Cabot Prime Week Ending August 18, 2017
Quarterly Prime Market Report
In this Q2 2017 Prime Market Report, Cabot President Timothy Lutts gives his read on the stock market, looking back at the most recent quarter.
Quarterly Prime Analyst Teleconference
Listen to the Q2 2017 quarterly teleconference where Cabot Analysts answer members’ questions live.
Cabot Weekly Review
In this week’s stock market video, Mike Cintolo discusses the market’s worsening action, both the major indexes (where one of his key indicators has turned negative) and the broad market. He’s not getting overly negative, but Mike is advising clients to build up some cash, let go of losers and laggards and cut back on new buying. Meanwhile, he is still seeing plenty of growth stocks holding up well, so if and when the bulls regain control, there should be plenty of winners to sink your teeth into.
Cabot Growth Investor
Other Stocks of Interest August 18: Follow ups to stocks featured March 15, 2017 (issue 1363) to August 16, 2017 (issue 1374). 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 August 16: Mike reviews all our stocks and writes about the “whipsaw buy signal.” He also tells you to “Let the Stock Make the Decision For You.”
Cabot Top Ten Trader
Movers & Shakers Weekly Update August 18: Given the market evidence, now’s not the time to be a hero. With the selling pressure intensifying, take a couple of steps back, set some stops and react to what the market shows us going forward. Should the indexes storm higher, Mike will do some buying, but if the selling pressures continue, he’ll grow more defensive.
Weekly Issue August 14: This week’s list does have a bunch of good growth stories, which is encouraging after the recent selling. We’re going with Vantiv (VNTV) as our Top Pick—it’s not the most volatile stock, but it just blasted out of a long period of lackluster action following a game-changing acquisition.
Cabot Undervalued Stocks Advisor
Special Bulletin August 18: In this discussion on falling share prices, Crista explains that it’s important to determine whether the situation will last for a couple of months, which can be quite normal, or for several years, which can be insufferable.
Special Bulletin
August 17: Crista is adding Molina Health Care (MOH) to the Buy Low Opportunities Portfolio as a Strong Buy.Weekly Update August 15: Twenty-four of our portfolio companies reported June quarter results. Among those 24 companies, fifteen reported EPS that exceeded analysts’ consensus estimates; eight of which exceeded all analysts’ estimates. Two companies reported EPS that came in on target, and seven fell short of consensus estimates. Several additional portfolio companies will report July quarter results next week.
Monthly Issue August 1: Today’s featured stocks include Quanta Services (PWR) and two new additions to the portfolios: Weyerhaeuser (WY) and Alexion Pharmaceuticals (ALXN). Also, Tesoro (TSO) has officially changed its name to Andeavor (ANDV), and TiVo (TIVO) is a Sell.
Cabot Stock of the Week
Weekly Issue August 15: This week’s stock is PayPal (PYPL), a name you’ll know. The company was born in the early days of the internet and today it’s all grown up—a major player in the world of financial transactions. Tim is selling Carvana (CVNA) and JD.com (JD) and moving Vertex (VRTX) back to Buy.
Cabot Emerging Markets Investor
Bi-weekly Update August 17: The iShares EM Fund has been jumpy, but is still well above its 50-day moving averages, keeping our Buy signal in place, if a little bruised. Paul has one portfolio move tonight: JD.com (JD) to Sell.
Special Bulletin August 16: The move of TAL Education Group (TAL) is the result of a change in the ratio of native shares to ADR shares. Technically, its not a stock split, but functionally it’s as good as. The value of your position is the same as it was, and you don’t need to take any action.
Special Bulletin August 15: Paul has seen some unsettling action in a few of his stocks, so he thinks we need to make a few small adjustments. YY Inc. (YY) and JD.com (JD) move to hold.
Bi-weekly Issue August 10: Markets sold off slightly on Wednesday, but really got into it on Thursday, with the iShares MSCI ETF falling a full 2%. Most of our stocks followed suit, with all but two finishing the day on a down note. The biggest damage was done to NetEase (NTES), which attempted to bounce a couple of times during the day, but finished near its lows. Despite the blood-letting, the Cabot Emerging Markets Timer is still flashing a green light, indicating that the medium-term trend of the market is still up. But we are taking a very close look at our mental stops, and will be ready to start taking some profits if this pullback deepens. We’re welcoming a well-known stock Baidu (BIDU) back into the portfolio today.
