Cabot Prime Pro Week Ending June 9, 2017
Cabot Wealth Summit
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Cabot Weekly Review
In this week’s video, Mike Cintolo talks about the vibrant market for growth stocks and the good performance of the overall market. He also answers many of the most common questions he’s receiving these days and offers tips on how best to handle things now that the bull market is roaring. Plus, as usual, he highlights some of his favorite buys (and potential buys) going forward.
Cabot Growth Investor
Bi-weekly Issue June 7: Mike is restoring Buy ratings on Shopify (SHOP), ProShares Ultra S&P 500 Fund (SSO) and XPO Logistics (XPO) and averaging up in XPO as it has begun to emerge from a multi-month rest period, but he’s still holding about 14% in cash given the iffy broad market and the many divergences in the market.
Other Stocks of Interest June 9: Follow ups to stocks featured January 11, 2017 (issue 1358) to June 7, 2017 (issue 1369). 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 June 9: Not much has changed with the market environment—the overall market is good, not great, with most indexes above their 50-day lines and the S&P 500 making some progress. The action of the Nasdaq and leading growth stocks, however, remains outstanding, as they continue to race up their charts with minor pullbacks. Candidates for taking partial profits: Nvidia (NVDA), Medidata (MDSO) and RingCentral (RNG).
Weekly Issue June 5: This week’s list has a wider variety of stocks and sectors, probably due to the broadening action we’re seeing. Our Top Pick, JD.com (JD), is a big-cap growth stock that’s rested nicely after bursting to all-time highs in early May.
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 June 8: Sell Half of Existing Position: Sell HALF your ON Semiconductor (ON) July 16 Calls for $0.95 or more. This will give us a 26.5% profit, and we’ll go for a home run on the second half.
Stock on Watch June 7: For the past week, rumors have been circulating in the trading community on a potential takeover of Occidental Petroleum (OXY). And possibly tied to those rumors, call buyers have been aggressively buying OXY calls in the last several days.
Position Updates June 6: Updates on Square (SQ), MGM Resorts (MGM) and Cypress Semiconductor (CY).
Trade Alert June 5: Adjust Existing Position: Against your Anheuser Busch Inbev (BUD) September 115 Calls, Sell the July 125 Calls (exp. 7/21) for $0.70 or more.
Weekly Update June 5: With earnings season mostly over and economic data fairly light this week, traders will likely turn their focus to Washington again, as former FBI director James Comey is set to testify before the Senate Intelligence Committee on Thursday morning. Also on Thursday, the European Central Bank will make its interest rate decision.
Cabot Undervalued Stocks Advisor
Special Bulletin June 8: Sell H&R Block (HRB), Total SA (TOT) moves from Hold to Strong Buy, notes on Cavium (CAVM) and 15 great stocks to buy today.
Monthly Issue June 6: The market seems to be lending itself to more bullish price action in June, and I’m looking forward to making money this month! Today’s issue features Cavium (CAVM), Schnitzer Steel (SCHN) and Invesco (Ltd), which is a new addition to the Growth & Income Portfolio. There’s also one rating change: Thermon Group Holdings (THR) moves from Hold to Sell.
Special Bulletin June 5: Now that Chipotle Mexican Grill (CMG) has been resting for quite a few weeks in a trading range between 470 and 500, I’m moving CMG back to Strong Buy.
Cabot Stock of the Week
Weekly Issue June 6: Today’s recommendation is Weibo (WB), a very strong Chinese stock that had quieted down nicely during the past two weeks and is now on a four-day run. One thing we really like in a growth stock is a huge mass market, and Weibo is right in the middle of one of the biggest markets there is. Tim also takes a modest profit in PRA Health Services (PRAH).
Cabot Small-Cap Confidential
Weekly Update June 9: The market continues to climb a wall of worry. We don’t know if this is the last hurrah of the bull market, but we do know that we should be mindful of the risks out there. Tyler has one rating change: Asure Software (ASUR) moves back to Hold.
