Cabot Prime Week Ending September 29, 2017

Cabot Prime Week Ending September 29, 2017

Cabot Weekly Review

In this week’s stock market video, Paul Goodwin talks about the general good health of the market, with the S&P 500 and Dow leading the way higher despite the Nasdaq’s lackluster performance. Paul takes a look at how the FANG stocks, the engine behind much the market’s move earlier this year, are faring, which is mixed. He also checks in with the BAT stocks of China and finds the situation looking very good. And, as always, Paul councils looking for what’s working, whether it’s a couple of mega-cap blue chips or smaller tech stocks that are building great charts.

Cabot Growth Investor

Other Stocks of Interest September 29: Follow ups to stocks featured April 26, 2017 (issue 1366) to September 27, 2017 (issue 1377). 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 September 27: Mike is encouraged with the support we’ve seen since Monday, in both the broad market and growth stocks. He’s standing pat with 27% in cash, but a continued rebound should provide some low-risk entry points in new leaders. He details our recent moves and his thinking, and updates the track record of our most reliable market timing indicator.

Special Bulletin September 25: In the Model Portfolio, we’re going to sell half of our shares in Alibaba (BABA) and Universal Display (OLED), taking some chips off the table in what have become good-sized positions. We’re also going to place Facebook (FB), Grubhub (GRUB) and ServiceNow (NOW) on Hold.

Cabot Top Ten Trader

Movers & Shakers Weekly Update September 29: It’s been an interesting and somewhat encouraging week for the market, especially given how it started. As always, we advise going with the flow. You should remain mostly bullish, but be sure not to put things on autopilot. Honor your stops and loss limits with your existing stocks, and for new buys, continue to look for names that have pushed to new highs and have shown excellent recent buying volume.

Weekly Issue September 25: This week’s Top Ten is lighter on growth stocks but has many intriguing turnaround stories. Our Top Pick is Guess? (GES), a well-known retailer with big earnings estimates and a stock that’s powered off its low in recent months.

Cabot Undervalued Stocks Advisor

Special Bulletin September 29: Crista makes three rating changes today. Boise Cascade (BCC) moves from Strong Buy to Buy, Dollar Tree (DLTR) moves from Buy to Hold and ExxonMobil (XOM) moves from Hold to Sell.
Special Bulletin September 27: Ameriprise Financial (AMP) moves from Buy to Hold, and Crista comments on other portfolio stocks and Equifax.

Weekly Update September 26: Crista comments on a interesting articles about Chipotle Mexican Grill (CMG) in recent days. One rating change: Blackstone Group (BX) moves from Strong Buy to Hold.

Monthly Issue September 5: Today’s featured stocks include four companies that should benefit from the post-Hurricane Harvey rebuilding process: Boise Cascade (BCC), Martin Marietta Materials (MLM), Vulcan Materials (VMC) and Weyerhaeuser (WY). Changes: Andeavor (ANDV) moves to Hold, Cavium (CAVM)* moves to Strong Buy and Johnson Controls (JCI) moves to Hold.

Cabot Stock of the Week

Weekly Issue September 26: Today’s selection is small cap BioTelemetry (BEAT), which provides a valuable medical technology that should see increased use in the years ahead. It’s also growing by acquisition. One rating change: Grubhub (GRUB) moves to Sell.

Cabot Emerging Markets Investor

Bi-weekly Update September 28: The iShares EM Fund (EEM) has been in a downtrend since September 22, turning the Cabot Emerging Markets Timer neutral. We will continue to manage our stocks individually, but will curtail new buying and keep stocks on a shorter leash until momentum improves. Paul is shifting Autohome (ATHM) to Hold and YY Inc. to Buy.

Special Bulletin September 25: Paul is taking two actions in response to today’s market weakness, moving Sociedad Quimica y Minera (SQM) to a Hold rating and selling Vedanta (VEDL).

Bi-weekly Issue September 21: Despite a hiccup in the past couple of days from Chinese stocks, the U.S. market and the emerging markets continue to outpace their moving averages by comfortable margins. Paul writes about the importance of planning for bad times while the good times are still here, and recommends a new financial stock, Grupo Supervielle (SUPV) that’s not on many radar screens.

Cabot Benjamin Graham Value Investor

Weekly Update September 29:Roy summarizes the latest news for Nike (NKE) and Thor Industries (YHO). This is Roy’s last Weekly Update, as he is retiring today after 50 years in the investment business, including 15 years writing the Cabot Benjamin Graham Value Investor. Azmath Rahiman will become the new Chief Analyst beginning on Monday.

Monthly Enterprising Issue September 7: Roy writes that Canadian stocks are more undervalued than U.S. stocks, and the Canadian economy is now improving noticeably for the first time in a long while. Consequently, Roy adds Canadian company, Alimentation Couche-Tard (ATDB.TO), to the Model.
Monthly Value Model Issue August 31: The Cabot Value Model contains 16 securities this month with three new stocks: Apple (AAPL), Home Depot (HD) and Ross Stores (ROST). Three stocks transition out of the Model: Disney (DIS), FleetCor Technologies (FLT) and Lowe’s (LOW).

