Cabot Prime Pro Week Ending August 4, 2017
Cabot Wealth Summit
Have you registered for the Cabot Wealth Summit in September? It’s included in your Prime Pro membership, but you need to register to reserve your seat. Registrations for your guests are just $400 per person. Click here to register now.
Quarterly Prime Market Report
In this Q2 2017 Prime Market Report, Cabot President Timothy Lutts gives his read on the stock market, looking back at the most recent quarter.
Quarterly Prime Analyst Teleconference
Listen to the Q2 2017 quarterly teleconference where Cabot Analysts answer members’ questions live.
Cabot Weekly Review
In this week’s video review, Paul Goodwin talks about the state of the market where the Dow is hitting new highs and the Nasdaq is chopping around. It’s still a positive market environment, but it’s also earnings season and growth stocks are underperforming large-cap stocks. It’s a time for cautious optimism, but more than that, it’s a time to follow the rules. Buy only the stocks that give you a complete package of story, numbers and chart. Keep your sell disciplines sharp and watch earnings results closely.
Cabot Growth Investor
Other Stocks of Interest August 4: Follow ups to stocks featured March 1, 2017 (issue 1362) to August 2, 2017 (issue 1373). 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 August 2: Mike reviews all our stocks and highlights some names he’s watching, including one—GrubHub (GRUB) that’s set up very well ahead of earnings. He also dives into some details about how we run our ship—we’ve gotten a few questions about this lately, and we think this will clear up any questions you may have.
Cabot Top Ten Trader
Movers & Shakers Weekly Update August 4: It’s possible we’ll nudge our Market Monitor down a notch on Monday. We’re still mostly bullish, but are honoring our stops and being more selective on the buy side. Buy ideas: Citigroup (C), Exelixis (EXEL), iRhythm Technologies (IRTC), Littelfuse (LFUS), Square (SQ) and Wayfair (W).
Weekly issue July 31: This week’s list has a bunch of recent earnings winners; most aren’t blasting out of long bases, so normal dips should provide good opportunities to enter. Our Top Pick this week is Align Technologies (ALGN)—it has an outstanding long-term growth story, and last week’s earnings report catapulted the stock higher.
Cabot Options Trader and Cabot Options Trader Pro
Note that the current week’s Weekly Update, earnings updates, position updates and stocks on watch are posted on the website in the Market Update section, which is deleted each week.
Trade Alert August 4: Close Existing Position: Sell your Nasdaq ETF (QQQ) September 136 Puts for $0.65 or more, or Close Existing Position: Sell your Nasdaq ETF (QQQ) September 136/126 Put Spreads for $0.50 or more.
Trade Alert August 4: Buy S&P 500 ETF (SPY) January 240 Puts (exp. 1/2018) for $5.50 or less or Buy S&P 500 ETF (SPY) January 240/225 Bear Put Spreads (exp. 1/2018) for $3.00 or less.
Earnings Update August 4: Yesterday after the close, Kraft Heinz (KHC) announced earnings that beat expectations but missed on revenues. In early pre-market trade, KHC is trading marginally higher on light volume.
Earnings Update August 3: Kraft Heinz (KHC) will report earnings after the close today. We are holding half a position, having sold the first half for a profit of approximately 20%. The second half of the position is currently at a 20% profit as well. I will hold my position through earnings because order flow remains very bullish.
Trade Alert August 3: Exit Existing Position: Sell your Unisys (UIS) Stock and buy back your August 13 Calls.
Earnings Update August 3: This morning, Sprouts Farmers Market (SFM) reported earnings and revenues that beat expectations. In early trade, SFM is trading marginally lower while the company hosts its earnings conference call.
Market Update August 2: This earnings season, like every earnings season, is showing the wild profit and loss swings earnings season can create. Despite the three major indexes trading at or just below all-time highs, this earnings season has been challenging for most traders. Updates on Anheuser Busch (BUD), Cypress (CY), MGM Resorts (MGM), Unisys (UIS), Sprouts Farmers Market (SFM) and Square (SQ).
