Cabot Prime Week Ending June 16, 2017
Cabot Wealth Summit
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Cabot Weekly Review
In this week’s stock market video, Mike Cintolo relays his mostly-bullish-but-watchful market outlook—he remains heavily invested as few leading stocks have cracked, but he’s taking his cues from the market. Mike highlights not just stocks on his watch list, but also differentiates between early-stage stocks (many of which are resilient) and later-stage stocks (which look more ragged), helping him hone in on the potential winners of the next leg up.
Cabot Growth Investor
Bi-weekly Update June 14: We’re focused on seeing how the market and leading growth stocks act following the Friday/Monday wave of selling; so far, there’s been some abnormal selling but most stocks are holding key support. The overall market is also still in good shape, and thus, we’re generally standing pat with 22% in cash.
Special Bulletin June 12: We’ll respect the market’s recent action by selling our position in Netflix (NFLX), which was never a powerful leader this year, and in the past two days, is one of the few growth stocks to break through its 50-day line. We’re also placing Shopify (SHOP) and Veeva (VEEV) Systems on Hold.
Bi-weekly Issue June 7: Mike is restoring Buy ratings on Shopify (SHOP), ProShares Ultra S&P 500 Fund (SSO) and XPO Logistics (XPO) and averaging up in XPO as it has begun to emerge from a multi-month rest period, but he’s still holding about 14% in cash given the iffy broad market and the many divergences in the market.
Other Stocks of Interest June 9: Follow ups to stocks featured January 11, 2017 (issue 1358) to June 7, 2017 (issue 1369). 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.
Cabot Top Ten Trader
Movers & Shakers Weekly Update June 16: We’re still mostly bullish because the evidence tells us to be so. But we continue to think the next week or two will be revealing. Buy ideas: Lumentum (LITE), Melco Resorts (MLCO), Paycom Software (PAYC) Regeneron Pharmaceuticals (REGN) and Summit Materials (SUM). Sell ideas: Atlassian (TEAM), Five Below (FIVE), HubSpot (HUBS), Jabil Circuit (JBL), Lam Research (LRCX) and Netflix (NFLX).
Weekly Issue June 12: This week’s Top Ten has a more diversified feel to it, with many sectors represented. Mike’s Top Pick is Penn National Gaming (PENN)—the stock is in a growth-oriented industry that remains resilient.
Cabot Undervalued Stocks Advisor
Special Bulletin June 15: Crista moves Mattel (MAT) from Buy to Hold. At yesterday’s Investor Day, the the company announced a dividend cut and that it’s implementing a new business plan. The outlook is positive.
Weekly Update June 13: Crista advises her subscribers to sell Royal Caribbean Cruises (RCL) and begin to accumulate cash. Vertex Pharmaceuticals (VRTX) moves from Hold to Strong Buy.
Special Bulletin June 12: Crista is selling Adobe Systems (ADBE) and buying Bank of America (BAC). She describes a big June catalyst for banks’ share prices and highlights 11 other bank stocks. Best stocks for EPS growth and value: Bank of America (BAC) and KeyCorp (KEY), and best stocks for immediate upside: Bank of New York Mellon (BK), Citigroup (C) and Northern Trust (NTRS).
Monthly Issue June 6: The market seems to be lending itself to more bullish price action in June, and Crista is looking forward to making money this month. Today’s issue features Cavium (CAVM), Schnitzer Steel (SCHN) and Invesco (Ltd), which is a new addition to the Growth & Income Portfolio. There’s also one rating change: Thermon Group Holdings (THR) moves from Hold to Sell.
Cabot Stock of the Week
Weekly Issue June 13: Tim’s selection this week is Ulta Beauty (ULTA), a quality stock with a strong and healthy technical pattern at a decent buy point. There are five changes this week: Legg Mason (LM), Square (SQ) and Vertex Pharmaceuticals (VRTX) are all downgraded from Buy to Hold, while Adobe (ADBE) and Snap (SNAP) are downgraded from Hold to Sell.
Cabot Global Stocks Explorer
Bi-weekly Issue June 15: The recent corrections to tech stocks (including Chinese tech stocks) have certainly gotten our attention. While these pullbacks haven’t turned our market timing indicator negative, that’s always a possibility. In today’s issue, Paul gives some tips on how to handle your portfolio when markets are kicking up a fuss and he makes portfolio moves to lower our exposure a little. His new stock pick, HDFC Bank (HDB) takes us outside China and the tech sector.
Cabot Benjamin Graham Value Investor
Weekly Update June 16: In this Weekly Update, Roy reports on Kroger (KR), a sell candidate, plus four companies that raised their dividends: FedEx (FDX), Lowe’s Companies (LOW), LyondellBassell (LYB) and UnitedHealth Group (UNH).
