This webinar was recorded on March 20, 2019
You can download the slides here.
When you look at the evidence—the 2018 fourth-quarter mini-crash was likely a bear market that refreshed the longer-term market upcycle; the blastoff indicators that flashed green in January and February; and the pristine action in the major indexes—it’s like the market has just recently begun a new bull phase that could last for months.
Growth stock expert and Timer Digest honoree Mike Cintolo discusses the surging bull market he sees for 2019 and the signals he’s seeing now that tell him it’s on the way.
According to Mike, these are the stocks you need to buy now to make sure you are in on the profits—all in his special webinar-only report, 3 Leaders for the 2019 Bull Market.
This free webinar is moderated by Andre Arsenault, Vice President of Operations.
[00:00:05] Hello, and welcome to today’s Cabot Wealth Webinar, “Why 2019 Will Be a Strong Bull Year and the Best Growth Stocks to Buy Now to Take Advantage of It.”
[00:00:13] I’m your host, Andre Arsenault, Vice President of Operations here at Cabot Wealth Network. With me today is growth stock expert Mike Cintolo, Chief Analyst of our flagship advisory, the Cabot Growth Investor and also Cabot Top Ten Trader.
[00:00:24] Today, Mike will be sharing his thoughts on the current bull market and what he sees potentially happening for the rest of the year. First, he’ll take a look back at 2018 which sets the stage for why he’s so optimistic for what’s ahead in 2019. To conclude, he has three stocks that should warrant your attention as they look to be emerging as new leaders.
[00:00:45] This is an interactive webinar, which means we will be fielding your questions after Mike’s presentation. So, if you have a question, feel free to ask it at any time, and we will try and get to as many of them as time allows, once Mike completes his presentation. Just keep in mind that we cannot offer advice in regard to your own personal investing situation or portfolio.
[00:01:04] We’ll also have a special offer reserved exclusively for today’s listeners, which I’ll touch upon later in the webinar.
[00:01:10] But first, let me introduce Mike. A growth stock and market timing expert, Mike Cintolo is the chief analyst of Cabot Growth Investor and Cabot Top Ten Trader. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks.
[00:01:26] Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides, which has helped Cabot place among the top handful of market-timing newsletters numerous times. He does a phenomenal job with everything and such an asset here for us.
[00:01:41] Long story short—Mike knows what he’s talking about when it comes to growth stocks and market timing trends. So, it’s time for me to step aside and turn it over to Mike.
[00:01:50] All right. Thanks Andre. Thanks everyone for being here. Two quick things before we dive in. If you have any questions whether you’re a subscriber or not but just for listeners don’t hesitate to just shoot me an email. Put something in the subject line that makes it sound like the stock market. So the spam folder doesn’t get hungry. And I am on Twitter. I know a lot of you already follow me but if you don’t, give me a follow on Twitter @MikeCintolo. I usually tweet out a few things a week if not more. Just what I’m seeing in the market.
[00:02:23] I’m not a big predictions guy. As Andre said I’m really more of a trend follower when it comes to stocks or the market as a whole. So I’m not a big believer in the you know the S&P is going to be such and such on June 30th. I just don’t. You can’t do that consistently. OK.
[00:02:40] But the reason we’re doing this webinar is I wrote an article in late January saying it was going to be a good year for the market which you know, so far so good. It’s just every few years the evidence tends to line up and I think now is one of those times.
[00:02:58] Very simply you know the three reasons.
[00:03:01] Number one, 2013 was probably a bear market. And I know a lot of people when you think bear market most people think devastation 2008 stuff like that because that’s what we’ve seen in the last relatively recent history but most bear markets are kind of garden variety and I think 2013 was one of those that kind of refreshed a longer term uptrend.
[00:03:21] Number two I’m going to spend some time talking about the blast off indicators, a couple of them in particular but just in general what they mean their history what kind of returns tend to be produced all that sort of thing.
[00:03:32] And last but not least, very important to know, so far the evidence backs it up and it’s good to have indicators, it’s great to have green lights, it’s great to say “hey I think the market’s going to do well” but then if the market starts tanking it doesn’t really know it doesn’t mean I think you find some new indicators but so far the good news is it all has been lining up.
[00:03:52] I pulled this chart off of the internet so I apologize for all these fancy lines and even all this commentary over here feel free to read it, but I didn’t. The only reason I printed this is it was actually kind of hard to find a 100 year chart on the Dow. The market cycles through every 10 to 20 years going sideways. Basically net net and then going up. .
[00:04:14] So just for instance you call them long term bears or secular bears. But yes 1929 to 1949 you didn’t make any progress. Kind of sideways to down then you basically went up for whatever that was 20 years 17 years I guess sideways during the 70s. So on and so forth. I’m not going to go into every cycle.
[00:04:32] The point of this chart though is something I talk about at the Cabot Wealth Summit every year when I do my presentations. We just had a 13 year, 2000 to 2013, was one of these longer term bears sideways market. Now we’re probably in that called the middle innings but whatever but we’re definitely in one of these longer term uptrend now we’re six years into it. I don’t know if it’s going to last 10 years or 20 years or whatever but either way we’re in one of these longer term uptrend.
[00:04:58] What does that mean. Well when you look through history I’ll go. Let me go to the next slide I’ll come back to that chart. Like I said most bear markets are garden variety. When you begin the long term bear markets those sideways markets. That’s when you get the devastation. That’s when you get the Great Depression. Back here and the Dow falls 89 percent. That’s when you get to 1937 down move where the market fell 50 percent over here in the 70s this is when you get the Watergate you know super inflation. The Dow actually.
[00:05:29] This was a forty five percent decline and of course in the recent times you had the internet bubble popping. That was 78 percent on the Nasdaq and of course the financial crisis whatever that was 60 percent on a live up bad memories. That’s when you get those devastating moves so when you’re in the longer term up trends like we are now bear markets tend to be either short and sharp and they scare you out, or they tend to be shallow and tedious and wear you out.
