Cabot Prime Week Ending July 16, 2021

Cabot Prime Week Ending July 16, 2021

Stock Recommendation Tracker

The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any changes to our recommendations over the previous week. We include this table at the bottom of the Weekly Summary, and provide a link here at the top to the Stock Recommendations Tracker.

Cabot Weekly Review (Video)

In this week’s stock market video, Mike Cintolo talks about the market’s turn for the worse—while the mega-cap indexes look fine, there’s lots of damage under the surface, especially among growth titles. That’s keeping Mike cautious, though he’s not throwing in the towel, as most leaders are pulling back normally so far—the onus is on the bulls to show up, but if they do, there are still a decent number of setups as we head into earnings season. Stocks mentioned include CRWD, DOCU, NET, NVDA, MRVL, SHOP, CROX, PYPL and CVNA.

UPCOMING CABOT EVENTS:

How Government Spending Can Turn Into Investment Gains

FREE WEBINAR FOR PRIME MEMBERS: July 22, 2021 Sign up now.

Advisory Services

Cabot Growth Investor

Bi-weekly Issue July 15: Because most of us are long-only players (focusing our time looking at what to buy, not short), we usually think of things from the perspective of buyers. There’s nothing wrong with that, per se—a lot of my commentary and analysis is focused on whether or not we’re seeing big, institutional buyers show up. Especially at key levels, such evidence is vital; when a stock is trying to break free of a multi-month range, for instance, the volume surrounding the liftoff is one of your best indicators of whether the move will hold.

Special Bulletin July 14: Growth stocks and the market have remained tricky and challenging, and so far this month we’re beginning to see the sellers show up again—while big-cap tech has held up, many glamour names (and indexes) are coming under pressure. We’ve been nearly half in cash and aren’t eager to sell wholesale, but we’re also not going to hold and hope. Tonight, we’re pulling the plug on our half-sized position in Roblox (RBLX), which cracked support today, while placing Progyny (PGNY) on Hold. That will leave us with around 53% in cash.

Bi-weekly Update July 8: The market wobbled today, which put our Cabot Tides back on the fence. As for growth stocks, there’s still wobbly action, but there’s also many names that continue to improve and set up. We’re more optimistic than not, but tonight we’ll stand pat and see how the next few sessions go—ideally, we get a controlled pullback or rest that presents some solid entry points, but if the selling accelerates, we may be forced to prune a name or two. Tonight, we have no changes (~47% in cash), but we’ll be on the horn if that changes in the days ahead.

Cabot Top Ten Trader

Movers & Shakers July 16: If all you own is the S&P 500 or the Nasdaq, this was another relatively quiet week—as of this morning, the S&P is about flat, and the Nasdaq is off less than 1%. But that action masks what was a lot of turmoil under the surface: Mid-caps (down 2%) and small caps (down 3.5%) were hit hard, and the damage was acute among growth stocks, with things like the Russell 2000 Growth Fund (IWO) down 4.7% and the Ark Innovation Fund (ARKK) off more than 7%!

Weekly Issue July 12: The news-driven environment featuring incessant rotation and crosscurrents remains in effect; throw in the fact that breadth is narrow (about half of stocks are still below their 50-day lines despite the S&P 500 and Nasdaq being near new high ground; broad market indexes are chopping sideways) and earnings season is approaching and we think it’s best to continue going slow and aim to buy on weakness. Mike’s Top Pick is Arista Networks (ANET), whose stock is in a smooth uptrend as growth picks up steam.

Cabot Undervalued Stocks Advisor

Weekly Update July 14: In the Boston area, we’ve had nearly 8 inches of rain so far this month. This 0.7 inches-per-day average compares to the 0.6 inches-per-day average for a monsoon rainforest, the type found in the tropics along the equator. Sounds a lot like the dampened mood of the stock market. Compared to the crisp 19% return for the average stock in the first half of the year, the 1% return so far this month seems soggy. Part of the reason is that there are too many mixed macro signals – rising inflation but falling bond yields, murkiness over whether the Biden administration’s large spending proposals will be passed, surging Covid cases despite what appeared to be the end of the pandemic, incredibly strong economic and profit growth which may be rolling over.

Monthly Issue July 7: At the mid-point in the year, the investing environment seems to be exceptionally favorable. The U.S. economy is recovering robustly with promises of ongoing strength as the jobs market recovery accelerates and as international economies more fully reopen. Earnings growth for the S&P 500 this year is estimated to be 35%, followed by 21% growth in 2022. Not only are these growth rates exceptionally healthy, but analysts seem to be underestimating the strength. S&P 500 earnings estimates typically decline as a year progresses, but over the past three months, the consensus estimate for 2021 earnings of $191 has been increasing – and by a record amount (+9%).

