Cabot Prime Week Ending May 19, 2017
Cabot Wealth Summit
Have you registered yet for the Cabot Wealth Summit in September? It’s included in your Prime membership, but you need to register to reserve your seat. Registrations for your guests are just $400 per person. Click here to register now.
Cabot Weekly Review
In this week’s stock market video review, Paul Goodwin talks about the generally favorable conditions of the market and the unsettling two-day correction that hit on Wednesday and Thursday. Paul also lists the six stocks that have been the major drivers of the success of the S&P 500 since the beginning of the year and looks at a few strong stocks that are showing strength by ignoring the market’s volatility. It’s time to keep some cash on the sidelines, but there are also plenty of strong stocks to be putting your money to work in.
Cabot Growth Investor
Bi-weekly Update May 17: Today’s whopping decline isn’t the end of the world for growth stocks, but the broad market is more worrisome, with the Cabot Tides now neutral and our Two-Second Indicator turning negative. Tonight we’re going to sell half our position in ProShares Ultra S&P 500 Fund (SSO) and place Facebook (FB), XPO Logistics (XPO) and our half position in Tesla (TSLA) on Hold. Our cash position will now be around 21%.
Other Stocks of Interest May 12: Follow ups to stocks featured December 7, 2016 (issue 1356) to May 10, 2017 (issue 1367). 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 May 10: In the Model Portfolio tonight, Mike is filling out our position in Universal Display (OLED), and placing XPO Logistics (XPO) back on Buy. That will leave us with one empty slot and about 13% in cash.
Cabot Top Ten Trader
Movers & Shakers Weekly Update May 19: Most of the market is treading water, but leading Top Ten stocks and the Nasdaq are still in good shape. We’re likely to knock our Market Monitor down a notch on Monday, but net-net, you should remain mostly bullish and see how the market handles itself from here. Buy ideas: Adobe Systems (ADBE), Dycom (DY), GrubHub (GRUB) and Vertex Pharmaceuticals (VRTX).
Weekly Issue May 15: We have a bunch of excellent stories with strong charts again this week. Mike’s Top Pick is Nvidia (NVDA), a big-cap growth stock that just got going from a four-month rest after a huge run last year.
Cabot Undervalued Stocks Advisor
Special Bulletin May 17: Today’s bulletin describes a management change at H&R Block (HRB) and bullish price movements, especially among integrated oil stocks.
Weekly Update May 16: It’s no secret that I’ve favored energy, financial and construction materials stocks for many months. That’s because many stocks in those sectors are expected to achieve very strong, multi-year profit growth. No ratings changes.
Monthly Issue May 2: Today’s featured stocks include ExxonMobil (XOM), Legg Mason (LM), and a new addition to the Growth Portfolio, Cavium (CAVM). Crista also compares the featured stocks and their peers in the integrated oil, asset management and semiconductor industries.
Cabot Stock of the Week
Weekly Issue May 16: Recognizing the risk in the current hot market, today’s selection is not a hot stock; it’s Carnival Corporation (CCL), a slower grower with a heathy and growing dividend.
Cabot Emerging Markets Investor
Bi-weekly Issue May 18: Investors’ jitters about the dog fight in Washington, D.C. caused a sharp market correction that included emerging market stocks. Our portfolio also sustained a little damage, but, so far at least, it’s under control. In this issue, Paul look at the performance of emerging vs. developed market stocks, and his new buy is Baozun (BZUN), which will give us a different take on Chinese retail.
Cabot Benjamin Graham Value Investor
Weekly Update May 19: Roy includes summaries for three Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other noteworthy news during the past week—Avigilon AVO.TO), Cisco Systems (CSCO) and Home Depot (HD).
Monthly Enterprising Model Issue May 11: This month, Roy introduces a new stock that has out-shined most stocks in the retail sector. Five Below (FIVE) will add 100 new stores in 2017, which will surely add significant growth, but there’s much more to the story. Today’s issue describes how this specialty retailer has thrived in a difficult sector.
Monthly Value Model Issue May 4: This month’s Cabot Value Model contains a diversified list of buy recommendations, with a bias toward high quality companies in the Technology and Financial sectors. Roy adds Alliance Data Systems (ADS) to the model and moves Schlumberger (SLB) out of the model.