[00:05:59] For instance here’s 1994. I’m going to get into the weeds on all this but 1994 was one of these quote unquote bear markets shallow and tedious that refreshed the longer term uptrend. It was only a 10 percent correction the S&P but the broad market got killed. The Fed was raising rates Orange County crisis, Mexico blew up in early 1995 actually got the Fed to start cutting rates and the market went nowhere net net for a year.
[00:06:22] Time passes. By the end of the consolidation here. Ton of pessimism is like 60 percent bearish investment advisers on and on and on. This was enough to sort of reset the market and clear the decks. Another example is more recently this is 2015 and 2016 which to me was a bear market.
[00:06:40] Now the S&P only falls 15 percent so CNBC is going to say that’s not a bear market. Well the S&P went nowhere for two years. Net net. The Russell 2000 by the way went nowhere for three years. He had a 15 percent correction leading stocks like biotech stocks back then were big losers they fell 40 percent. Oil stocks went over the falls financials got hit. So on and so forth.
[00:07:02] Again it was enough. The key here is it’s enough to refresh the cycle and by the end of it. You remember before the election by the end of it. Massive pessimism massive uncertainty. Everyone’s predicting the end of the world the way the election went. Of course the opposite kind of happened at least with the market.
[00:07:18] The other option here is short sharp and scary which is what we saw last year. This is 1990 and you’ll see a lot of them look the same. This was a 20 percent 11 week down move in the market and the Nasdaq was down 31 percent in eleven weeks. That’s pretty sharp.
[00:07:33] Now it didn’t go straight up after that we bottomed out for a while before kicking off. This is right before the first Gulf War. Again huge pessimism. Oil prices spiked. We’re going to go to war with the fourth largest country or fourth largest army whatever it was so on and so forth. Caused a big correction. One of these bear markets and set the stage for a three year bull market.
[00:07:55] 1998 — twenty two percent down 13 weeks. The Nasdaq was down 33 percent. This is Long-Term Capital Management Russian ruble. Recession watch inverted yield curve. So on and so forth. And then after this we launch into basically the Internet bubble for the next year and a half.
[00:08:13] That’s what I think last year was from basically October 1st to Christmas Eve. The S&P down 20 and basically one quarter 24 percent for the Nasdaq and it’s not just the numbers historic oversold readings we had over 1000 stocks on both the New York and Nasdaq hit new lows three straight days which I don’t think has ever happened before might have happened in ‘08 but I couldn’t find it.
[00:08:37] We had record money outflows huge pessimism by the end of it. Obviously China trade uncertainty. The headlines were bad and now we’re seeing all the bad economic news which the market was probably forecasting in Q4.
[00:08:48] So basically Q4 looks like a short one of these short scary and scary out there. Bear markets. Now the question is well OK, Mike these are all just labels whether it’s a correction or a bear market or a downturn. What’s the difference?
[00:09:03] Well it hasn’t been kind of saying if it was a bear which I think it was it refreshes the cycle when you think about it every downturn kind of refreshes something right. If you get a 3 or 4 percent pullback probably refreshes the market for the next few weeks you know assuming you come out of it. If you get a bigger you know 10 percent correction or a ten twelve I probably refreshes things for the next few months.
[00:09:25] But when you get a real bear market within the longer term secular uptrend it can refresh things for a year or two that means a new sustained uptrend not just a month or two but really something can go on a year or two. I’m not going to put a timeframe on it. We’ll just see how it goes. But that’s really what that means.
[00:09:41] And it also means and something that we’ve seen here and talk about a little bit later you’re going to see new leadership so NVIDA (NVDA), they bought would they buy Mellon X I think and the stock looks a little bit better here at seeing some buying. I’m not negative on video but the stock fell 50 percent in the fourth quarter hasn’t bounced that much relatively speaking and everyone is still following it.
[00:10:06] When that news broke I must have gotten 10 e-mails that day from subscribers and other people all the articles about it. What do you think of NVIDA (NVDA)? What does this mean. Are they going to start growing is the stock going to get go. Everyone’s focused on sort of the old leading stocks. Meanwhile there’s new leadership stocks that are either big turnaround situations or names that few people have heard of that are already kind of leading the charge higher.
[00:10:27] Again you tend to see this new leadership not that the old ones are going to go down 80 percent stay there. Some of them will come back. Some of them will kind of do ok but usually there’s new more vibrant leaders to buy. So that’s step one. We did have a bear market.
[00:10:41] Number two and importantly at this time by the way so we go back in 2008 and I’m seeing this oversold stuff I’m seeing the pessimism and I’m seeing what I think is a bear market. And I right at the end of the year I’m stuck out in Michigan with my in-laws so I couldn’t do a video a weekly video, so I wrote an article for everyone. I just say you know I think we’ve hit a bottom but we’ll probably have to retest it and we’re probably going to take some time we’ve got to build a bottom from here we’ll see how it goes.
[00:11:09] Well then we come in and the first 10 days off the bottom all of a sudden we start seeing blast off indicators flash. What’s the blastoff indicator? It really flags rare signs of strength not for a day or two but usually for at least a couple of weeks usually it’s a couple of months and most people these things tend to happen after you’ve had a big correction the news is bad. Everyone just recently sold stocks because they’ve been getting knocked out of them getting killed here in the fourth quarter. And then all of a sudden the market turns around and becomes what I call hyper overbought. And of course most people see this hyper overbought situation say hey we’re overbought we’re still in a downtrend we’re below the 200 day moving average or whatever. Which is kind of what we were looking at too. We’re trend followers. But when you get these blast off indicators they really do portend great performance down the road and better yet they tend to happen near the start of new bull markets that last a year or two.
