Cabot Prime Pro Week Ending May 26, 2017
Cabot Wealth Summit
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Cabot Weekly Review
In this week’s stock market video review, In this week’s video, Mike Cintolo, chief analyst of Cabot Growth Investor and Cabot Top Ten Trader talks about the bullish market snapback from last Wednesday’s major market decline, with the Nasdaq and growth stocks remaining in their leadership role. There are still some flies in the ointment, as most indexes have yet to join the party and some defensive areas have recently perked up. But Mike is putting most of his emphasis on the bullish action of individual stocks and the leading index (Nasdaq) and is remaining mostly bullish.
Cabot Growth Investor
Other Stocks of Interest May 26: Follow ups to stocks featured December 21, 2016 (issue 1357) to May 24, 2017 (issue 1368). 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 May 24: Mike dives into all our stocks and highlights his current batch of ideas (including an intriguing recent IPO, Floor & Decor (FND), with a great cookie-cutter story) and discusses the good and bad of mental versus in-the-market stops. Mike has no changes in the portfolio tonight, but will continue to take his cue from the market.
Cabot Top Ten Trader
Movers & Shakers Weekly Update May 26: Last week, we said that Wednesday’s huge distribution day was a shot across the market’s bow—while it didn’t break the overall bull market, we thought the next few days (or couple of weeks) would tell us whether that was more of a shakeout or the start of a topping phase. Buy ideas: Chipotle Mexican Grill (CMG), CoStar Group (CSGP), Tesla (TSLA), LendingTree (TREE) and Restoration Hardware (RH).
Weekly Issue May 22: Because of last Wednesday’s big decline, we’re nudging our Market Monitor down a notch. But we’re still more bullish than not because few leading stocks have broken down and the leading Nasdaq is still in good shape. This week’s Top Ten Trader has another strong batch of growth-oriented stocks. Mike’s Top Pick is Global Payments (GPN), a steady grower whose stock just lifted from a 13-month base.
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.
Market Update May 26: The three major indexes are virtually unchanged today ahead of the long holiday weekend. The market will be closed Monday in celebration of Memorial Day, and you will receive your weekly market update Tuesday morning.
Trade Alert May 25: Buy the MGM Resorts (MGM) September 33 Calls (exp. 9/15) for $1.55 or less
Trade Alert May 25: Buy the MGM Resorts (MGM) September 32/37 Bull Call Spread (exp. 9/15) for $1.50 or less
Trade Alert May 25: Sell Existing Position: Sell your Oracle (ORCL) June 44 Calls for $1.45 or more
Options Education May 24: Because Jacob thinks the upside in the market is somewhat limited, he chose to sell an in-the-money call yesterday, which is more conservative, vs. an out-of-the-money call, which is more aggressive.
Trade Alert May 23: Buy-Write: Buy Square (SQ) stock and sell the July 21 Call (exp. 7/21)
Stocks on Watch May 22: Today, the most interesting action is in the financial sector, as a trader or traders have been selling incredible amounts of upside calls.
Stocks on Watch May 22: Options trades in MGM Resorts (MGM) has put the stock at the top of Jacob’s watch list.
Weekly Update May 22: Because I was on vacation and not actively watching the market last week, this is not my usual Monday morning update, but I do update all of our our open positions.
Options Education May 19: Jacob shares the story of his greatest trade while he was on the trading desk of the CBOE. And it was pure luck! My Greatest Trade.
Options Education May 18: Not many people outside of my old company know about this trade—it’s the greatest trade I ever witnessed. The Greatest Trade I Ever Saw.
Options Education May 17: As a trader on the Chicago Board of Options Exchange (CBOE) for more than 10 years, Jacob witnessed and heard many unbelievable trading stories. Stories from the CBOE.
Cabot Undervalued Stocks Advisor
Special Bulletin May 26: Today’s bulletin has earnings reports on Dollar Tree (DLTR) and GameStop (GME); a management change at TiVo (TIVO) and Quanta Services (PWR) has authorized a $300MM share repurchase.
Special Bulletin May 25: Today’s bulletin has a rating change on Thermon Group Holdings (THR) from Strong Buy to Hold and reiterates a Buy on Schnitzer Steel (SCHN).