Cabot Dividend Investor
Weekly Update May 17: Pembina (PBA), Carnival (CCL), Cummins (CMI) and 3M (MMM) are buyable here. And we still have one earnings report to look forward to when GameStop (GME) reports next Thursday.
Monthly Issue April 26: Chloe adds large-cap industrial stock Cummins (CMI) to the Dividend Growth Tier, reviews her sales from the past week, and explains how to write covered calls.
Wall Street’s Best Investments
Daily Alert May 19: Check Point Software Technologies (CHKP) from Argus Weekly Staff Report
Daily Alert May 18: Teladoc (TDOC) from Canaccord Genuity Research
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).
Daily Alert May 17: Vulcan Materials (VMC) from Shortex Market Letter
Daily Alert May 16: Oakmark Global Investor (OAKGX) from Moneyletter
Daily Alert May 15: Masimo Corporation (MASI) from Validea Hot List Newsletter
Wall Streets Best Dividend Stocks
Daily Alert May 19: Eastman Chemical (EMN) from AlphaProfit Sector Investors’ Newsletter
Daily Alert May 19: Sell Macy’s (M) from Ian Wyatt’s Million Dollar Portfolio
Daily Alert May 18: Chartwell Retirement Residences (CSH-UN.TO) from The Income Investor
Daily Alert May 17: MPLX LP (MPLX) from Forbes/Lehmann Income Securities Investor
Daily Alert May 16: Capital Product Partners (CPLP) from Top Stocks under $10
Daily Alert May 16: Sell PIMCO Strategic Income Fund (RCS) from Capitalist Times
Daily Alert May 15: LyondellBasell Industries (LYB) from Internet Wealth Builder
Monthly Issue May 10: Our Spotlight Stock, Qualcomm (QCOM) became a common household name to many investors during the tech revolution. The Internet/mobile chip provider not only managed to survive the boom and bust, but has come out on top of the growing semiconductor sector for low-cost chips for the exploding biometrics identification industry.
This Week’s Q&As
Cabot Undervalued Stocks Advisor
Question: What do you think of the Trump Bump, and what might happen next?
Crista: The phrase “Trump Bump” is a catchy sound bite that implies that stocks have risen recently based on hopes that some sort of legislation will pass that’s good for the economy. If the Trump Bump is tied to action in Washington D.C., and the action doesn’t take place, then the implication is that the stock market will lose all the gains that it’s accrued since November.
I haven’t agreed with that scenario, so I’ve tuned out the newscasters.
Frankly, if any of those hoped-for changes in the tax code or interest rates or Dodd-Frank legislation take place, they will serve to increase analysts’ earnings estimates. But they’re not currently built into most estimates. It’s been my belief that stocks have risen because corporate earnings growth is expected to be stronger-than-usual in 2017 and 2018 based on actual business endeavors that are taking place; not based on hopes and dreams.
The S&P 500 tends to rise 20% or more in two to four years of every decade. It’s only done that once in the current decade, in 2013. We’re due for a big year, and I expect 2017 to be a 20%+ year. What’s more, I also expect 2018 to be a better-than-average year. Here’s why: most investors are still on the sidelines, sitting in cash, worrying about politics and interest rates and tax rates and The Wall and Russia and North Korea and you-name-it. Come December, they’re going to see that the market rose a lot this year, and they’ll be kicking themselves that they missed out. Then they’re going to begin investing, which will be the fuel that pushes the market up further in 2018. Eventually, there’ll be a stock market correction, although I would not expect the correction to erase all the gains from 2017 and 2018.
Cabot Emerging Markets Investor
Question: It’s a good day for Weibo (WB) today. I’m glad I held on to WB after buying it back a few weeks ago. Given that NYSE and S&P is not going anywhere, I wondered if I should sell WB tomorrow (or soon) and buying it back later, because if NYSE and S&P starts dropping, it could take the whole market down. Your thoughts?
Paul: I think it’s a mistake to try to anticipate the market. China and the other emerging markets are doing well, so the best course is just to stick with them for as long as they last. There will be time enough to take action when the market actually gives a signal.
Question: What do you think about Yintech’s (YIN) troubles? Will it recover soon?
Paul: I’d love to be able to tell you something about Yintech’s future with any confidence, but I can’t. The company’s business model is concentrated on commodity speculation, which is a highly emotional sector. Investors liked last year’s acquisition of a major competitor in the gold business, but confidence has waned.