[00:11:59] I’m not saying it’s going to go on for another 10 years but they tend to kind of signal the beginning of the next major up move. So like I said we come into the into the new year I get back from vacation and you see the market in the first 10 days off the low one of the most reliable and oldest of these blast off indicators flashed on January 9th it’s a two to one blastoff indicator and it basically happens when the NYSE advance decline line averages better than 2 to 1 over 10 days now two to one reading on the 80 line on any one or two or even three or four days not that unusual but to get over 10 days very unusual just 10 signals if you take out repeat signals which kind of happen within a couple months of each other just 10 signals since 1960.
[00:12:44] And even if you included repeat signals by the way it’s like 15. So very rare and a very consistent track record. Now I admit I made this slide kind of more or more for myself. So I have it for reference I’m always searching for these numbers when I’m trying to. When we finally get them, but this is the S&P max gain after these two to one signal so within three months on average the S&P rises as much as 11 percent sometime in those three months from the signal within six months 15 to 18 percent and call it twenty one to twenty five percent 12 months later. So big, big gains.
[00:13:17] And by the way I went back and looked at this one we’re not at the three month mark yet obviously that would be on I guess April 9th but we’re up about nine and a half percent maximum on the S&P I think that’s not too bad. Very consistent very reliable been going back years very rare and I think the reason these things work just to kind of go back a bit.
[00:13:38] The reason these blast off indicators work is it’s the ultimate in contrary opinion.
[00:13:43] You literally have them usually after some sort of bear market major downturn. Pessimism. There’s a lot of negativity out there. The news is bad which kind of feeds into that. And then the market turns on a dime usually and just goes straight up for no obvious reason. It wasn’t like there was some great trade deal necessarily or something got cut or the Fed cut rates or anything like that it just sort of happened and people have a hard time believing it even people who are technicians they don’t really follow these because only flash every few years. But they’re very, very reliable.
[00:14:17] Then we move on in the market you know at this point after the 2 to 1 signal I write the article saying you know we got the bear market we got the historic oversold we got the historic pessimism and now we get this blast off signal and everyone thinks the market’s still going to go down and retest and I’m saying you know maybe it’s not going to. And so far so good. So then we come into February and we get what’s called the 90 percent blastoff signal.
[00:14:39] And I have to give some credit to the Chartists for this an old time newsletter. I first read about it with Dan Sullivan 18 years ago or something like that. So it’s been in our arsenal since and it happens when 90 percent of NYSE stocks close a day above their 50 day line. Again hyper overbought. Everything’s above its 50 day line that usually is at least an intermediate term negative. But as with the two to one it has a great track record just 11 signals since 1970. And here’s the table for that I’m not going to get into the minutia but again three months after the signal the S&P rises as much as 9 percent sometime during that timeframe 15 percent seventh call 20 percent after 12 months. It tends to highlight times when it goes up. Even more impressively at least with this indicator. I said what if you just bought the S&P 500 at these 90 percent signals? Which you can obviously these days. What would be your biggest loss? You know it’s I if I bought it there would I have to with the market pullback 10 percent and then go up or how does it work.?
[00:15:39] It turns out the average maximum loss is just a percent and a half from there. You can see it right there that 90 percent signal this time was at S&P 2784 for whatever that’s worth. And so far the most downside we’ve had is about one and a half percent from there. Now I will note the most recent reading here in 2016 that was a little bit bigger. The reason for that — Brexit. We had a two day sell off that kind of undercut that signal and then came snapping right back in the summer of 2016.
[00:16:07] But on average the point is that even though we get these super overbought signals and they occur when the news is bad and we’re kind of up against resistance in the longer term trend is a little bit questionable and so on and so forth they tend to do very, very well and all the signals do well it’s not like half of them do well. Some of them do well. If the Fed is cutting rates now they just tend to all do very well.
[00:16:29] And as I mentioned earlier another thing that’s you can take all the exact percentages and you know 20 years ago when I first started here I probably would kind of get into the weeds but bigger picture these signals tend to occur near the start of Bull Moves. I mean just this is 1982 which I mean that kicked off a 18 year run. But you know just in the shorter term this went up many, many months. This is 1987. People say what is he talking about the market crashed the market did crash in 87. The signal was in January from January to August the market went up another 30 percent after the signal.
[00:17:02] I don’t want it to crash but I would take a 30 percent in eight months or something like that.
[00:17:06] This is 2009. This was the 2009 bottom two to one signal. This is the 1991 and we looked at the chart with the 1990 bear market. This was the 1991 blastoff that kicked off really a three year bull market. There’s no guarantees of course. That’s something I got to mention later. You still have to verify things day by day week by week. No guarantees maybe the signals don’t work this time but throughout history throughout the last 50 years 40 years.
[00:17:31] Even more recently they have worked. So it’s very encouraging.
[00:17:35] And then the third piece like I said verify. And so far it’s been textbook action. And I’ve been chatting with my buddy Jacob Mintz our analyst of the Cabot Options Trader and Cabot Options Trader Pro, as we are more on the computer all day and we’ll talk.
[00:17:51] And I started texting him NPA which was just means ‘no pullbacks allowed.’ That’s kind of what we’ve seen so far at least in the S&P. This was the two to one blastoff here. And you just got a couple of down days you got a one down day here just a couple in here but really the market can’t pullback. It’s a vacuum of selling pressure every time there’s one or two bad days in here there’s buyers in there to support it.
[00:18:15] The market has every right if it wants to pullback a few percent here but so far it’s having trouble doing so. This was a little bit of a pullback obviously it to the upside so far. We’ll see how it goes.
