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Cabot Prime Week Ending March 30, 2018

Cabot Prime Week Ending March 30, 2018

Cabot Wealth Summit Registration

What do Cabot’s most successful investors have in common? They come to the Cabot Wealth Summit!

If you haven’t yet registered for the Cabot Wealth Summit, now’s the time because the Extra Early Bird rate expires soon! The Summit is a literal breakfast, lunch and dinner with every one of Cabot’s analysts, a rich and intense program of stock picks, market analysis, investing tips and techniques and a chance for face-to-face Q&A with some of the savviest investors around. We will also have great social activities!

Register here for the August 15-17, 2018 Summit at special pricing for Cabot Prime members.

Cabot Weekly Review

In this week’s stock market video, Paul Goodwin looks at the wretched state of the market as the major indexes look to be retesting February lows with the S&P perilously close to its 200-day moving average and only a one-day rally to sustain us through the long weekend. The important thing is to honor the signal of the market and cut way back on new buying while keeping losses small. If you’re determined to buy, look for stocks that are outperforming the market. But cash is king right now.

Cabot Growth Investor

Bi-weekly Issue March 28: Mike says that he’s not eager to raise more cash, but he’ll continue to listen to the market and our stocks. He’s also keeping our Watch List up to date — despite the downer of the past week, many growth stocks actually remain in relatively good shape. There is one change in tonight’s issue: Sell one-half of Shopify (SHOP) and hold the rest.

Special Bulletin March 27: While Mike says the market’s long-term trend is still up, the Cabot Tides and Two-Second Indicator are both negative, telling us to be cautious and focus on capital preservation. In the Model Portfolio today, Mike is going to sell the rest of our shares in both Alibaba (BABA) and ProShares Ultra S&P 500 Fund (SSO). Stocks now rated HOLD include Five Below (FIVE), Grubhub (GRUB), PayPal (PYPL), Proofpoint (PFPT) and Shopify (SHOP).

Bi-weekly Update March 20: The market’s slide this week has put our Cabot Tides back on the fence, but most leading growth stocks continue to act very well. Mike is selling Facebook (FB), one of our biggest winners ever, as the stock has plunged through our mental stop, and he’s going back to Hold with ProShares Ultra S&P 500 Fund (SSO). Our cash position will now be around 27%.

Other Stocks of Interest March 30: Follow ups to stocks featured October 25, 2018 (issue 1379) to March 28, 2018 (issue 1390). 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 March 30: Mike says it’s still time to be cautious—a nibble on a stock here or there is fine, but he doesn’t advise diving into a bunch of names with big positions. Holding some cash and honoring your stops are still key, as our main focus right now is capital preservation. Buy ideas: Baozun (BZUN), Etsy (ETSY), Five Below (FIVE), Okta (OKTA), Planet Fitness (PLNT) and Shutterfly (SFLY).

Weekly Issue March 26: This week’s list still has a lot of good stories and solid charts, and includes a few newer names. Mike’s Top Pick is ServiceNow (NOW), which remains exceptionally resilient. Just remember to keep new buys small given the market.

Cabot Undervalued Stocks Advisor

Special Bulletin March 29: Crista talks about GameStop (GME), its share price, its fourth quarter earnings report and the company’s outlook. But she also talks about the differences between thriving companies and failing companies, and the murky in-between. Today, her recommendation is to Sell Half of GameStop (GME).

Weekly Update March 27: Crista writes about the stock market correction and takeover target USG Corp. (USG). Here are today’s rating changes: Alphabet (GOOGL) moves from Hold to Strong Buy, BB&T Corp. (BBT) moves from Buy to Strong Buy, Delek US Holdings (DK) moves from the Buy Low Opportunities Portfolio to the Growth Portfolio, GameStop (GME) moves from Strong Buy to Hold and Interpublic Group (IPG) moves from Buy to Strong Buy.

