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Cabot Prime Pro Week Ending May 12, 2017

Cabot Prime Pro Week Ending May 12, 2017

Cabot Weekly Review

In this week’s video review, Mike Cintolo discusses the market (which he believes is doing OK) and growth stocks (which are lighting up the track). Mike remains mostly bullish because of the action of individual stocks, though he’s keeping his feet on the ground given the lack of upside shown by most indexes. Most important, he relays the characteristics he’s looking for in new buys right now, sharing a few of his favorites.

Cabot Growth Investor

Bi-weekly Issue May 10: In the Model Portfolio tonight, Mike is filling out our position in Universal Display (OLED), and placing XPO Logistics (XPO) back on Buy. That will leave us with one empty slot and about 13% in cash.

Cabot Top Ten Trader
Movers & Shakers Weekly Update May 12: After three weeks up in a row, the major indexes were flat-to-lower this week, with the lagging small- and mid-caps performing worst, and the leading Nasdaq holding up the best. Buy ideas: Dave & Buster’s (PLAY), HubSpot (HUBS), Melco Crown (MLCO) and Yum China (YUMC).

Weekly Issue May 8: This week’s Top Ten has a great collection of strong stocks and good growth stories—and they’re in a variety of sectors, which is a plus. Our Top Pick is Zillow (Z), an old favorite that is just waking up after nine months of consolidation.

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.

Options Education May 11: Here’s the first of several options education pieces that Jacob recently wrote about trading and some stories from his time on the trading floor. Earnings: When to Sell and When to Hold.

Stops on Positions May 9: Here are Jacob’s mental stops on our positions while he’s on vacation. Mike Cintolo will be watching our positions while Jacob is away, and Mike will have nearly instant access to Jacob.

Earning Update May 9: After the close on Monday, Builders FirstSource (BLDR) reported earnings and revenues that topped analysts’ expectations.

Earning Update May 8: Builders FirstSource (BLDR) will report earnings after the close today. We are long the stock via a buy at 15.87, and short the June 15 Calls, which were sold for $1.62. Because we have a large cushion in our trade via our call sales, I’m going to take the earnings risk tonight.

Earnings Update May 8: ON Semiconductor (ON) reported earnings that were slightly below expectations and revenue that exceeded analysts’ estimates. In early pre-market trade, ON is trading higher by $0.60 at 15.
Weekly Update May 8: Traders have not been buying puts on the leaders when the market has periodically softened, and they have not been buying puts into earnings. So far, this has been the right strategy as the growth leaders have had only shallow pullbacks.

Cabot Undervalued Stocks Advisor

Special Bulletin May 11: We have non-urgent news and price action today: a few trading ideas, a possible new CEO at American International Group (AIG) this week and an update on TiVo Corp. (TIVO).

Weekly Update May 9: We’re on the tail end of earnings seasons for companies that wrapped up their quarters in March. Reports are due early this week from Tesoro (TSO) and Vulcan Materials (VMC). Almost every one of our portfolio companies that reported earnings delivered an upside earnings surprise, especially in the integrated oil and construction materials industries. Universal Electronics (UEIC) moves from Hold to Buy.

Monthly Issue May 2: Today’s featured stocks include ExxonMobil (XOM), Legg Mason (LM), and a new addition to the Growth Portfolio, Cavium (CAVM). Crista also compares the featured stocks and their peers in the integrated oil, asset management and semiconductor industries.

Cabot Stock of the Week

Special Bulletin May 10: One of our stocks, Aqua Metals (AQMS), reported results on Thursday and investors didn’t care for the results. The stock is now rated Sell.

Weekly Issue May 9: In choosing today’s stock, Tim leaned toward the growth side, because that’s what’s working best today. Then, to get an element of safety, he chose a stock with very strong and growing institutional sponsorship. The stock? Facebook (FB). The only change is the reinstatement of PRA Health’s (PRAH) Buy rating.

Cabot Small-Cap Confidential

Special Bulletin May 12: Tyler presents comprehensive analysis on Marrone Bio (MBII) Q1 earnings and some very interesting commentary from Marrone management regarding the cannabis industry.

Weekly Update May 12: It’s been a wild week, much more so than a high-level look at the small-cap index would imply. According to the index, we’re just moving sideways with a little wiggle here and there. But when you look within our portfolio—wow! This was anything but a quiet week. Stocks were jumping all over the place as earnings reports came out.

Special Bulletin May 11: Asure Software (ASUR) reported Q1 results this morning that came in better than expected. Even though the stock ran up 20% in the week leading up to the earnings report, shares blew through their prior all-time high (at 13) following the report. Shares are trading between 10% and 15% higher at mid-day today, which pegs our current gain at 30% to 35%.

