Mike Cintolo, Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader, shares his take on what to expect from the market in 2020. He also reveals 3 great stock picks to buy.
The webinar was recorded January 23, 2020
You can find the slides here.
[00:00:01] Hello and welcome to today’s Cabot Wealth Webinar: 2020 Market Outlook plus, three stocks to buy now.
[00:00:08] I’m your host, Chris Preston, chief analyst of the Cabot Wealth Daily Advisory and managing editor here at Cabot Wealth Network. With me today is Mike Cintolo, chief analyst of our Cabot Growth Investor and Cabot Top Ten Trader Advisories. Today, Mike’s here to talk about what he expects from the stock market in the year ahead. How you should approach the currently bullish, but possibly a bit frothy investing environment and what stocks he currently likes. This is an interactive webinar, which means we’ll be answering your questions after Mike’s presentation wraps up. So if you have a question, feel free to ask it at any time and we’ll try to get it as many of them as time allows once Mike wraps up. And just keep in mind that we cannot offer advice in regards to your own personal investing situation or portfolio. First, let me introduce Mike. Mike, is a growth stock and market timing expert who has been with Cabot for more than 20 years. During that time, his advisories, Cabot Growth Investor and Cabot Top Ten Trader have routinely beaten the market. Along the way, Mike has developed creative new tools, indicators and strategies for uncovering some of the market’s most exceptional growth stocks. Perhaps most notable was his development of the proprietary trend following market timing system— Cabot Tides—which has helped his two investment advisories to be placed among the top handful of market timing newsletters numerous times. Long story short, Mike knows what he’s talking about when it comes to the market and when it comes to finding growth stocks. Let him do just that. Mike, take it away.
[00:01:38] OK. Chris, thank you very much. Thanks, everyone, for being here. 2020 market outlook. Good start so far for the year. If you’ve read any of my free stuff or paid stuff the last couple of months, you know I think I’m expecting good things in 2020.
[00:01:59] I think it’s going to be a bull market year. And I think the vast majority evidence favors that. If you’ve attended any of my Cabot Wealth Summits in the summer. First of all, if you haven’t, you should. It’s a great time. A lot of one to one time there. But if you have this is going to kind of follow the same script. I’d like to look at things sort of starting with the mega trend or the 10000 foot view, as I call it, drill down into sort of a longer term view. And of course, get into the here and now. And what’s interesting is we’re kind of in the middle innings, in my opinion, of both the key market trends, both the megatrend and sort of the quote unquote, regular long term looking out over the next six to 18 months.
[00:02:37] So those are still supportive. It’s not as high odds as it was a year ago, did a webinar about a year ago that was really coming right off the bottom. Very high odds, but obviously I’m expecting good things right here for the here and now. Yeah, we’re bullish. But listen, it’s the risk here. We’re watchful. So far, the market’s been resilient, despite a bunch of bad news really this month, or at least news that could drive the market lower really hasn’t. But, you know, the risks are high that we’re going to either get a consolidation, pullback, shake the tree moments, something like that.
[00:03:07] OK. But like I said, I’d like to start with the mega trend where the secular view a lot of people call you can call it whatever you want. And I’m not going to harp on this too much. But basically over the past hundred years plus years, the market tends to move in these 10 to 20 year cycles. And it’s not voodoo or, you know, magical technical chart analysis just during the secular bull markets, which we’re in now. You have rising valuations, rising investor perception in the world’s things are usually going pretty good. A lot of new inventions, you know, low interest rates, good policy, that sort of thing during the secular bears.
[00:03:41] It’s the opposite. And that’s when you have your housing bubble crashing. You have your Watergate, you have inflation, you have wars, you have the Great Depression. You know, all those somethings are really kind of going wrong in the country and or the world as a whole.
[00:03:56] OK. The good news, like I said right now, is we’re in the middle of one of these uptrend now. I yank this chart off the Internet. So I didn’t put any of these notations. Feel free to look at it. I think it came from JP Morgan. The long story short, if you look from twenty nine to forty nine, the market went nowhere, OK, from forty nine to sixty six, it basically went up from 66 to 82, sideways from 82 to 2000 up. And then we had the 2008 2013 period where we made no net progress. Obviously we had the two huge bear markets during that time and now, or at least not now. But I guess as of March of this year, we’ll be seven years into this secular bull. Again, these things tend to go 10 to 20 years. It’s a very, very big picture background thing. It’s not exact. And of course, the market can do whatever it wants to do. But the odds favor that we’re just kind of in the middle of this trend. OK. It’s not just the charts, though. There are other reasons for thinking that. This is a chart I pulled out.