[00:18:27] The other thing I have to say that’s been textbook is sentiment and you can almost always say these blast off indicators are like having the answers to the test because again there’s no there’s no sure thing. But you kind of you almost can see it coming. So it’s like when you know the market’s going to do pretty well we’re in a persistent uptrend anyway even if you didn’t know anything about blast off indicators yet sentiment is in the doghouse.
[00:18:51] This is just simple I mean you could look at a variety of things and I’m not saying people are panicking right now but this is cumulative money flow billions from Lipper since the start of 2019. You can see it’s negative. So the market’s gone straight up, but money has actually come out of and this is equity funds and ETF. Equity funds and ETF so money has actually been coming out of it. I read an article this weekend they said there’s been a lot of money come to the market recently. I don’t know where that’s coming from I look at Lipper I look at Investment Company Institute those cover like 98 percent of all these funds and I look at narrower measures like the RYDEX funds that’s not showing any enthusiasm. There’s something called the Bank of America Merrill Lynch survey of like 200 global investors yada yada. They’re very overweight cash and very underweight global equities in general. I just think there’s not a lot of enthusiasm.
[00:19:41] I wouldn’t trade based on that. And we do have a shorter term indicator we use in Cap Growth Investor that uses money flows and it’s neutral right now. So I wouldn’t trade on it but it’s just a sign that the market is going up even though a lot of these stocks are doing really well. No one’s really that excited about it. People are still more worried about what could go wrong than excited about what can go right. That’s all big.
[00:20:03] So that’s the three things we got a bear market. Rare blastoff indicators that not many people follow and they’re really working well. And then obviously the market itself has been performing well this year. And just kind of backing up doing exactly quote unquote what it would be supposed to do if that’s the case.
[00:20:21] Now we kind of get into the stocks and like I said earlier new leadership. They tend to be fresh names newer stories and just supply and demand wise institutions have to build positions. The good story if you’re a two billion dollar fund and you’re trying to build a 2 percent position you know that’s a bunch of money that you have to buy the stock even if the stock is well traded. You’re not going to go in there and click a mouse and go buy 40 or 50 million dollars worth of stock right.
[00:20:51] You’re going to go in there and buy 50 thousand shares today. Fifty thousand tomorrow. Take a break do that you know buy some more the next day try to buy on dips and then you multiply that times 300 funds they’re trying to buy a stock. That’s what creates these longer term trends in these leading stocks the ones that have already had big moves and are a little bit overplayed. They tend to have a little bit more selling pressure as people are kind of cutting back positions and moving on. In other words they’re not overplayed during the last cycle. And what you’ll notice and kind of what I referred to earlier were that in video story a lot of these newer names will run while the older names are still getting the attention. If things play out the way I think they can you know six months from now people will be talking about XYZ leading stock. They won’t be talking as much about Invidia or Micron Technology (MU) or Align Technology (ALGN) or some of these stocks ahead huge moves in the last cycle.
[00:21:42] So for three names I started with I want to do one that was sort of a glamour stock a little bit more a firecracker. Something I like. I’m not saying it’s going to blow up but something it has big potential on the upside. It’s going to be more volatile a little bit less well sponsored. One that I would consider an emerging blue chip sort of in between a liquid leader and a glamour stock and then of course one that’s a liquid leader.
[00:22:04] So let’s get into it the first one here. This is called Zscaler (ZS). Now what the hell is Zscaler. Most people have never heard of this stock. Never heard of the company I’ve never heard of it. I think it showed up in top 10 last year. So we had heard about it last fall but I never heard about it. It’s recently public. It just came public last year. And I like to analyze stocks basically using story numbers and chart. It’s more complicated than that but those are kind of the three general categories.
[00:22:31] And without getting in the weeds again. But here the cybersecurity I’m very bullish on fundamentally the stocks have been a little bit harder to handle in the last couple of years even though the numbers have been pretty good.
[00:22:43] What I’m favoring now is some of these newer cybersecurity firms that really go after the new world are built from the ground up basically for cloud mobile work forces as opposed to everyone go into the office. Turn it on your desktop. Getting online or getting on the company network from the server and you just have to protect your server so that nobody can hack that server. Now you’ve got people on their smartphones with their different apps they’re accessing. Companies are using Google docs which is in the cloud you know you’ve got to protect all this stuff.
[00:23:13] Zescaler kind of has a global distributed cloud based security network not to throw a big thing at you that’s really built for this and it’s catching on fast. They have accelerating revenue growth so revenues last. Those are the last three quarters fifty four fifty nine sixty five and just other numbers deferred revenue because you know they collect the money and earn it over time. That’s up 73 percent last quarter. And I think importantly EPS has been positive last couple of quarters and ramping earnings have kind of picked up. In my experience that’s a big favorable thing for institutions not always necessary. If you have the rapid sales growth and they really think it’s going to pay off but a lot of these stocks like in the past like First Solar (FSLR) or AOL way back when they have rapid revenue growth and they’re just turning positive and there’s really starting to ramp that bottom line and institutions really like that.
[00:24:00] As for the chart I can get my pointer here. It had a nice initial run and then corrected here. This is the market correction late last year but I like about it is right after the market bottom in here actually a little bit before. Not only did it go up a bunch of weeks in a row it just kind of marched higher. But look at all these tight closes. I’m not going to do a chart school piece maybe that will be my next webinar but tightness on a lot of these charts especially when you’re kind of within this consolidation range and especially when the market is iffy and it’s not like there’s a lot of bullishness out there it’s usually a sign that the stock is under control and under accumulation you can see you know it keeps kind of trading in this range they’re buying it in this range it pops up.
[00:24:39] The other clue here was right here this day. This was a shorter week. This was Presidents Day or whatever, it was for day week but very low volume very tight range. Again there’s just no selling coming into the stock even though it’s had a pretty good run and then a reported earnings this is a weekly chart by the way and it’s gone nuts on earnings now to buy it up here. I’m not going to get too specific. I mean you could start small.