Cabot Benjamin Graham Value Investor
Weekly Update August 18: Roy expects stock market action to moderate as investors looking for bargains will step in and buy stocks, although once-a-week tumbles could reappear on a regular basis. Updates on Cisco Systems (CSCO), Home Depot (HD) and VMware (VMW). Sell Cisco (CSCO).
Enterprising Model Issue August 10: In this month’s Enterprising Model Issue, Roy highlights five interesting companies that offer great promise, including Citizens Financial Group (CFG) which is the first bank in a very long time that he find’s truly undervalued. Ratings changes: Alliance Resource (ARLP) Buy to Hold, Avigilon (AVO.TO) Hold to Buy, Big Lots (BIG) Buy to Hold, Chicago Bridge & Iron (CBI) Buy to Hold, GNC Holdings (GNC) Buy to Hold, Greenhill & Co. (GHL) Hold to Sell, Spectra Energy (SEP) Hold to Buy, Stifel Financial (SF) Buy to Hold, Ulta Beauty (ULTA) Hold to Buy and WestJet Airlines (WJA.TO) Hold to Buy.
Monthly Value Model Issue August 3: This month’s Cabot Value Model contains a wide variety of stocks as usual, with a slight focus on companies in the technology and financial sectors. This month’s Buy recommendations include conservative stocks that will perform well if the stock market falters a bit during the next couple of months. One new Buy-rated stock: Facebook (FB), and one stock transitions out of the Model: Alliance Data Systems (ADS).
Cabot Dividend Investor
Weekly Update August 16: The stock market has begun to recover from last week’s war of words-induced selloff, and Chloe is moving Broadridge Financial (BR) back to Buy today.
Special Bulletin August 11: The portfolio held up fairly well to the selling, with the exception of Pembina Pipeline (PBA), Broadridge Financial (BR) and Prudential (PRU). PBA and PRU are still rated Hold and BR moves from Buy to Hold.
Monthly Issue July 26: Chloe adds Ecolab (ECL), a 94-year-old company with a 31-year history of dividend growth, to the Safe Income Tier. Be sure to read Important Information for REIT Investors in the educational section. One rating change: 3M (MMM) moves to Hold.
Wall Street’s Best Investments
Daily Alert August 18: Perrigo Company (PRGO) from Canaccord Genuity Research
Daily Alert August 17: Third Avenue Real Estate Value Investor Fund (TVRVX) from Sound Advice
Monthly Issue August 16: In this monthly issue, Nancy’s Spotlight Stock is Aegean Marine Petroleum Network (ANW), a company that operates in the Oil Services area. Beaten down by low oil prices, this company is pulling out all the stops to cut costs and expand into new geographical arenas—efforts that are attracting some very interesting institutional interest in its stock. Her Feature article further explores the strategies that the company and its new management team are applying to manage—and expand—the company’s footprint.
Daily Alert August 16: Cemex (CX) from Top Stocks Under $10
Daily Alert August 15: Owens Corning (OC) from Dow Theory Forecast
Daily Alert August 14: Global X Lithium & Battery Tech ETF (LIT) from The Cutting Edge
Wall Streets Best Dividend Stocks
Daily Alert August 18: Sinclair Broadcast Group (SBGI) from Forbes Dividend Investor
Daily Alert August 18: Sell M.D.C. Holdings (MDC) from Forbes Dividend Investor
Daily Alert August 17: Alliance Resource Partners (ARLP) from Jack Adam’s Insider Plus
Daily Alert August 17: Annaly Capital Management Inc. (NLY-PF) from Jack Adam’s Insider Plus
Daily Alert August 16: Dow Chemical (DOW) from Energy & Income Advisor
Daily Alert August 15: Kite Realty Group Trust (KRG) from Barclays Capital Equity Research
Daily Alert August 14: First Republic Bank (FRC-F) from Forbes/Lehmann Income Securities Investor
Monthly Issue August 9: Nancy’s contributors have found a very nice variety of investments for your consideration this month, beginning with our Spotlight Stock, AT&T (T), which has seen many economic and market cycles, and managed—even with a huge footprint—to keep up with technology and sector innovation and revolution. Nancy’s Feature discusses the coming disrupters in the telecom industry and focuses on the advantages that AT&T offers in this next cycle of change.