[00:04:55] This is from DShort.COM, but it’s the 15 year annualized return of the S&P after inflation, actually. And it’s really just a derivative of the chart we just looked at. But the vertical lines are major multi-year talks in the market. So 1929, 1937, most people don’t remember that, but I do. I was there. But that was a 50 percent decline in the market. The late 60s was a major top and of course, 2000. All right. And you can see, generally speaking, you’re kind of in the 12 to 15 percent annualized return range. Things have been hot for a long time. People’s memories of the prior, you know, the mess of the 20 years ago or 15 years ago has been forgotten. We’ve solved all our problems as a country. That sort of thing right now kind of fit in with the thesis we’re at around call it 7 percent right in the middle. We’re not scraping the bottom, but we’re not we’re not at 15 percent or anything like that. So we’re kind of in the middle range. And I would say now maybe six, seven, eight years from now, that might be different. But at this point, I would say, you know, kind of in the middle of the secular bull. This is a chart actually I do update every year for the capital summit. This is just Gallup asked every year, do you own any stocks personally? Mutual fund. Anything. All right. It’s just a poll. Let’s go back to the late 90s and see before the Great Recession, we’re kind of in the low to mid 60s percentage wise. And since the Great Recession, even in recent years, we’re kind of in the low to mid 50s. Now, I know some people are gonna say demographics and stuff. But first of all, there’s nothing says a retired person can’t own a stock mutual fund. So I don’t really buy that. I just think the Great Recession did such psychological damage. And it just takes a long time for that to recover and new investors to come in who have a lot shorter memories, that sort of thing. So basically when again, six, seven, eight years from now, I wouldn’t be surprised if this figure is right back up into the mid 60s. You know, that sort of thing telling you that the proverbial shoeshine boy is talking about stocks, but we’re not. We’re nowhere close to that. And then lastly, on the sort of the secular picture this is, we have a shorter term indicator and Cabot Growth Investor, it’s called the Real Money Index that uses this data. But of course, we also kind of look at the cumulative flows. This is cumulative money flow into or out of obviously all equity funds, equity mutual funds and ETF. So it’s not just mutual funds or anything like that. And you can see like even just a couple of years ago when the market was real hot at the end of 2017, early 2018, it doesn’t look like much on this chart, but there were 60 or 70 billion dollars gushed into the market right near the top in January 2018. And it kind of hung around the market there for another few months before coming off. The big thing to me is even after the late 2018 was scary, that a lot of people panicked out of it. That’s normal. But even 20, 19, which was a good recovery year, obviously it had a lot of volatility, though. It had a lot of, you know, trade war headlines and tweets and all that sort of thing and uncertainty with the Fed. And people were just withdrawing money hand over fist, actually. Jacob Mintz, who’s the editor of Cabot Option Trader, I communicate with him most of the day. He sent me something this morning that said 2019 had I think was the largest ever, the largest in a long time outflows from hedge funds. This doesn’t include that. But that the point is, is that people are still looking for safety. They’re going into bonds. And again, this is not the sort of sentiment you’re going to see if we’re near sort of a multi-year top.
So anyway, I wouldn’t wake up every day and say, hey, the secular bull market is intact. It’s sort of obvious, but it’s good once or twice a year. And when we look out for the for the outlook for the year to kind of just keep that in the back of your mind that the wind is at your back and all the doom and gloom stories that are out there are viruses in this case, you know, doesn’t mean they can’t affect the market or they won’t. But it’s unlikely to cause some of these doom and gloom scenarios that people harp on. So then we drill down into the quote unquote, regular long term. The long term for the next six to 18 months is kind of what I like to say. And I’m not really as I’m talking a lot about cycles and timeframes, but I’m not a big cycle guy. I take it day by day, week by week. But it’s good to kind of know where you are in the ballgame, where you are in the standings. And while a lot of people in the media, in fact, nearly everyone is saying, oh, we’re in a 10 year bull market. Right, since 2009. I don’t believe that at all. In fact, that market’s action makes a lot more sense when you consider that and you’ll see this in the next slide. But there’s been two or three sort of cyclical bear markets during that time that have sort of refresh the advance led to some new leadership, some new leading industry groups, that sort of thing. And this chart just shows you, you know, last year, actually not last year, but the fall of 2018, that was a cyclical bear market. When you’re in these blue mega up trends, the bear markets tend to be short, sharp and scary. It could be on the extreme side, like in the 87 crash, most of them tend to be more like 20, 25 percent over three or four months.
And that’s what we saw at the end of 2018. And that refreshed the market cycle. And we’ve seen, I mean, a lot of the names now that people are familiar with. Right. Like Coop and some of the leaking of the Twilio or whatever. Those weren’t leading. Still, two years ago, nobody had heard of those that a lot of fresh leadership coming to the fore. OK, so that kind of reset it. Now, we’re kind of one year into this bull move, 13 months call it. And these things tend to go again. It’s very general. But these cyclical advances tend to go two to three years. Usually the first two years of the best, then the indexes might do OK, but it’s kind of choppy and a little bit more defensive oriented stocks. But the first couple of years tend to be pretty good for growth stocks. Generally speaking, what we’ve seen parent. With the secular trend, the mega trend, we’re prized that we’re in the middle innings of both, we’re probably and this is way too exact. But we’re probably like the top or bottom of the fifth inning if you kind of want to get into the into the nitty gritty. I would say, you know, for this cyclical trend, we’re probably more a little earlier, maybe in the fourth inning. And one of the reasons I say we’re earlier is this. We just recently emerged from the third consolidation since the market bottom in 2009. OK. 2011, 2012, we had 19 months here in the S&P of no net progress to the horizontal line. There is a little bit off. But net net, the S&P went nowhere from I think it was March 2011 to November 2012. Then we had the fiscal cliff deal. And if I want to remembers that we went nuts. 2015 2016 was a wear you out bear market. The media won’t say that because we’re only down 15 percent on the S&P or whatever. But for twenty three months, the S&P made no net progress. The Russell 2000, by the way, went three years without any net progress during that time. So that that is a bear market and reset the advance. And of course, after the presidential election, the market went nuts. From January 2018 to really through September and early October of last year, again, no net progress. And now we’re, whatever, four months up out of their eyes. I’m going to talk about I do think we’re a little you know, there’s risks here in the short term, but it would be unusual, not impossible, but highly unusual for something up and die after four strong months on the upside after a 20 month basing period. Probably even better than this is 6 random chance I could’ve showed maybe not 60, but I could have showed 30 charts easily. There’s tons of long term breakouts. A lot of times like the S&P might hit a new high all day, S&P sending a new high. And then you kind of look at the market. It’s like, well, Coca-Cola looks good and you know, Johnson and Johnson, but there’s nothing really confirming the move.