[00:25:01] My guess is there’s a lot of people who want to buy this a lot of institutions are like I said trying to build positions. My guess is the first couple times that it does pullback to say the 10 week moving average which is down here now 55 but rising pretty quickly. It will be buyable so whether it’s starting here hopefully on some dips looking for sort of a consolidation phase I think Zscaler has a great chance of being a glamour stock leader of this advance.
[00:25:29] Next up is Twilio (TWLO). What I really like about Twilio. I think it’s an emerging blue chip. I think like 500 funds on it. This seems like one where a thousand mutual funds are going to own the stock. They’re going to have big positions in it two or three years down the line because it’s such a it almost reminds me a little bit of Salesforce.com (CRM) not saying it’s going to do that but one of those sort of stocks that was initially sort of an upstart then became pervasive and then became basically a blue chip.
[00:25:55] The story here is they just have a speaking a pervasive communications platform. I think Andre, do we use it? We do yeah. We use Twilio and we’re a little small fry up here in Salem, Massachusetts with the witches. That’s why we use it because it’s right simple. It can work it’s simple. I don’t know we’re probably paying them 50 bucks a month we’re not we’re not driving the stock higher. I wish we were. But no I mean it’s pervasive so it’s everyone from Coca-Cola and Uber and Lyft and all that to cab.
[00:26:22] And they have 60 thousand accounts up 31 percent from a year ago. I mean so it’s not like they’re selling it just to the global to 2000 or the Fortune 500 or whatever accelerating revenue growth. And importantly this is a number for software not to get in the weeds but for the software companies they call it net dollar retention rate which is a horrible name somebody should re market that but basically it just means like hey if you had 100 customers a year ago how much of those customers whether they’re with you or not how much are they spending with you right now and in the fourth quarter.
[00:26:53] That was up 47 percent from a year ago. Now some of that there might have been a little bit of an acquisition that helped that number out a little bit. But even so that’s usually if it’s 15 or 20 percent that’s huge for a software firm. Forty seven percent I don’t ever remember seeing that before. So the stories there the numbers are definitely there.
[00:27:11] It is profitable although we’ll see the estimates seem low to me and you can see it had I didn’t show it on the chart but it had a huge decline post IPO decline and bottoming out phase before it got going last year. It’s looking really strong and it finally has a correction with the market. But as soon as it comes down here for a month boom it reports earnings and it has a massive volume clue right here up to new highs. Yes it shopped around after that with the market.
[00:27:36] Obviously the market was falling off a cliff. But generally speaking it kind of held in this wide range granted that was 70 to 100 we owned it wasn’t easy to hold through that but it really wasn’t doing anything wrong. And of course since the start of the year it’s done pretty well. There was a couple of shake outs in here this was on earnings but it never really penetrated this 15 week line and it’s just in a pretty solid uptrend.
[00:27:57] Again pullbacks are likely or possible maybe likely we’ll see how it goes. Portfolio really does have the feel of me sort of emerging Blue Chip if you’re kind of a chart fanatic out there and this sort of reminds me of AOL back in 1998 it kind of had declared a leadership status here and then kind of got caught up in that 1998 bear market that I showed you earlier and then took off from there.
[00:28:23] So we’ll see how it plays out but I’m quite optimistic on Twilio especially looking at longer term and that’s been at least as a liquid leader which is a familiar name.
[00:28:32] I think it’s a great turnaround is polling.
[00:28:35] Chipotle Mexican Grill (CMG). Obviously these guys you know not the best business plan to sicken people. So they did that that wasn’t good. But we didn’t know that then. That’s nice. So it had a huge correction and a huge bottoming out process. What I like about this whole getting the story.
[00:28:50] Obviously it’s a turnaround they’ve rebuilt trust management is emphasizing digital sales these lifestyle bulls on the menu like Quito and whole 60 or whatever you know veggie bowls, tofu bowls those have been very popular. And they’ve tightened up their cost controls and what not to earnings are really taken off. The other thing I like here just let me just jump to the chart real quick as you know this was kind of the bottom and then it got going here early in 2018. This was a nice earnings gap. In other words by the time it built this base here in the last few months it had already gotten into enough trend you know trying to buy the bottom.
[00:29:25] I know a lot of people want to do that. Not trying to buy the bottom because there’s no guarantee it doesn’t fall back in which it did a couple of times before. You know earlier here on the chart and it’s already kind of established like hey the trend is back up for earnings that trend is back up for sale sales are starting to accelerate. Same store sales are accelerating they have some new things going on with delivery and digital sales that sort of thing.
[00:29:48] Even so a correction of the market that’s kind of a double bottom base again if you’re kind of a chart fanatic and right here you can see it’s gone from basically 400 to 650 in a straight line. I am viewing this as kind of like the market a kickoff to a longer term move does not mean the stock cannot pullback does not mean the stock cannot consolidate for a few weeks pull into the 10 week line shake some people out.
[00:30:12] I’m not predicting that but something like that wouldn’t surprise me. But I’m looking at this huge up move on big volume reacted well to earnings no ability to pullback really just kind of tight consolidation or running as sort of an initial move.
[00:30:25] So maybe you get a correction maybe it consolidates for a while and then I think there’ll be another move or two on the upside. So basically Zscaler, Twilio and Chipotle are the three stocks three of the stocks and very high on for other people who are subscribers out there.
[00:30:39] There’s a lot of stocks out there that look good if you watch my weekly video so if there’s a name they have a question on feel free to email me. But just because I didn’t mention it with one of these three doesn’t mean I don’t like it. Obviously there’s more than three good stocks out there but these are three I think you can look at.
