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Weekly Summary July 13, 2018

Cabot Prime Pro Week Ending July 13, 2018

REMINDER: The next Cabot Prime Pro quarterly analyst call is Wednesday, July 18 at 2:00 p.m. Eastern Time. It’s free as part of your Cabot Prime membership. Sign up here.

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Cabot Weekly Review (Video)

In this week’s stock market video, Mike Cintolo discusses the market’s improved action during the past two weeks--while the picture isn’t perfect, his indicators are bullish and he’s seeing a lot of strong stock action, so he’s mostly bullish. As always, he reviews some solid setups in a few categories (brief setups, long bases, tennis balls, etc.) and will be watching the market’s (and leading stocks’) action during earnings season for clues.

Advisory Services

Cabot Growth Investor

Bi-weekly Update July 11: Mike says to continue to lean bullish. The market’s bounce off support last week was encouraging, and while we remain in a news-driven, choppy environment, our current cash level is too high given the mostly positive evidence. Thus, tonight, he’s adding two new stocks: Ligand Pharmaceuticals (LGND) and Teladoc (TDOC), leaving us with a cash position of 20%.
Bi-weekly Issue July 3: Mike is standing pat tonight but keeping an open mind. If this was just a brief short-term pullback, there will be many growth stocks to jump on. But right now he’s keeping some relatively tight stops in place in case the sellers punish growth stocks further. From here, Mike is open to anything—prepared to raise more cash if a full-fledged correction gets underway, but he’s more focused on fine tuning our Watch List with vibrant actors.

Other Stocks of Interest July 6: Follow ups to stocks featured January 31, 2018 (issue 1386) to July 3, 2018 (issue 1397). 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 July 13: Today, Mike says he’s seeing a good amount of strength in stocks that are either beginning to come to life again after multi-month consolidations (Vertex, the Top Pick this week, is a good example) or rounding out bases that began a couple of weeks before the mid-June shakeout. Thus, while there remains lots of divergent action, he sees plenty of good charts out there. Today’s Buy Ideas: Etsy (ETSY), Heron Therapeutics (HRTX), Okta (OKTA), Spotify (SPOT) and ZTO Express (ZTO). Mike has three sells: Cheniere Energy (LNG), Peabody Energy (BTU) and RH (RH).

Weekly Issue July 9: Mike says the intermediate-term trend is still tilted up, and while there are fewer stocks hitting new highs than there were a few weeks back, there remain many stocks in good shape. With the improved evidence, he’s nudging our Market Monitor up a notch to 7; like we just wrote, last week was encouraging. Mike’s Top Pick is Vertex Pharmaceuticals (VRTX), which has surged toward the top of an 11-month consolidation. We’re OK starting small and adding more if shares advance.

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.
Cabot Options Trader Vacation Notice July 5: Jacob will be on vacation from Monday July 9th through Monday July 16th. While I am away fellow Cabot Analyst Mike Cintolo will be our watching our stocks, along with my stops, and will alert me if I need to evaluate a position.

Cabot Undervalued Stocks Advisor

Weekly Update July 10: Crista is getting ready for earnings season. She’s thinking that financial stock share prices might have a very good couple of weeks. There is one portfolio change today, Blackstone Group LP (BX) moves from Strong Buy to Buy.

Monthly Issue July 3: Crista says for now, stay focused on GDP if you’re worried about a recession (which she promises you is nowhere in sight), and literally just glance at a two-year stock market price chart if you’re worried about a bear market. Today, CF Industries Holdings (CF) joins the Growth Portfolio and Delek U.S. Holdings (DK) joins the Buy Low Opportunities Portfolio, both as Strong Buys.

Cabot Stock of the Week

Weekly Issue July 10: With this week’s recommendation Tim is swinging back to the higher-risk end of the spectrum with a small, fast-growing company that just came public last November. The stock, Stitch Fix (SFIX), was originally recommended by Mike Cintolo in Cabot Top Ten Trader. Here are tonight’s rating changes: Axon Enterprise (AAXN) moves from Hold to Buy, PagSeguro (PAGS) from Hold to Sell and TiVo (TIVO) from Buy to Hold.