Weekly Update May 23: No portfolio changes. Buy-Rated Stocks Most Likely to Rise More Than 5% Near-Term: Blackstone Group (BX), Boise Cascade (BCC), Cavium (CAVM), ExxonMobil (XOM), Legg Mason (LM), Schnitzer Steel (SCHN), Tesoro (TSO), Thermon Group (THR), Vertex Pharmaceuticals (VRTX) and Vulcan Materials (VMC).
Special Bulletin May 22: Update on Blackstone Group (BX), and Ratings Changes on Vertex (VRTX) and Total (TOT).
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
Weekly Issue May 23: Tim’s selection, Alliance Data Systems (ADS), is not only undervalued but also at a low-risk entry point, technically. It’s a good story. As to the current portfolio, most of our stocks still look great, but Tim’s recommending taking profits in two, Martin Marietta Materials (MLM) and Total (TOT).
Cabot Small-Cap Confidential
Weekly Update May 26: he S&P 600 Small Cap Index bounced off rock-solid support at the 820 level late last week, and over the last few sessions has migrated back to its 50-day moving average line at around 837. Tyler moves one stock—Q2 Holdings (QTWO)—to Hold.
Special Bulletin May 24: Tyler gives a special update on Ooma (OOMA), which reported yesterday after the close, plus updates on Asure (ASUR), MindBody (MB) and BioTelemetry (BEAT).
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 25: The Emerging Markets Timer is doing just fine, as the iShares EM Fund has rebounded from its May 17–18 dip. Our only portfolio move tonight is to sell half of our position in Momo Inc. (MOMO) and hold the rest.
Bi-weekly Issue May 18: Investors’ jitters about the dog fight in Washington, D.C. caused a sharp market correction that included emerging market stocks. Our portfolio also sustained a little damage, but, so far at least, it’s under control. In this issue, Paul look at the performance of emerging vs. developed market stocks, and his new buy is Baozun (BZUN), which will give us a different take on Chinese retail.
Cabot Benjamin Graham Value Investor
Weekly Update May 19: Roy includes summaries for three Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other noteworthy news during the past week—Avigilon AVO.TO), Cisco Systems (CSCO) and Home Depot (HD).
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.
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
Special Bulletin May 26: GameStop reported first-quarter earnings that beat expectations last night. However, the stock declined in after-hours trading.
Weekly Update May 24: Oil prices have firmed thanks to increasing confidence that OPEC will extend production cuts, and the odds of a June rate hike have fallen somewhat—although it’s still more likely than not. Utilities have been rallying, while financials and industrials have stumbled. Chloe is putting GameStop (GME) on Hold today after the stock suffered a sharp drop yesterday. She has no other rating changes, although Home Depot (HD) has weakened due to a sector selloff.
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 26: Chicago Bridge & Iron (CBI) from Sound Advice
Daily Alert May 25: ON Semiconductor (ON) from Dow Theory Forecasts
Daily Alert May 24: Darling Ingredients (DAR) from Technology & Opportunity
Daily Alert May 23: Fitbit (FIT) from The Lancz Letter
Daily Alert May 22: Triumph Group (TGI) from Cabot Benjamin Graham Value Investor
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 May 26: Bemis Co Inc. (BMS) from IQ Trends
Daily Alert May 25: DoubleLine Emerging Markets Income (DBLEX) from Bob Carlson’s Retirement Watch
Daily Alert May 24: STORE Capital Corporation (STOR) from The Intelligent REIT Investor
Daily Alert May 23: Essex Property Trust (ESS) from Barclays Capital Equity Research
Daily Alert May 22: UGI Corporation (UGI) from Dow Theory Forecasts
Daily Alert May 22: Sell Union Pacific (UNP) from 2 for 1 Stock Split Newsletter
Daily Alert May 22: Sell Chimera Investment (CIM) from Validea Hot List Newsletter
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’ve seen you advise taking partial profits on the way up on certain stocks in Top Ten Trader, but not on others. Can you explain your reasoning a bit more on when to ring the register?