Earnings Update August 2: Jacob is aware that a decent percentage of subscribers have stock and/or options positions in a handful of stocks, including Tesla (TSLA), which will report earnings later today. Because of your interest in the stocks, he digs a bit deeper into what the options market is “projecting” for the stock.
Earnings Update August 2: Yesterday afternoon, Unisys (UIS) reported earnings and revenues that missed expectations. However, the company reaffirmed full-year guidance. UIS has not traded in the pre-market, but is indicated lower by $0.50 at 12.15, on very light activity.
Earnings Update August 1: Unisys (UIS) will report earnings this afternoon after the close. We are holding the August 13 Buy-Write, having bought stock at 13.2 and sold the August 13 Call for $1.22.
Position Update August 1: Our Micron (MU) position is not working. Jacob is extremely close to selling half his position and taking his loss. The stock looks dreadful (though higher by 2% today). On the other hand, the bullish order flow does not stop.
Earnings Update August: Apple (AAPL) will report earnings this afternoon after the closing bell. The stock is trading unchanged today at 149, and the market is also unchanged. For the year, AAPL is higher by 28.5%. The options market is pricing in a move of $5.50 this week for AAPL, 143.5 to the downside and 154.5 to the upside.
Earnings Update July 31: Shopify (SHOP) will report earnings 8/1 before the open. With the stock trading at 92, the options market is pricing in a move of $8.50, 83.5 to the downside and 100.5 to the upside.
Stock on Watch July 31: Traders have begun building positions in Carvana (CVNA) calls ahead of the company’s earnings on 8/8.
Weekly Update July 31: On the economic front, traders will be focused this week on Friday’s Jobs Report. But throughout the week, most attention will be on earnings reports.
Daily Watch List: Order Flow Reading is a strategy Jacob uses to follow the biggest hedge funds or traders into their trades. These are recent large order flows that Jacob has spotted, plus two covered call ideas.
Cabot Undervalued Stocks Advisor
Special Bulletin August 3: American International Group (AIG), Cavium (CAVM) and Quanta Services (PWR) reported June quarter results; AIG and CAVM beat all analysts’ estimates for the quarter, and PWR boosted full-year revenue expectations. Also Crista gives an update on Mattel (MAT).
Special Bulletin August 2: Archer Daniels Midland (ADM), BP plc (BP), Martin Marietta Materials (MLM) and Vulcan Materials (VMC) reported earnings results. Apple (AAPL) is a new Buy, Archer Daniels Midland (ADM) is a Sell, Tesoro (TSO) changed its name to Andeavor (ANDV) and Andeavor (ANDV) moves from Strong Buy to Buy.
Monthly Issue August 1: Today’s featured stocks include Quanta Services (PWR) and two new additions to the portfolios: Weyerhaeuser (WY) and Alexion Pharmaceuticals (ALXN). Also, Tesoro (TSO) has officially changed its name to Andeavor (ANDV), and TiVo (TIVO) is a Sell.
Cabot Stock of the Week
Weekly Issue August 1: In selecting today’s recommended stock, Tim went straight for a high-growth sector that is coming back into favor after years on the sidelines. It’s the solar power industry and his selection is JinkoSolar (JKS), the leading Chinese company in the business. Two rating changes: Legg Mason (LM) and Sherwin Williams (SHW) to Sell.
Cabot Emerging Markets Investor
Bi-weekly Update August 3: The iShares EM Fund has been trading sideways since July 19, but is holding well above its rising moving averages, so our Buy signal is in good shape. Paul has one portfolio move tonight: Melco Resorts (MLCO) to Sell.
Bi-weekly Issue July 27: Our market timing indicator is positive and our stocks are doing well. We’re heading into earnings season with a powerful wave of momentum providing the power. In this issue Paul does a little basic review of earnings season and list all the firm dates for companies we own. He also reintroduces NetEase (NTES), which boasts very strong numbers and will be reporting in a couple of weeks.
Cabot Benjamin Graham Value Investor
Weekly Update August 4: Roy summarizes the latest news for 12 companies. Scripps Networks (SNI) is now a Sell. Scripps will be acquired by Discovery Communications. SNI shareholders will receive $90 per share in the form of $63 cash plus $27 in Discovery Communications common stock.