Monthly Issue June 2: This month’s stock, AppFolio (APPF), has a cloud-based software solution tailor-made for property managers. It’s growing revenue by more than 30%, has no debt, is on track to become profitable this year, and the chart is solid. Tyler believes the company will ultimately be sold, hopefully at a nice premium to where shares trade today.
Cabot Emerging Markets Investor
Bi-weekly Update June 8: Despite today’s pullback, the Emerging Markets Timer is doing just fine, as the iShares EM Fund remains safely above its moving averages. We have three portfolio moves tonight, including booking our profits in Momo Inc. (MOMO) (half position) and Pampa Energia (PAM) (full position) and holding the cash, and dropping Vedanta (VEDL) from the Watch list.
Bi-weekly Issue June 1: The trend is up and most of our stocks are acting well, so you should remain bullish. Paul’s new buy today is Autohome (ATHM), a powerful Chinese online automotive site that’s hitting on all cylinders, and he’s restoring the Buy rating to Melco Crown (MLCO).
Cabot Benjamin Graham Value Investor
Weekly Update June 9: In this Weekly Update, Roy includes a summary for Five Below (FIVE), which reported quarterly financial results during the past week.
Monthly Value Model Issue June 8: This month’s Cabot Value Model contains a wide variety of stocks, with a slight focus on companies in the technology and financial sectors. Roy features four companies and one ETF (exchange traded fund): Walt Disney (DIS), Facebook (FB), T. Rowe Price (TROW), UnitedHealth (UNH) and WisdomTree International Hedged Quality Dividend Growth ETF (IHDG).
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.
Cabot Dividend Investor
Weekly Update June 7: Most of the stocks in our portfolio are behaving quite well; Wynn Resorts (WYNN) and 3M (MMM) both streaked to new highs in the last few days. Chloe has no changes to the portfolio this week.
Monthly Issue May 31: Chloe adds mid-cap tech stock Broadridge Financial Solutions (BR) to the Dividend Growth tier, provides updates on all our holdings, and shares some of her favorite investment resources. Guggenheim 2017 Corp Bond (BSCH) and Home Depot (HD) move to Hold.
Wall Street’s Best Investments
Daily Alert June 9: Volkswagen Aktiengesellschaft (VLKAY) from The Turnaround Letter
Daily Alert June 8: Fidelity Blue Chip Growth (FBGRX) from The Chartist Mutual Fund/ETF Letter
Daily Alert June 7: Illumina (ILMN) from Schaeffer’s Investment Research
Daily Alert June 7: Sell Marriott International (MAR) from Capitalist Times
Daily Alert June 6: Osisko Gold (OR) from Adrian Day’s Global Analyst
Daily Alert June 5: Taylor Morrison Home Corporation (TMHC) from Upside
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).
Wall Streets Best Dividend Stocks
Daily Alert June 9: Oaktree Capital Group, LLC (OAK) from Dividend Lab
Daily Alert June 8: Dr Pepper Snapple Group (DPS) from DirectInvesting.com
Daily Alert June 7: Tsakos Energy Navigation Series E (TNP-E) from Dividend Detective
Daily Alert June 7: Sell CSX Corp. (CSX) from The Prudent Speculator
Daily Alert June 7: Sell Navios Maritime (NM) from The Prudent Speculator
Daily Alert June 6: Rio Tinto (RIO) from Capitalist Times
Daily Alert June 5: Imperial Brands PLC (IMBBY) from Positive Patterns
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 Growth Investor
Question: I know earlier this year you owned a couple of financial stocks after they took off following the election. They fell apart, but now I’m seeing some of the pop back. What are your thoughts on the group?
Mike: So, first, with so many true growth stocks (my specialty) doing so well, I’m unlikely to be recommending many (if any) financials in Cabot Growth Investor in the near future. However, I am intrigued by their action in both the short- and long-term.
Short-term, the group pulled back sharply in mid-March but has been in a tight range since then. And longer-term, the post-election blastoff kicked financials stocks out of a 15-month consolidation on powerful volume. Thus, the odds favor the next major move is up, and with the sector picking up steam, that time could be now.
