Cabot Prime Pro Week Ending March 17, 2017
Cabot Growth Investor
Other Stocks of Interest March 17: Follow ups to stocks featured October 12, 2016 (issue 1353) to March 15, 2017 (issue 1363). 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 March 15: The market’s primary evidence (market’s trend, action of leading stocks) remains bullish, so we do, too. In the Model Portfolio, we have no changes tonight, with a cash position near 18% but all eight of our stocks rated Buy.
Cabot Top Ten Trader
Movers & Shakers Weekly Update March 17: We remain mostly bullish, though the funky action of the broad market in recent weeks is probably a good reason to gently lift your foot off the accelerator. If you’re fully invested or on margin, selling your weakest stock or two makes sense. And on the buy side, be selective, looking for good entry points in strong stocks. Buy ideas: Adient (ADNT), Clovis Oncology (CLVS), HubSpot (HUBS) and Paycom Software (PAYC).
Weekly Issue March 13: We are pushing our Market Monitor down to a level 7 (out of 10), but we still advise a mostly bullish posture until we see the sellers take control. This week’s Top Ten list contains a variety of stocks, including some names we haven’t seen in a while. Our Top Pick is Builders Firstsource (BLDR), a mid-sized supplier of housing materials that just surged on earnings.
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 March 17: Trade Alert March 16: Buy-Write: Buy Builders Firstsource (BLDR) Stock and Sell the April 15 Calls for $14.50 or less.
Position Updates March 16: Updates on Blackstone (BX), United States Oil ETF (USO), Oracle (ORCL), Coca-Cola (KO) and Nasdaq ETF (QQQ).
Trade Alert March 16: Sell Half your Oracle (ORCL) June 44 Calls for $2.80 or more.
Position Update March 16: Oracle (ORCL) reported earnings and revenues that topped expectations. In early pre-market trade, ORCL is trading higher by $2.70 and five Wall Street Analysts have raised their price targets for ORCL. We will likely sell half of our position shortly after the open.
Education March 15: Jacob tackles one of the questions he frequently receives: What’s the Difference Between Cabot Options Trader and Cabot Options Trader Pro?
Position Update March 15: Oracle (ORCL) will report earnings after the close of trade today. We are currently holding the June 44 Calls.
Position Update March 14: Astra Zeneca’s (AZN) drug data came in positively for the company. In reaction AZN is trading higher by $0.50 this afternoon at a new recent high of 30.60. Though I would caution that this is the initial reaction, and the stock is moving somewhat violently. Our calls are now worth $2.20, and can be closed for a profit of approximately 70%. However, I will continue to hold my position for greater upside.
Position Updates March 14: Symantec (SYMC) is trading higher by another 3% today at 31. At this level in the stock, our calls originally purchased for $2.04 are now worth $7 (243%), and our bull call spread, originally purchased for $1.45, is now worth $4.80 (231%). Astra Zeneca (AZN) is making a new multi-month high today at 30, and the big trader continues to hold his July and September call positions.
Weekly Update March 13: This week’s Federal Reserve meeting has turned into somewhat of a “non-event” as traders now fully expect a rate hike. Likely of greater importance to the market is the Fed Chair’s press conference that will follow. Traders will be looking for clues on future rate hikes as economic data continues to shine. Traders will also be focused on the price of oil and other commodities, which were hit hard last week.
Stocks on Watch March 13: Encana (ECA) has popped on my radar for the past four trading days as a trader or traders have been building a very large option position.
Cabot Undervalued Stocks Advisor
Special Bulletin March 17: Adobe Systems (ADBE) reported first-quarter 2017 earnings yesterday (November year-end), after the market closed. The company outperformed analysts’ estimates by a good margin, and also increased second-quarter expectations. The market is thrilled, and the stock is up about 5% this morning.
Special Bulletin March 15: Blackstone Group LP (BX) joins the Growth & Income Portfolio, plus updates on Boise Cascade (BCC), H&R Block (HRB) and Schnitzer Steel (SCHN).
Weekly Update March 14: All the major U.S. stock market indexes are experiencing orderly pullbacks right now. (This is good news because the farther the market climbs without resting, the bigger the pullback when it finally arrives.) Buy-Rated Stocks Most Likely to Rise More than 5% Near-Term: BP plc (BP), Martin Marietta Materials (MLM), Mattel (MAT), PulteGroup (PHM) and Vulcan Materials (VMC).
Monthly Issue March 7: Today’s featured stocks include Dollar Tree (DLTR), a guest appearance by Assurant (AIZ) and a new addition to the Buy Low Opportunities Portfolio, Thermon Group Holdings (THR).
