Cabot Prime Pro Week Ending November 3, 2017
Guide to Cabot Prime Pro
This Guide to Cabot Prime Pro will help you make the best use of your Prime membership to create a strong personal portfolio.
Cabot Prime Pro Quarterly Market Report
In this Cabot Prime Pro Quarterly Market Report, Cabot President Timothy Lutts offers his read on the stock market, looking back at Q3 2018.
Cabot Prime Pro Quarterly Analyst Teleconference
Watch the October 18 Quarterly Prime Pro Teleconference, in which Cabot Analysts answer members’ questions live.
Cabot Weekly Review
In this week’s stock market video, Mike Cintolo discusses his overall bullish view on the market—he’s nearly fully invested at this time—though he also talks about the importance of keeping your feet on the ground and sticking to your plan. Mike relays some very interesting (and long-term bullish) action in one group, and goes through his usual array of high-potential stocks and lower-risk entry points.
Cabot’s 10 Best Marijuana Stocks
Special Update (emailed to Prime Pro members on October 30) Today, Constellation Brands (STZ), with a market capitalization of $42 billion, announced that it had acquired 10% of industry leader Canopy Growth (TWMJF). Canopy stock jumped 18% on the news (on high volume) and is now up 68% since Tim’s August recommendation.
October Update (emailed to Prime Pro members on October 9): If you bought a basket of Tim’s 10 Best Marijuana Stocks when the report was originally published on August 22, you’re off to a good start. Since that report was written, the average of the 10 stocks is up 21%, with the best up 49% and the worst down just 6%.
Cabot Growth Investor
Bi-weekly Update November 1: Mike is buying a 10% position in Autodesk (ADSK) and putting GrubHub (GRUB) back on Buy, leaving us with around 4% in cash.
Other Stocks of Interest October 27: Follow ups to stocks featured May 24, 2017 (issue 1368) to October 25, 2017 (issue 1379). Since they’re not in the Model Portfolio, you don’t see them followed on a regular basis. However, we are monitoring these stocks, and this listing gives their current momentum status.
Bi-weekly Issue October 25: Mike has no new buys or sells in the Model Portfolio, though most of our stocks are acting well; we’ll follow our usual plan as we wade through earnings season, including looking for new leadership. Elsewhere in tonight’s Cabot Growth Investor, we talk about using earnings gaps to spot new leadership, including describing the rules and tools we use to separate the wheat from the chaff.
Cabot Top Ten Trader
Movers & Shakers Weekly Update November 3: with the majority of the market’s primary evidence pointed up, you should remain bullish, giving your best stocks a chance to continue higher and looking to leap on new opportunities as they appear. Buy Ideas: Five Below (FIVE), iRhythm Technologies (IRTC), Meritor (MTOR) and Spirit Aerosystems (SPR).
Weekly Issue October 30: This week’s Top Ten includes many recent earnings winners, with our Top Pick is First Solar (FSLR), a liquid stock that just blasted out of a very flat base as part of its powerful turnaround.
Cabot Options Trader and Cabot Options Trader Pro
Note that the current week’s Weekly Update, earnings updates, position updates and stocks on watch are posted on the website in the Market Update section, which is deleted each week.
Stocks on Watch November 3: The earnings winner that then sees aggressive call buying is one of Jacob’s favorite setups, and Waste Management (WM) and Marathon Oil (MRO) are on the top of his watch list for new positions.
Earnings Update November 2: Apple (AAPL) will report earnings this evening after the closing bell. The stock is trading unchanged today at 167, as the market is down marginally.
Earnings Update November 2: This morning Sprouts Farmers Market (SFM) beat earnings and revenues, and the company forecasted guidance above expectations. In early trade, with the market lower by 0.5%, SFM is trading higher by 6.5%. Also, Yelp (YELP) which dropped 17% yesterday after earnings, has now recouped all of those losses, and is up marginally on the day.
Earnings Update November 2: Yesterday after the close, Yelp (YELP) announced earnings and revenues that exceeded analysts’ expectations, but the company’s guidance was short of expectations.
Earnings Update November 1: Sprouts Farmers Market (SFM) will report earnings tomorrow before the open.
Earnings Updates November 1: Jacob does a thorough analysis of the expected moves in Facebook (FB) and Tesla (TSLA), which will report earnings this evening after the closing bell, and Alibaba (BABA), which will report earnings tomorrow before the open.