The most important thing, with YIN or any stock, is to protect your portfolio from big losses. YIN has fallen from its March high of 22 to just above 12 in recent trading. The chart shows a steady decline in May on rising volume, which is a real warning sign.
I don’t know whether you own YIN or are just curious. If you own it, you should have a maximum loss limit in place that will get you out before your loss undercuts the performance of your portfolio.
If you’re just considering buying YIN, you should wait until you see the reaction to the company’s quarterly report on May 23 (next Tuesday) before the market opens. There are no analysts’ estimates for this quarterly report, so you will just have to watch what the stock does.
Question: I am a subscriber to your Emerging Market Letter. I have been watching ZTO Express (ZTO) since the day you originally put this stock on WATCH. It seems to me we are very close to this stock moving past its IPO selloff. If earnings don’t disappoint this week, I think we will pass February highs and the stock will be “on its way”. Are you still watching this one?
Paul: I agree that ZTO’s chart is shaping up. There’s still the February resistance at 14.76 to get past, but that shouldn’t be a problem if news about the company remains good.
The event to watch will be ZTO Express’ quarterly earnings report, which will come out tomorrow (Wednesday, May 17) after the market closes. Below, I’ve attached the information the company posted on its Investor Relations website.
I don’t recommend taking a significant position just before earnings, but you can keep a close watch on the reaction to earnings to see how investors feel about the numbers. (Analysts are looking for revenue of $368.8 million and earnings of nine cents per share.
Lastly, you should remember that while ZTO may perform well, what you want to do is find the stock that will make the biggest possible contribution to your portfolio. So don’t pass up a stronger stock just in order to follow a good story.
ZTO to Announce First Quarter 2017 Financial Results on May 17, 2017
SHANGHAI, May 8, 2017 /PRNewswire/ -- ZTO Express (Cayman) Inc. (NYSE: ZTO) (“ZTO” or the “Company”), a leading express delivery company in China, today announced that that it will release its unaudited financial results for the first quarter ended March 31, 2017, after the close of U.S. markets on May 17, 2017.
ZTO’s management team will host an earnings conference call at 9:00 PM U.S. Eastern Time on Wednesday, May 17, 2017 (9:00 AMBeijing Time on May 18, 2017).
Dial-in details for the earnings conference call are as follows:
United States: 1-888-317-6003
Hong Kong: 852-5808-1995
China: 4001-206115
International: 1-412-317-6061
Passcode: 6235404
Please dial in ten minutes before the call is scheduled to begin and provide the passcode to join the call.
A replay of the conference call may be accessed by phone at the following numbers until May 24, 2017:
United States: 1-877-344-7529
International: 1-412-317-0088
Passcode: 10106990
Additionally, a live and archived webcast of the conference call will be available at http://ir.zto.com/.
Question: Is it time to buy Autohome (ATHM) again?
Paul: It looks great, although given how extended it is (it’s at 38.8 and its 25-day moving average is back at 33) you should take just a half position until you get a 10% profit cushion. Then you can average up.
Cabot Benjamin Graham Value Investor
Question. Will you let me know if you are still as confident as you were previously on Chicago Bridge & Iron (CBI)? Should I double down? (From subscriber P.G.)
Roy: Note: On May 18, CBI announced the retirement of Philip K. Asherman, 66, from his role as President and Chief Executive Officer of CBI and as a member of the company’s Board of Directors effective July 1, 2017. Patrick K. Mullen will become President and Chief Executive Officer. I believe this is good news. The company’s leadership has been in question, and a change was long overdue.
I have searched for additional clues to explain why Chicago Bridge & Iron (CBI 19.35) is continuing to fall. I haven’t found anything to fully explain the drop in the price, but I would like to keep you informed of the latest news and rumors. I continue to have confidence in my Buy rating because CBI is a big company and makes lots of money.
The initial drop in the stock a week ago, when CBI announced weak first quarter results, is old news. However, there is a rumor circulating that Toshiba could declare bankruptcy soon. CBI does some work with Toshiba, but the impact on CBI would likely be small or minimal because CBI is a giant company.
