Cabot Prime Pro Week Ending October 13, 2017
Cabot Weekly Review
In this week’s stock market video, Mike Cintolo discusses the uniformly bullish market action, where most indexes, stocks and sectors are in gear on the upside. Short-term, he does think it’s important to keep your feet on the ground; earnings season is starting, and some complacency has been popping up, which often leads to some potholes or tricky trading. But he sees the odds clearly favoring upside down the road, and sees plenty of stocks in a variety of sectors that you can buy or keep on your shopping list.
Cabot Marijuana Investor
October Update (emailed to Prime Pro members on October 9): If you bought a basket of Tim’s 10 Best Marijuana Stocks when the report was originally published on August 22, you’re off to a good start. Since that report was written, the average of the 10 stocks is up 21%, with the best up 49% and the worst down just 6%.
Cabot Growth Investor
Other Stocks of Interest October 13: Follow ups to stocks featured May 10, 2017 (issue 1367) to October 11, 2017 (issue 1378). 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 October 11: Mike goes over all his recent moves, dives into the recent action in Shopify (SHOP) and reviews one of our proprietary indicators that, along with some precedent analysis, adds further evidence to the market’s bullish outlook. No changes in the Model Portfolio tonight.
Cabot Top Ten Trader
Movers & Shakers Weekly Update October 13: With so many stocks acting well, don’t forget to take a few chips off the table (partial profits) while things are good, which not only gives you some profit, but also allows you to give your remaining shares more room to breathe. Examples include include Caterpillar (CAT), ON Semiconductor (ON), Red Hat (RHT) and Square (SQ).
Weekly Issue October 9: This week’s Top Ten has a nice mix of growth, “old world,” big and small, reflecting the broad strength in the market. Mike’s Top Pick is HubSpot (HUBS), which has a great fundamental story and recently broke out on excellent volume.
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 October 13: When the market is slow (as it’s been this week), and you’re looking for more trading recommendations, where might you look? Jacob’s daily order flow list is the perfect source for trading ideas. He shows you the order flow he’s watching today.
Position Update October 12: Bank of America (BAC) will report earnings tomorrow before the open tomorrow. In late August, we bought the stock at 23.83, and sold October 24 Calls for $0.76. We also collected the $0.12 dividend. With the stock trading at 25.7 today, unless the stock falls hard tomorrow on earnings, we will collect our full $105 per buy-write, a yield of 4.55%, next Friday.
Stocks on Watch October 11 Citigroup (C) and JP Morgan (JPM) report earnings on 10/12 before the open.
Trade Alert October 11: Buy-Write: Buy Freeport McMoRan (FCX) Stock and Sell November 14 Calls (exp. 11/17) for a net of $13.45 or less, or Put Sale: Sell Freeport McMoRan (FCX) November 14 Puts (exp. 11/17) for $0.50 or more.
Stock on Watch October 10: Since Shopify (SHOP) has fallen on a short sell attack, option order flow has largely been mixed. However, this afternoon, a trader is executing an interesting bull call spread.
Position Update October 10: In his email earlier this morning, Jacob noted takeover rumors in Johnson Controls (JCI). Since then, call buying has been very aggressively bullish.
Position Updates October 10: Micron (MU) is making another new 52-week high this morning, trading at 41.5. At this level, our MU calls are worth $8.50, a profit of 265%, and our MU spread is worth $4.85, a profit of 241%. Jacob is going to let the MU positions continue to run. Johnson Controls (JCI) is spiking higher this morning on rumors that the company could be a takeover target. if you missed selling HALF your JCI calls for $2.65 last week, you can easily sell today at that level.
Weekly Update October 9: The VIX closed the week at 9.65, virtually unchanged from the prior week. The Friday close at 9.65, was a very slight rally off the all-time record lows on Thursday. That small rally in the “fear index” was likely due to a report that North Korea was preparing to test a rocket that could hit the west coast of the U.S. That said, the fact that the threat of such a potential dire situation would only cause the VIX to rise 5% shows how little fear there is of a market pullback.
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
Special Bulletin October 13: Bank of America (BAC) beat on earnings estimates, Nucor (NUE) moves from Strong Buy to Buy and updates on eight other stocks.