Monthly Issue March 6: Today’s featured stocks include GameStop (GME), which moves to Strong Buy, Southwest Airlines (LUV) and PBF Energy (PBF), which is joining the Buy Low Opportunities Portfolio. Crista is also selling Nucor (NUE), and Commercial Metals (CMC) moves to Strong Buy.

Cabot Stock of the Week

Weekly Issue March 27: Today, Tim’s recommendation is outside the U.S., and outside China, too! In fact, his recommendation is in Brazil, where a young airline is enjoying rapid growth and the chart is positive, Azul SA (AZUL). Tim has one sell recommendation: Knight-Swift Transportation Holdings (KNX).

Cabot Emerging Markets Investor

Bi-weekly Update March 29: Our Emerging Markets Timer has turned negative, but its action of the past two months looks more like a trading range than a downtrend. Tonight, despite the yellow light, Paul is going to add a half position in Azul S.A. (AZUL) but will return two stocks, Alibaba (BABA) and Vipshop Holdings (VIPS) to Hold ratings.

Bi-weekly Issue March 22: Today, Paul is making several changes to the portfolio: Fibria Celulose (FBR) Buy a Half to Sell, Tencent (TCEHY) Buy a Half to Hold a Half and Weibo (WB) Buy to Hold. His new recommendation is a Brazilian company, PagSeguro (PAGS) (which translates roughly to “secure pay”), has been quietly and quickly gaining an advantage on both its international and Brazilian competition, producing wildly rapid growth in the process.

Cabot Benjamin Graham Value Investor

Weekly Update March 29: Crista gives us her take on the current stock market correction.

Monthly Issue March 8: Azmath is consciously changing the portfolio into more defensive stocks to guard against inflationary fears. He introduces two new stocks, STORE Capital (STOR) andMcKesson (MKS), recommends selling Blackstone (BX) and Malibu Boats (MBUU), and changes Hanesbrands (HBI) from Buy to Hold.

Cabot Dividend Investor

Monthly IssueMarch 28: Chloe is selling another half of our General Motors (GM) shares and placing UnitedHealth Group (UNH) on Hold. This month’s featured buy is Intel (INTC), which will join the Dividend Growth Tier.

Special Bulletin March 26: Because of the decline in the major indexes last week, Chloe has two changes today. BB&T Corp (BBT) and 3M (MMM) move to Hold.

Cabot’s 10 Best Marijuana Stocks

Update February 27: Cronos Group is expected to be elevated today from the Nasdaq International Designation program (where it has traded as PRMCF) to the Nasdaq Global Market, where it will trade under the ticker symbol CRON. In Canada, it will continue to trade under the symbol MJM.

Spring Issue February 15: Tim gives updates on the 10 stocks we’ve been following and two new stocks. The market’s recent correction has brought most of them down to what look like good buying areas.

Wall Street’s Best Investments

Daily Alert March 30: PagSeguro Digital Ltd. (PAGS) from Cabot Emerging Markets Investor
Daily Alert March 29: Japan Smaller Capitalization Fund, Inc. (JOF) from The Personal Capitalist
Daily Alert March 28: TD Ameritrade (AMTD) from Cabot Stock of the Week
Daily Alert March 27: Electronic Arts (EA) (IONS) from Nate’s Notes
Daily Alert March 26: Brown & Brown (BRO) from 2 for 1 Stock Split Newsletter

Monthly Issue March 21: Our Spotlight Stock, MSC Industrial Direct (MSM), is a business in the very fragmented maintenance, repair and operations (MRO) industry—it’s a company that has consistently rewarded its shareholders with stock repurchases and rising dividends. Nancy’s Feature article further explores the company’s opportunities, especially in light of recent tax reforms.