The outcome of a CBI lawsuit against Westinghouse Electric, CBI’s former Shaw subsidiary, is up in the air. CBI is suing Westinghouse for $428 million regarding the calculation of working capital involved in the sale of Westinghouse to Toshiba. Westinghouse is suing CBI for $2 billion claiming that CBI hid some of the problems in two Westinghouse nuclear power projects in South Carolina and Georgia. CBI sold its Westinghouse subsidiary to Toshiba in 2015, and Westinghouse declared bankruptcy in March 2017. The judge will decide how the case should proceed after arguments were heard on May 3, 2017. Because of its complexity, the case could drag on for years.
The drop in CBI shares is still a mystery because the Westinghouse fiasco is far from being resolved, and the impact of a Toshiba bankruptcy is slight. The possibility of an activist investor taking a large position in CBI is now a good possibility. A push for executive changes that could get the company back on course would provide a huge boost to CBI’s stock price, but no rumors are brewing. CBI is still a Buy, with limited downside and plenty of upside possibilities.
Question: Can you give me your current thinking on Greenhill (GHL)? I purchased GHL back in March when it was on the Current Buy Recommendations list (around $29). It has since dropped over 20% to $23. What is your near-term and long-term outlook for the company? Should I continue to Hold? (From subscriber J.G.)
Roy: Greenhill & Co. (GHL 21.55) reported disappointing first-quarter results. Revenue dropped 15% and the company recorded a loss of $0.02 per share compared to increases of 34% and 196% in the prior quarter. Earnings tend to be volatile, depending on large fees that the company earns on mergers and acquisitions.
Greenhill added six new Managing Directors during the first quarter. In the early days of April, transaction activity picked up, bringing the company’s year-to-date revenue back into line with forecasts, and costs back into a more normal relationship with revenue. Management believes the poor showing in the first quarter is temporary, and revenue and profit growth will resume in the current quarter and next several quarters. I will likely add Greenhill to my Enterprising Model Buy list soon. I am waiting for the stock to settle. Hold.
Cabot Dividend Investor
Question: I am new to your letter so I don’t have any of your (really great) picks in my portfolio. I am not asking for investment advice, I just want to express a concern about bonds. Interest rates are on the floor and I worry about putting any money into them for obvious reasons. I know they generate income, but ... Are you thinking at all about preferred shares?
Chloe: Preferred shares are definitely less sensitive to interest rates than bonds, though they can still be affected. I don’t recommend individual preferred shares, but I do think they’re a good bond alternative. Just be sure you know what the credit quality and yield to maturity are, and if they’re redeemable early. (Quantum Online is a good source of information.) You can read more about how to choose good preferreds on page 9 of our Retirement Guide. In our portfolio, we keep things simple with the PGX ETF, which has a fairly high credit quality and low volatility.
I also wouldn’t buy most bonds today, for the reasons you mention. However, we do have the four Guggenheim defined-maturity ETFs in our portfolio for stability and income. Each ETF has a maturity date, like an individual bond, so they don’t carry interest-rate risk (interest-rate triggered moves are temporary.)
Wall Street’s Investments and Wall Street’s Best Dividend Stocks
Question: What are you current thoughts on Uniti Group (UNIT) which I bought at your strong suggestion that it would double within 12/18 months
Nancy: I have just heard back from Ford Equity Newsletter, the contributor of this recommendation. The newsletter has the stock on hold; it has fluctuated between hold and buy since their recommendation to us, as they continue to be bullish on the energy sector, long-term.
The shares are currently rated ‘2' or ‘Buy’ by the consensus of Wall Street analysts, who have the following growth projections for the company:
current qtr: 233.30%
next qtr: 550.00%
current year: 446.40%
next year: 77,20%
next 5 years: 44.00% (per year)
The company just reported first quarter results as follows: net income of $15.9 million, compared to a loss of $0.83 per share in the same period a year earlier. EPS was 31 cents. Earnings, adjusted for non-recurring gains (a $38 million writedown in the carrying value of certain properties), were 15 cents per share. The average analyst estimate was for earnings of 23 cents per share. Revenue was $175.7. Here is a link to the quarterly conference call, which will give you much more detailed information on the results, as well as the company’s forward progress: https://finance.yahoo.com/news/edited-transcript-unt-earnings-conference-121056199.html.
Our recommendation remains the same. As you know, energy stocks—since the price of oil fell—have not been the top performers in the market. But, the successful companies have managed to cut costs and acquire their not-so-successful peers to ready themselves for the next oil price cycle up, which will come at some point. For the long-term, this company could be considered as a ‘Hold’.