Monthly Value Model Issue August 3: This month’s Cabot Value Model contains a wide variety of stocks as usual, with a slight focus on companies in the technology and financial sectors. This month’s Buy recommendations include conservative stocks that will perform well if the stock market falters a bit during the next couple of months. One new Buy-rated stock: Facebook (FB), and one stock transitions out of the Model: Alliance Data Systems (ADS).
Special Bulletin August 2: The stronger than expected results have caused Roy’s Min Sell Price for Apple (AAPL) to rise to 178.71 from 163.22.
Special Bulletin July 31: Scripps Networks (SNI) will be acquired by Discovery Communications. SNI shareholders will receive $90.00 per share in the form of $63.00 cash plus $27.00 in Discovery Communications common stock. SNI has advanced 29.6% in the past 26 months compared to a gain of 18.9 % for the Standard & Poor’s 500 Index during the same time period. Sell SNI now.
Enterprising Model Issue July 20: Roy’s new stock in this month’s Cabot Enterprising Model is Canadian Tire (CTCA.TO), a diversified retailer with $13 billion in sales. Ratings changes: Big Lots (BIG) to Buy, Chicago Bridge & Iron (CBI) to Buy, Five Below (FIVE) to Hold, LKQ Corp. (LKQ) to Hold and Ulta Beauty (ULTA) to Hold.
Cabot Small-Cap Confidential
Monthly Issue August 4: No analysts are following today’s recommendation, Globalscape (GSB), but it has big clients for which its products are absolutely critical. The stock has been on a wild ride this week. Tyler has a hunch he knows why, and we’re going to step in and to try and grab shares at a discount, starting with half a position. One rating change: Asure Software (ASUR) to Buy.
Cabot Dividend Investor
Weekly Update August 2: Chloe makes three portfolio moves today. She’s putting Pembina Pipeline (PBA) on Hold due to an earnings miss and taking half our profits in Wynn (WYNN) off the table, as the stock has stalled out. She’s also selling Home Depot (HD), as planned, due to significant technical erosion in the chart.
Special Bulletin August 1: General Motors (GM) and Cummins (CMI) both opened lower this morning after reporting earnings. Chloe is keeping GM on Hold and moving CMI, which was rated Buy, to Hold as well.
Monthly Issue July 26: Chloe adds Ecolab (ECL), a 94-year-old company with a 31-year history of dividend growth, to the Safe Income Tier. Be sure to read Important Information for REIT Investors in the educational section. One rating change: 3M (MMM) moves to Hold.
Wall Street’s Best Investments
Daily Alert August 4: Brocade Communications Systems (BRCD) from The Buyback Letter
Daily Alert August 3: Harding Loevner International Equity (HLMNX) from Ian Wyatt’s Million Dollar Portfolio
Daily Alert August 2: NutriSystem (NTRI) from Pivotal Point Trader
Daily Alert August 1: Quanta Services (PWR) from Cabot Stock of the Week
Daily Alert July 31: Costco Wholesale (COST) from Internet Wealth Builder
Monthly Issue July 19: In this Mid-Year Top Picks issue, Nancy features the top five picks year to date, which averaged 54.85% gains, plus updates on all our Top Picks. Going forward, analysts expect the three industries to grow the fastest in the remainder of the year to be energy, information technology and financials, and we have plenty of ideas in each of those sectors.
Wall Streets Best Dividend Stocks
Daily Alert August 4: Vanguard European Stock Index (VEURX) from Moneyletter
Daily Alert August 3: Taubman Centers (TCO) from The Intelligent REIT Investor
Daily Alert August 2: Novo Nordisk (NVO) from DRIP Investor
Daily Alert August 1: iShares International Development Property ETF (WPS) from The Investment Letter
Daily Alert July 31: Big Lots (BIG) from Sure Dividend
Monthly Issue July 12: In this Top Picks Mid-Year Update issue, Nancy reports that overall, her contributors did a wonderful job. The number one stock—Lam Research (LRCX), recommended by Richard Moroney of Dow Theory Forecasts—pulled off a stunning return of 37.55%.