This Week’s Q&As
Cabot Emerging Markets Investor
Question: This stock (AutoHome, ATHM) is really exploding the past few days. Other than earnings have you seen anything else?
Paul: Investors liked ATHM even before earnings, which helps, and the numbers on Wednesday’s report were all outstanding, well ahead of both analysts’ forecasts and the company’s own projections.
I think what’s really moving the stock is the picture of AutoHome’s evolution from an online auto showroom to what management calls “a fully-integrated automotive eco-platform.” This has led to higher-quality lead generation and a higher share of the automotive advertising market. The 38% decline in the cost of revenue was also impressive. Smaller news, like the total clearance of the company’s direct-sale inventory and a move into the growing used-car market also helped.
In short, it’s a good story with improving fundamentals and the perilous state of the broad market is concentrating interest in a few leaders.
I’m a little worried about any stock that takes off like this; it’s not a sustainable angle of advance. But the portfolio has a nice profit cushion, so we can sit through a reasonable correction/consolidation.
Question: Paul, I’m confused. JD reported earnings 11 cents better than expected but lost $1.65 today. Why? Was their future estimate bad?
Paul: This is why we always say to watch the reaction, not the numbers. Sometimes the problem may be that there was a whisper number that the results didn’t reach. And sometimes, as you point out, management’s guidance is disappointing.
In the case of JD, the quarterly results showed a larger-than-expected loss due to higher marketing costs. Management says that the company will be profitable for the full year as it has been investing in logistical efficiency, which I take to mean building more warehouses and other improvements to handling and delivery systems.
I think the next few days will be crucial for how we handle JD. The stock is sitting right on top of its 25-day moving average after three days of declines on increasing volume. The stock should find some technical support at 43/44, which was resistance in June. If it deteriorates from here, I’ll send a Special Hotline advising a sell, if necessary.
Just be sure to keep your own loss limits in place, based on where you bought the stock.
Question: In wondering if I should just sell JD now. Is it possible that the reason why JD is dropping lately is because everybody is anticipating that tomorrow’s earnings from BABA could hurt JD in an unpleasant way? If this turns out to be true, JD could tank tomorrow. What do you think?
Paul: I don’t think e-commerce in China is a zero-sum game. The online retail business is big enough, and growing fast enough, that Alibaba can grow quite well without taking business away from JD.com.
There were enough problems in JD’s quarterly report (larger-than-expected loss) to explain the stock’s weakness without worrying about a threat from Alibaba.
Indeed, it’s possible that a good quarterly report from Alibaba tomorrow morning might be taken as a good thing for all e-commerce stocks, including JD.com.
The key numbers for JD.com are revenue and revenue growth. For Alibaba, it’s gross merchandise volume and its growth rate.
In any case, I don’t think I’d care to try to anticipate what might happen. The charts will tell us all we need to know after tomorrow’s open.
Cabot Growth Investor
Question: Hi Mike—I liked your article in Growth Investor this week about letting the stock make decisions for us. Question, though — what if a stock is set to report earnings soon and could gap well below the stop if it’s not received well? Would that be a reason to sell ahead of time?
Mike: It’s a good question and one I was just incorporating into one of my presentations for this year’s Cabot Wealth Summit (next month!). If a stock has stalled out for a couple of months and you don’t have much profit cushion (say, less than 5% or 10%), then I’m OK trimming your position ahead of earnings—but just trimming, maybe selling one-third or so of your holdings.
Really, though, I think the earnings question would be better covered by a “profit test” heading into the report— i.e., if your profit is at least X% (say, 7%), you hold, otherwise, you sell some and use a stop for the rest.