Now, it’s like, you know, chip stocks, biotech stocks, we even see banks. J.P. Morgan today, by the way, first test of the 50 day moving average since its breakout. Just a lot of even some software stocks have reemerged. Salesforce.com came out of an 18 month consolidation or something like that. And when you just see the breadth of the stocks doing well, different sectors combined with the action of the indexes, again, there’s no sure things in the market, but it would just be highly unusual for all these things to do nothing. Have a huge shake out in 2018. Shop around, shop around where everyone out sentiments kind of terrible and then explode higher for three or four months and then die. So my guess is whether we pull back or not or consolidate sideways. My guess is a lot of these things have more to go. And I actually wrote this just as an aside, not to go too much of a tangent. I wrote this in last week’s Growth Investor, but I was I was messaging with a hedge fund friend of mine and we were just sort of sharing ideas. And it’s just, you know, we were we were just saying it’s really unusual where we have a so many strong charts, B, by the way, so many persistent charts that are just up, you know, eight, nine, 10 weeks in a row or something like that, which is a sign of persistent accumulation by big funds. And they look relatively early in their advances, meaning they just got going from these one or two year ranges. So I think that is really one of the big bullish pillars that are out there. This is a little bit of a busy slide. If you want to know the details on these, shoot me an email. I can put together a little, you know, half page thing. But basically there’s just a lot of these long term studies. You know, the market did X, Y, Z over ABC and that’s only happened 10 times in the last 40 years. What happened those 10 times? Did the market go up? And it turns out there’s just a lot of things that have happened over the past five to six months. I’d say some of some of the more recently that portend good things down the road. It’s basically just telling you it’s a bull market and that’s basically what it was telling you. The last one here I just mentioned that I call it the similar study. I couldn’t come up with a good name for it. But basically just the other day, I think was last week I just said out. The S&P is up 13 percent in the last 70, 72 days. So something stupid like that. But I just went back and looked. I said, hey, since 1980, what do other occurrences like this look like? And sure enough, six months later, even though the markets had a huge run, on average, it’s up another 8 percent, that sort of thing. So that’s where those targets come from. It’s hey, the market should be up 15 percent a year later. So I’m not trading based on those. I wouldn’t advise you to memorize those. It’s just when you see not just one or two, but three, four or five studies all point in the same direction. It just gives you more confidence, just putting more odds in your favor that, like I said, it’s a bull market and we’re probably going higher here down the road and 20, 20. These charts were over the weekend, so I know they got a little bit of they got a little bit of virus. Not to make a joke of it, but they pulled back a little bit. But there’s been no divergences lately. Again, when you looking at the long term view, usually you see at least like a month worth of divergences, if not three, four, five months like before the 20, 18 decline. The A.D. line diverge from the S&P. I think for about five or six weeks.
But as of this weekend and I think as of Tuesday or Wednesday, to be honest with you, there’s no divergences going on, small caps, midcaps, a decline, that sort of thing. So things are, generally speaking, in gear. And then, you know, for sentiment, I think it is the last night on the long term. This is a secondary indicator, but this is it’s interesting. I don’t know anyone who trades the right X funds anymore. They’re there. They’re leveraged long index or sector funds, and you can do that via ETF now. But interestingly, the asset levels that they have tend to correlate pretty well here. You can just kind of line them up here with the S&P chart pretty well with tops and bottoms over the past few years. So I keep an eye on it and you can see sentiment has been heating up a little bit. Some of the money come in. This is a 21 day moving average. So it’s a little bit higher than that real life. But, you know, we’re nowhere near where we were during, say, the spike peak of January 2018 when it was up at four point seven billion dollars or whatever, or even the highs there in 2015 when the market was sort of topping out. OK, so sentiment is heating up. And I got to show you some shorter term sentiment, things that are a little bit more yellow flags. But in terms of, you know, people put money to work and, you know, people really being greedy, it’s just not there yet.
So I think, again, the secular trend and the longer term trend there, both in the bulls favor right now. And that’s really honestly 80 percent of the ballgame. Now, you know, I come to work every day, I’m looking at the market. We look at charts and I mean, things are extended. So, you know, now we don’t sell. Thankfully, we don’t sell because of that. I really wouldn’t. By the way, if you’re obsessed with overbought, oversold stuff, I would try to get out of that habit because it’s going to work against you or it’s going to work for you a few times in a row and then you’re going to miss a really big trend. So things have been sort of overbought since mid December. But, you know, you never want to sell because of that. We are getting stretched here. This chart is the S&P versus its 35 week moving average. Mike, why using a thirty five week moving average? That’s just what we use in our Cabot trend lines, which is our long term trend model. Probably a most reliable market timing indicator.
But one of the key ones we watch and you can see this is just going back 10 years. I just pulled it right off the spreadsheet that we keep. And I think it closed last week, 10 and a half percent or whatever that number is. You can see it’s not up there very often over 10 percent. Now, that doesn’t some of these things ended up being the start of multi month consolidations. Some did not. In fact, one was in early 2013. That was a great I would say a great time to buy that second. But, you know, the market had a great year that year, so I don’t think it’s a longer term negative. In fact, if anything, I think that sort of momentum we have as a longer term positive.
But there’s no question that we could pull back a few percent or chomp sideways and would be totally normal within the bigger scheme of things. And then here’s you know, this is shorter term sentiment. So we’ve looked at sort of cumulative money flows right early on and you’re seeing people are just piling out of it. We kind of looked at what I would call speculative money flows with those write ex funds and they were, you know, perking up. But nothing kind of in the middle of the range, nothing extreme, nothing that would point to, you know, a nine month consolidation or something long but shorter term. This is like a 10 day moving average of the equity put call ratio. Low means there’s a lot of calls and there’s not a lot of puts. What does that mean? Nobody’s really buying protection. That’s what it means. Forget about betting on a market decline. You know, people aren’t really betting, trying to protect their portfolios. And I’m really nervous, that sort of thing, which is good. And it can remain good until it isn’t sort of thing. So you just you just know the environment’s there where if things start to kind of come down here in the short term, there’s probably gonna be a lot of people who are saying, hey, hey, I’ve got a lot of profits here. I want to protect. I’m going to trim some stocks. I want to buy, you know, puts or whatever to protect myself.
