Cabot Prime Pro Week Ending December 15, 2017
Cabot Weekly Review
In this week’s stock market video, Paul Goodwin looks at a market that’s in very good health. Investors don’t seem to be worried about Fed rate hikes, Brexit, North Korea, Greece or anything else. There’s just a touch of excitement about a possible tax bill, which has kept every sector but consumer staples in the black for the year. There are plenty of attractive stocks, and Paul names a few in the retail, financial and energy industries, plus one long-term tractor stock.
Cabot’s 10 Favorite Low Priced Stocks for 2018
Annual Report December 14: The report was sent to you via email on December 14. The goal with these stocks is generally to capture a shorter-term rally during the next two to eight weeks. Historically, most of these types of stocks enjoy something of a pop higher, and there are usually one or two that continue to trend for a few months (assuming the market remains in good shape).
Cabot’s 10 Best Marijuana Stocks
November Issue (emailed to Prime Pro members on November 16) If you bought a basket of Tim’s 10 Best Marijuana Stocks when the report was originally published in August, you’re off to a great start. Since that report was written, the average of the 10 stocks is up 38%, with the best up 157% and the worst down just 3%. Even better, if you bought only the eight stocks that he actually recommended (he suggested waiting on two until their charts improved), your average gain was 45%—and you had no losses!
Cabot Growth Investor
Bi-weekly Update December 13: Mike is buying a 10% position in E*Trade (ETFC), a leading Bull Market stock that’s pulled back a bit after a decisive breakout. That will leave our cash position near 18%.
Other Stocks of Interest December 8: Follow ups to stocks featured July 5, 2017 (issue 1371) to December 6, 2017 (issue 1382). 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 December 6: We’ve pared back during the past few days in the Model Portfolio (we now have 28% in cash), but we’re not sticking our heads in the sand and are giving our profitable stocks room to consolidate. In tonight’s issue, Mike dives into his game plan for our remaining stocks, and also does some sector analysis, including two areas that are launching new leaders.
Cabot Top Ten Trader
Movers & Shakers Weekly Update December 15: We’re keeping our antennae up for any follow-on selling after the early-December downmove, and on the buy side, still picking our spots and looking for good buy points. But in total, we’re mostly bullish, as the primary evidence (trends of the market and leading stocks) is positive. Buy ideas: CF Industries (CF), Cree (CREE), Grubhub (GRUB), Nutanix (NTNX) and ProPetro (PUMP). Sell idea: Juno Therapeutics (JUNO).
Weekly Issue December 11: This week’s list has a bunch of “fresher” leadership—stocks that have just gotten going during the past few weeks after rest periods. Mike’s Top Pick is Etsy (ETSY), a niche online retailer that’s turning profitable and whose stock has exploded out of a tight base in recent days.
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 December 14: Buy Nutanix (NTNX) April 37.5 Calls (exp. 4/20/2018) for $4.20 or less or Buy Nutanix (NTNX) April 37.5/47.5 Bull Call Spreads for $3 or less.
Position Updates December 14: Freeport McMoRan (FCX) has raced higher in the past week, and this morning it’s trading at 16.3, which is $2.30 above our short strike price. As long as the stock stays above 14 tomorrow, which is very likely, the position will expire for full profit of approximately 8%. Fiat Chrysler (FCAU) is trading at 17.85 this morning, which is $0.85 above our short strike price. As long as the stock stays above 17 tomorrow, which is likely, the position will expire for full profit of 3.65%.
Stock on Watch December 13: Nutanix (NTNX) has been on Jacob’s radar since the stock gapped from 32.5 to 36 on November 30. Since then, the stock has mostly chopped around with growth stocks. But this afternoon, the stock is trading higher by 2% at 35.35. And into today’s strength, a trader executed two trades.
Trade Alert December 13: Exit Existing Position: Exit Existing Position: Sell your S&P 500 ETF (SPY) January 240 Put for $0.20 or more or Sell your SPY January 240/225 Bear Put Spreads for $0.10 or more.
Trade Alert December 12: Sell Half of Existing Position: Sell HALF your Etsy (ETSY) March 20 Calls for $1.95 or more.
Weekly Update December 11: On Wednesday, the Federal Reserve is expected to raise interest rates by a quarter-point, its third hike this year. However, traders will be most interested in Fed Chair Janet Yellen’s press conference following the interest rate announcement and the FOMC forecasts for GDP growth and inflation.