Cabot Stock of the Week

Weekly Issue July 12: Tim’s featured stock Floor & Décor (FND), is currently one of our favorite retail cookie-cutter stories out there, and it has all the characteristics of a stock that should do very well over time. Fundamentally, the big idea is that the company is upending the hard-flooring retail industry; at the end of Q1, Floor & Décor operated 140 warehouse-style stores that have everything professionals and DIYers need. Whereas the typical competitor might have a couple hundred different products available in-house, Floor & Décor has 1,400 or so, allowing customers to see/touch/feel/buy whatever they want right away.

Cabot Explorer

Bi-weekly Update July 15: After last weekend’s successful space flight of Sir Richard Branson, one would have expected Virgin Galactic (SPCE) stock to soar on Monday. Instead, it lost altitude. Sure, the announcement of a $500 million secondary offering leading to dilution was not welcome news, but part of the reason the stock fell is that investors asked, “what next?” and sold some shares. What comes next is indeed the right question since markets always look forward.

Bi-weekly Issue July 8: The Uber of China, DiDi (DIDI) has been in the headlines and is caught up in a power play over data security and defying authorities in Beijing. All this highlights the fact that Chinese stocks listed in the U.S. should be considered speculative as they are caught between American and Chinese regulators. Carl’s new recommendation Porsche Automobile Holding (POAHY), has a controlling interest in Volkswagen. And with typical Teutonic complexity, Porsche, in turn, is one of the many divisions of this auto giant, along with VW and Audi, and owns prestigious names including Bentley, Lamborghini and Bugatti. Porsche owns 31.4% of Volkswagen equity, but has 53.3% voting control of the company.

Cabot Dividend Investor

Monthly Issue July 14: Remember income? It used to be so easy. But good yields from traditional investments have gone the way of the eight-track tape. A 10-year Treasury bond pays just 1.4%. A three-year CD pays less than 1%. A 20-year AAA-rated municipal bond pays 1.2%. After taxes and inflation, you don’t even break even. And that’s not to mention the fact that bond prices can plummet if interest rates rise. Tom’s featured stock is Blackrock Enhanced Capital and Income Fund (CII).

Weekly Update July 7: There is a Fed meeting today. The ultimate oracle of wisdom will bestow their current thinking upon anxious traders. The ground-breaking event may determine the market trend for the next couple of days. Last time the central bankers met, they blind-sided traders with the shocking revelation that they might start raising rates in two years. Wall Street people are on the edge of their seats, waiting to see if there is another tectonic-plate-moving declaration this month. We’ll see.

Cabot Marijuana Investor

Weekly Update July 7: Green Thumb (GTBIF) announced the closing of its acquisition of Dharma Pharmaceuticals, which gets it one of the five licenses in Virginia as well as an operating production facility. The first medical marijuana dispensary opened in Virginia last August, and home growing and possession of marijuana for adult use became legal in Virginia on July 1, but over-the-counter adult-use sales won’t begin until January 2024!

Monthly Issue June 30: In the early years of marijuana legalization in the U.S., when the main action was in Colorado and the three West Coast states, there were no major multistate operators (MSOs). Instead, hundreds of small-time businesses sprang up, and in the competitive environment that followed, many found it difficult to compete with the established illegal market, which didn’t pay taxes. But many survived, and because of that, those early states still have a very fragmented industry. Today, as the country is perhaps halfway (a very rough guess) toward national legalization, the state of Michigan, where legal adult-use sales began in December 2019, provides some interesting data.

Cabot Early Opportunities

Special Bulletin July 6: Today we’re going to part ways with two positions that we added in May and which we’ll make a little more than 10% on. Both positions were trading higher a couple weeks ago but have lost some momentum recently. Sell WHD and APP.

Monthly Issue June 16: The Nasdaq, which fell 9% in the first half of May, has recovered and hit an all-time closing high early this week. Even the ARK Innovation ETF (ARKK), which felt immense pain from February through March, has begun to look better and is up 18% over the last four weeks, though it is still 26% below the all-time high from February. Tyler’s Top Pick Telus International (TIXT) is a customer care company that serves enterprise clients and their digital customer experiences by designing, building and managing engagement and HR tools that reach end consumers. Examples of services it provides on behalf of clients are sales, after sales support, transaction processing and complaint management.

Cabot Profit Booster

July Expiration July 15: Investors are being challenged with some of the strangest stretches in market history. On the surface, the market looks to be in great position. Stock indexes are hitting or are near record highs, but there is a lot of commotion below the surface. As it stands, roughly 40% of all stocks within the S&P 500 are below their 200-day moving average, which typically indicates bear market action. However, technology has been incredibly strong, especially the mega-cap stocks like AAPL, MSFT, AMZN, etc. And 40% of the S&P 500 is comprised of technology stocks, hence the current 17.6% return in 2021.

Weekly Issue July 13: This Friday marks the expiration of July options, and if everything holds steady, our calls in MRO, GPRO and SGMS will expire worthless. As a result, we will maximize the call premium on each position. Per usual, on Monday Jacob plans to sell his shares in each position and start the search for more opportunities. However, we still have a few trading days left in the week, so expect to hear from him Thursday. Jacob’s new stock recommendation is Limited Brands (LB).

