three years ago. I like these licensing plays now. Ligand didn’t really work. I think we just got out break even or something, but it just it didn’t it didn’t work for a few different reasons. This one has a new better mousetrap with drug delivery. They basically breaks down some stuff in the skin that prevents bulk fluid flow and they can do therapeutics in minutes instead of hours safely. They still have to test these things out and go through trials to make sure it’s safe. But a lot of big companies have signed up to them. They’re paying ‘em milestone’s, they’re paying them up front fees. And now a couple like J&J and Roach are paying royalties. The royalty should double this year, so there’s real sales and big earnings growth. They even have a share buyback program. So this isn’t some like biotech that’s you know, hopefully they have a good clinical trial here or there. And then kind of like the biotech index had a decisive multi year, kind of broke out to new highs earlier in the year. But the real breakout came, you can see at the very beginning of November, and it’s free wheeling now, again, short term maybe we averaged up last week. Maybe the market slaps me in the face and comes down here in the near term. But I think this is why I think, like five hundred funds own it. It does smell to me that if management pulls the right levers, you can never be sure. But if they do with what they have and the partnerships they have and new products coming online that will deliver royalties and all that, it just seems like one of those rapid, reliable medical stories, high margins, cash flow, that instead of five hundred funds owning it a year and a half or two years from now, nine hundred or a thousand funds will own it, that sort of thing. So Halozyme another one that I’m quite optimistic on. Fingers crossed, we have it in Cabot Growth Investor.
Mike Cintolo [00:29:25] And the last one, I think is going to surprise you. I’m going to say ahead of time before I get to it, I don’t think it’s going to be the biggest winner. But again, I have a pretty high degree of confidence that looking out a year or even two or three, I think it’s going to do well. And that is Goldman Sachs, Goldman beyond Goldman, the bull market, I call them bull market stocks. And those are brokerages, exchanges, money managers, you know, people whose business is directly tied to the health of the market and the activity of the market and the interest in the market. OK, and Goldman is probably your institutional number one play as a bull market stock. There’s going to be others out there, I think, like LPL Financial and stuff. But in terms of like you’re a big fund, you want exposure to the group, you’re piling into Goldman. OK, and again, I’m not even showing it here, but the stock, I think in 2007 was like two fifty and as of two months ago it was two hundred. So it did nothing for ten years. And now the stock is broken on the upside, 11 weeks up in a row for a big liquid name like this. That’s a sign that there are no week hands left, in my opinion. And the stock is just straight up now. It’s starting to pull back here after earnings. But note that earnings were up big the last two quarters is supposed to make thirty bucks a share this year. And, you know, I just think the financial stocks will be getting a little feedback there.
Mike Cintolo [00:30:51] But that’s the end of the presentation was pretty Farfetch and Halozyme and Goldman Sachs are my three picks. Again, do I think Goldman’s going to go to a thousand this year? No, it’s not going to triple. But I think this is one of these names, especially on a weakness. If it takes a two, three, four weeks off, I just think it has a high degree of working. And it’s one of those longer term breakouts and one of these sectors with the wind at its back. Now, the I think it could actually have a multi-year run. So that is my presentation. I hope I kept you all the way. And I’ll hand it back to Chris. Are you ready for some questions?
Chris Preston [00:31:25] Yeah, thanks, Mike. Yeah, I’ll give you a minute to to catch your breath before he starts answering some of your questions. In the meantime, a bit of housekeeping, if you like what you’ve heard from Mike so far today and are interested in setting up for his Cabot Growth Investor advisory, again it’s our flagship advisory here at Cabot Wealth Network. We have a special one dollar introductory offer reserved exclusively for listeners to today’s webinar. What you get in return for paying just one dollar for the first month is bi monthly issues delivered every other Thursday with great stock ideas and market insight, updates about the stocks Mike follows delivered all other Thursdays, special bulletins alerting you to sudden market changes and ways to take action, 24/7 online access to our exclusive Cabot Growth Investor library and analyst archives and direct private access to Mike for answers to any of your investing questions. Sign up now, again, just for one. For just one dollar for the first thirty days.