Cabot Stock of the Week
Weekly Issue March 14: Tim’s new recommendation is Lumentum (LITE), which has just had a 20% pullback and is ripe for a new uptrend. It’s a classic little-known technology stock, with great potential for growth. As to the portfolio, most stocks are on normal corrections, a few are bucking the trend and moving higher, and one, Banco Santander Brasil (BSBR) is causing some anxiety; I’m downgrading it to Hold.
Cabot Small-Cap Confidential
Weekly Update March 17: Tyler doesn’t think it’s time to go running naked through the streets buying stocks and yelling “Paaaarty!!” at the top of our lungs. But he also don’t think it’s time to sell out and go home. His best guess is this is the seventh inning stretch of the bull market. So expect some volatility, review what you own and make sure you still like it, and don’t be overly concerned about “missing out” if you’re not 100% invested. The Small-Cap portfolio has 10 stocks, seven of which are doing quite well, one of which is new, and two of which are acting a little weak.
Monthly Issue March 3: This month’s stock is Asure (ASUR), a micro-cap company poised to grow on the back of strong employment trends in the U.S. and select international markets. Four of our positions reporting results over the last five days. Three of them, Everbridge, LogMeIn and U.S. Concrete, went well. The fourth, NanoString, was disappointing, and the company’s outlook has caused Tyler to recommend selling your remaining stake in NanoString (NSTR). Everbridge (EVBG) moves to Hold.
Cabot Emerging Markets Investor
Bi-weekly Update March 16: The Emerging Markets Timer is in fine shape after Wednesday’s big rally. Earnings season has come to an end with China Lodging’s report on Tuesday morning. We have been treated pretty well by the season, although we have a couple of companies that will report in what amounts to the off season. We have no changes to the portfolio today.
Bi-weekly Issue March 9: Featured stocks Autohome (ATHM) and Momo (MOMO) are rated Buy a Half. We’re selling Vale (VALE), which has broken down with many commodity stocks, we’re dropping ZTO Express (ZTO) from coverage, and Banco Santander (BSBR) moves from Buy to Hold.
Cabot Benjamin Graham Value Investor
Weekly Update March 17: This Weekly Update includes summaries for four Cabot Benjamin Graham Value Investor companies: Biogen (BIIB), MSCI Inc. (MSCI), Oracle (ORCL) and Williams Sonoma (WSM), which reported quarterly financial results or other important news during the past week.
Monthly Enterprising Issue March 9: Roy introduces two new stocks this month that hold great promise: Eastman Chemicals (EMN) and Western Digital (WDC). Blackstone Group (BX), LKQ Corp. (LKQ) and Toll Brothers (TOL) are also featured, and there are six new ratings changes.
Monthly Value Issue March 2: No one knows when this stock market rally will end. According to Roy’s evaluation models, stocks are overvalued and due for an extended rest, but now that they’re “free-wheeling” in uncharted territory, it’s also possible that stocks will considerably higher.. Four new stocks are added this month: Danaher (DHR), Nike (NKE), Schlumberger (SLB) and Williams-Sonoma (WSM), and four stocks transition out of the Model and now rated Hold: Alliance Data Systems (ADS), Celgene (CELG), Walt Disney (DIS) and Johnson Controls (JCI).
Cabot Dividend Investor
Weekly Update March 15: If you’re underinvested, you can continue to use pullbacks to start new positions, judiciously. Focus on investments that are healthy and meet your investing goals and risk tolerance. In the High Yield Tier, most of our recommendations are at good buy points, with General Motors (GM) probably the most promising in the short-term. For capital appreciation, look to the Dividend Growth Tier, where Carnival (CCL), Prudential Financial (PRU), U.S. Bancorp (USB) and now Wynn (WYNN) are all poised for gains. Home Depot (HD), in the Safe Income Tier, is another likely winner this year.
Monthly Issue February 22: You’ll find plenty of great potential portfolio additions in today’s issue. Chloe adds a new 4.7% yielder Verizon (VZ) to the High Yield Tier, and moves Xcel Energy (XEL) to Buy.
Wall Street’s Best Investments
Daily Alert March 17: Fidelity Select Natural Gas Fund (FSNGX) from Sound Advice
Daily Alert March 16: Arconic (ARNC) from Wall Street Stock Forecaster
Monthly Issue March 15: Our Spotlight Stock, John Bean Technologies (JBT), is a company that is a hybrid of two interesting sectors—both in the high-growth stage. My Feature expands on the company’s winning technologies, focusing on the catalysts that are propelling its progress.