The chart on the right is the AA II survey. It’s bulls less bears. It’s a four week moving average. Again, it’s kind of interesting, like the right X thing just to go on us on a note that only 300 people or something answer the survey. So you’d think it would have no value, but it does line up pretty well with tops and bottoms. OK, with the market and you going to see again, this chart goes back three or four years. It’s toward the higher end of the range. There’s no I don’t use it for signals or there’s no buy or sell signals per say. But, you know, people have gotten the message that, hey, the market’s pretty good. You know, we’re hitting new highs. A lot of the worries of the past few months, you know, the trade war and even stuff that popped up this month like I ran seemed to kind of came and gone pretty quickly. So that just tells you that there’s a rising risk of a retreat, pullback, shakeout, whatever term you want to use. You just have to be aware of it. So you want to be choosy on the buy side.
[00:20:57] That’s really that’s a summary. You know, the big picture backdrop, the megatrend remains very supportive. All right. You know, again, you’re not going to wake up every day and say that, you know, hate the secular bull markets up. And that means I’m going to be buying stocks now.
[00:21:13] But like I said, once or twice a year, you want to just be aware that, hey, the worst case scenario, especially if we do pull back and, you know, unfortunately say this virus spreads or something bad stuff happens in the world, you know, it tends to these things tend to happen. You know, you just want to keep a level head and say, oh, this is this time is different. Now, chances are we might pull back. We might correct. But chances are that pullback is going to be buyable and eventually lead to higher prices. In terms of the current bull run, yeah, I think we’re kind of in. If you look at the fact that we’re 13 months into it, it’s probably something like, you know, we’re in the fifth inning. But I think the fact that we just came out of that 20 month range in the S&P bodes well for going down the road. OK. And there is a near-term risk of a shakeout in arrest. But the good news and like I point out on that slide, I think one of the biggest positive pieces of evidence is there’s tons of stocks that are early-ish in new up trends. What should be sustained up trends that last many, many months.
That includes three picks I have for the year. Now, I could have just picked three stocks from Cabot Growth Investor model portfolio. I thought I’d be a little bit more fun. I picked one. I wanted to focus on liquid leaders, first of all, which are big, well traded institutional quality stocks, OK, that tend to not just do well, but are easier to hold on to. So they’re not bottle rockets like, say, a lock and coffee, which I like, but that thing can come up and come down 20 percent, you know? Right. Quick. They’re a little harder to hang onto, especially if you don’t have a profit. These other ones tend to act a little bit more like they quote unquote should and respect areas that they should. If all goes well. OK. So without further ado, let’s jump in. OK. Pick number one. And this is in no particular order but this one I do own. We’ve owned it and growth investor for a couple months.
This is Dexcom (DXCM) and I like to analyze things. If you don’t know my work story numbers and chart are kind of the three pillars of what we look at when choosing individual stocks. Now they have the bet. I think they have the best in class continuous glucose monitor, which is which is big. But I think really even bigger stories that the whole diabetics field and the insulin field, so to speak, is really shifting thanks to technology. More and more people are getting on pumps. They’re using these continuous glucose monitors. They have much better results. And my grandmother-in-law, I guess that’s the right term. She’s 90 years old. She’s not going to start using a pump. She has diabetes. But, you know, you see, I’ve seen kids at the beach. You know, unfortunately, they’re diabetic, but they have, you know, a Dexcom g six or a pump that uses a Dexcom g six in there. And I just think it’s going to become more and more as the technology gets better and better, leaving behind sort of the finger sticks, you know, not sticking yourself ten times a day to take your own readings. The company itself has been doing great for the last few years. So you can see sales are up two and a half fold in the last few quarters, 30 plus percent sales and earnings growth. But the stock really had a big comeback in 2018 and then the market fell late that year. And you can see it tried to try to get my. See if you can use this. You know, it pulled back. Not too bad, really, with the market. It really didn’t fall off a cliff or anything. Are going to see it had a lot of failures. Because I was watching it for months to try to get going here. Not the market wasn’t ready. It fell back down. Oh, no, that’s a good reaction. I think they had a good outlook for 2019 here. It looks like a breakout. No gas? No. They got hit again and then. No, this one’s for real. Now, that didn’t work. Okay. Now, this is definitely for real. Not bad. So it just really wore people out with a lot of ups and downs. So then when the time. I’m sorry about that. When the time came to get going. It did. It broke out in early November on earnings and it really had that power on the breakout with the volume and the big gain. It wasn’t you know, it was very decisive. Since then, it’s held the this is the blue line is the 10 week moving average. Respected that. You know, as we always say, if something really changes, I can always be wrong.
[00:25:13] We’ll sell the stock and move on. But I really think that it’s been 14 months doing nothing. It broke out. It’s acting well so far. It’s had a couple of shake outs. And I think it’s a liquid leader. This advance. I think it could do very well. And they also have a new product coming out. Their G-7 later this year, which I think just in a bull market can cause a lot of enthusiasm as it greatly expands their market into some type 2 patients. So anyway, Dexcom is one I’m high on DLC and I think it works well. And the path of least resistance is up.