Chris Preston [00:32:30] Go to the website on your screen, CabotWealth.com/webinarspecial.
Chris Preston [00:32:37] Get to your questions. See, there’s been a lot of them. There’s been a couple, Mike, that sound familiar? I think there was one like this on the prime webinar yesterday. A few people have asked about the increase is a huge increase in our national debt and how that might impact the market going forward.
Mike Cintolo [00:33:03] I yeah, I wouldn’t I wouldn’t I wouldn’t pay attention to that. I think that the market is discounting the future and you’ll see it in the market eventually, yeah, there’ll probably be know the bill will come due eventually. The bill will come due. But is that bill going to come to an in August is going to come due in three years. Is the economy going to grow so much faster than expected that maybe it if they don’t do one of these stimulus things and the deficit shrinks, that sort of thing? I think right now, if you’re looking for a reason, interest rates are - this is me just using common sense, I don’t have any great insight, but interest rates are so low that the interest service on the debt is not that huge. And the Fed, as far as I know, is buying part of the debt. Again, eventually that’s probably going to lead to some issues, inflation or whatever. But until that rears its ugly head, I wouldn’t I’m not overly concerned about it, but we’ll just take the cues from the market. Listen, if the markets are caving in tomorrow and acting completely abnormally and I’m completely wrong, I’ll say I was wrong and we’ll we’ll make a move to to change it. But right now, the odds don’t don’t favor that happening.
Chris Preston [00:34:16] OK, Mike, can you hear me? By the way, I was having some issues.
Mike Cintolo [00:34:20] Yeah, I can hear you.
Chris Preston [00:34:22] OK, let’s see. Where do I start? Lots of questions here. Let’s see. What’s the period? A question from Burt. What’s the period of time you invest for? Of course, for as long as possible. But, you know. What happens in a year, I guess, basically is just asking, what do you invest for?
Mike Cintolo [00:34:44] Yeah, I’m a position trader, so it’s usually means intermediate to longer term. There’s no I don’t want to give out an average because it’s just meaningless. So if we have a bad trade, you know, I wouldn’t be out of it in three days. I hope - that would be really bad. But it might be three weeks, four weeks, something like that. If we have a winner, usually my M.O., if you try to take some off on the way up, like we’ve owned Roku, we bought it in two steps. I don’t even know. I think it was like September or October or something like that, November. And then the stock went bananas. So last week we sold a third of our shares. And then I’m going to try to play if I think it’s early stage, like some of these stocks, I’m going to try to play it out longer term. Maybe that’s the wrong thing to do with Roku. We’ll we’ll find out. But generally speaking, I’m trying to give these things a chance to go on. So with winners, ideally we can own them for a year, year and a half. That’s usually kind of the maximum performance. If they’re not winners, then it might be a month or two and then we try to move on.
Chris Preston [00:35:44] OK, I’ll go to a question from Jerome, who’s been waiting patiently, this is interesting question for you as a growth investor, Mike, do you think value will be better than growth this year?
Mike Cintolo [00:35:56] That’s a good question, and I’m not really sure what value means. I mean, I guess I would say that we like I showed on that slide with the relative performance lines. Yeah, it would surprise me. Growth has been really strong for a few years. Last year was awesome. And we are seeing obviously these long breakouts in, you know, financials and and cyclical stocks and stuff like that. I think in general it wouldn’t surprise me, yes. If value does better. That said, I think I’m not buying like growth index X, you know what I mean? I think there will be - and I showed some charts of some early, early stage stocks that are great growth stocks that can do a lot better than kind of the average value stock. So I don’t want to talk out of both sides of my mouth there, but I am pretty. I do think value stocks could do better as a whole, but I still think they’ll be a lot of opportunities in growth. I don’t think it’s going to be something where growth stocks fall 10 percent in value, stocks go up 20 or anything like that.