Cabot Dividend Investor

Monthly Issue September 26: Chloe is adding CME Group (CME), a unique play on financial markets, to the Dividend Growth Tier. She also writes about interest rates—the driving force behind many of this month’s sector rotations. No ratings changes.

Wall Street’s Best Investments

Daily Alert September 29: Grupo Supervielle (SUPV) from Cabot Emerging Markets Investor
Daily Alert September 28: Malibu Boats (MBUU) from Pivotal Point Trader
Daily Alert September 27: DIGI International (DGII) from Top Stocks Under $10
Daily Alert September 26: Amazon.com (AMZN) from Internet Wealth Builder
Daily Alert September 25: Viavi Solutions (VIAV) from Technology & Opportunity

Monthly Issue September 20: This month’s Spotlight Stock is PTC Inc. (PTC), a technology company that is a leader in the all-important cloud business, and Nancy’s Feature further explores that cloud industry and the up-and-coming applications that should see it expand greatly in the near future.

Wall Streets Best Dividend Stocks

Daily Alert September 29: Westjet Airlines (WJA.TO) from Stock Pickers Digest
Daily Alert September 28: Scotts Miracle-Gro (SMG) from The Wealth Advisory
Daily Alert September 27: XL Group (XL) from Cabot Undervalued Stocks Advisor
Daily Alert September 26: Siemens AG (SIEGY) from The Prudent Speculator
Daily Alert September 25: Briggs & Stratton (BGG) from Jack Adamo’s Insiders Plus

Monthly Issue September 13: Nancy’s contributors are staying mostly on the safe side—with recommendations paying solid and rising dividends. We also offer several stocks with a more adventurous bent this month. Spotlight Stock: Fastenal (FAST).

This Week’s Q&As

Cabot Undervalued Stocks Advisor

Question: You had mentioned Zions Bancorp (ZION) last year as a good regional bank. Now that it’s getting close to an annual high, I wondered if I should continue to hold it.

Crista: ZION just broke out of a 10-month trading range, which is extremely bullish. Many other bank stocks are experiencing similar trading patterns.
EPS growth will slow from approximately 42% in 2017 to 12% in 2018. The stock is fairly-valued based on 2018 numbers. In the near future, the market will turn its focus away from this year’s aggressive earnings growth toward next year’s more moderate earnings growth. At that time, those who were in ZION for the company’s two-year aggressive earnings growth cycle will likely move on to other stocks.
I would personally look forward to a near-term run-up, while using stop-loss orders to protect my downside. I would expect the share price to eventually stop climbing, and for my stock to be stopped out, at which time I’d reinvest in an undervalued growth stock.

Cabot Emerging Markets Investor

Question: TAL has rocketed higher than any Chinese stock in the portfolio: 75% in 3 Months, 100% in 6 Months and 200% in 1 Year. Why are you still recommending a half share? You are making me nervous. I have been accumulating and making big gains.

Paul: Good for you! I haven’t ever bought the second half because 1) I couldn’t find the ideal buy point for the second purchase and 2) because I was always more interested the next stock than filling the position. Call it a personal failing. I have always relied on my subscribers to exercise considerable initiative in managing their personal portfolios. Congratulations! You’ve proved I was right.

Question: I’m responding to what you wrote in the last issue of the Cabot Emerging Markets Investor. As an inexperienced investor, I’m confused by what you mean by “taking profits.” Does that mean going into cash, or less volatile stocks? And is this for tax purposes? I’m not really sure what to ask here but maybe you can shed some light in this department!

Paul: When growth investors talk about taking profits, they’re generally referring to stocks that have been held for a while and whose prices have made big strides. TAL Eduction (TAL), which had a 318% profit before today’s broad market correction, is one example. China Lodging Group (HTHT) (244% gain as of last Thursday) is another.
The general rule is to take partial profits when a particular holding has had a big run or when it becomes an outsized part of your portfolio.
This kind of portfolio management isn’t possible for me to do for all of my subscribers because many of them have bought their stocks at different prices. It’s also not intended to address tax consequences because I can’t know the details of your portfolio and other details.
It’s not something you need to worry about until you get a profit of 40% or so in a stock and it’s probably a decision best made in consultation with your tax advisor, who will have a more complete picture of your total tax picture, including capital gains consequences.
Taking profit isn’t about going to cash or reducing volatility; it’s just a way to make sure you keep as much of the gains your stocks record without losing touch with the major movement of the market.

Question: We are retired teachers and we have bought some stocks based on your recommendations in the portfolio.We joined your site a few days ago and we intend to be your long term customers.
Let me explain how I transacted in our retirement IRA account in the last few days. I had sold 775 SPDR GLD shares that I bought in 2012. I had a loss of about $30000- in the transaction. Then, I bought BABA, ATHM, TAL,HTHT, SQM HDB and few other shares, mostly, this month. In the last Friday and yesterday the Chinese stocks have dropped over 6 to 7 % and we have lost a considerable money and are quiet worried.
Let me brief you of our financial position. We have about $375,000 in IRA accounts in Fidelity and Vanguard. We have NRE FDs of about $150,000. Besides this we have a few assets in India close to 1.5 million dollars.
We are both retired as University professors but I am working, after retirement in a school district as a Physics teacher making a meager gross of $75,000. I intend to work another couple of years.
We will be your customers for a long time. Please advice us professionally and with all the experience that you enjoy in investment of stocks, as to what should be our approach at this point. We are not greedy of returns but expect about 5% to 7% return on our assets.
We are writing this in the middle of the night very worried about our current investments.