[00:30:54] So just parting thoughts first. You trust but you verify day by day. There’s no guarantees. We’ll see maybe the trade deal falls through and it ends up being a Brexit like event we get a big sell off. You can never take anything for granted in the market. You know I am a trend follower at heart but if you’re going to go down you want to go down with the evidence and whether it’s the bear market the oversold stuff the blast off the fact that the intermediate longer term trends buyer measures are actually pointing up now or the apathy in terms of sentiment they all kind of point toward the fact that there’s a new bull phase that’s underway here even though a lot of people say a lot of people probably think the worst is over but they’re not really thinking like Hey we’re going to go up I don’t know twenty five percent this year and have great new leadership and all that.
[00:31:40] That’s really the parting thought is how would be bullish. I would go with the evidence if the evidence changes then we’ll change. But right now it’s all kind of lined up for the bulls.
[00:31:51] All right. Well thank you Mike. That was absolutely terrific.
[00:31:55] We have a bunch of questions coming in, so I might as well just address them in regards to the slides of Mike’s presenting today and a replay will all be made available after this. We’ll look to provide a nice email summarizing everything including the replay. So if you came in late or you feel like you missed something you want to rehear it or replay, all the slides will be made available.
[00:32:14] So I’m going to give Mike a minute here to catch his breath before he starts answering some of your questions. In the meantime I’d like to inform you how you can sign up for his advisories since we have a mixed audience today where some of his current subscribers and many new names are on the webinar with us. We’re going to e-mail each of you a unique offer as a token of our appreciation for showing the support and joining us.
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[00:34:21] So at this point let’s get onto the questions here. You mentioned a bit about, a little bit about this early in your presentation Mike.
[00:34:29] But it’s curious to hear your thoughts about whether the near inversion of a Treasury yield curve, weaker housing activity, and some softer consumer spending are strong indicators of a potential recession or why might not they actually bring in a bear market?
[00:34:42] Yeah it’s funny I write in our Cabot Wealth Daily which is our free letter so I’m up every couple of weeks and I just did one today saying I don’t know what the title is going to be I don’t I don’t make the headlines but I was thinking it could be something like the economy is really softening buy stocks now. So I don’t know some of the leading economic indicators I do keep it I do keep an eye on it. I wrote today on my economics miners. I’ve always kind of watched some of that stuff but no I don’t I’m not worried about that of a recession. To me what’s going on here is the markets in the fourth quarter was forecasting this big slowdown.
[00:35:15] So I would just predict that the first, I don’t know half of the year ballpark. I don’t know. We’ll have some pretty crummy economic numbers I saw someone say that I guess the first quarter might be a zero no growth GDP quarter or something like that. So but now I think what the market’s forecasting the last couple of months is things are going to probably reaccelerate and you can argue if that’s because of the Fed or they have a China deal or whatever but that that’s what it is. So in terms of the economic stuff I really think that’s more backwards looking or at least coincident where the market’s looking ahead and looking ahead to better times.
[00:35:50] So now we have a few questions here in regard to individual stocks we’ll start off with one with the DBX which is Dropbox. It looks like they’re delivering the last two quarters. We’re not really seeing anything being reflected in the stock price this show. So do you think the situation will change?
[00:36:07] Yeah, I can’t. But let me use a weekly chart here because this was one of many these hot IPO that came out there was a lot of them were Chinese but then you had like a sign and a lot of these last year and they got hot in June and then just died.
[00:36:21] Yeah I can’t say I need. Like I said I hinted at earlier I need story numbers and charts. I’ve always been intrigued with Dropbox but I know there’s competition number one. And number two the chart just can’t get going. Now I’m not saying the stock has to be up here like all time highs to get interested but at the end of the day the fact that it reports earnings and there’s just a lot of selling volume in there and the stock can’t get going despite well it’s gotten going a little bit but it can’t do much despite strong market.
[00:36:47] That to me is a sign that for whatever reason Fidelity and T Rowe Price and all these guys they’re not that excited about it. Now maybe you know maybe a couple of months from now the thing shapes up earnings. They have another good couple of earnings reports and whatnot but overall it’s not something that excites me. You can see right here and by the way this is a program called WONDA stands for William O’Neal Direct Access you can get more information at williamoneal.com, it’s a competent institutional software product. We’re going to see the earnings estimates here you can get these on Yahoo or anywhere you know down 2 percent for the year it doesn’t mean the company is not growing you know sales wise obviously but I think you know institutions probably want to see that change before they die. And so can’t say it’s something I’m excited about. It’s probably bottomed out but it needs work.
[00:37:31] Now is a stock which you’ve talked about quite a few times it’s AYX, Alteryx.
[00:37:40] For this one of many strong cloud stocks I have to say I got a little we had in Cabot Top Ten Trader and I got blacked out of it here on this pullback. This is sort of one of the very loosely I’m using it as sort of a big data analytics sort of software. There’s a there’s a couple of stocks in this group and it’s a newer name. The only hesitate. So first of all looks great. If I owned it I would hold on. It’s hitting new highs. You can’t really complain about that.
[00:38:06] The group is strong it’s probably the number one leading group you know enterprise software anything I would kind of say is you know came public at 14 closed at 60 and this is back in early 2017 and here we are at 8. You’re not early on it. I’m not saying the stock can’t go to one hundred and fifty I hope it does. In fact there’s a lot of tightness in here.
[00:38:27] So I do like it. I would just say it wouldn’t surprise me if when the market eventually does actually have a real correction. If some of these names might cool off a little bit that I’ve already gone up a few fold over the past few months but long term I’m kind of nit picking. Long story short I like the growth. I like the chart it came back from this test of the 50 day line which is this red orange line whatever.
[00:38:49] I do like it but to me it’s probably more beholden to buy here. You’re getting many compliments for turning the market around today.
[00:38:57] That’s what they do. That’s me. That’s what I do.