[00:25:45] Pick two is not going to be a stock that no one’s heard of. Everyone’s heard of this one. Tesla. Very controversial. You kind of look, somebody said at best it’s like politics you kind of love. I hate them. I just I’ve been sick of hearing about him the last few years because I’ve never seen a stock have so much press coverage when it really did nothing for six years, which is what it did. But the big story here is just really demand has never been an issue. And despite all the well-deserved criticisms they’ve had as a company, they haven’t ever. They’ve been selling as many cars as they can know, as many as they can produce. And they’re really bringing the I probably should innocent masses here. They’re bringing the electric vehicles, maybe not to the masses, but it’s not to the point one percent anymore. It’s probably to the top 10 percent. You’d get a car for 40 grand. Forty five grand if you want. Stylish. You know, performs well and all that sort of thing. The numbers that we’re kicking off here, I think going forward is the 20, 20 earnings estimates. They had one big quarter in Q3. Then it was like, oh, they might make three or four bucks in 2020. Then the estimate became five, five and a half bucks. Now it’s up to six and a half bucks. Now, who knows? You know, they you can ever put anything past him. So who knows how they executed in Q4? But I think as long as that perception keeps growing, that 20, 20 and of course, going forward, 20, 21, going forward with the cyber truck and all that is going to really goose earnings. That’s kind of brought a lot of institutions back into the fold here. OK. Now, the stock I’m not ignorant to the fact that the stock has gone bananas here recently. It’s more than doubled over the past few months. So obviously, it could it could take a month or two, three months, who knows, to build a base at some point when it tops out. But I’m looking at this whole thing the last few months as the initial breakout again. You have these stocks that haven’t gone anywhere for four or five, six years. Anyone except the ultimate true believers like Tim have sold out. And now obviously there’s a lot of hot money in there short term. But if you’re an institution, you’re kind of like, all right, there’s probably hundreds of institutions trying to rebuild positions that either they trimmed or they got rid of. And that’s going to take time. It doesn’t just all happen in six, seven, eight weeks. OK. So I still think it’s early stage. It’s a long way of saying that. And I love the accelerating price and volume. It’s not something I’m buying here. And of course, this chart was over the weekend. So now, of course, the stock’s up another 30 or 40 bucks. But I do think if you get you know, it won’t take long. You know, it doesn’t have to be three months.
[00:28:15] But if it pulls back for two, three, four weeks, maybe the first test of the 10 week moving average, see how it’s acting, see what the market’s doing, like the market as a whole, I think the first pullback, consolidation will prove viable. It might take a little bit longer than people want. Once it starts pulling back. But I don’t think it would be highly unusual for it to just top out here. And last but not least, is a stock that I would say is the top of my watch list right now.
[00:28:40] Believe it or not, it’s Alibaba. Obviously, it’s been pulling back here with the virus stuff. So, you know, we’ll see how that goes.
[00:28:50] But I wrote about this in last week’s issue of Growth Investor. Obviously, it is still the blue chip play in China. They have some stuff besides retail, like their cloud computing could be like the next Amazon Web services over in China. And I wrote that I think basic conditions have turned up. Check China’s stocks at a huge 2017. We own Bob back then and we made some good money. But I was kind of disappointed because I really thought it was starting a what could have been a two or three year advance sort of thing, kind of like buy do did back in 0, 9, 10 and 2011. We rode that, but then it got interrupted. Why? Well, the trade war. You know, you can’t ignore that. And the trade war just got worse and worse. A lot of uncertainties. And you can see even through most of 2019, the stock was just kind of stuck in the mud. OK. But it broke out around 190 and it’s been very persistent since then. Up. I don’t know what. Well, I guess it says nine weeks and 12 out of 13 coming into this week, all time highs, which is better than most Chinese stocks. And I think it’s almost resuming the leadership role it had from back in 2017. Now that, you know, at least for the next few quarters, probably. Right. Basic conditions in terms of the trade war and stuff have changed for China, promising, you know, their economies probably to reaccelerate. This company’s been doing great the whole time. I think maybe, you know, better. Currency action is going to sort of help translate numbers. I don’t get in the weeds on that. But they’ve got 60 billion in revenue. They’re still growing at 30 percent plus clips. And I think the macro is going to help. So I think Alibaba. It’s not something I think is going to hit 400 bucks the next two or three months. Nothing like that. But again, it’s a liquid leader, I believe. I think, again, like Tesla, a lot of big investors got out. They trimmed. Now they’re getting back in their building positions. And if they come out with a couple of, you know, a good quarter here in the next couple weeks, I really think the stock can trend nicely here throughout the year. So those are the three textures. I mean, of course, there’s a million strong stocks out there. We own other stocks that I like to Corvo and all these other things. So it’s not just these three, but these are three liquid leaders, including two. I don’t own that I’d like to own. Now, it’s a Alibaba is, like I said, probably on the top of my watch list right now.
[00:30:58] So that’s it for, I believe, the presentation. So I’m going to hand this over to Chris, who’s going to tell you about a special offer. And when I’m when he’s done and I get a sip of water, I’ll happy to answer any more questions you guys have.
[00:31:10] Yeah. Thanks, Mike. Yeah. Like Mike said, I would give him a minute to catch his breath before he starts answering some of your questions. I think we have a few rolling in. In the meantime, just a bit of housekeeping, if you like, of what you’ve heard from Mike so far today. And our interested in signing up for his Cabot Growth Investor Advisory, which is our pledged flagship investment advisory here at Cabot, dating back 50 years since its inception when it was called the Cabot Market Letter. We have a special offer reserved exclusively for today’s listeners. You get the first 30 days for just one dollar. In essence, a free trial run to see if growth investor is right for you. And when you subscribe. Well, you get immediate access to Mike’s exclusive growth stock portfolio twice monthly issues, weekly updates and special alerts. Mike’s guide to investing in growth stocks and direct access to Mike. For any questions you might have now to subscribe. Just go to the Web site on your screen. Cabot Wealth dot com slash webinar special. Again, it’s just one dollar for the first 30 days. Now let’s get to your questions. Let’s see here.
[00:32:23] There’s a pretty good one from decimal. I’m pronouncing that right.
[00:32:29] Is it a good time now to buy the S&P 500, Apple and Video and Twilio? Or should I wait for dips? What month do you think the market may dip and to what level would be a good buy?