Daily Alert March 15: Raymond James Financial (RJF) from U.S. Investment Report
Daily Alert March 14: STMicroelectronics (STM) from Blue Chip Growth
Daily Alert March 13: Telenav (TNAV) from Top Stocks under $10
Wall Streets Best Dividend Stocks
Daily Alert March 17: Outfront Media (OUT) from Pivotal Point Trader
Daily Alert March 16: Steel Partners Holdings L.P. 6.00%; Series A; Par $25.00 (SPLP A) from Forbes/Lehmann Income Securities Investor
Daily Alert March 15: The Hershey Company (HSY) from Stock Trader’s Almanac
Daily Alert March 14: Global X China Financials (CHIX) from Capitalist Times
Daily Alert March 13: PowerShares Fundamental HiYld CorpBd ETF (PHB) from The No-Load Fund Investor and Sell Huntington Bancshares (HBAN) from Top Stocks under $10
Monthly Issue March 8: Sentiment remains bullish, as you’ll see in our Market Views, although advisors are turning a bit more cautious. Our contributors continue to find good dividend payers with a long history particularly attractive. And that includes our Spotlight Stock, Xerox (XRX).
This Week’s Q&As
Cabot Prime
Question: I am new to investing and just upgraded to your Prime membership. I hope to fast track my learning and investment opportunities.
I read your report on “The Next Netflix " and would like to invest more money in Facebook. Roy Ward recommended buying it at $137.75 and Michael Cintolo recommended buying around $136. Since your report came out, I have not seen the price dip to either of these levels.
Do you recommend that I just sit tight, or since it is the next big thing, buy it now?
Tim Lutts: We cannot give personal advice, but I can give you some guidance.
There is no certainty in investing; Facebook (FB) may perform terribly from here. However, the odds are good, particularly long-term, so including it in a diversified portfolio makes sense. Also, given that the market, and FB in particular, has had a good run, it may make sense to wait for a correction before buying the stock. Alternatively, buying a small pilot position now and adding to it if the stock rises, can also make sense.
If you look through our website, you’ll find lots of advice like this, and the more you learn, the more you can put the odds in your favor.
Cabot Options Trader and Cabot Options Trader Pro
Question: Any thoughts on NVDA? Seems to be in a good support area with double bottom.
Jacob Mintz: Semiconductors have been real leaders recently, though NVDA has been chopping around. Here is an excerpt from a Goldman note on NVDA this morning:
Question: My two March 17 options are due to expire on this Friday. There is nothing I need to do here, correct? The options just will expire and I keep the premium that I received by selling on Jan 4. PS, I am thinking of doing the same thing with either the May or June contract, “Sell to Open a $65.00 Put.” Do you have an opinion on this as I wouldn’t mind owning another 200 shares of Microsoft?
Jacob Mintz: As long as MSFT closes ABOVE the strike price of the put you sold, then yes, there is nothing for you to do. You collect your $265 premium/profit and move on. If MSFT drops below that strike price, then you have to decide if you want to take the shares, or buy back the puts. Great trade!
If you don’t mind owning the shares of MSFT at the strike price in May or June, then sell away, and keep repeating this process.
I’m glad you’re learning about selling puts, it’s a great way to collect “insurance” every couple of months ... as long as you’re willing to own the stock.
Cabot Undervalued Stocks Advisor
Question: What’s your current opinion on GM? I like the dividend.
Crista Huff: The price chart on General Motors (GM) is showing strength. We could see it push past 38 soon. From a value standpoint, earnings are only expected to grow 1% and 2% in 2017 and 2018, so there’s no logical reason for the share price to rise. I suggest that you hold the stock, but use a stop-loss order to protect your downside.
Question: It seems like Gamestop is on a slide lately. Do you still see a recovery coming? If not, should it be a sell rating?
Crista Huff: Gamestop (GME) is volatile today, but remaining firmly within its recent trading range, between 24 and 26.
Full-year 2017 earnings will be reported on the afternoon of March 23 (January year-end). The stock will likely move 3% or more—in either direction—the next day.
While I am disappointed that earnings growth expectations have come down since I originally bought the stock, it’s also true that the market is far more pessimistic on the company’s outlook than is warranted. The company is expected to earn record profits in fiscal 2018, the stock pays a huge & growing dividend, and the P/E is extremely low. Once the market accords GME a fair valuation, I will consider selling.
Cabot Emerging Markets Investor
Question: Paul, You have recently selected to buy ATHM. Just curious, why do you pick ATHM over BITA? The second part of the question is, do you see any good prospects in buying BITA too?
Paul Goodwin: I like the charts for both stocks. I prefer Autohome (ATHM) because the company is bigger, the stock is cheaper and the rally has been going on longer. That’s it in a nutshell.
Bitauto (BITA) has a market cap of $1.8 billion and sales of $854 million. P/E 28. EPS forecast is 23% for 2017 and 34% for 2018.