Special Bulletin October 11: Steel stocks are surging today, most likely triggered by the unfortunate news of corruption at Kobe Steel. Cabot Undervalued Stocks Advisor portfolios currently hold two steel stocks: Commercial Metals (CMC, Buy) and Nucor (NUE, Strong Buy). Crista is expecting these stocks to retrace their recent highs from December 2016—CMC at 24 and NUE at 65—then to trade sideways and/or have pullbacks before they can gather enough steam to move higher.
Weekly Update October 10 Crista writes that the S&P 500 has had a very specific pattern this year: advance-rest-pullback-recover, then repeat the cycle, continuing to rise as months pass. After just completing another advance, Crista believes the odds are strong that the market’s now ready for some sideways trading. Today’s Portfolio Changes: Chipotle Mexican Grill (CMG) moves to Buy, Total (TOT) moves to Hold and XL Group (XL) moves to Buy.
Monthly Issue October 3: Today’s featured stocks are Bank of America (BAC), Schlumberger NV (SLB) and Nucor (NUE). BP plc (BP) and Legg Mason (LM) move to Hold and Schnitzer Steel (SCHN) moves to Sell.
Cabot Stock of the Week
Weekly Issue October 10: Today’s recommendation is Nucor (NUE), a classic steelmaker that has great growth prospects as the U.S. economy speeds along and protectionist measures improve our country’s competitive position. As for the portfolio, overall, it’s performing superbly, but there is one obvious laggard, and that’s Chinese solar company JinkoSolar (JKS), which is now rated Sell. Facebook (FB) moves to Hold.
Cabot Emerging Markets Investor
Bi-weekly Update October 12: The iShares EM Fund (EEM) has been trending up, keeping the Cabot Emerging Markets Timer a bright green. Our stocks are generally doing well, and Paul has no changes to the portfolio tonight.
Bi-weekly Issue October 5: Despite some nervous-making weakness last week, the Cabot Emerging Markets Timer has bounced back to regain its green-light status. And with our stocks acting well, the situation looks excellent, although we’re issuing the usual bull-market warnings that this can’t go on forever. Today’s featured stock is Sina Corp. (SINA).
Cabot Benjamin Graham Value Investor
Monthly Issue October 12: Azmath begins the transition of stocks from Roy Ward’s Value and Enterprise Models to his new, more consolidated Prudent Model. Azmath’s top recommendation is Gentex (GNTX).
Cabot Small-Cap Confidential
Weekly Update October 13: It’s entirely possible this bull market has more room to run. Accordingly, Tyler will keep doing what he’s been doing. There’s only one change to the portfolio today, and that’s to move Primo Water (PRMW) to Hold.
Monthly Issue October 6: A year ago, a group of college kids laid out the case for a Trump’s victory. And they did it with a mess of disparate data in just 20 hours using a data prep platform by the little-known company that Tyler is recommending today: Datawatch (DWCH). One rating change: US Concrete (USCR) moves to Buy.
Cabot Dividend Investor
Weekly Update October 11: Chloe is putting General Motors (GM) and PowerShares Preferred Portfolio (PGX) back on Buy today. That brings the total number of Buy-rated recommendations in the portfolio to 10, not including the four ETFs in our bond ladder.
Monthly Issue September 26: Chloe is adding CME Group (CME), a unique play on financial markets, to the Dividend Growth Tier. She also writes about interest rates—the driving force behind many of this month’s sector rotations. No ratings changes.
Wall Street’s Best Investments
Daily Alert October 13: Okta, Inc. (OKTA) from Crisis and Opportunity
Daily Alert October 12: Red Hat (RHT) from The Periscope Report
Daily Alert October 12: Sell Aegion (AEGN) from The Periscope Report
Daily Alert October 11: Vanguard International Growth (VWIGX) from Moneyletter
Daily Alert October 10: MSCI South Korea Hedged Equity ETF (DBKO) from Jack Adamo’s Insiders Plus
Daily Alert October 9: Fidelity Event Driven Opportunities (FARNX) from Fidelity Monitor & Insight
Monthly Issue September 20: This month’s Spotlight Stock is PTC Inc. (PTC), a technology company that is a leader in the all-important cloud business, and Nancy’s Feature further explores that cloud industry and the up-and-coming applications that should see it expand greatly in the near future.