Cabot Emerging Markets Investor

Bi-weekly Issue July 12: This issue’s featured stock is WNS Holdings (WNS), an information technology company that practices business process outsourcing (BPO) for global clients in the banking, financial insurance and travel industries. Paul has it rated Watch. Also, he gives you five rules, that if you follow them, will go a long way toward blunting the market’s attempts to take your money—and be in position to greatly increase your wealth when the buyers return. Noah Holdings (NOAH) is moving from Watch to Drop.

Bi-weekly Update July 5: Emerging market stocks have been attempting to find a bottom after a month of accelerating declines. The week has been fairly calm, with the iShares EM Fund (EEM) and many of our stocks showing some signs of basing. Paul has no changes to the portfolio.

Cabot Benjamin Graham Value Investor

Weekly Update July 12: Crista writes that if you own shares of Walt Disney (DIS), it’s time to decide whether you’re planning to hold it forever because you’re in love with the stock, or whether you’d rather trade it for an undervalued growth stock, thereby lowering your portfolio risk and increasing your chances of achieving capital appreciation. She is moving Intercontinental Exchange (ICE) from Hold to Sell.

Cabot Small-Cap Confidential

Weekly Update July 13: Tyler writes that the market is telling us to proceed about as we have over the last 12 months. That means keep adding exposure to our strongest-performing positions and take new positions in established leaders and stocks that have recently begun to break out. He has two portfolio changes today: Everbridge (EVBG) and IntriCon (IIN) both move to Buy.

Monthly Issue July 6: Tyler’s new recommendation is Chefs’ Warehouse (CHEF). With this month’s new addition, Tyler decided to go in a different direction then he has with previous recommendations. Instead of featuring another rapid-growth medical device or software stock, he’s selected a consumer defensive stock in a very specialized industry and with a more modest growth profile. There are no changes to the portfolio.

Cabot Dividend Investor

Weekly Update July 11: Chloe writes that markets ended last week with a strong performance, despite the mid-week holiday, which typically reduces trading. All three indexes finished the week higher, and then tacked on more gains to start this week. There are no rating changes today, but if you’re looking to a do a little buying, she has plenty of options in every tier of the portfolio. Some of the financials (AB and AXP) and our energy stocks (OKE and OXY) are looking particularly constructive right now, as are Broadridge (BR), McGrath RentCorp (MGRC) and UnitedHealth Group (UNH).

Monthly Issue June 27: This month’s featured buy, Occidental Petroleum (OXY) is a large oil and gas company with a 3.7% yield, a 15-year history of dividend growth, and rapidly rising earnings. It’s being added to the Dividend Growth tier. Chloe is selling half of Intel (INTC), and replacing Invesco BulletShares 2018 High Yield Corporate Bond ETF (BSJI) with Invesco BulletShares 2022 High Yield Bond ETF(BSJM).

Cabot’s 10 Best Marijuana Stocks

Update June 14: Tim recently attended the Cannabis World Conference and Business Expo in New York City. His main takeaway from that conference was that the trend continues to gain strength, at a faster rate than expected. He also updates the 10 stocks in the portfolio.

Summer Issue May 24: With this issue, Tim is replacing two of the portfolio stocks—Emerald Health (EMHTF) and CannaRoyalty (CNNRF)—with new recommendations—Hydropothecary (HYYDF) and iAnthus Capital (ITHUF).

Wall Street’s Best Investments

Top-Picks Mid-Year Daily Alert July 13: LightPath Technologies Inc. (LPTH) from The Inger Letter
Top-Picks Mid-Year Daily Alert July 12: Autohome (ATHM) from Cabot Emerging Markets Investor
Top-Picks Mid-Year Daily Alert July 12: GDS Holdings (GDS) from Cabot Emerging Markets Investor
Top-Picks Mid-Year Daily Alert July 11: Encision, Inc. (ECIA) from S.A. Advisory
Top-Picks Mid-Year Daily Alert July 11: Cemtrex, Inc. (CETX) from S.A. Advisory
Top-Picks Mid-Year Daily Alert July 10: Cerner (CERN) from Logos LP Blog
Top-Picks Mid-Year Daily Alert July 9: MasTec Inc. (MTZ) from Money Options

Monthly Issue June 20: Our June Spotlight Stock is, SVB Financial Group (SIVB), financial services company, as well as a bank holding and a financial holding company. Nancy’s Feature article discusses the correlation between venture capitalists and the Spotlight Stock.