Fundamentally, too, there’s reason for optimism if the economy accelerates and the Fed keeps raising rates.
Like I said above, I’m probably not going to go there, but I do think the group is worth keeping an eye on—if it gets going, there will probably be many well-set-up stocks to grab if you choose.
Cabot Options Trader and Cabot Option Trader Pro
Question: Thanks for your article on hedging. I am not that concerned about hedging for a slow decline as I can adjust positions or sell when I hit a mental stop. But at times I worry about a big catastrophic drop, perhaps something caused by a big cyber problem, or a North Korean missile launch, or something dumb that Trump does. Where would I get the most bang for my buck in hedging for a catastrophe only? I know I can buy far out of the money puts. That is where I get hung up. I guess I would need to estimate the index decline, then calculate the expected movement in the put and extrapolate? Which put, what strike maturity, etc? Am I on the right track and do you have suggestions?
Jacob: I think you kind of answered your own question by writing it out.
Perhaps you shouldn’t get wrapped up on just buying 1 strike. You can space out your hedge by buying puts at different time levels, and price drops. Ie. 10 SPY 240 puts expiring in August, as well as 10 SPY 220 puts expiring in January, and so on (those are just examples)
Question: I need a little of your knowledge here again, please. I did a “Sell to Open” $65 June 16 Put on Microsoft (MSFT). The stock is currently at $72.25/sh. If I want to wait till the contract expires on Friday June 16th I don’t need to do anything and contract would expire and I collect the whole premium. On the other hand if I were to do a “Buy to Close” on that PUT today June 5, I would have to pay the trading cost + the bid .01 or ask .02 per contract, correct? If I just let contract expire on June 16 with doing a “Buy to Close” I won’t have to pay a trading fee to close that contract, correct? Could you give me an example of when I might ever want to do, or execute a “Buy to Close” on a put or a covered call?
Jacob: First off great trade. I remember us discussing it. You are correct, if on June expiration the stock is above the strike price, you have nothing to do, and you collect your premium. However, you might want to Buy to Close (since you were looking for an example) if the stock were trading at 65.10 for example. Why? Well if in the hours before expiration, if the stock was potentially going to go through 65, and you didn’t want to take the risk of buying the stock at 65, then you might buy back that put. But for now, your trade looks great!
Question: Do you see any opportunity in Micron Technology (MU)? Lots of call volume.
Jacob: MU has hit my radar many times over the past two weeks for bullish orderflow. Unfortunately I did not pull the trigger on a bullish position. Though instead we bought MGM, SQ and CY, which are all working ... for now.
If I was bullish on MU, I might look at the October 33 calls for $2.50 which seem reasonable. Or perhaps the October 33/37 bull call spread for $1.25.
If I was looking to execute a buy-write, I might buy stock at at 31.20 and sell the July 33 calls for 1.35. Breakeven at 29.85. Static Return of 4.52%, Return if Called Away of 10.55%
Earnings are expected in late June (which explains why the July 33 calls are so expensive, and ripe to be sold)
Cabot Undervalued Stocks Advisor
Question: Could I please get your thoughts on ADP? It’s down a bit today and I was thinking of nibbling.
Crista: Automatic Data Processing (ADP, yield 2.3%) operates on a June fiscal year, so let’s look at fiscal 2018. Earnings per share are expected to grow 7.0%, and the price/earnings ratio (P/E) is 25.1. (Ideally, in order to know that you’re getting a bargain, you want the P/E to be lower than the earnings growth rate.)
The stock’s down to 100 on a brokerage firm downgrade. The short-term upside is 105, where the stock traded in March and April. I don’t think 5% upside (plus dividend) is a large enough gain to entice an investor to take on the risk associated with such a comparably high P/E.
Cabot Emerging Market Investor
Question: I was a little surprised that you have listed Momo (MOMO) and Pampa Energia (PAM) to be sold. Chart wise, they don’t look too bad, or do they? Do you see on the chart that they have exhausted upward momentum?