Chris Preston [00:36:54] Yeah, and our value stock expert at Cabot, Bruce Kaser, wrote about how or wrote about this on our CabotWealth.com website about how, you know, value has vastly underperformed growth in the last decade and expects it to outperform growth in the next decade. But again, it didn’t necessarily mean this year in particular, which I think was Jerome’s question.
Mike Cintolo [00:37:13] I would also say not to take too much out of this one question, but. A lot of that growth out performance back in the 2016 or 15, some of those years way back then was like the Facebook, it was sort of the mega cap growth stocks. Those have cooled off. I mean, Netflix popped up, but those have cooled off. And so maybe it’s one of these things where, like the Nasdaq and the Nasdaq one hundred, the super cap heavy index, those sorts of names might underperform. But again, I just think in the broad market, there’s a lot of these like medical, there’s a million smaller midsized medical stocks that are acting great. And to me, those are growth stocks. I don’t know, maybe they’re technically value because they haven’t done anything for a few years. But anyway, go to the next question.
Chris Preston [00:37:57] Ok. Question from Michael. Do you ever worry about valuation like GDP to total market cap?
Mike Cintolo [00:38:04] No, no. Yeah, I’m a student of the market, I mean, if. You know, I don’t have the Bible of investing, I mean, we don’t have all the answers, that’s I’ll say that to anybody straight up. But, you know, we try to work, focus on what works and what historically has worked. Sales and earnings growth, certain chart, not really patterns, but just like supply and demand. Is it under accumulation by Fidelity? Guess what? The stock’s probably going to go up, you know what I mean? Things like that. And market timing trend following to us is by far the best because you’re guaranteed never to miss a major up move and you’re guaranteed never stay heavily invested during a major down move. You might get whipsawed. There will be some blood. There’s always going to be some downside to any system. But the big valuation things, especially that GDP, the ratio that it’s just it’s just too it’s too out there. It’s it’s it’s not direct enough, you know what I mean? So I’ve never used it or found any value of it in terms of giving you an edge and making more money.
Chris Preston [00:39:11] OK, question from Bob. Is there any stock that you recommend from the Fang group, Facebook, Apple, Amazon, Netflix, Google?
Mike Cintolo [00:39:21] I don’t and my specialty is trying to be sort of emerging blue chips rather than blue chips. That’s one reason, like I said, most of those have been sitting around. Netflix, I will say did pop yesterday. Maybe it’s trying to get going. It’s had like a six month rest. Google doesn’t look bad. Amazon kind of looks like Netflix before it popped because kind of sitting there for six months. So I’m not negative on them, but I don’t really I’m not close enough to the stocks. And honestly, you can breathe and get a lot of details about that anywhere. You just search for it online. We’re trying to find the next Amazon, the next Google, that sort of thing.
Chris Preston [00:40:02] OK, question from Ken. Do you have any reservations about buying Chinese stocks in light of new US regulations?
Mike Cintolo [00:40:11] A little bit. A little bit. You know, I do, and so I would say yes, I wouldn’t say I would. Maybe I’ll see something this weekend and change my mind and say, Oh my God, that looks great. But, yeah, it’s a factor in my mind because part of our liquidity requirements, I try to buy stuff that trades at least 50 million dollars a day. Hopefully more than that, it’s just you’re trying to avoid getting some sort of big loss on random, uncontrollable, unforeseeable news. That’s going to happen anyway in the market. But why do you want to pour gasoline on that fire? So, yeah, a little bit. I wouldn’t say I will definitely exclude Chinese names. Some of them pop in Top 10, and some of them have done great. But it is something where I probably would treat them a little differently with a tighter leash, that sort of thing.
Chris Preston [00:41:03] OK, question from Paul, how do you view gold and silver?