Trade Alert November 1: Sell Half your remaining Yelp (YELP) January 47 Calls for $4.30 or more. The options market is pricing in a massive move for YELP tonight on earnings, so we will sell another piece of our position ahead of earnings for a profit of 17%, and hold the balance.
Earnings Update November 1: Jacob give his view on Kraft Heinz (KHC), which reports earnings today after the close.
Trade Alert October 30: Sell Half your Yelp (YELP) January 47 Calls for $4 or more.
Earnings Updates October 30: Pfizer (PFE) and Shopify (SHOP) will report on Tuesday before the market open.
Stock on Watch October 30: General Motors (GM) has been on the top of my watch list for the past several weeks as option order flow has been relentlessly bullish, though I have held off on buying a position because the stock has stalled out following great earnings.
Weekly Market Update October 30: This week has tons of potential market-moving events including the Federal Reserve’s decision on interest rates (not likely to hike) on Wednesday, and President Trump’s announcement of his choice to lead the Federal Reserve and the release of the October Jobs Report on Friday.
Daily Watch List: Order Flow Reading is a strategy Jacob uses to follow the biggest hedge funds or traders into their trades. These are recent large order flows that Jacob has spotted, plus two covered call ideas.
Cabot Undervalued Stocks Advisor
Special Bulletin November 3: Earnings reports from Apple (AAPL), Molina Healthcare (MOH) and Universal Electronics (UEIC). MOH moves from Strong Buy to Hold, and UEIC moves from Buy to Strong Buy.
Special Bulletin November 2: Boise Cascade (BCC) moves from Buy to Hold, plus earnings reports from Cavium (CAVM), Martin Marietta Materials (MLM), Quanta Services (PWR) and Vulcan Materials (VMC).
Special Bulletin October 31: BP plc (BP) and Boise Cascade (BCC) have third quarter earnings beats and Crista writes about Alexion Pharmaceuticals (ALXN) and Mattel (MAT).
Weekly Update October 31: Many stocks are rising—either toward former highs, or surpassing recent highs—because the companies are growing profits very well. Crista says it’s not “Trump,” nor “irrational exuberance” nor “a lack of other good investment markets.” It’s simply strong earnings growth. No portfolio changes.
Special Bulletin October 30: Ameriprise Financial (AMP) moves to Sell, Vertex Pharmaceuticals (VRTX) moves to Strong Buy, XL Group (XL) moves to Buy, and Apple (AAPL) shares are rising.
Monthly Issue October 3: Today’s featured stocks are Bank of America (BAC), Schlumberger NV (SLB) and Nucor (NUE). BP plc (BP) and Legg Mason (LM) move to Hold and Schnitzer Steel (SCHN) moves to Sell.
Cabot Stock of the Week
Weekly Issue October 31: Tim leaned back toward the conservative side of the spectrum to choose today’s stock. Wynn Resorts (WYNN) is a dividend-paying stock with strong growth prospects that’s trading at the lower end of its recent range.
Cabot Emerging Markets Investor
Bi-weekly Issue November 2: Emerging market stocks in general strengthened this week, keeping our Cabot Emerging Markets Timer firmly on the positive side. Our new stock is ZTO Express (ZTO), an express delivery company with a China-wide network that covers 96% of China cities and towns. We have ratings changes on two of our stocks, Alibaba (BABA) from Hold to Buy and Baidu (BIDU) from Buy to Hold.
Cabot Benjamin Graham Value Investor
Weekly Update November 2: Azmath updates his position on Biogen (BIIB), EQT Midstream (EQM), LKQ Corporation (LKQ), T. Rowe Price Group (TROW), Alphabet (GOOG), Gilead Sciences (GILD), Alliance Resource Partners (ARLP) and Stifel Financial (SF).
Monthly Issue October 12: Azmath begins the transition of stocks from Roy Ward’s Value and Enterprise Models to his new, more consolidated Prudent Model. Azmath’s top recommendation is Gentex (GNTX).
Cabot Small-Cap Confidential
Monthly Issue November 3: Today’s addition to our portfolio, Materialise (MTLS), is different from our other stocks. It’s not a pure-play cloud software stock, though its software division generates 26% of revenue. It’s not a pure-play medical device stock, though its medical division generates 33% of revenue. It’s not even based in the U.S.
Cabot Dividend Investor
Weekly Update November 1: Several of our holdings reported earnings this week, and Chloe gives all the details. She’s also moving ConEd (ED) back to Hold due to the stock’s recent advance, and adding the second half of the ONEOK (OKE) position today.