Paul: While I’m not qualified to act as a portfolio advisor, it seems to me the there are a few things you need to do.
First, you need to find a good financial advisor and lay out your entire retirement picture, including assets, liabilities, goals and everything else. If it is done correctly, the process of being taken under the wing of a financial advisor will feel like he or she knows more about you than your parents do. Be sure to find an advisor who charges only fees (isn’t also a broker) and is well certified.
As to your present situation, I think you are perhaps over invested in the stocks that I have recommended in Cabot Emerging Markets Investor. Chinese and other EM stocks are quite volatile, and are only appropriate for a relatively small percentage (I suggest 10%) of your total portfolio. While these stocks have been doing well since the start of 2016, there is always the chance of a major correction, and you do not want to be exposed to that kind of risk in a portfolio that you are counting on for your retirement income. EM stocks should be the spice, not the main course.
I could say the same about your gold investment. Gold is an emotional commodity, and doesn’t follow any particular rules. Some people like to have some as a hedge against inflation, and while I’m not personally in favor of such a move, if the exposure is kept small, it’s a reasonable diversifier.
It’s possible that you might be happier with one of the Cabot advisories that are designed for longer-term investments that include the possibility of income from dividends. Cabot Benjamin Graham Value Investor focuses on a value approach, while Cabot Income Investor specializes in stocks with reasonable valuations and higher-than-average dividends.
If either of these advisories seems more appropriate for you, one of our client service people will be happy to shift your subscription to one or both.
In the latest issue of Cabot Emerging Markets Investor, I suggested that subscribers who have large profits might want to sell part of their biggest winners to book profits and lower their risk level. That’s always good advice, but I also had in mind that it has been a long time since we have had a substantial correction in EM stocks.
It may be that EM stocks will settle down immediately and resume their advances. But if this is not the case, your large investment, young as it is, is near its maximum risk.
I will continue to advise subscribers about how to handle each stock in the portfolio. But some of those decisions will be made from the perspective of an investor who has already achieved large gains and has a substantial profit cushion. And that is not your current position.

Cabot Benjamin Graham Value Investor

Question: What is happening with ADS? Should we consider selling at this point? Thanks for your guidance. (from subscriber J.R.)

Roy: Alliance Data Systems (ADS) reported disappointing second-quarter sales and EPS. Sales rose 4% and EPS advanced 4%, after increasing 12% and 2% in the prior quarter. Ed Heffernan, president and chief executive officer of Alliance, stated that sales will remain solid during the remainder of 2017, but $0.40 of EPS will be delayed until 2018. Analysts had been expecting accelerating sales and earnings growth in 2017. ADS shares dropped 9.5% after sales and earnings were released on July 20.
Management, however, remains quite optimistic about 2018. Sales are forecast to climb 12% and EPS are expected to jump 19% to $21.50. Since 2018 is only three months away, I advise holding ADS. At 11.9 times current EPS, Alliance Data Systems shares are a bargain. I am looking for a nice rebound in ADS in 2018. Hold.

Question: Not too long ago, you talked about how Canada is having good growth and there were some stocks at a good price but were not directly available in the U.S. market. Are there any ETFs that we can buy that may have the correct sectors in Canadian stocks? (from subscriber S.L.)

Roy: There are many ETFs that concentrate on Canadian stocks; the one that I like is SPDR MSCI Canada Strategic Factors ETF (QCAN).
QCAN seeks to track the performance of the MSCI Canada Factor Mix A-Series Capped Index. The Index replicates the performance of leading large- and mid-cap Canadian companies. QCAN offers the mixed performance of quality, value and low volatility factor strategies. The ETF is an equal weighted combination of three indexes, the MSCI Canada Value Weighted, MSCI Canada Minimum Volatility and MSCI Canada Quality Indexes, in a single multifactor index.
Sector weightings for QCAN include Financials 40.3%, Energy 11.8%, Consumer Staples 9.2%, Consumer Discretionary 8.5%, Materials 7.9% and Industrials 7.7%. The six largest holdings are: Toronto Dominion Bank, Royal Bank of Canada, Canadian Imperial Bank, Bank of Nova Scotia, Sun Life Financial and Canadian National Railway.
The average P/E for stocks in the QCAN ETF is 17.7 and the dividend yield is 1.9%. QCAN’s year-to-date return is 9.3%, one-year is 12.5% and the three-year is minus 0.7%. The expense ratio is low at 0.30%. The ETF’s concentration in banks and financials bodes well for the next six to 12 months. The Bank of Canada has raised the benchmark interest rate twice this year by a quarter point, which will help banks and insurance companies in QCAN’s portfolio.