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
Weekly Update December 12: International trade can be somewhat of a dry topic, but since these decisions are affecting the bottom line in U.S. industry, Crista sees stock market opportunities are unfolding before us. Nucor (NUE) moves from Strong Buy to Buy.
Monthly Issue December 5: Today’s featured stocks include two new additions to the portfolios, Alphabet (GOOGL) and The Interpublic Group of Companies (IPG), and Alexion Pharmaceuticals (ALXN), which seems ready for a huge price rebound.
Cabot Stock of the Week
Weekly Issue December 12: This week’s stock is GDS Holdings (GDS), a fast-growing Chinese company that most investors have never heard of. The company is not yet profitable, but it’s growing rapidly, and promises real earnings once management slows its expansionary efforts. Two ratings changes: Exact Sciences (EXAS) to Hold and Sociedad Quimica y Minera de Chile (SQM) to Sell.
Cabot Emerging Markets Investor
Bi-weekly Issue December 14: After an outstanding year, the current slowdown in emerging market stocks is giving us a little cautionary message. The Cabot Emerging Markets Timer is sitting firmly on the fence and some of our stocks are taking breathers. It’s not anything like a time to over-react, but we’re pulling in our horns in an appropriate way. Paul’s new stock is 58.com (WUBA), which does a brilliant job of balancing a national presence with thorough local focus.
Cabot Benjamin Graham Value Investor
Monthly Issue December 14: Since the last issue, five stocks have declined and 10 gained more than 10%. Many are now at or near fair value, and eight are rated Sell or Sell a Portion. Also in this issue, Azmath recommend two new stocks, Hanesbrands (HBI) and LCI Industries (LCI) and profiles a new small-cap stock, Malibu Boats (MBUU), that’s on his watch list.
Cabot Small-Cap Confidential
Weekly Update December 15: There hasn’t been a lot of stock-specific news in recent weeks, so Tyler uses today’s Weekly Update to summarize the investment thesis, story and major initiatives for each of our companies. This should help refresh your memory on what each of our stocks does, what their growth rates are, and why you should continue to buy (or hold) them as we head into the New Year.
Monthly Issue December 1: Public since just last September, this month’s stock is Apptio (APTI), a $895 million market cap software company that is pioneering Technology Business Management (TBM) solutions. Ratings changes: BioTelemetry (BEAT) to Buy and Datawatch (DWCH) to Hold.
Cabot Dividend Investor
Weekly Update December 13: Given the improvement in the overall market, Chloe is putting ONEOK (OKE) back on Buy today for high-yield investors. And if you’re looking to add a stock with great short-term momentum, CME Group (CME) is looking indestructible today; the stock just broke out to a new all-time high for the first time since before the financial crisis. Other good buys in the portfolio include Pembina Pipeline (PBA) for high income, General Motors (GM), BB&T Corp (BBT), Broadridge Financial (BR) and Wynn Resorts (WYNN) for growth, and 3M (MMM) and United Health (UNH) for long-term growth and safe income.
Monthly Issue November 29: Chloe adds UnitedHealth (UNH) to the Safe Income Tier. She also reviews why you might want to own preferred stock, and provides updates on all our holdings.
Wall Street’s Best Investments
Daily Alert December 15: Centene (CNC) from Dow Theory Forecasts
Daily Alert December 14: GDS Holdings (GDS) from Cabot Emerging Markets Investor
Daily Alert December 13: Alcoa Corporation (AA) from Bubble & Bust Report
Daily Alert December 12: Fidelity Emerging Markets (FEMKX) from Moneyletter
Daily Alert December 11: Fidelity Conservative Income Bond (FCONX) from Fidelity Monitor & Insight
Monthly Issue November 15: Most of Nancy’s contributors remain bullish for now, and are still finding pockets of opportunities for our subscribers. This month’s Spotlight Stock is Cognizant Technology Solutions (CTSH), a company that is steeped in a variety of technology channels, including some very disruptive technologies that Nancy discusses further in her feature.