Monthly Issue October 25: Chloe adds ONEOK (OKE), a new 5.3% yielding stock to the High Yield Tier. Most of her other positions are rated Buy as well, and the market is strong, so if you’re underinvested, it’s time to put some money to work. She also review some of her best and worst trades of the past two years, to see what we can learn from them.
Wall Street’s Best Investments
Daily Alert November 3: Baron Emerging Markets Fund (BEXFX) from Ian Wyatt’s Million Dollar Portfolio
Daily Alert November 2: SPDR S&P Global Natural Resources ETF (GNR) from The Income Investor
Daily Alert November 1: Chemours (CC) from DRIP Investor
Daily Alert October 31: MKS Instruments (MKSI) from The Investment Letter
Daily Alert October 30: iShares MSCI Germany ETF (EWG) from Internet Wealth Builder
Monthly Issue October 18: This month’s Spotlight Stock is Advance Auto Parts (AAP), a household name that ran into some challenges that put a dent in its stock price. But now with a new management team and favorable industry trends, the turnaround looks promising, and the stock price is certainly discounted—and attractive.
Wall Streets Best Dividend Stocks
Daily Alert November 3: Agrium (AGU) from Positive Patterns
Daily Alert November 2: Stanley Black & Decker (SWK) from The Wealth Advisory
Daily Alert November 2: Sell Juniper Networks (JNPR) from The Wealth Advisory
Daily Alert November 1: Schlumberger (SLB) from Cabot Undervalued Stocks Advisor
Daily Alert November 1: Sell Invesco (IVZ) from Cabot Undervalued Stocks Advisor
Daily Alert October 31: Sun Life Financial (SLF.TO) from Dividend Advisor
Daily Alert October 30: Weyerhaeuser (WY) from Real Wealth Report
Monthly Issue October 11: Our Spotlight Stock this month is representative of thriving stock markets. CME Group (CME) owns and operates exchanges for stocks, options, futures and derivatives. It has grown leaps and bounds, both internally and by acquisition, and numerous opportunities for expansion remain. Nancy’s feature further explores those opportunities.
This Week’s Q&As
Cabot Growth Investor and Cabot Top Ten Trader
Question: I was reading through the tax reform bullet points and there seems to be lots of stuff that that could hit various sectors, like home builders (mortgage deduction being lessened) or debt-heavy firms (less interest write-offs). How do you recommend playing this?
Mike: Well, in short, I don’t, at least not yet. First off, while perception is reality in the stock market, this week’s unveiling of the tax bill is step 1 of many that Congress will have to take to pass it. I don’t think it’s a stretch to say that the odds of anything passing is far from 100%, and I think most investors factor that in to their thinking.
Second, though, even if the bill (or something similar) does become law, it’s best to simply base your decisions on the market’s action. While any changes could have a big effect, they might not, or any effect might be outweighed by other factors. I’m not saying any bill won’t have a big impact, but it’s best to focus less on the news itself (much of which right now is speculation) and, instead, on the reaction to any news as it comes.
Right now, the market is acting well, as are groups like the homebuilders, which are in firm uptrends. So we remain bullish.
Cabot Options Trader and Cabot Options Trader Pro
Question: I wonder if you could share your thoughts on AMD. Is there any play given the current news about the company?
Jacob: AMD is a stock I’m watching. Not necessarily to buy, but as a barometer of risk in the market. I’m going to assume your looking for bullish ideas. If I was bullish, I might look at these ideas:
Buy-Write: Buy stock around 11 and sell the December 11 call for around $0.75. If stock closes above 11 on December expiration, that would be a yield of 7.3%.
Put-Write: Sell the January 10 put for around $0.50. Stock closes above 10, collect $0.50, or a yield of 5.26%. Though if stock drops below 10, at risk for buying the stock at 10.
Call Buy: January 11 calls for $1 look reasonable. Most that can be lost is $1 per call purchased.
Bull Call Spread: Buy January 11 call and sell January 13 for around $0.65. Most that can be lost is $0.65 per spread. Make $1.35 if stock is at 13 or above on January expiration.
Cabot Undervalued Stocks Advisor
Question: What’s happening with Alexion Pharmaceuticals (ALXN) and Vertex Pharmaceuticals (VRTX)?