Enterprising Model Issue June 15: Roy initiates coverage on Thor Industries (THO), which is thriving in the recreation vehicle sector. Demand far exceeds supply in this industry, and Thor is adding two new manufacturing facilities to meet record new orders which have nearly doubled from a year ago.
Special Bulletin June 12: Roy assesses the high-flying technology sector, which got clobbered last Friday, June 9, and again this Monday morning.
Monthly Value Model Issue June 8: This month’s Cabot Value Model contains a wide variety of stocks, with a slight focus on companies in the technology and financial sectors. Roy features four companies and one ETF (exchange traded fund): Walt Disney (DIS), Facebook (FB), T. Rowe Price (TROW), UnitedHealth (UNH) and WisdomTree International Hedged Quality Dividend Growth ETF (IHDG).
Cabot Dividend Investor
Weekly Update June 14: The long-term trend remains up, and so do most of our Cabot Dividend Investor positions. There are no ratings changes today.
Monthly Issue May 31: Chloe adds mid-cap tech stock Broadridge Financial Solutions (BR) to the Dividend Growth tier, provides updates on all our holdings, and shares some of her favorite investment resources. Guggenheim 2017 Corp Bond (BSCH) and Home Depot (HD) move to Hold.
Wall Street’s Best Investments
Daily Alert June 16: Universal Display (OLED) from Cabot Growth Investor
Daily Alert June 15: LeMaitre Vascular (LMAT) from Validea Hot List Newsletter
Daily Alert June 15: SELL Masimo (MASI) from Validea Hot List Newsletter
Daily Alert June 14: Becton, Dickinson and Company (BDX) from Shortex Market Letter
Daily Alert June 13: Pool Corp. (POOL) from Pivotal Point Trader
Daily Alert June 12: William Blair Small Cap Growth N (WBSNX) from Moneyletter
Monthly Issue May 17: We’re still bullish, and as you can see from our Advisor Sentiment Barometer and Market Views section, so are most investment pros. And that’s great news, as it means our contributors continue to find an array of stocks with excellent potential. Our Spotlight Stock this month is Cavium (CAVN).
Wall Streets Best Dividend Stocks
Daily Alert June 16: Best Buy (BBY) from The Chartist
Daily Alert June 15: People’s United (PBCTP) from Forbes/Lehmann Income Securities InvestorMonthly Issue June 14: Our issue this month is packed with a variety of great investing ideas, beginning with our Spotlight Stock, Western Digital (WDC), a company that is helping to manage Big Data requirements around the world. My Feature examines the opportunities ahead for this industry and company in more detail.
Daily Alert June 14: Horizons NASDAQ 100 Covered Call ETF (QYLD) from The No-Load Fund Investor
Daily Alert June 13: Invesco (IVZ) from Cabot Undervalued Stocks Advisor
Daily Alert June 12: Regal Entertainment Group (RGC) from Dividend Confidential
This Week’s Q&As
Cabot Undervalued Stocks Advisor
Question: I have some Facebook (FB). Should I sell? I’ve heard different opinions.
Crista: Let’s look at earnings growth, value, and price chart on FB:
EPS are expected to growth 15.1% and 23.4% in 2017 and 2018. Those numbers are attractive.
The corresponding P/Es are 30.9 and 25.1. That makes the stock way overvalued based on this year’s earnings, and fairly-valued based on next year’s earnings.
The stock is up about 35% this year, and has not rested very much. That’s called “overextended,” and it indicates that a stock is overdue for a price correction.
I decide to sell a stock when it’s no longer undervalued. (And FB is no longer undervalued.) However, I might approach the sale in different ways. Sometimes I use stop loss orders, sometimes I sell near the top of the recent trading range (in the case of FB, that would be 155), and sometimes I sell right away.
Cabot Emerging Markets Investor (now Cabot Global Stocks Explorer)
Question: PGJ looks kind of rough, although FXI looks a little better. EEM not too bad. Do you think we are at the start of some kind of intermediate term correction in China, or are you in a wait-and-see mode? I’m guessing I’m not alone in this type of query...?
Paul: No, not alone in the least. But the simple truth is that I have no idea what will happen tomorrow. The Cabot market-timing disciplines are founded on having a firm grasp of what’s actually happening. So, just as you are, I’m following the relevant indexes with interest. But I don’t have any particular insight into the future.
I wouldn’t be surprised to see an intermediate-term correction in either the U.S. or China. But I’ll stick with what I know, which is that the market is much smarter than I am, and that it will tell me when the picture changes.