Cabot Income Advisor

Weekly Update July 14: It’s another week of more of the same. The three major indexes are very near the all-time highs, but still not really going anywhere. The market is boring for a couple reasons. One reason is the summer malaise. The same lackluster attitude investors have about life in the summer, they have about the market. Activity tends to dry up, at least relative to the rest of the year. The other reason is earnings. Reports will start coming in and investors are waiting to see what earnings bring.

Monthly Issue June 23: The sideways market finally got some action. It went the wrong way. But it showed signs of life nonetheless. Last week, the Dow Jones Industrial Average posted its worst week since last August, down more than 3.4%. The main culprit was the Fed. At last Wednesday’s meeting, the central bank announced its intention to start hiking the federal funds rate – in two years. That is sooner than the market had anticipated. And investors freaked.

Cabot Turnaround Letter

Weekly Update July 16: Covering recent news and analysis for our portfolio companies and other topics relevant to value investors.

Monthly Issue June 30: Major pharmaceutical stocks are clearly not “the place to be” in today’s market. Investors much prefer fast-growing yet expensive technology (including biotech) and cyclical re-opening stocks. After years of stagnant share prices while the S&P 500 surged, the group now sells at about a 40% price/earnings discount to the market, its largest in decades and well below the historical premium valuation. Bruce’s has one buy recommendation: Organon & Co. (OGN).

Ask the Experts

Cabot Profit Booster

Question: In setting up a Covered Call, I have the following questions: (1) Do you use “Market Order” or “Limit Order”. If you recommend the latter, what is the criteria to select one. (2) Do you use “GTC” or “Day”. (3) Do you use “Delayed” or subscribed to “Market Data Manager”.

Jacob: (1) I typically use a limit order when selling calls, especially if a wide bid-ask spread exists in the call strike I’m interested in selling. Not really the case with F, but for future situations. (2) It depends on your time horizon for getting into the trade. I prefer to use a day order and reestablish my entry the following day if I’m not filled. (3) I always use live quotes...always. Delayed quotes don’t really help me since they are often delayed by 15 minutes...and when trading options that can make a huge difference in the price of my call options. And to pay an extra $15 a month for live quotes (approximately) this may save you some money in the long run.

Quarterly Cabot Analyst Meeting

The recording of the Cabot Prime Members Meeting with the Analysts from April 21, 2021 is now available for you to listen to at your convenience—click here for access. This private call with our analysts is one of your exclusive Cabot Prime member benefits.

Stock Recommendations Tracker

The table below lists all of the stocks held in any Cabot portfolio.
Updated or revised recommendations from the past week are in purple text.
Stocks added to a portfolio are highlighted in green text.
Closed stock positions in the past week are highlighted in red text.

Stock	Cabot Explorer	Cabot Growth Investor	Cabot Marijuana Investor	Cabot Stock of the Week	Cabot Undervalued Stock Advisor	Cabot Dividend Investor
ABBV						Buy
AGC	Buy
AGNC						Buy
ARCO					Buy
ASML				Buy
AVGO				Buy		Buy
AVVIY					Buy
BIP				Buy		Buy
BMY					Strong Buy
BSCL						Hold
CBT	Hold
CCHWF			See Advisory	Sold
CGC			See Advisory
CII						Buy
CRLBF			See Advisory
CSCO					Buy
CURLF			See Advisory
CVX						Hold
DLR						Hold
DOCU		Buy
DOW					Hold
DVN		Hold
EPD						Buy
FIVE		Hold		Hold
FND		Buy		Buy
FSR	Hold
GM				Hold	Hold
GOLD					Buy
GRWG			See Advisory
GTBIF			See Advisory
HTHT				Sell
HUBS				Buy
IBM	Buy
IIPR			See Advisory
JUSHF			See Advisory			Hold 2/3
KKR						Buy
KO					Buy
LLY						Hold
MRK					Buy
MRVI				Hold
MRVL	Buy
NEE				Buy		Buy
NET	Hold 1/2	Buy
NVCR				Buy
NVDA				Buy
O						Buy
OGN					Buy
OKE						Buy
OTTR					Buy
PDD	Hold 1/2			Hold
PGNY		Hold		Buy
PGX						Hold
PLTR	Buy			Buy
POAHY	Buy
QCOM						Buy
RBLX		Sell		Hold
SE	Buy 1/2			Buy
SLB				Buy
SPCE	Hold 1/2			Sold
SSO		Buy
ST				Buy	Buy
STAG						Hold
TAP				Hold	Buy
TCNNF			See Advisory	Buy
TPB			See Advisory
TRSSF			See Advisory
TSLA				Buy
TSM	Buy 1/2
USB						Buy
VLO						Buy
VZ						Hold
XEL						Buy
XP	Sold