Crista: Pharma/biotech industry stocks are suffering from bad news at a few companies, including Celgene (CELG) and Merck (MRK). There is no apparent problem at Alexion (ALXN) or Vertex (VRTX), so I think those stocks will bounce back rather quickly (as opposed to languishing for several months). I would consider their recently-lower prices to be a buying opportunity.
Cabot Emerging Markets Investor
Question: I’m writing in response to your last update where you recommended selling ATHM.
I realize there’s been some weakness in the Chinese stocks and I see that there’s been a slight downtrend in this particular stock recently. I’m wondering, if I’m comfortable with some volatility, whether the stock’s long-term prospects make it strong enough to hold through this weakness? I’m aware that this may not be in line with the goals of the portfolio, but aside from that?
Paul: I’m perfectly okay with being patient with a stock for which you have longer-term hopes. Just make sure that you set a loss limit (a mental stop, not a hard stop) so you don’t let your conviction keep you holding the stock longer than you should.
Cabot Small-Cap Confidential
Question: Is Tactile Systems (TCMD) still a buy? My luck I purchased at $33.85 and again at $30.95. This is the biggest loss in my portfolio this last week. So should I hang in there or get out? Suggestions?
Tyler: It’s been a tough few weeks for sure. But I’m hanging in there with a buy rating. Earnings out next week. More details coming in today’s update …
Question: I bought SCC publication today and like what I see so far. You highlighted Datawatch (DWCH) on Oct 6. I notice earnings are Nov 1. I’m thinking of breaking my rule and buying a little tomorrow ahead of earnings. My question: do you have any info since Oct 6 that might influence my decision on it?
Tyler: I don’t really have any new thoughts since not much has been publicly disclosed since I released that report. I was pleased to see that IBM had a good quarter (DWCH is a partner), but that said, nothing discussed on the IBM conference call related directly to its work with DWCH (not surprising given how tiny it is), so not much read across there. Others in the big data prep space, mainly Alteryx (AYX), haven’t reported yet, so again, not much to go on industry-wise there.
Technically speaking, I like that DWCH has been grinding steadily higher and has been less prone to spikes and dips since mid-August. While that can change at any time, it suggests to me that the stock is seeing steady buying demand. I don’t get the sense that the market has super high hopes out of earnings, and that a solid report that confirms the trends discussed in my report will be enough to keep it on its current trajectory. In other words, I’m not expecting a monster quarter with a huge jump in share price, or a total whiff and collapse either. Just strong and steady, I hope.
Is it worth breaking your rule over? Obviously only you can answer that! The stock has traded higher after each of the last three quarterly earnings reports. But, in each case it gave back a good portion of the pop so there were opportunities to buy in at a price not too much higher than the pre-earnings one. I’m not predicting a similar move this time, just wanted to mention it.
Cabot Benjamin Graham Value Investor
Question: My wife and I have 750 shares of Avigilon (AIOCF) cost $10.60 in two accounts. I trust you are following the stock. When should we add to our position?
Azmath: I do not follow the stock and I think the earnings are too unpredictable to come up with a reasonable conclusion on its value. I would personally not buy the stock, or if I already owned it, I would not hold more than 1% to 2% of my portfolio.
Question: I have been a long-standing client of Roy’s and look forward to an equally rewarding relationship with you.
Are you planning to follow the Toronto market? I ask this since I am an 86 year old Canadian citizen and tend to be a value investor. Trump’s apparent intentions regarding NAFTA gives me some concern. This agreement has served all three countries well over the years and I see nothing but problems if it is canceled.
One of my specific concern is how this will impact Magna (MG/MGA). I have noted that you have it as a buy and yet I worry that it will be adversely affected should NAFTA be scrapped and would appreciate your comments.
Azmath: Anticipated uncertainty in NAFTA is definitely a concern, but in the long-run, it may not cause a lot of trouble to Magna. For instance, out of 149 manufacturing facilities, 55 are in U.S. while only 50 are in Canada and 30 in Mexico. Out of 27 development and sales center, 13 are in the US, 1 in Mexico and 11 in Canada. Magna although a Canadian company, has a significant presence in the U.S. In addition, Magna’s presence in the Asian market is rising at a much faster rate than that of its growth in North America. This will give some cushion in case there is a revamp of NAFTA agreement.
In the large scheme of things, say in 15 years or so, if autonomous driving kicks in, automobiles will be highly commoditized. Magna can be a potential supplier of fully built automobiles to potential tech companies. At a current P/E of 11x, Magna seems to be a bargain. I would continue to hold it.