Question: After sending off the initial email yesterday I found myself wondering how much babysitting the client base plays into sending out a newsletter. Probably not so much during smooth sailing...
Paul: I’m always happy to hear from the people who read Cabot Emerging Markets Investor. It lets me know what you’re thinking. And THAT you’re thinking. Write any time.
Question: I’d like to ask about Baozun (BZUN), which I’m long, in various small and medium bites. I’m a little underwater, which doesn’t necessarily worry me (I’ve been underwater on some oil/gas stocks for far longer—for better or worse, I’m of the opinion that the Opec/non-Opec agreement is a game-changer, and that the Anglo-American-Israeli-European elites are trying to jawbone oil down in the media in the their never-ending quest to hurt Russia, and in Trump’s case, Iran—but ultimately it won’t work), but I’m looking at it right now, and it appears to want to close a second day under its 25 day MA (I tend to use 20, which is a bit more convincing in this case).
It looks to me that it has some immediate lateral support in the 19.50 range, then nothing until its 50-day MA for support.
I’m also looking at FXI, EEM, $NDX, PGJ—all looking positive for the day to varying degrees.
So I’m asking myself three questions:
1) Why is BZUN not participating in today’s rally? (Should I be worried about it)?
2) Is there a sector rotation in progress out of $NDX/EEM/PGJ and into other things (or example Financials, Transports, Energy)? If so, will I lose money staying in a declining sector too long, and lose opportunity getting into another one at a later stage?)
3) If it’s just a consolidation, how long will it last? (What’s the dollar/opportunity cost of holding versus moving onto to something more actively rising?)
And my question to you is, do you have some idea of where you might put BZUN on Hold or Sell?
Paul: Those are some very plausible thematic speculations. Since my investment horizon is generally too short to accommodate macro-economic developments, I can’t really comment, but they seem reasonable.
One thing about the use of multiple indexes and moving averages is that more data doesn’t necessarily yield more certainty. I’ve found that a couple of relatively simple indicators will generally capture the main trend, which is all I need. It’s like having a weather service that just tells you the temperature and whether it’s raining or not. More information may be useful, but its additional utility diminishes pretty quickly when you get beyond the basics.
About BZUN. The portfolio bought it at 21.85, so its 10% loss limit would be 19.7 and its 15% loss limit would be 18.6. The stock has been trading sideways since about May 12, and its support at 20 is solid, with no secondary support in sight (as you noticed).
The portfolio has a half position, which translates to 5% of our capital. With our reduced exposure, I think we can afford to give the stock a little more room. But a convincing close below 20 will probably put the stock on Hold, and any further price deterioration will have us selling pretty quickly.
Cabot Benjamin Graham Value Investor
Question: I am a new subscriber, but I am a little confused. How and when is someone to use the two different recommendations (Value and Enterprise). Do you use one or the other or do you use a combination? Do you use one with a certain type of market and the other with another type of market? What is the distinction between the two?
Roy: The reason I have two Models is to provide both low-risk stocks (Cabot Value Model) and moderate-risk stocks (Cabot Enterprising Model). I advise basing your portfolio on the Cabot Value stocks to form a solid base for your holdings. Then if you want to add some extra dividend yield, for example, you can look for higher yielding stocks in the Enterprising Model. If you desire additional growth, for another example, you can find stocks in the Enterprising Model with high Growth Ratings.
Cabot Value stocks tend to be less volatile—rising less when the stock market is advancing, but declining less when the market is falling. Enterprising stocks usually perform very well when the market is rising, but can fall a tad more when the market is pulling back. Surprises can occur in any stock in either Model, however.
Cabot Dividend Investor
Question: I took your earlier suggestion and have been slowly adding stocks to my portfolio.
I currently own CCL, MMM and WYNN (following your great advice from the newsletter). Now that the stocks are peaking, do you suggest selling some of the shares or with these stocks do you just hold on to them since they pay dividends? I am asking because Mike Cintolo from Top Ten Trader suggests selling like a third of them when they are peaking. I am guessing the answer is that we hang on to the dividend stocks, but want to be sure, since I am new to this.
Chloe: I don’t think peaking is the right word. That implies that this is the top (at least temporarily). Without a crystal ball, we can’t identify a top until it’s passed. And since WYNN, CCL and MMM are all trading at or near 52-week highs, they’re still in uptrends.
Of course, a correction is possible in any of them! If you want to take some profits now, go right ahead. I know Mike likes to take some money off the table once he has double-digit returns. Since our holding periods are longer (as you note) I usually don’t take profits unless I have a reason to worry about a stock. (It’s correcting, it’s stalled out, or I’m simply getting more cautious about the sector or broad market.)