Wall Streets Best Dividend Stocks

Daily Alert March 30: International Game Tech PL (IGT) from Canaccord Genuity Research
Daily Alert March 29: Ally Financial Inc. (ALLY) from AlphaProfit Sector Investors’ Newsletter
Daily Alert March 28: Aflac Inc. (AFL) from Sure Dividend
Daily Alert March 27: International Business Machines (IBM) from Sound Advice
Daily Alert March 26: Buy: Annaly Capital Management (NLY) from Jack Adamo’s Insiders Plus
Daily Alert March 26: Sell: Annaly Capital Management Preferred Series F (NLY-PF) from Jack Adamo’s Insiders Plus

Monthly Issue March 14: The Spotlight Stock is Gramercy Property Trust (GPT), an Industrial Real Estate Investment Trust that pays a high yield and is growing internally and by acquisition. Nancy’s Feature explores Wall Street’s misunderstanding of the effect of rising rates on the REIT industry and discusses the opportunities for Industrial REITs as the economy continues its expansion phase.

Cabot’s 10 Best Small-Cap Cloud Computing Stocks to Buy Now

Special Report March 12: If you’re a growth investor, you need to own cloud software stocks. It’s just that simple. Cloud computing is changing the world. It’s powering massive growth in companies across sectors, empowering digital transformations, enabling new generations of connected technologies and changing how people live their lives. Tyler Laundon lays out the landscape and names his 10 best small-cap cloud computing stocks.

This Week’s Q&As

Cabot Emerging Markets Investor

Question: With the volatility of the last couple of weeks I sold Alibaba when Timothy Lutts recommended us to. I assume you do not recommend purchasing it at this time since it is on hold. Is that a correct assumption? I noticed in a recent update he was recommending selling Knight Swift but he stated that Crista Huff was still keeping it in her portfolio. I would recommend that when a stock is being recommended by two different analysts you do that in the future. I try to default to the primary analyst but when the market is volatile and someone recommends selling I am more apt to go with that unless they make a statement like he did this week regarding Knight Swift.

Paul: That’s a great suggestion. I know that as a long-time follower of Chinese and other emerging-market stocks, I’m a little more risk-tolerant, and will sometimes hold onto stocks that I think have excellent stories and long-term prospects, even when stocks head sideways (or down) in threatening ways. I will raise the idea with our analysts’ group and will strive to point out when my advice differs from another analysts’. I still have high hopes for Alibaba, by the way, but if it touches its 200-day moving average I’ll sell in a heartbeat.

Question: You seem to be the smartest man I know when it comes to making me money. I am therefore asking if you can give me some guidance regarding finding stocks via a screen. The goal is to find stocks which have either recovered fastest from their bottom and show leadership or those that did not really get affected by the market correction and did not sell off. I know this is vague but I’m not sure how to articulate it any better. I am trying to build a list of stocks that appear to have momentum on their side and are recovering faster than the market. So when we see a further correction I can quickly review those top stocks that have recovered with momentum. Do you have any guidance as to how I might find or build a screen like this? Thank you for any help you might give me. I really appreciate all the work you’re doing. If this is out of your purview I totally understand and apologies for any inconvenience.

Paul: It’s an interesting question, but not an easy one to answer. I have some suggestions. Your screen will have to have 1) a measure of price appreciation, 2) a specific time period and 3) a way to include the price performance of a benchmark index. These requirements can be incorporated in a single screen, but you need to decide exactly what you’re looking for. If you’re trying to find stocks that are recovering faster than the market, you need to fix a time period following a correction. Take the percentage advance of the relevant index from its low, and use that as your lower screen limit on price appreciation for the entire market. You may want to use measures of liquidity and price to eliminate thinly traded stocks (say, less than 300,000 shares a day) and penny stocks (below a dollar). A simpler screen would be limited to price appreciation. Just set the percentage appreciation bar high enough that your results are limited to between 25 and 75 stocks that also meet your liquidity and price screens. Manipulating your time criteria is the only way to isolate the kind of specific outperformance you’re looking for. As a simple alternative, there’s a lot to be said for using a screen that just looks for stocks trading at 52-week highs. I’m going to paste an article I wrote a few years ago about simple screens to find great growth stocks below. I hope you find it useful. Get back to me if you need any clarifications. And be sure to let me know what you come up with. it’s what all growth investors are trying to find.

You ask a simple question, sometimes you get an answer so complicated that you’re sorry you asked. That’s one of the discouraging truths about the universe.