[00:32:43] Well, if I go if I knew that I’d be on my yacht right now, I would say generally speaking, I think it did not. I don’t want to get make too much of an answer, but I think a lot depends on where you are in your portfolio, OK? If you’re kind of missed out, if you’re half in cash just to pick a random number. Yeah, I’m okay. Buying a couple small positions. You know what I’m saying? And trying to force feed your way into it. And while I do think the market could pull back, I’m not anticipating, you know, like a 20 percent decline or something crazy in the markets. I’m fine doing that. Whether it’s the S&P 500 or whatever other index. That said, if you’re already heavily invested or even on margin, I wouldn’t be pushing the envelope right here with some of these stocks. I think they look great. I’m just flipping through the charts right now. Apple’s had a huge run in video and chip stocks look great. So if you really wanted to buy a small amount, that’s fine, but I’d kind of lean toward keeping it small and or looking for dips and shake outs on some of these names. And if they don’t pull back and shake out, well then hopefully all the other things that you bought, no one are going to continue higher and are going to do fine. That’s kind of where I’m at right now is just being a little choosy or on the buy side. I do think those stocks look good, but there’s nothing that says they can’t consolidate for a bit.
[00:34:02] Here’s a question from Carol, who’s been waiting patiently. Do you have any suggestions or advice on Bitcoin?
[00:34:11] I. I don’t. I keep a very, very, very distant eye on it. Usually when I just see some headlines, GTC is sort of that fund that owns Bitcoin, but it’s just kind of stuck in the mud here. It’s not something I would play anyway. I’m a growth stock guy. But even just looking at chart wise, even if I didn’t know what it was, there’s no momentum there. It’s not strong. It’s trying to bottom out, but there’s nothing doing at this time.
[00:34:39] OK. Here.
[00:34:44] Jerome asks for your thoughts. Mike on DOT. Well, you mentioned Corvo. It’s one of the stocks. But Doc, you and older.
[00:34:56] Doctor, you mean Doc, you said Dr. Stein. Yes. Yeah. Donkey sign. I like it. I love this story. I think it’s got the fundamentals I love. I think it’s rapid, you know, rapid, reliable and a long runway. I’m trying to come up with a cool moniker like three hours or something for growth. That’s really because that’s what that’s what institutions want, right. They don’t want to buy something to blow up, take a big position and blow up next quarter. So fundamentally, I really like it. I have to say, the stock hasn’t really been a leader, though, since the market got going in October. The stock hasn’t done anything wrong. It’s kind of riding its 50 day line higher, but there’s not a lot of power. I do have it rated by. So I’m certainly holding it. But it’s I’m keeping an eye on it. I five if you have a profit, I would just hold tight. And if you want to nibble at it here, that’s fine. But I wouldn’t say it’s the strongest horse out there. Talk to some of the software stuff has gotten going. And I have to say, Octet has formed a decent base right here, meaning a launching pad the last few months.
[00:36:00] The only thing is we’re four months into the advance. If you haven’t broken out yet, maybe you’re not really a leader. Now, I’m not I’m not saying that octet can’t go up or can’t do well, but I’m sort of preferring stocks like, say, Alibaba, that’s already broken out, already trended higher. And now you’re trying to play that next pullback or consolidation or whatever happens to octaves. OK. I’m kind of neutral on it. I do think short term it is set up pretty well here, but I’m just not sure, to be honest with you. A lot of these cloud software stocks, they look better, but they’ve not. I don’t know.
[00:36:35] They’ve had big I mean, they’re up five fold in the past couple of years that you’re not in the first inning there.
[00:36:43] OK. Plenty of questions about specific stocks rolling in. One from Mike.
[00:36:51] Any thoughts on Costco with new stores opening in China?
[00:36:58] I don’t have knee deep. It’s been one of the better acting. I mean, especially recently. But even the last few months before this consolidation, it was one of the better acting sort of mega cap retailers for lack of a better term. Hundred and thirty billion, our market cap. And it is just kind of breaking out to new highs here this week. So, you know, I’ll give it a stamp of approval. It’s not my kind of name is not growing fast enough. But I certainly don’t have anything against it.
[00:37:25] OK, Jason is asking about Advanced Micro Devices.
[00:37:30] Andy, we’re just generally what are your thoughts?
[00:37:34] Yeah, Andy is. I like it. I think it’s a leader. It was one of those charts, I think. I think it was one of those charts on the slide that had the long term breakouts. I’m looking at a chart.
[00:37:48] He orders up 20 percent. He mentions.
[00:37:51] He’s up 20 percent in the last month.
[00:37:54] Yeah. Well, all I say is the stock had one of these, you know, it didn’t do anything for a year sort of thing. And then since the bottom the market bottom, I think it had. I’m looking at a chart here. I can’t count of all twelve or 13 weeks up in a row. And of course, before it had a down week when you get that many weeks up in a row, which by the way is kind of what we’ve seen with the overall market.
[00:38:12] Again, it’s a sign of persistent accumulation, doesn’t guarantee anything. That’s a good sign that especially if you’re early in in advance after a breakout, that it’s going to carry forward. So MDI, like, again, I I personally would prefer dips or consolidations if you want to try to shoehorn your way into it. Start small. That’s fine too. But long story short, I do think it’s one of the I don’t know, you know, 10 liquid leaders out there.
[00:38:40] OK. The question from Carol. Any suggestions on marijuana stocks?
[00:38:47] That’s a good question. I I’m intrigued. They’ve had a big decline. They’re not they’re not going to touch here because they are still in longer term downtrend. And I’m a trend follower, so I don’t go there. But I’m also a chart reader. And there’s been a lot of big volume buying in some of the names. I keep an eye on CNBC, which is to me just kind of the blue chip of the group. I mean, not that it’s a blue chip, but, you know, that sort of thing. And that one’s had first of all, they’ve been bottoming out for two or three months. They might need a longer bottom given that they got, you know, destroyed more time. But there’s been a lot of good volume clues in that starting in mid-November. And just recently, of course, it popped higher. I’m not going to I’m going to leave the official advice to Tim. He’s much closer to the stocks. He’s done a great job of sort of timing them. But I do think that there is increasing signs that the decline they have is that the worst is behind. And I guess I put it that way, whether they get going from here or need a little bit more time, I’m not sure. But I think there is a lot of potential there.