Wall Streets Best Dividend Stocks

Daily Alert July 13: B. Riley Financial, Inc. (RILYH) from Forbes/Lehmann Income Securities Investor
Daily Alert July 12: Sell: iShares J.P. Morgan Emerging Markets Bond ETF (EMB) from The Income Investor
Daily Alert July 12: O’Shares FTSE Russell Sm Cp Qual Div (OUSM) from Internet Wealth Builder

Monthly Issue July 11: This month’s issue is our Top Picks for 2018 mid-year update. Capturing first place, with a gain of 27% is Ingrid Hendershot of Hendershot Investments, who recommended The TJX Companies (TJX). In this issue, Nancy updates many of our Top Picks from our January 2018 issue, and has also added a couple of new Top Picks, as well as a variety of additional investment ideas.

Top-Picks Mid-Year Daily Alert July 11: AT&T Inc. (T) from The Inger Letter
Top-Picks Mid-Year Daily Alert July 11: General Electric (GE) from The Personal Capitalist
Top-Picks Mid-Year Daily Alert July 10: General Mills, Inc. (GIS) from Equity Research & Portfolio Evaluation, Inc.
Top-Picks Mid-Year Daily Alert July 9: Asia Pacific Wire and Cable (APWC) from S.A. Advisory
Top-Picks Mid-Year Daily Alert July 9: Optex Systems Holdings, Inc (OPXS)/(OPXXW) from S.A. Advisory

Premium Reports

Cabot’s 10 Best Buy and Hold Stocks for 2018

Update July 13, 2018: Today, Crista updates investors on portfolio news and performance of the stocks in Cabot’s 10 Best Buy and Hold Stocks for 2018. In terms of individual stock performance, Supernus Pharmaceuticals (SUPN) is up 34.6% YTD through July 12, while Universal Electronics (UEIC) is down 28.0% YTD. The performance of the remaining stocks ranges between +19.5% and -18.2%.

Update June 12, 2018: On June 11, 2018, USG Corporation (USG) announced that its Board of Directors agreed for the company to be acquired by Gebr. Knauf KG for $44 per share in cash. Crista suggestion is that investors sell USG now, rather than wait for the remaining $0.96 per share to accrue from the special dividend and the remaining potential capital appreciation.

Cabot’s 10 Best Takeover Stocks

Special Report May 3: There are a variety of reasons that a corporation might want to purchase another company. They might want to acquire a company’s patents or products to enhance their product lines; access the company’s distribution network and sales relationships; or simply aim to increase their earnings growth rate by purchasing a very profitable company within a related industry. After all, stronger earnings growth leads to better share price appreciation—a topic that boards of directors care very much about. Crista’s investment strategy, which combines both growth and value criteria, inadvertently identifies potential takeover targets. That’s because big companies and she often seek the same thing: stock investments in undervalued, financially thriving companies that can deliver profits to investors. The ten companies are all undervalued growth stocks. What’s more, they’re small enough that big competitors and peers within their sectors could easily finance their acquisitions, often through current cash flow.

Cabot’s 10 Best Covered Calls on Dividend Stocks

Special Report April 12: With interest rates just coming off of historically low levels, income investors have been desperately searching for alternative sources of yield. Dividend stocks are the obvious answer. But there’s an even better way to create yield: by executing a covered call strategy on stocks that pay dividends.

Cabot’s 10 Best Small-Cap Cloud Computing Stocks to Buy Now

Special Report Updated June 18: If you’re a growth investor, you need to own cloud software stocks. It’s just that simple. Cloud computing is changing the world. It’s powering massive growth in companies across sectors, empowering digital transformations, enabling new generations of connected technologies and changing how people live their lives. Tyler Laundon lays out the landscape and names his 10 best small-cap cloud computing stocks.

A Richer Retirement

Special Report This handbook is designed to help you secure a better, longer, richer retirement for yourself by making the most of your savings both before and during retirement.