Autohome has a market cap of over $4 billion and sales of $888 million. P/E 20. EPS forecast is lower (7% for 2017 and 23% for 2018).
Either stock could prove more attractive to investors, but I don’t see a lot of advantage to owning both. Same industry, same situation, and only execution will differentiate them.
Question: What do you think of SSW. Over the long term, it seems to be in a strong position, though the dividend is not so compelling now.
Paul Goodwin: I’ve always had a fascination with Seaspan (SSW), mostly because its business model of long-term leasing of container ships creates a transparency in the company’s future revenue. The company’s stock has been in a long-term downtrend since September 2014, but it’s recent weakness has been mostly because of the bankruptcy of Korea’s Hanjin Shipping.
With SSW down from 19 at its peak in July 2014 to below 7 in recent trading, it should be a bargain. But a cut in the dividend from 37.5 cents per share to 12.5 cents per share is not good news. The company says that the reduction in the dividend will allow it to take advantage of industry weakness, but it’s never a good sign.
SSW may look attractive trading below 7, but I’m reluctant to question the judgment of the market, which is pricing SSW so low for a reason. The stock’s valuation is pricing in the company’s longer-term viability, which is no joke given overcapacity in the industry, and further reductions of the dividend.
If you want to take a chance on SSW, just be sure to keep your initial investment small enough to protect your portfolio should it fail. If the market changes its mind about the stock and starts to send it higher, you can increase your stake. But the reduction in the dividend is a negative signal.
Cabot Benjamin Graham Value Investor
Question: With Kroger’s disappointing fourth quarter, should I buy, hold or possibly sell? The decline in same-store sales was unexpected I think and this may be a difficult trend to reverse now that Wal-Mart Stores is experimenting with lower grocery prices.
Roy Ward: Kroger (KR 29.32; Max Buy Price 30.39; Min Sell Price 41.01) has plummeted 21% during the past three months because of stagnant sales and earnings during the past couple of quarters, and management’s modest forecast for the next several quarters.
Competition will be the key to Kroger’s success in 2017 and beyond. As you mentioned, Wal-Mart is on a campaign to gain market share, and will lower some prices on food items and increase its e-commerce presence. Kroger is focusing on its ClickList program, which allows customers to order online and pick up their groceries at the local supermarket.
In my opinion, Kroger is better suited to gain online sales because of better customer relations, even though Wal-Mart has deeper pockets. Rumors that Amazon could become a formidable competitor don’t make sense to me, but I will be watching Amazon closely to determine if the company could undercut Kroger and Wal-Mart.
Kroger shares are selling at a bargain price, but I will continue with my Hold opinion until the company begins to show progress competing against Wal-Mart and others. Hold.
Question: What is going on with GNC? I am trying to take your advice and not sell too soon; however, this one worries me.
Roy Ward: GNC Holdings (GNC 7.26; Max Buy Price 9.52; Min Sell Price 16.30) has been in a downward spiral since November 2013, but the trend has slowed during the past month. GNC will likely form a base between 6.5 and 8 before rallying in the second half of 2017.
Declining sales and earnings have hurt GNC, and the recent omission of the quarterly dividend caused many investors to abandon the stock. On the positive side, new management is implementing new strategies for the company which will likely improve sales and earnings.
GNC holds desirable lease space in shopping malls and continues to bolster its strong balance sheet. Lastly, the company’s stock price is very cheap and could attract a buying for the entire company. The private equity firm, KKR, and others have been rumored to be interested in GNC, so a buyout at a reasonably high price is a good possibility. I recommend holding your GNC shares. Hold.
Question: I was looking for the list of ETFs. Please direct me.
Roy Ward: I currently have seven ETFs with Buy or Hold opinions; all are recommended in the Cabot Value Model Issue. March 2 is the latest Issue. The SPDR S&P Dividend ETF (SDY) is included in the Current Buy Recommendations on page 3 and the remaining six ETFs are listed in the Hold and Sell Recommendations table on page 7. Guggenheim 2020 High Yield Corp Bond ETF (BSJK) has not declined to my Max Buy Price of 23.95 yet, so it’s currently a buy recommendation that hasn’t been purchased. I have recommended ETFs sparingly in the past as defensive holdings to lower the risk in your portfolio.
Cabot Dividend Investor
Question: What do you consider to be the position size that the new column refers to? I’ve never known how many shares were in our portfolio, although I’m sure that my positions are much lower, since I do not have much money to spend.
Chloe Lutts Jensen: The position size doesn’t refer to a specific number of shares, but rather to a percentage of the portfolio. So we own the same dollar amount of GameStop and Carnival, for example, and half as much of Home Depot.