[00:39:48] And Mike, you mentioned, Tim, that Tim Lutts is our CEO and chief analyst of Cabot Marijuana Investor, which he has managed to his positions are well up despite that decline. So, incase, you’re interested. He’s definitely the person to go to on marijuana stocks.
[00:40:11] Let’s see. Another question from decimal. What is your take on cloud computing? What companies do you like?
[00:40:20] Well, the cloud software stocks have all come reemerged story wise, I still love Cuba. I just have a soft spot for it. I think it could be. It’s kind of it’s got emerging blue chip written on it in terms of all these companies using it. I guess they call it business spend management. You know, that said it. I wouldn’t say it’s very a lot of these they don’t strike me as super powerful here. They’ve had either big run sort of off their bottom this year in 2020 or Cooper did break out to new highs. But it was it was good. Not great, to be honest with your chart. Why is the band the best looking one believer, not a sales force? I know that sort of bigger and not slow, but slower.
[00:41:02] So I’m not going to argue with it. The group seems to have reemerged. I’m just a little bit more preferential.
[00:41:07] The like I said, some of these earlier stage stocks that just broke out of two year bases a few months ago as opposed to things that broke out back in February, March 20, 18, had huge runs and now are kind of participating. Don’t get me wrong, if Cooper say reacted well, the earnings are started showing some power. I might take a swing at it, but my focus is mostly elsewhere at this time.
[00:41:35] Here’s a question from Ricky. You may have touched on this or just in just a little bit earlier. But at what level would you consider taking an initial position at Tesla?
[00:41:45] Yeah, it’s a good question. And I don’t I don’t have a good answer for you. The reason I mean, I could just say, you know, a pullback to the twenty five day moving average, which currently is for 70 or so. But honestly, it’s really going to depend how it pulls back, how it consolidates and stuff like that. At some point it’s going to meet up with its 10 week moving average, which is just kind of what these things do. I don’t know when and so when it does, I’ll be ready. If I miss it, I miss it. We had some other good winners and there’s some other stocks I think I could buy, you know, pulled access. Tesla doesn’t that that’s what happens. But it’s not so much a level like a value. It’s more of how it progresses here in the next few weeks or a couple of weeks.
[00:42:33] OK. Question from Joy Behar Can snap still be considered a leader? Do you have any thoughts on this?
[00:42:42] Well, yeah. No, it’s a good question. I like snap. It’s kind of. I’m not sure it’s going to be on my watch list in my update tonight, but it’s something I am watching again. I don’t think the story is change at all. We took a swing at it last year and it didn’t work out. But now it’s kind of reemerged. The trick here is they got earnings. They might be this week. They may be. Tonight, I forget it’s pretty soon, so they got earnings the next few days. That’s probably until the intermediate term tail.
[00:43:09] But I do like the persistency, the advance. It’s kind of reemerging and this one got killed for the prior couple years before last year. So I don’t consider it overplayed at all. So I do like SNAP. It’s something that I wouldn’t mind owning. I don’t I don’t really see how I’m going to jump into it ahead of earnings, though.
[00:43:27] It looks like earnings are on the February 4th. OK, I hope you’re here. So coming up, Carl.
[00:43:35] Yeah. Let’s see. Do you have any question from Craig? Do you have any cybersecurity favorites?
[00:43:48] Not really. Again, this was kind of a group that some might reemerge like, OK. Obviously is in that group.
[00:43:56] See why VR was a leader last year that’s trying to sort of reemerge, but I’m sort of putting some of these in that category of like the cloud computing names that were I’m not trying to. I’m not trying to sound bearish on them at all. I think they could do fine, just fine. But, you know, they’ve had big runs and they’re kind of more obvious to the to the crowd than some of the other names that have gotten going. So I don’t have any favorites right now. We’re more bottoms up than top down anyway. But if something really emerges and earning seasons coming up, always, you know, kind of can change the landscape. But right here, not so much.
[00:44:33] OK. Lots of questions. Another question from Ricky.
[00:44:40] Disney had a big breakout last year, but the price action has been weak since that big breakout. Any thoughts on what’s going on with Disney?
[00:44:49] Yeah, it’s been disappointing. I mean, not that I would it’s too big for me. But I guess what I would say is when you’re looking at the big picture, I still think it’s intact. It hasn’t done anything that’s out of the ordinary for it. It’s above its 200 day line, which is slow. But that’s kind of what a stock like Disney is going to do. But I agree that I kind of thought it might be ready to get move in there in November when it Disney plus the big volume clues. If you own it, you know, I assume you don’t have a huge loss. So a 7 percent off a tie if you own it.
[00:45:23] I would probably give it a chance here, but my guess is it will come down to earnings and the updates on Disney plus that they give and the outlook and stuff like that. If it can emerge on that, I think it’s got a chance to do pretty well.
[00:45:34] If not, then not right here. It’s not a leader, but not broken either.
[00:45:41] And was my stock pick for the year. I hope it does.
[00:45:44] Well, that it definitely got to do well.
[00:45:46] It’s guaranteed, let’s say. It is an interesting one. I think I know your answer might be, but a question for William G. General Electric, but a recommendation of has it or is forecasting it to rise to 14?
[00:46:08] Yes. Just what are your thoughts on energy?
[00:46:11] Right. So my I mean, my main thought is I don’t follow it closely and all that. It’s not just on my kind of stock. I will say it’s gone through the wringer. Obviously, it’s bottomed out for a long time in sort of the 68 area. And more recently, it has tightened up, which is usually a sign that the I guess I would just say that we can see the weaker hands are out. It’s under control, so to speak. So just chart wise, it it’s a bull market overall. So it would not surprise me if she could get the 40 bucks at all. I mean, it’s twelve bucks right now. That said, I don’t have any insight or I don’t know what their prospects of all their businesses are, stock stuff like that. So that’s something I’m that close to. But my guess is it could head higher.