Ask the Experts

Cabot Wealth Network

Question: I loved the list of Forever Stocks, but have one bone to pick, if you will indulge me. Sounds like your heart was telling you to include Teladoc (TDOC) but you just couldn’t. Going with the HSA provider [HealthEquity (HQY0] is something I can’t argue with strongly. However, If you let yourself be talked out of TDOC based on competition, then I would disagree wholeheartedly. Have you checked the patents that TDOC won from American Well? Aside from that, being the first real horse to the trough gives them fantastic advantage in this type of technology and with their customers. TDOC is the only pure play in an industry being disrupted by its product. That said, I have done very well with your recommendations, and will remain a customer as long as I can. Please don’t be angry with me for fussing a bit and know that I am a big fan of your work.

Tim: Thanks for the comments. TDOC continues to behave fantastically, and there’s no question that I’m thrilled to have racked up a profit of roughly 100% in just six months. Furthermore, I am very bullish on the concept of telemedicine; our outrageously inefficient health care system will certainly benefit from such disruption. But yes, it is the threat of competition from bigger players that kept me from including TDOC in the latest list of Forever Stocks. I’ve seen too many medical technology stocks fail to deliver in the long term because a competitor came along with a slightly different idea, and I can very easily imagine that a large company, from Alphabet to Apple to Medtronic to Wellpoint, might enter the arena. But I hope I’m wrong!

Cabot Undervalued Stocks Advisor

Question: Hi Crista and thank you for your invitation to ask questions; mine relates to a financial stock, BLK, which I bought when it was in the 550s on a run but has since been seriously pulled back. What do you think of the fundamentals of this company for an investment term of say four years?

Crista: I looked at BlackRock (BLK) for you. The earnings growth is on a nice trajectory, projected out through fiscal 2020, as per the consensus earnings estimates. The dividend has been growing annually. The stock is not undervalued, but it’s not way overvalued either. As for the price chart, be aware that the entire financial sector has been weak recently, despite a preponderance of companies with attractive earnings growth in the sector. I expect financial stocks’ share prices to rebound, possibly beginning this month as they report second quarter results. My suggestion is to review the consensus full-year earnings estimates a couple of times per year for all of your stocks, to make sure that they are expected to see continued earnings growth. The moment you notice that one of them is expected to have a flat or down year, that’s the red flag that should cause you to reassess its place in your portfolio.

Question: Can you please comment on AVGO? Should I hold on to it?? With today’s 15% drop, should I add more?

Crista: Broadcom (AVGO) does not fit my investment strategy because the company is expected to have no earnings growth in 2019 (October year-end). In that light, I would not buy it, and if I owned it, I would sell it, putting the capital into an undervalued growth stock. Regarding today’s price action, the stock plummeted below price support. When that happens, it’s rare that the stock promptly rises back to its former trading range. Normally it would need to languish for a while (up to a couple of months), then slowly begin its recovery.

Cabot Growth Investor

Question: Hi Mike, I have a question on putting stops on stocks. I was using trailing stops of about 12% but I had some stocks that take a dive and by the end of the day climb up and my stock was sold. I had to absorb the loss and rebuy at a higher price. Is it better to use the loss limit that you recommend and not use the trailing stocks. I realize this would always end with a loss because it is lower than your bought a stock for. A trailing stock will allow you to capture some gains if it is in a free fall but then you have the scenario that I mentioned about a bouncing stock. What do you recommend as a good strategy.

Mike: So, first, I’m not a huge fan of blanket stop losses using the same % for each stock. That’s like saying we all are the same height or have the same metabolism. I tend to use charts for stops and such. Once a stock gets moving, I definitely raise the mental stop -- slowly at first, and I’ll often take partial profits on the way up, too. But just having a blanket number will often have you knocked out on noise alone. Not saying it’s the worst thing in the world -- it’s good to have at least some sort of stop -- but we think you can do better with a little judgment. As for mental vs. in the market stops, it’s really just about being consistent -- both have advantages and disadvantages, but just pick one and use that. Overall, I like to start with a relatively tight stop, raise it gradually as the stock heads up, take partial profits after a decent gain, and then trail from there. Not as easy as it sounds, but that tends to work over time.

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