Dycom (DY): New High Ground

By Michael Cintolo, Chief Analyst, Cabot Growth Investor and Cabot Top Ten Trader
From Cabot Wealth Advisory 9/24/15 Sign up for Cabot Wealth Advisory—it’s free!

As we head into the often-tricky late-September, early-October period, we’re working hard to keep things simple. When the market does turn up (hopefully it’s soon), there will be plenty of leaders to jump on. The key is to wait for the right time to jump, otherwise you’ll get chewed up by the endless ups and downs.

That doesn’t mean I’m completely opposed to nibbling on a stock or two, but you should make sure it’s a potential leader that’s acting resiliently. One that I have my eye on is Dycom (DY), which was recommended as the Top Pick in Cabot Top Ten Trader on September 8, and has run decisively into new high ground since then. Here’s what I wrote:

“Dycom Industries is a right place/right time kind of story. The company is a leading provider of engineering, construction, service and maintenance services to telecom companies that are expanding and upgrading their networks. And that’s a great place to be as 2015 has kicked off what could be a multi-year investment cycle by the big telecom firms that are looking to drastically expand their bandwidth. Indeed, most of the telecoms are big customers (AT&T accounts for 19% of revenues, CenturyLink 16%, and Comcast 12%) as they all look to lay upgraded pipe. That’s resulted in huge business for Dycom, which reported outstanding quarterly results last week—not only did sales growth accelerate and earnings blow away expectations, but the firm’s backlog grew to $3.68 billion (up 58% from a year ago) and management gave a bullish view of the next couple of quarters. And the top brass has been shareholder friendly, too, buying back about 3% of the company during the past two quarters. That said, Dycom is a “down the food chain” stock, so if the telecoms cut their budgets, business could dry up in a big way. But right now, the wind is at the company’s back.”

As noted above, I’m not big on buying much until we see a new buy signal, but if you’re heavy in cash, nibbling on some DY (preferably on dips of a couple of points) could work. The best idea, though, is to take a no-risk subscription to Cabot Top Ten Trader—that way, you’ll not only know when the market’s trends really turn up, but you’ll know exactly what stocks are the new leaders, where to buy them and how to manage them. Click here to order.