[00:39:00] I tell you it’s obviously in line with the Fed announcing that they’re not going to be raising rates. So now one more stock – CIENA Corp. symbol CIEN. This has been featured quite a bit. It’s obviously maybe turning out a favor but I’ll leave you to explain that further.
[00:39:18] This one hits close to home. So the reason I like CIENA Corp. is basically 5G and sort of a networking boom is going on a new networking boom which comes along every few years. That’s the fundamental backdrop. And you can see it cyclical you can see this is the earnings line and this is a monthly chart so you know it goes up and down but this down was pretty tame and now it’s really picking up chart wise though I liked it really broke out of this multi.
[00:39:40] You could even go back further. This sort of multi-year range back in September. I want to say OK before we we bought it we have it in Cabot Growth Investor and it’s been acting pretty well. And then it got hit on earnings. To me it’s right near the critical level here. They’re supporting here I’m not going to get into exact levels but 50 day line prior support. Obviously the breakout levels down here.
[00:40:05] If everything’s intact I would just say the stock should hold up around here. I’m not saying if it breaks here it’s going down to 10 bucks or anything like that. But if it’s really a leading stock my guess is it should hold in here we’ve seen a decent amount of stocks get hit on earnings and they fall for you know 2, 3, 4 days but then they’ve been finding support where they’re supposed to and they got going again. CIEN hasn’t quite done that yet. It’s close to the edge for me but I’m trying to give it a chance because I do think the major trend obviously is up for the business and the stock. There’s no doubt that it’s like I said you can’t be complacent you can’t take anything for granted.
[00:40:38] So we’re watching it closely. Now to some kind of general questions not individual stocks, so when picking a leader, is it better to pay more attention to sales growth rate or earnings growth rate?
[00:40:52] Yeah. Good question. I learned from Carlton Lutts who founded our company. Great guy. I like sales growth more. You want both, is what you want. But when you’re dealing with sort of younger and emerging blue chip stocks I have found that if there’s sort of a promise of earnings even if it’s a few quarters out the sales growth is more important now. If you’re talking about like a biotech speculative stock that has nothing has a little bit of sales and no earnings for the next five years or something like that that’s a little bit different.
[00:41:25] If you’re talking about something that’s kind of near and break even and growing 50 60 70 percent that’s really important factor. I’ll just say this. We used to do and I still do sort of more informally but studies seem you go back and examine all your trades. One of our best stock picking criteria was triple digit sales growth that didn’t include acquisition. Something that’s just growing like hell. It’s that Wall Street has trouble sort of keeping up with the pace because it’s just you figure it’s going to slow down and it doesn’t and always grow they end up growing twice as fast as people think so on and so forth.
[00:41:56] If I had to choose I’d say sales growth but ideally you want both come in now.
[00:42:08] Macro fundamentals. Do they play a part in your analysis or decision making.
[00:42:13] Macro meaning if you’re talking the economy. No.
[00:42:17] If you’re talking like what’s going on in an industry or themes like I said you know five year enterprise software or a cap ex spending or you know some sort of retail shift that’s going on. Yeah. So that definitely plays a thing. We want to combine fundamentals and technicals we’re not just charge people or you know screaming for numbers that say oh it’s up.
[00:42:42] Sales are up 30 percent the stock’s at a new high we’re going to buy it. That’s not what we do. We’re trying to find something that’s got a great ideally revolutionary product or service that’s catching on but not you know obvious to everybody. In other words it’s proven but it still has many years of growth ahead of it now.
[00:42:58] And so we’re getting plenty of questions, more than we’ll be able to get to today. Sorry I’m trying to cherry pick the ones that are most popular because there are a lot of stocks that are being mentioned a few times ,but if we don’t happen to get your questions by all means you can e-mail Mike directly email@example.com.
[00:43:15] I’ll follow up with the best we can in regards to all of these.
[00:43:21] Another individual stock. AMD, Advanced Micro Devices, what’s your current take on it?
[00:43:25] Yes that’s a good question. So it’s not so it’s not something I’m super high on. This is old overhead here which in theory would kind of stagnate the stock on the way up. I have to say though it is acting it looks like it’s changed character obviously got killed last year late last year. Nice volume here. Nice little consolidation here. I know there is that Google News yesterday. I think my bigger rub here if you look at the numbers is here’s your sales growth.
[00:43:55] I know these numbers can change chip companies you know next quarter could be up 100 percent. But kind of slowing down on the sales line a little bit. I don’t know if they’re really going to have earnings shrink in the March quarter but that’s probably not ideal if that’s close to the truth.
[00:44:09] It’s something I kind of keep a distant eye on. It’s obviously shown the ability to trend but after this big move right here from 10 to 30 or whatever my guess is it might need some more time to consolidate. I don’t think it’s really a leading stock here.
[00:44:23] Now stock has been featured in Cabot Top Ten Trader quite a bit, TDD, which is The Trade Desk.
[00:44:28] Yeah, Trade Desk. Great story Programmatic Trading. I’m not trying to be negative if you’re looking for something to be worried about the stock did get going here last May at sixty. And here we are at two hundred. You might not be early but with that said I do like it. It hasn’t been that long. It’s a unique story where basically all this advertising has gone online.
[00:44:52] But how you book an advertising campaign is still a lot about handshakes and whisky a lunch or anything three or three martini lunches. It’s sort of like that and this is really just moving it online. And they’re one of the leaders and they’re neutrals and everyone’s kind of gone with the ad agencies. Growth has been fantastic and just back on the daily chart here’s your earnings gap. And again it pulled back here with the market but then it popped up it’s consolidated in there I like it like a lot of stocks you’d almost like to see a chill out for a couple weeks or maybe have a shakeout to the twenty five day moving average. But I like I like TDD it’s definitely a hold in terms of an exact entry point. You know we’ll find one in the advisories but I like it.