[00:47:01] Yeah. Krista Hoff, who runs our Value Investing Advisory. She’s even been saying stay away. So. Okay. It says a lot. OK. Question from Stan, who’s been waiting patiently. How do you compare Cuervo with s W.K. S.?
[00:47:22] That’s Skyworks Solutions, right? They’re very similar. To answer your question, I mean, in terms of the in my opinion, investor perception, which is what’s going to drive the stocks, they’re both basically plays on the 5G smartphone move.
[00:47:39] So, you know, when I see QR videos down 2 percent one day and I don’t know, you know, I kind of check Skyworks just to see like, hey, is this something that just is sort of a group thing or not? I think they’re probably as close appears as you can get in that space. I think both do. Well, Skyworks was a little bit stronger recently. Curveball obviously had a bigger I call it clear vote just for fun, but it had a bigger run after earnings and all that. So but they’re both, you know, two sides of the same coin. I think in terms of investor perception.
[00:48:14] OK, time for a couple more. Let’s see a question from Henrik is Shopify too high to buy right now?
[00:48:24] Good question.
[00:48:27] I hesitate to say it’s too high to buy because you could have said that a month ago and all that, but that said, yeah, I mean, the stocks from 320 to for 80, almost 470 in the last few weeks. It is out to new highs. You’re gonna have earnings coming up in two or three weeks. So if you want to study same kind of blanket answer, if you want to start with a small position. See what happens and try to shoehorn your way into a bigger position over time. I think that’s fine. But in terms of a big position, at least the way we operate, I’d probably hold off.
[00:49:04] OK. Question from RJ. Any thoughts on a Y X?
[00:49:11] Yeah. So this is one of the cloud kind of cloud software. It’s the almost a new big data stock, I guess is, you know, it’s one of the same. Same thing. And it had a huge, huge, huge run. It fell from 150 fifty to one. Basically, it bottomed out for a while. And since the calendar is flipped, it’s really come on strong. I got nothing against it. But there’s still old overhead. It’s just more neutral on it. If I owned it, I’d hold on for sure. It’s shown great power so far this year and maybe it’s def definitely turned the corner. It’s going to go much higher. This story is still good. The growth is still good. So I’m not doubting it. But in terms of just plowing in right here, I’m not sure I’d do that. My guess is it probably goes some high, a little higher. But then you need to pull back and consolidate, especially as earnings season gets going here.
[00:50:00] All right. See one or two more. Paul, ask your opinion on telling doc videos.
[00:50:10] Well, obviously, I like it. We own it.
[00:50:13] What’s interesting is it just this week or last week, I guess broke out finally of this huge 15 month consolidation it was in and it’s carried forward a little higher here. It’s around a hundred bucks, a little higher than 100.
[00:50:26] It’s definitely a story stock. They’re losing money, but the growth is there. And what’s what I kind of always liked about it was it attracted some it’s attracted a lot of fun. So even though it’s lost money and, you know, virtual care, telehealth, it’s not the most common. It’s not that it’s not something that you can touch very easily, you know. But as of the end of September, six hundred and fifteen funds, own shares, mutual funds, which is a pretty good number, you know, and that’s not that’s a good sign to me.
[00:50:54] So the bottom line is, I like it. Like everything else on the planet, it could pull back. I mean, it’s extended, but it’s strong. The volume cloud a couple of weeks ago is for real. So I’m optimistic.
[00:51:06] Here’s a good question. And from Jason, it relates to something you just wrote about for tomorrow. Mike, can you give us some advice on how to set an appropriate stop loss for a stock and what to watch in the charts?
[00:51:19] Right. So definitely, Rick, you’d want to read the Cabot Wealth Daily from tomorrow. So if you’re on the list, if you’re not on the list, get on the list. If you’re on the list, it’ll be shut out tomorrow morning, Chris. I think yes.
[00:51:32] First thing tomorrow morning.
[00:51:34] But basically, they provide a bunch of tidbits in there. It’s really half the battle is what do you want out of the stock? So, I mean, if you’re okay selling something or get knocked out but making good money, even if the stock keeps going higher, you’re going to handle things differently than if you’re really trying develop some bigger winners. Me personally, which is all I can really tell you about. We tend to do kind of a tight to loose system where, you know, when we buy something, it’s relatively tight stops, meaning 10 to 12 percent. Generally speaking, it depends on the stock, how volatile it is as a loss limit.
[00:52:11] And then as you start to make progress on the way up, especially if you take some partial profits off, you’ll say you’re up 20, 30, 40 percent, you take a little bit off the table, then you kind of loosen it up. If you think you’re in like some of these stocks I mentioned, you know, Dexcom or whatever, you try to loosen up the stock a little bit. It play out what could be a longer term move. Now, if you’ve been playing that longer term move for a year and a half already, maybe you’re thinking, you know, it’s not going to go on for another year and a half. But at this point, if you think you have one of those leaders, I would tend to consider selling some shares, you know, not a big not half to maybe less than half and then trailing sort of a looser and looser stop and try to, you know, develop some of these winners, because a lot of these stocks, I think, could be a lot higher. You know, whatever, six to nine months from now, there’s definitely to be corrections along the way and painful downgrades and earnings disappointments and stuff like that in between. But that’s kind of how we’re doing it.
[00:53:04] What I’m aiming to do with some of our winners here that we have already and like Mike said, you can if you’re a Cabot Wealth Daily subscriber and it’s our free newsletter, you’ll get that in the morning or you can go to the Cabotwealth dot com Web site tomorrow. It’ll be up there. OK, we’ll go ahead and wrap things up there. Very good questions today. Thanks for all the questions. And thank you, Mike, for hanging in there. So thanks for joining us. And Michael, actually be back next month with another free webinar on February 26 at 2:00 p.m. Eastern again to give you five more growth stocks to buy for March will almost be in March by then. So mark that on your calendar. That does it for us from Mike Cintolo and the entire Cabot Wealth Network team. I’m Chris Preston. See you next time.