Special Bulletin May 10: Tyler gives earnings updates on three of our stocks: Aqua Metals (AQMS), Everbridge (EVBG) and Primo Water (PRMW), including a rating change on AQMS to Sell, plus minor updates on three other stocks: BioTelemetry (BEAT), Asure Software (ASUR) and Marrone Bio (MBII).

Monthly Issue May 5: Today’s candidate, BioTelemetry (BEAT), provides digital health solutions to people with chronic health issues. Its biggest market is people with heart conditions, but it is branching out to the diabetes market as well. For a short window of time, I believe we can establish a position while shares are “on sale.”

Cabot Emerging Markets Investor

Bi-weekly Update May 11: The Emerging Markets Timer is in great shape, as the iShares EM Fund has pushed out to new highs in recent days. We’re holding on tight to our winners, but we are downgrading LATAM Airlines (LFL) to Hold tonight.

Bi-weekly Issue May 4: The Cabot Emerging Markets Timer continues to offer a green light, so we’re forging ahead as our stocks enter the heart of earnings season for emerging ADRs. We also welcome back Tencent Holdings (TCEHY), a mega-cap old friend into the portfolio.

Cabot Benjamin Graham Value Investor

Weekly Update May 12: Roy includes summaries for 10 companies that reported quarterly financial results or other noteworthy news during the past week. Maiden Holdings (MHLD) and Nissan (NSANY) are now recommended to be sold.

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.

Special Bulletin May 11: Taiwan Semiconductor (TSM) reached its Minimum Sell Price of 35.69 today. First-quarter sales and earnings were strong, which sent the stock higher. Now is a good time to take profits.

Monthly Value Model Issue May 4: This month’s Cabot Value Model contains a diversified list of buy recommendations, with a bias toward high quality companies in the Technology and Financial sectors. Roy adds Alliance Data Systems (ADS) to the model and moves Schlumberger (SLB) out of the model.

Cabot Dividend Investor

Weekly Update May 10: Chloe reports first-quarter earnings results from Pembina Pipeline (PBA), Prudential (PRU) and Automatic Data Processing (ADP). Pembina, which beat estimates, is buyable here for high yield investors. She is also moving PowerShares Preferred Portfolio (PGX) back to Hold today; if you want to add to your position, wait until the ETF trades below 15 again.

Monthly Issue April 26: Chloe adds large-cap industrial stock Cummins (CMI) to the Dividend Growth Tier, reviews her sales from the past week, and explains how to write covered calls.

Wall Street’s Best Investments

Daily Alert May 12: T. Rowe Price Global Growth Stock (RPGEX) from The No-Load Fund Investor
Daily Alert
May 11: Berkshire Hathaway (BRK-B) from Cabot Benjamin Graham Value Investor
Daily Alert
May 10: Boston Scientific (BSX) from Sound Advice
Daily Alert
May 9: Fortive (FTV) from The Complete Investor
Daily Alert
May 8: Lowe’s (LOW) from Dow Theory Forecasts
Monthly Issue April 12: Our contributors found ideas with great potential in just about every sector this month, and our Spotlight Stock is Hologic (HOLX), a company that has taken the lead in women’s healthcare, particularly in the diagnostic, surgical and medical-imaging products sectors.

Wall Streets Best Dividend Stocks

Daily Alert May 12: Old National Bancorp (ONB) from The Prudent Speculator
Daily Alert
May 11: United Technologies (UTX) from Dividend Advisor
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.
Daily Alert May 10: Fidelity Strategic Income (FSICX) from Fidelity Monitor & Insight
Daily Alert
May 9: DJ Select Dividend Index Fund (DVY) from The Personal Capitalist
Daily Alert
May 8: Enable Midstream Partners LP (ENBL) from Capitalist Times

This Week’s Q&As

Cabot Growth Investor

Question: You’ve always written that the market usually sees growing divergences at the tail end of bull markets. Given the Nasdaq’s rally lately, combined with the sideways move of the rest of the indexes, are we near the end of this bull?

Mike: Good question. The answer: It’s possible, but I would say it’s unlikely, for a few reasons.
First, you’ll often see divergences play out at the end of bull markets for many, many months, so this three-week divergence isn’t world-ending at this point.
Second, you’ll often see divergences of three, four or five weeks during a bull run. Not everything is always in gear, but it’s the long-lasting divergences that make you worry. We’re not there yet.
Third, to measure divergences, we prefer to use the Two-Second Indicator (number of stocks hitting new 52-weeks) along with the Advance-Decline Line, as opposed to just eyeballing the indexes. Neither of these indicators have shown much abnormal action—though I’m always looking.
Fourth, divergences at the end of bulls usually go along with euphoric sentiment among investors. Sentiment is always open to interpretation, but we’re not seeing people beating a path to our door for the latest stock tip.
All that said, we’re open to anything, and we are holding a little cash to respect the lackluster action from most indexes. But given all the evidence, we’re not overly concerned at this point about a longer-term market top, though in theory, if the divergence persists for another two or three months, it could become an issue.