That does mean we usually give back a little profits before we sell, but as they say, “only liars buy at the bottom and sell at the top.”
I’m glad you’re finding the advice useful, you’ve made great picks!
Question: My biggest % losers are Gamestop and Mattel, they seem to be going only in one direction. I’m talking huge % losses in my investment in each, not at all balanced by the dividends. Do you still see a future for these? It’s hard to swallow a big hit, but hard too to see a constant graph line downward.
Chloe: Mattel (MAT) we sold in April, if you still own it, cut your losses now. Things aren’t going in the right direction, and management just reduced the dividend (as they hinted they might shortly before we sold).
As for GameStop (GME), the stock found support at 20 back in November, and again April, so that gives me some confidence that the current downtrend will also end soon. And analyst estimates are actually improving. So we’re going to hold on for now. Of course, use appropriate stop losses in your own portfolio, as always.
Question: My dividend cows (KMB, MO, PG, PM), which I’ve had for years and pay nice dividends have really been down recently. Should I keep them, and assume they’ll come back? I’ve lost about $2000 in the past few days, but I’ve made 10X that amount since I bought them over 10 years ago!
Chloe: You’ve almost answered you own question. More specifically, since KMB, MO, PG and PM are long-term, income-oriented holdings for you, just stay focused on the long-term performance of the stocks. Of course, analyze the stocks individually and sell if the long-term picture starts to look bad (and take profits when it helps you sleep). But right now, I don’t see a long-term reason to worry about any of the stocks you mentioned, technically or fundamentally.
Wall Street’s Best Investments
Question: What is your position on Hi-Crush (HCLP) stock and should I buy more since it’s dropped?
Nancy: The stock dropped as oil prices declined, but it currently carries a 1.6 (Buy) rating by Wall Street analysts. Three analysts have increased their EPS forecasts for the company in the past 3 days. And on June 2, contributor Christian DeHaemer of Crisis and Opportunity wrote this about the stock:
“Hi-Crush (NYSE: HCLP) — Hit our stop. We will look to buy back another day. HCLP provides fracking sand for use in tight oil wells. The use of fracking sand is increasing due to the rapidly expanding rig count coupled with new techniques called “Monster Fracks” which use twice the amount of sand. Hi-Crush is responding to demand by doubling its crews in the Permian basin – one of the low cost hydrocarbon production sites. The company has a new terminal in Pecos, Texas to supply the Permian. Hi-Crush CEO Robert Rasmus said in the conference call: “The first quarter results were in line with our forecasts and represent the logical progression in recovering margins as we experience significant and sustainable increases in demand for frac sand, which are expected to drive a 50-60% sequential increase in our volumes for the second quarter.” The company saw a nice jump in Q1 revenue to $83 million from $67 million due to higher sales and better pricing. Bought on October 28, for $14.75. Put your price target at $29. Our stop-loss is at $13.50. Current price $13.20.”
It looks like a buy at these prices to me.
Question: I read about Precision Auto Care (PACI) in your March 15 newsletter.
I bought some at $1.00 on the 25th. Today I read that Carl Icahn’s Automotive Business will be acquiring Precision Auto Care. The stock has gone up to $1.50 on this news.
I wondered if you had any insights to the future of the stock now. Do you believe that it would still have more room to grow, or is this as good as it’s going to get?
Obviously, I’m pretty happy seeing a stock I own go from $1.00 to $1.50.
Nancy: The company seems to have good operating numbers, including profit margins and growth. As I write this, the shares are up to $1.65 and they look promising for the future.
However, being fairly conservative, why not take 1/2 your profits and let the rest ride? That way, you have booked some profits and don’t have too much risk going forward.
Question: Two questions: What is the symbol of the marijuana ETF you mentioned in your article on marijuana stocks? In your article, why didn’t you touch on GWPH? A British company that has a 10 year lead on U.S. because they were allowed to do research. Just wondering if you have any opinion on it. The CEO was on Cramer and he seemed pretty savvy.
Nancy: The symbol for Horizons Medical Marijuana Life Sciences ETF is HMMJ.TO; sorry, I neglected to include the initials for the Toronto exchange after the symbol in my article.
GW Pharmaceuticals (GWPH) has certainly been a hot stock. GW Pharma shares have already blasted through most analysts’ expectations, in a short period of time, due to the company’s cannabis-based medications portfolio. I believe it still has plenty of room to grow, and some analysts expect it to reach nearly $150 per share. However, in my article, I wanted to focus on a lesser-known, smaller-cap name, in which investors may get in on the ground floor, and that’s why I chose to write about Aphria. I plan to write subsequent articles that will be more comprehensive in terms of reviewing the industry.