Wall Streets Best Dividend Stocks
Daily Alert October 13: Hannon Armstrong Sustainable Infrastructure Capital (HASI) from The Intelligent REIT Investor
Daily Alert October 12: AGNC Investment Corp. Perpetual (AGNCN) from Forbes/Lehmann Income Securities Investor
Monthly Issue October 11: Our Spotlight Stock this month is representative of thriving stock markets. CME Group (CME) owns and operates exchanges for stocks, options, futures and derivatives. It has grown leaps and bounds, both internally and by acquisition, and numerous opportunities for expansion remain. Nancy’s feature further explores those opportunities.
Daily Alert October 11: New Residential Investment (NRZ) from Pivotal Point Trader
Daily Alert October 10: Commodities Select Strategy (COMT) from Bob Carlson’s Retirement Watch
Daily Alert October 9: Valero Energy Corporation (VLO) from Sound Advice
This Week’s Q&As
Cabot Growth Investor and Cabot Top Ten Trader
Question: I see LendingTree (TREE), which you’ve had in your Cabot Top Ten Trader for a while, was downgraded to sell and fell about 5% early in the morning. Should we sell?
Mike: As always, if you want to take your profit, you can, but I’m a big believer in trying to play out your winners—you never know when a stock could just keep trending and trending and be one of your huge winners that really drives your portfolio.
In TREE’s case, we’ve been in since May, and have advised taking partial profits once or twice on the way up. Thus, if you have a big profit, we’d tend to give the remaining shares some rope, possibly holding down to the upper 220s or so. A break of that area would raise the odds that a real correction/base-building effort is getting underway.
The bottom line is that there are usually plenty of reasons to get out of a good trend-following trade, as TREE has been. Maybe it will prove to be smarter to sell up here (earnings are coming up in about three weeks), but long-term, you’re better off giving your winners a chance to run, especially if you’ve already taken partial profits off the table.
Question: You’ve mentioned a few times this that investor sentiment is pretty sour, which is a good thing for the market. After the latest advance, is that still true?
Mike: In general, yes. Looking at big-picture things like money flows, it’s clear that few investors are thrilled with equities, especially domestic equities. In fact, money has been pouring OUT OF domestic equity funds and ETFs in recent weeks, even as the market has advanced!
That said, short-term, yes, we have seen a little chest-bumping from some investors that are happy with their gains, and some measures like volatility (VIX below 10 again) suggest a few potholes are likely. Overall, I’d say that people certainly aren’t fearful, and there is a bit of complacency showing up. But on a longer-term basis, I don’t see anything close to euphoria.
Cabot Options Trader and Cabot Options Trader Pro
Question: I just recently signed up with your advisory. I presently use Schwab for my stock purchases and option buying. I am considering opening a different account for option purchases. Is there an online trading service you would recommend for option trading?
Jacob: I use Interactive Brokers. I find their commissions to be extremely cheap at around $1 an option contract. That said, I understand that platforms at Schwab or Fidelity are slightly easier to use but their commissions are higher.
If you decide to use Interactive Brokers, and ever have a question on how to use their system, feel free to email me and I will try to help out.
And regardless of which broker you decide to use, don’t be afraid to ask for lower commission rates. It is a very competitive market for brokers, and if you ask, you can likely get your commissions lowered.
Cabot Stock of the Week
Question: I have subscribed to Cabot Stock of the Week since it’s inception in June 2016. I have chosen this Cabot investment letter because it works best with my limited resources and my very limited knowledge of stock trading.
So far, to date, my portfolio is up 75%. Yes there have been a couple of losses which I limited to 10% and 12%. But overall I have no complaint, none whatsoever.
My question: In the latest issue 10 October 2017, you remind subscribers to have a plan of when to sell because this bull market is long in the tooth.
I have come to rely on your recommendations very much (totally). I have full expectation that following your expert advice you will provide signals, in the way of recommendations and what the market is doing, that it is time to decide to sell, or not. Yes, I know the responsibility is all mine. My question: is my expectation on track?
Tim: Thanks for the kind words—but don’t forget that the bull market deserves a lot of the credit.
And that’s why we should be wary of the end of the bull market and the return of a more difficult environment.
So, to answer your question, yes, your expectation is on track.
I will do my best to minimize losses and eke out gains for the Stock of the Month portfolio when the road gets rougher, using a combination of more conservative selections and shorter-term timing (trying to buy short-term bottoms and sell short-term tops), and I will try to communicate clearly my thinking at every stop.
For now, the trend is up.