Cabot Undervalued Stocks Advisor

Question: Why is TiVo (TIVO) acting so terribly?

Crista: There is absolutely no bad news that has emerged, other than the botched reporting of the great quarter by the news media. I have even been in touch with the President of TiVo and have had the correct earnings numbers verified by the CFO.
I think the biggest problem is that none of the news agencies have acknowledged that they published incorrect numbers (although Charles Schwab did eventually publish the correct number on their website).
I have a phone appointment with the company’s CFO on Friday afternoon, to discuss whether they will be publishing non-GAAP EPS numbers in future earnings releases. I might have more to report in my weekly update on May 16.
Question: Any thoughts on the weakness in Vertex Pharmaceuticals (VRTX)?

Crista: I think Vertex Pharmaceuticals (VRTX) is in fantastic shape. After that huge run-up in late March, there was no pullback, and then the stock slowly rose another $13.
At this point, VRTX is establishing a trading range. It would be perfectly normal for a stock to get stuck after a big short-term run-up, but I frankly don’t think VRTX will stay in a trading range for very long. The chart seems to be exhibiting a serious lack of sellers.
Unless you’re a very short-term trader, hold VRTX. As long as the market remains neutral-to-bullish, I think VRTX will probably have another run-up this year. It’s distinctly undervalued.

Cabot Benjamin Graham Value Investor

Question: What are your thoughts regarding GM? Also, what are your current thoughts regarding GNC? (from subscriber C.B.)
Roy: General Motors (GM 34.11; Max Buy Price 33.71; Min Sell Price 43.20) is one of the most undervalued stocks in my database. However, the stock has weakened because of sluggish sales in the auto industry during the first four months of 2017. GM’s sales aren’t falling as much as the sales of its competitors because the company continues to take market share. Also, GM has quickly shifted manufacturing to SUVs, crossovers and pickups, which are selling well.I dislike selling GM at the current bargain level. However, if the current downtrend in auto sales continues for the remainder of the year, I might have to recommend selling the stock.
I still like GNC Holdings (GNC 6.80). The company reported improved sales and earnings recently which sent shares substantially higher. The stock has retreated, though, because rumors about a possible takeover from KKR have disappeared. I believe GNC’s new management is improving the company’s prospects for future growth. My conclusion is that the current stock price correction presents an opportunity to buy a speculative stock at a very reasonable price

Cabot Dividend Investor

Question: I am wondering what your opinion is on DRI, the restaurant holding company. It pays 2.57 % dividend and has gone up 40% since November, 2016; is now sitting on a new high. Sure looks like a mover and a good dividend candidate to me, what do you think?

Chloe: I’ve had Darden Restaurants (DRI) on my watchlist for some time, I wish we bought it a while ago. Mike did recommend it in Cabot Top Ten Trader in early April, here’s what he wrote:
“Retail and restaurant stocks have been terrible performers during the past few months, but the group is starting to show a few signs of life and Darden could be a blue-chip leader if the group kicks into gear. The stock is strong today for a couple of reasons. First, the recent quarterly report topped expectations, with same-store sales eking out a gain of 0.9% (Olive Garden’s growth was 1.4%), which is actually far faster than the industry, while cost controls helped earnings squeeze out a 9% gain, topping expectations. (Analysts have also nudged up their estimates, now seeing a 13% earnings gain this year.) Second, Darden spent $780 million to acquire Cheddar’s Scratch Kitchen, giving it exposure to a different kind of dining concept; with just 165 locations in 28 states, Cheddar’s has lots of store expansion potential in the years ahead, and the purchase should result in about 20 cents per share of synergies going forward. All told, Darden’s business is outperforming the industry, the Cheddar’s purchase opens up a new avenue of growth, and the firm is known to treat shareholders well (dividend yield is 2.7% annually).”
More recently, the stock has gotten a bunch of analyst upgrades, which often precedes gains. The payout ratio is coming down. And there’s no overhead resistance.
As far as reasons not to buy the stock, earnings growth is currently expected to decelerate in 2018 (from 13% to 9%), which could cause a pullback. But like I said, estimates are rising, so that could change. Good pick.