Mike: There’s no set way to take partial profits, but what usually catches my eye is when a stock is extended to the upside both in the short-term (well above its 25-day and 50-day moving averages, etc.) and long-term (has been running higher for at least three months, if not longer, without much of a correction). Plus, maybe the market is acting funky, or the company has earnings coming out soon. Some combination of these often has me pulling the trigger on SOME of our position.
However, if you’re newer to charts, partial profits are usually best handled with a plan. You could take some off the table when your profit is, say, 1.5 times your initial risk. So if you bought at 50 with a stop near 45, maybe you sell when you have a 7 to 8 point profit, and then hold the rest for larger gains.
Another idea is to sell some if you’re holding a stock into earnings with a loss on your position; that way you’re holding positions that you have some cushion in.
All told, there’s no one perfect way to take partial profits, but I’ve found doing so not only puts some profit in your pocket, but also can help you hold your remaining shares through tough pullbacks, which can aid in developing a longer-term winner.
Question: I see your Two-Second Indicator has flared up again, yet you haven’t taken much action. What, then, should we read into the fact that new lows are picking up?
Mike: Because the number of stocks hitting new lows is something of a secondary indicator (i.e., it’s not the actual price action of the market and leading stocks), we consider the Two-Second Indicator as more of a risk measure than anything else—if it turns negative while the indexes are at/near new high ground, it tells us the situation bears watching.
Indeed, if we were fully invested (or on margin), we would have taken that as a sign to back off a bit; however, in the Model Portfolio, we were already 13% in cash, so selling a piece of ProShares Ultra S&P 500 Fund last week got us up to 21%, which seems reasonable.
Thus, we don’t use the Two-Second Indicator as a sign to do a ton of buying/selling when it turns positive/negative. But it does do a great job of telling us when any market divergence is beginning to eat away at the broad market, thus raising the chance of a larger decline.
Cabot Options Trader and Cabot Option Trader Pro
Question: I bought the stock and then sold a call on SQ today as recommended…. just wondering if selling a put and a covered call are exactly the same is there a reason why to buy the stock and then sell the call?
Jacob: It’s a good question. Covered calls and put sales have the exact same risks and rewards. However, for some reason, which i don’t understand, some investors/traders are allowed to execute covered calls, but NOT sell puts. So I recommend the trade that most readers can execute.
Question: I have watched Autozone’s (AZO) stock price rise year over year during the recession. It has continued in the past 12 months and they have opened multiple stores along with having an aggressive stock buyback program. Please let me know your thoughts after AZO got hammered this am.
Jacob: So my general rule is wait three days on these big downside moves. Here is a link to an old story I wrote regarding the three day rule. The gist of the three day rule is halfway down the story.
As for my thoughts on AZO ... if i were to guess, and i don’t really follow it much, is that AZO, ORLY, and the other car companies are in the penalty box. Buyers may stay away for awhile. I don’t know if its because of some type of big long-term shift away from the sector, but clearly the stocks have been weak the last 6 months.
However, if I were to take a shot on the long side, I might buy the September 610 calls for around $27. That said, that is a huge premium.
Or, if i was willing to buy the stock lower, I might sell the September 560 puts for around $11. If AZO stayed above 560, I would collect $1,100 per put sold. However, if it dropped below 560, I would be forced to buy the stock at 560—the level I chose to be willing to buy the stock.
Cabot Undervalued Stocks Advisor
Question: What’s happening with integrated oil stocks?
Answer: There’s been a recent rapid rebound in oil prices. West Texas Intermediate crude oil is up over 13% from its low price in early May. In terms of stock prices, foreign oil majors like BP plc (BP) and Total (TOT) reacted promptly, and had run-ups in May. However, U.S. oil majors, such as ExxonMobil (XOM) and Chevron (CVX), were stuck in trading ranges. It looks like the U.S. oil majors are now ready to react to the upswing in crude oil pricing. This is an excellent time to buy XOM and CVX. And remember, all of the aforementioned stocks are slated for strong multi-year earnings growth, with big dividends and low P/Es. They’re great investments!
By the way, the only reason that CVX is not part of my Cabot Undervalued Stocks Advisor portfolios is because I’m already heavily weighted in energy stocks. I would certainly buy CVX in a heartbeat.