[00:45:33] Question for something that’s a bit more timely, Micron Technology symbol MU, got earnings tonight. I’m assuming, judging by the questions, I’m not following it personally but any comments.
[00:45:47] Also I don’t predict earnings. If I did I wouldn’t be doing this I’d be on a beach somewhere. Micron, I don’t know what’s going to happen on earnings as it is the answer. I just think again the stock went from hate to 60 had a huge persistent correction with the market and I forget. You know I think it’s bottomed out. I’m not negative on these things. I think some of these can come back and do OK but below longer term moving averages. Business is tough, so we’ll see.
[00:46:15] This is the type of stock where it’s so cyclical they come out with earnings today even if the numbers are crappy they say that the DRAM pricing is change in the stock gaps up to you know on huge volume and it’s up 30 percent. I mean you know we’ll talk we’ll talk then. But just going with the evidence in front of me today it’s not something that I’m again I just don’t think it’s a leading stock. It could it could go higher. Don’t get me wrong it doesn’t seem like something that’s really leading the way higher it seems like something that’s already had a huge move for now.
[00:46:46] Few questions in regards to kind of all the FANG stocks. Apple (AAPL) and Amazon (AMZN) Facebook (FB) Google (GOOG) Netflix (NFLX) anything sticking out there as a good buy or something you should consider? Buy all of them in a certain sense like a mutual fund or anything like that?
[00:47:01] Well I’m not going to get in the funds. As long as ideas, I would say Netflix and Amazon are probably the two that well Google looks okay too. But Google’s not growing as fast. They look all of the bottom line is I think they look okay. I think they going to do okay. I’m not sure how much they’re going to really outperform the market. I mean some will some won’t or they will for a couple of months and they won’t for a couple of months.
[00:47:22] The one thing I’ll say about Amazon is it was a normal correction here. It had it see how it tightened up again with the tightness. It’s easy to see in the weekly chart actually adding a second. See how tight that is compared to all these kind of big weekly bars that’s up down up down up down the rally’s back up and then just kind of nice and tight in here volume well below average well below this average line and now it’s starting to reassert itself. I still favor some of the newer names but trust me nobody buys more stuff from Amazon than this until the household. Every day you come home there’s a box on the door. But that looks pretty good.
[00:47:59] Netflix I think is a decent setup. It just doesn’t seem. Well maybe it is ready. I’m going to say it doesn’t seem ready. But thank you Federal Reserve. I talked to Jerome Powell before this webinar. I said hey make the market go up. But again you kind of had this thrust here and then it basically tightened up. I know it’s on the daily chart it looks like it’s all over the place is pretty tight range. So I think Netflix and Amazon of the two are I guess the two I’d be most interested in but I’m still favoring newer names and stuff like that.
[00:48:29] Time for just two more questions here. Sports betting legalization is coming many states and got any stocks or anything to consider that you’re looking for out there. Have you found any?
[00:48:40] I’m a bottoms up guy not a top down. Not that there’s really esports — it’s not like there’s 20 stocks out there to chew on. So far what I’ve sort of seen it’s kind of more bigger companies that might be starting that. And so it’s not going to have a big impact on their financials. But no I’m keeping my eyes open I definitely think that could be something worthwhile whether it’s an individual company whether it’s a processor like a software company that facilitates it or whether it’s just kind of a midsized company that gets into it and ends up being a big part of their business. So I’m intrigued by it. I am looking for it but to this point I haven’t seen anything on it.
[00:49:16] Now we have many questions coming in regards to marijuana stocks.
[00:49:20] We do have our own Cabot Marijuana Investor advisory, but I don’t know if you just want to give any general comments or rather than all the individual positions or something that gets caught your attention in regard to that.
[00:49:33] Well Tim Lutts is the expert and he’s done a great job with that. There’s no doubt about it.
[00:49:38] In terms of my methodology, I would just say the two or three I’m looking at. One would be Cronos (CRON), this guy has a deal with Altria. When I say it deal Altria owns like half the company so it’s pretty good. So they’re in bed with a pretty good partner in here. And this has been I mean yeah you’d like to see it kind of up and away here but to me this is just a nice consolidation really no selling volume in here as the 50 day line catches up and this is after the stock just went bananas. So I mean that’s one and Canopy Growth Corporation (CGC) is the other that I keep an eye on. It’s below its old high but pretty good overall pattern here. And they’re back by Constellation Brands (STZ). So for me Cronos and CGC are the two that I kind of keep an eye on. But longer term I am bullish on the group. It’s one of those. We’re paid to try to find things that go up in the stock market.
[00:50:28] I understand people some people don’t want to invest in them I get it. But whether we like it or not the trend is seems to be in place as more and more things get legalized. So those are the two I’m watching closest.
[00:50:40] That’s going to be it for questions for anyone that we didn’t get to. By all means feel and feel free to e-mail Mike directly firstname.lastname@example.org.
[00:50:48] Mike any last comments or anything before I wrap this up or I’ll just say just what Andre said though we’re a small company. So we take customer service pretty seriously. We’re not you know 500 deep or anything like that so shoot me an email if you do try to put something like a stock symbol or whatnot in the subject line. And if I didn’t get to your question today, I’ll get back to you.
[00:51:08] Well thanks again Mike and thanks to everyone for joining us today and for all the great questions. Be sure to check your inbox for all the post webinar follow up information. A link to the replay and a link to Mike’s report. Three leaders for the 2019 bull market will be made available.
[00:51:22] We’ll be back next month on Thursday April 18th with another webinar this time featuring chief analyst of Cabot Undervalued Stocks Advisor Crista Huff. It’s gonna be a unique webinar. Crista’s focus is going to be on great growth and value stocks that are poised for immediate upside. You certainly don’t want to miss it! So until then, for Mike Cintolo and the entire Cabot Wealth Network team, it’s been an absolute pleasure. We’ll see you next time.