Paul: The sale of MOMO and Pam is more of a portfolio management move than anything. I think it’s possible that MOMO may need more time to work through the selling/profit-taking that its strong quarterly report was met with. PAM has surprised me over and over with its persistent gains, so selling is a calculated risk. You certainly don’t need to follow my lead as long as it keeps its momentum.
But I needed to consolidate the portfolio, which had five half-position stocks in it and had reached full investment. I want to select the strongest of the half positions and fill them. To do that, I needed to create some room in the portfolio, and I picked the two stocks where I had good profits and less satisfying SNaC narratives.
Question: Crammer who seems to be the most powerful man in this country aside from the President has been bashing these strong running China stocks and when he does, they usually take a decent hit that day. What is your take on Crammer’s comments? I know you will be putting out your weekly report soon. You may be addressing this issue? The only one I do not own is JD.com (JD) and I wanted to get some of it. So far I am looking for what I think the buy point should be.
Paul: I think Cramer is a very smart guy and a heck of an entertainer. But I know he pays more attention to valuations than a true growth investor would. I also suspect he sometimes makes pronouncements for headline value. If he’s responsible for today’s correction in many of our Chinese stocks, I’ll have to take him off my Christmas card list.
Yes, the scheduled update will be out in just a few minutes. I don’t regard today’s pullbacks as a big threat, but will watch for any follow-through to the downside. The market sometimes doesn’t share my sense of what’s threatening and what’s not.
BTW, I think JD is buyable here.
Question: I still have some Bidu (BIDU) stock 150 shares. Should I move on from these? Buy more BABA or one of the hotter growth stocks? Bidu never seems to break through 200. I have had these shares for some time and they haven’t moved much in awhile.
Paul: I still have a small (very small) position in BIDU, which I’m holding because I bought it at around 40 a long time ago. Your decision must rest, in part, on where you bought it. If you have just a small profit or loss, I might be inclined to recommend selling. But maybe not yet, as the chart is showing a potential breakout from its long-term wedging action. If you look at the weekly chart for BIDU, you’ll see that its late-May move has actually topped its February high. That’s the first time it has taken out a previous high since November 2015. If it can follow through on that move, it would be a strong technical signal.
The real question is whether you’re prepared to be patient with BIDU while there are much stronger Chinese stocks in strong uptrends. It might just be that selling BIDU the next time it pops above 190 and putting the proceeds into BABA, JD or WB would be a better choice.
Plus, of course, you can always buy BIDU back if it takes off. With a base as long as the stock has, any move should have legs.
Cabot Benjamin Graham Value Investor
Question: I again see nothing new affecting CBI, as bad as it is acting the past few days. Do you see anything out there? (from subscriber I.M.)
Roy: Chicago Bridge & Iron (CBI 19.57) continues to plummet. The latest drop is caused by a Wall St. analyst at Macquarie Group who lowered his price target for CBI from 18.00 per share to 11.50 and kept an Underperform rating. The analyst’s price target reduction was based on an assumption that management is borrowing heavily against CBI’s line of credit. In my opinion, this is fake news. I have never seen a stock plummet based on drawing money from the company’s previously established credit line.
CBI is due to close on the sale of its Capital Services business at the end of June. The $755 million proceeds will be used to pay toward total debt of $1.8 billion, of which $500 million is due within five years. CBI is expected to generate $500 million in cash flow in 2017 and 2018. Long-term debt divided by current assets produces a ratio of 39% which is low for an industrial company with heavy capital commitments.
Latest analysts’ estimates call for $3.55 EPS in 2017 and $4.40 in 2018. The stock is way undervalued, but investors probably won’t jump in until President Trump gets an infrastructure bill passed. The lawsuit involving Westinghouse is scheduled for arbitration before the end of 2017, which should lift a burden off the stock. This year is a lost cause, but 2018 should bring a sharp recovery for CBI under new management. I advise holding your position. It will take a while for CBI’s stock price to establish a base. Hold. ?