Here’s the simple question: “How do I find great growth stocks?

Since I work for a company that sells advice on stock investing, I have a couple of obvious suggestions, but I’ll keep them to myself for a while .

The real question is, how can an individual investor find leading growth stocks?

A few obvious choices probably don’t work.

For instance, you probably won’t find great growth stocks by scanning the lists of the day’s biggest gainers. All too often, the stocks making the biggest leaps during the day are low-priced issues that are rebounding after big losses. Plus, even if a stock trades at 10 or higher, a 20% gain (or more) often signals a climax in price action.

It’s also difficult to find stocks with big growth potential by watching the parade of babbling fund managers on financial TV shows. In the first place, most big fund managers use a valuation approach to stocks, so their recommendations focus on cheap stocks, rather than those with a chance at rapid price appreciation.

Financial blogs and the columnists on financial sites are fun and fascinating, but they’re too hit-or-miss to use as guidance in putting your hard-earned money to work.

No, the best way for the individual investor to find great growth stocks (short of using Cabot’s services) is to screen the markets for growth characteristics.

The Wilshire 5000 Index was established in 1974 to track the value of every stock on the market that represents a firm headquartered in the United States and that trades on U.S. exchanges and has widely available pricing information. The market has grown since the Index was established, and now includes about 6,700 stocks.

So your job is to pick out 50 candidate stocks from among those 6,700 for further study and analysis.

What do you screen for?

Your most important screen is for price appreciation. You should set your screening characteristics to show you stocks that have risen 20% or more during the previous month. This will eliminate stocks that are losing value, ones that are trading in a range and ones that are appreciating only gradually.

If you only have one screen, that’s the one you would use. The most bullish thing a stock can do is to go up in price. Price appreciation represents an improving opinion of the stock on the part of the investing community. And by keeping your time period at a month, you will exclude the one-day flash-in-the-pan stocks that rise and fall like mayflies.

If the markets are in generally good health, as they are now, you will need more screens to whittle down your list. I would suggest setting your screens to eliminate any stocks that trade under 10. Low prices stocks are just too volatile. I would also look for stocks that trade with adequate volume to ensure that you can buy and sell easily. Your liquidity screen should exclude stocks that trade fewer than 300,000 shares a day.

Once your list becomes manageable, you can begin to look for the fundamentals that support price appreciation. These supporting numbers include revenue and earnings growth (both quarterly and over the years), institutional sponsorship and after-tax profit margins.

Finally, you will want to begin researching the business propositions of the companies you have selected. Are their products and services innovative, revolutionary and with potential appeal to a huge mass market? Are they the best in their industry? Is management seasoned, responsive and able to juggle the rise and fall of costs, demand and competition?

You need to consider everything before you put your money down. But the place to start is with price appreciation. The market is constantly processing all of the information I’ve talked about here, and the movement of a stock’s price is like a running tabulation of the results. Start with stocks that are going up and you won’t go far wrong.

Cabot Stock of the Week

Question: Thank you for sharing the wealth of your investment research and finding the treasures in the market for subscribers like myself. I am currently a subscriber of your Stock of the week newsletter. I have a quick question - considering the negative news around recent crash and liquidity issue and resulting sell-off of TSLA in the last couple of days, do you still consider TSLA as a BUY? Is the current price a buying opportunity or should I wait for it to settle down? Thank you for your help.

Tim: Thanks for asking. As I said in my latest Stock of the Week, good news builds tops and bad news builds bottoms, and there has certainly been a lot of bad news about Tesla recently. But there has also been bad news about Facebook, and I don’t think FB is at a bottom. Both companies have great fundamental growth potential, but the main difference between the two today from an investment point of view is that FB was at a top quite recently, while TSLA has been is a consolidation phase for nine months, so the stock is a lot “cooler” than FB. Thus, for risk-tolerant investors, I believe TSLA is at a great entry point here.

Guide to Cabot Prime

This Guide to Cabot Prime will help you make the best use of your Prime membership to create a strong personal portfolio.