Wall Streets Best Dividend Stocks
Daily Alert December 15: ZCL Composites (ZCL.TO) from Income Investor
Daily Alert December 14: The Kellogg Company (K) from DirectInvesting.comMonthly Issue December 13: Nancy’s Market Views contributors remain bullish, as do the Advisor and Investor Surveys she follows, and contributors continue to find investing ideas with which to stuff your stocking—in just about every sector.
Daily Alert December 13: Taiwan Semiconductor Manufacturing (TSM) from Schaeffer’s Investment Research
Daily Alert December 12: TD Bank (TD) from Internet Wealth Builder
Daily Alert December 11: Exxon Mobil (XOM) from DRIP Investor
This Week’s Q&As
Cabot Options Trader and Cabot Options Trader Pro
Question: As of last night, bitcoin futures can be bought on the CBOE. Can we buy options on bitcoin?
Jacob: Not yet. But give the CBOE some time, and I’m sure they will come up with something. EVERYONE wants to get into the bitcoin frenzy.
Cabot Undervalued Stocks Advisor
Question: I took your advice at the 2017 Cabot Investors Summit and wrote a covered call on Steel Dynamics (STLD). That was such a fantastic trade for me. I still own the stock and I do not have a covered call on it at the moment. I would love to hear your new assessment on STLD today!
Crista: You know that I go by the numbers. (All of the Wall Street analysts review all of the business components/outlooks, and come up with the earnings estimates, which is why I would find it redundant for me to ALSO review all that. I take advantage of their hard work, which is EPS estimates.)
Earnings per share (EPS) at Steel Dynamics are expected to rise 38.7%, 11.7% and 8.8% in 2017 through 2019. The key number there is the 2018 number. (2017 is pretty much finished; the market is looking toward 2018, and the 2019 estimate comes from only TWO analysts, so it could potentially be wildly inaccurate.)
The 2018 P/E is 13.8, indicating to me that when you take into account the 1.5% dividend yield, the stock is currently fairly-valued. Speaking of the dividend, the company raises the dividend each year around March 1. The annual dividend increases greatly vary, between 2% and 20% increases in recent years.
The debt level is fair, and it has been annually decreasing since 2014.
STLD broke out of a one-year trading range in October, to new all-time highs, had a quick pullback, and is now actively climbing.
If I owned STLD, I’d keep it for the current run-up. Since it’s already fairly-valued, I’d also use a stop-loss order. (Whereas if the stock were undervalued, I would not personally use a stop-loss order. In those cases, I tend to simply buy more on pullbacks.)
Cabot Emerging Markets Investor
Question: With the invasion of electric cars, are you guys recommending any lithium stocks?
Paul: I recommended Sociedad Quimica y Minera (SQM) as a lithium play, but got shaken out in the middle of November. Still, as a long-term play, I think it makes good sense.
Question: What do you think of SE? Sounds like an interesting company. They had an IPO in October, had a pretty good 1st report but stock has taken a beating. It almost seems to me that the report was misunderstood. BTW, for a new issue, it’s pretty liquid.
Paul: Sea Limited certainly addresses some geographical areas that we don’t get much access to. You’re right that it’s liquid, but the chart shows that investors haven’t really found much there to like. A correction after an IPO is customary, so that’s not a problem.
My two real concerns are first, that the company isn’t profitable and has booked seven consecutive quarters of declining earnings. After losing an estimated $1.55 per share in 2017, analysts see losses growing to $1.84 per share in 2018. We’ve certainly invested in some unprofitable companies in the past, but I would like to know why Sea Limited went from profitability in 2012 and 2013 to three years and three additional quarters of losses.
Second, I’m always hesitant to say that I understand a report better than the market does. The chart is a direct readout of investors’ conclusions about a company and its stock, and if the market doesn’t like what it sees, I would need much more evidence than I have to disagree with them.
When the chart improves, it will mean that investors are ready to see value in SE. And at that point, I will start investigating to see what the excitement is about.
Cabot Small-Cap Confidential
Question: Datawatch (DWCH): Opportunity to average in or continue to hold?
Tyler: I’m most likely to keep DWCH at Hold until we see a more established positive trend. I tend to be much more conservative when it comes to averaging down in these microcaps (whereas with a company like Microsoft, or even LogMeIn, I tend to think investors can be more aggressive), mainly because I don’t think they trade as efficiently. I’ll include some commentary in tomorrow’s update on what/where I would be inclined to move back to Buy.
Guide to Cabot Prime
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