This Week’s Q&As
Cabot Options Trader and Cabot Options Trader Pro
Question: You said: “In recent days, the amount of stocks falling 10% to 20% on earnings has become alarming. . . positive earnings has not been met with strong stock performance.” You’ve been in the business a long time. Have you seen this before? Is this a short term or cyclical thing? Are investors taking profits out of stocks with a long run because its safe and they know they will gain it back? Or often I hear that stocks have run ahead of their fair value. But even that argument breaks down when they buy Tesla and Amazon.
I have a position in Square which had a blow out quarter and they are down 5% today. Discouraging if you don’t have a clue why this is happening.
Jacob: It’s not a great sign. But it may be a short-term situation. Also interesting is that I’ve noticed that stocks that beat and the stock goes up have also started to stall out. But again, this could be temporary. It’s hard to make any big market calls based on two weeks of action. But I’m certainly paying attention.
Cabot Undervalued Stocks Advisor
Question: What’s up with Cavium (CAVM)?
Crista: Cavium (CAVM) reported second-quarter results on the afternoon of August 2. Non-GAAP EPS was $0.67, above the highest analyst estimate of $0.66 (19 analysts, per Charles Schwab); revenue $242.1 million, above the highest estimate of $239.3 million.
Most major semiconductor stocks had pullbacks in the last two weeks. Even though pullbacks are unpleasant, there is some comfort in knowing that the pullback took place across the industry, and not just with CAVM, which might otherwise signify a problem at the company.
Analysts’ earnings estimates inched upward in recent months, reflecting aggressive earnings growth and comparatively low P/E. Yesterday, management guided third quarter earnings projections higher for the third quarter, so expect Wall Street to issue a few more bullish research reports and earnings estimate revisions.
My feeling is that the stock could travel back to the mid-70s (or higher) quickly. I’m keeping a Buy recommendation on the stock.
Cabot Emerging Markets Investor
Question: I’m curious about the fact that many of the emerging market stocks are pulling back at the same time. Is this an indication of an overall change in trend?
Paul: Lots of pressure on growth stocks in both U.S. and emerging markets. Chinese ADRs are especially weak today. (You can check PGJ to see that.) But I use the 25- and 50-day moving averages to filter out the daily noise and tell me what the medium-term trend actually is. And right now, EEM and PGJ are each well above their moving averages.
And as far as the portfolio goes, I handle it on a stock-by-stock basis, so the moves in our timing indicators are just advisory. For instance, I will probably recommend selling Melco Resorts (MLCO) in tomorrow’s update even though our market timing indicator is in good shape.
The move by EM stocks, coupled with a parallel pullback in the Nasdaq, is probably an indicator of heightened risk avoidance, which hits growth stocks harder than the Dow or S&P 500.
Cabot Benjamin Graham Value Investor
Question: What do you make of today’s major move on TEVA and current price vs fundamentals? Falling Knife?
Roy: Teva Pharmaceutical (TEVA: Current Price 24.14; Max Buy Price 37.40; Min Sell Price 49.91) recorded weak sales and earnings, slashed its dividend, and guided 2017 results noticeably lower. Sales advanced 13% after increasing 17% in the prior quarter. EPS dropped 18% after declining 12% in the previous quarter. Teva cut its quarterly dividend to $0.085 from $0.34 Management lowered its 2017 EPS forecast to 4.40 mid-range from 5.10.
Fierce competition is driving down generic competition, and sales of Teva’s leading drugs are slipping. The biggest bright spot for Teva is the potential to improve efficiency and achieve sizable cost synergies from the company’s August 2016 purchase of Actavis, formerly a division of Allergan. Teva lost its CEO in February, so any new plans for the company will have to wait until a replacement is on board.
Teva’s shares are way undervalued, as evidenced by the P/E of 5.5 based on management’s 2017 EPS estimate and the current price to cash flow ratio of 4.2 times. In my opinion, Teva will remain a risky bet until a new CEO is hired, and new drugs are successfully launched. I advise avoiding Teva.