Mike Cintolo [00:41:10] I’m not that yeah, I’m a growth guy, so it’s not my specialty either. Right now. A few popped up in Top 10 a month or two ago, a couple of months. And they they’re OK. They’re kind of in the sort of sloppy consolidations for the last little while. So I’m not opposed to them. And I wouldn’t be. I think the major trend is up there. I don’t know if the timing is right and I don’t think it’s the best area to be in. I guess that’s my main thing. I think there’s better opportunities elsewhere.
Chris Preston [00:41:40] OK, we have time for two or three more questions. Question from Lawrence, how would you describe the March crash last March crash? Some think of it as a bear market crash, while others, like you view it as a correction. How do you make a decision as to how to categorize it?
Mike Cintolo [00:41:58] I don’t know, labels are for, you know, I don’t know, I think I know what you mean, like, did it reset everything or not? I guess I would just view it more as a correction just because it was so sharp but quick. I don’t think that necessarily reset every stock so that all of a sudden it became like they were all quote unquote, first stage or early stage situations. I’m seeing a lot of early stage situations anyway, like I pointed out. But I guess when I see something like that and then the way the market recovered, I don’t really view it as a bear market per say as much as just a it is what it is. It was a crash and a quick recovery for the top stocks. And the broad market finally kicked into gear in November.
Chris Preston [00:42:46] OK, question from Daniel, which dovetails well into something you’ve been doing recently, Mike, would you play options on these growth stocks on top of owning the stock?
Mike Cintolo [00:42:58] Well, that’s yeah. So I’m the type of guy who’s bought options like five times in my life and lost money nine times somehow. Like, that’s the joke I always tell. So I’m not an options guy. I just I’m a bear of little brain sort of thing. So I’d like to stick with growth stocks. Jacob Mintz is one of the smartest people market wise I’ve ever met. Don’t tell him I said that, though.
Chris Preston [00:43:21] Just say only market wise...
Mike Cintolo [00:43:25] But he really is. I mean, he’s a pro, used to trade on the floor and he’s taken a lot of Top 10 stuff. And we have a publication Cabot Profit Booster that he’s basically just writing covered calls on these things and just cranking out some extra profit in terms of buying calls or selling puts. I know a lot of Top 10 people and stuff do that, but I don’t provide specific recommendations on that because I would probably just cause you pain. So I just stick to what I do.
Chris Preston [00:43:54] All right, We’ll do one last question from Frenchie, interesting one, do you believe the current move in the market is due to the installment of the new political administration?
Mike Cintolo [00:44:07] I do not touch politics, so I’m not going to answer that question because it’s guaranteed to make half the people upset. No, I mean, here’s what I will say. I’ve been at Cabot since ’99 and was investing. I came right out of college and started here in ’99 and I’ve been here however long that is, a long time. I’ve seen, you know, Democrat presidents, Republican presidents, I’ve seen wars and obviously all the stuff that happened in the 2000s and pandemics and all this. I’ve seen the Fed raise rates and cut rates and quantitative easing. So we’re just trying to stick to a methodology that helps us keep the odds in our favor and make and keep subscribers money. And then if we do a good job, you renew your subscription and that’s how we make money. It’s pretty it’s a pretty simple thing in terms of the why and who’s right and who’s wrong. You know, that’s good stuff for the dinner table or talking to your kids about or arguing with your your wife about or whatever. But I just try to keep it out of the out of the letter.
Chris Preston [00:45:10] OK, that’s a good one to end on. And let me just say before we go, first of all, thanks, Mike. Thanks. Thank you for all the questions and for joining us today. We’ll be back next month on February 18th with a webinar about investing in the resurgent marijuana sector. That’s hosted by our chief investment strategist and marijuana stock expert Tim Lutts. So come back next month for that presentation. Again, that’ll be Thursday, February 18th at two p.m. Eastern Time, just like today. That does it for us from Mike Cintolo and the entire Cabot Wealth Network team, I’m Chris Preston, and we’ll see you next time.
Mike Cintolo [00:45:50] Thanks, everyone.