Cabot Emerging Markets Investor
Question: Do you have any concerns re: Alibaba (BABA) due to it’s (possibly news-related) selloff? It appears to be selling off on news of the Chinese government’s desire to be given a 1% stake and a seat on the board. Or else it was just due for a correction. As you’re no doubt aware, it’s not broken any important support. Thoughts?
Paul: At this stage of the rally in emerging market stocks, I have concerns about everything. This rally isn’t like anything I’ve seen in my time in the investment industry. I’m sticking with everything because the market has taught me not to second guess the bull. But I’m also trying to tell everyone who will listen that this can’t go on forever. (This makes me a real drag at cocktail parties.)
I’m skeptical in general of attributing a stock’s movement to a particular news story. (I made an exception with the resignations of AutoHome’s President and CFO.) I still think it’s best to just manage a stock by looking at the price/volume action and avoiding interpretation.
If BABA tanks, I’ll sell it. If it flattens out, I’ll hold it. And if it continues to advance, I’ll continue to recommend buying it.
Question: Do you find it odd that PGJ does not have Alibaba (BABA) or Tencent (TCEHY) in its holdings, KWEB has all the BAT stocks in Top Ten.
Paul: There are a ton of indexes, many with slight variations. I don’t think it’s odd that PGJ doesn’t have TCEHY, as that stock trades only on the OTC market. BABA is a bit of a surprise, but not a huge one.
What really impresses me is that EEM, PGJ, KWEB and most of the rest perform pretty much in line with one another. And since I’m using EEM only as a way to gauge the medium-term trend of the market, I haven’t looked too closely.
Question: I bought PAC on 2/18/16 for 82.90. Would you suggest selling or holding?
Paul: Grupo Aeroportuario del Pacífico (PAC) has been in a downtrend since late July and is down from 118 to 97. It has dipped below its 200-day moving average, which I usually regard as the third rail for stocks. The downtrend, the volume spikes on selling days and the stock’s dip below its May support all make it a sell. I think it’s time to book your profit and look for a better stock.
Question: I am a subscriber to Cabot Emerging Markets Investor. I have been watching BZUN carefully lately as it consolidates. It has formed a pennant with declining volume, all above the 50-day moving average. It looks ready to resume it’s upward move. Are you still watching this stock?
Paul: I’m always interested stocks that I’ve had in the portfolio before, as much of the initial research has been done and I can give the chart more weight.
Three things.
First, Baozun (BZUN) has been trading net flat since late July, with one shakeout, one rally on increasing volume and one return to the baseline. That indicates that there hasn’t been a fundamental change in the opinions that institutional investors hold about the stock.
Second, the action since July has created a technically sound base in the 33–34 range. It’s a solid enough trend that a deviation up or down, especially on increased volume, would constitute a valid buy/sell signal.
Third, therefore, the next move on volume is likely to indicate the stock’s trend for a while, always with the caveat that a bad earnings number can always take a growth stock off at the knees.
Bottom line: If you really like the story, you can take a small position here and just wait it out. Or you can wait for the breakout (on volume) above 35 and start averaging up as it advances.
Cabot Small-Cap Confidential
Question: I just go stopped out of Primo Water (PRMW) which sucks. Took quite a hit.
I generally trade with brackets to protect myself but find that using bracket orders with your small cap orders seems to have lost me a fair bit of capital. So 2 questions. Do you put stops on tour small cap trades? And is this now a but opportunity for PRMW and should I get back in.. Look like it could go as low as 10.17 as it did back in May of 2016??
Tyler: You pretty much nailed it (PRMW’s action sucks). I’ve been watching this general area as one that should provide iron-clad support, but I can’t say it’s looking too good. I was surprised by the move below 11, and if it moves below 10 I’ll be shocked. But, that’s happened before.
As far as time to get back in, I’m becoming incrementally more bearish on the stock, not bullish. It’s not that it doesn’t have potential (it does), but because the chart is telling me to. We need to get an earnings release date to give the market something to look forward to. For now, holding on, but watching closely.
As far as stops, no, I don’t use them. My experience is similar to yours – there were just too many times when a weird intra-day spike down triggered a stop that they didn’t make a lot of sense to keep using. I do have alerts set up to let me know if/when key levels are hit. But nothing that would trigger a buy or sell order (and I’m checking in on the stocks all day anyway). I like to try and match up the trading action with any news, SEC filings, blog posts, etc. before acting.
Will provide more details in tomorrow’s update.