Great Growth & Value Stocks That Are Poised for

Immediate Upside

Crista Huff, Chief AnalystCabot Undervalued Stocks Advisor

Recent Stock Market History

From MarketWatch, January 25, 2018:

“Crista Huff, chief analyst at Cabot Undervalued Stocks Advisor, said that she is advising her clients to be prepared for a correction, defined as a drop of at least 10% from a recent peak…”

The stock market peaked the next day, then dropped rapidly and bottomed 13 days later, with the S&P 500 index falling 10.2%.

Jan. 26, 2018 S&P 500 closing price 2,873Feb. 8, 2018 S&P 500 closing price 2,581

More MarketWatch comments:

“It will take three to five months to recover,” but she said she expected [the] market to resume its path higher afterward.”

The S&P 500 index bottomed in February 2018 and bottomed again in April 2018. The S&P 500 resumed trading near its January highs in July, and began reaching new all-time highs in August 2018.

2019 Stock Market Outlook

I expect 2019 to remain a “trader’s market,” as stocks continue to recover from the sudden and extreme downturn in December 2018.

Many stocks are now traveling back to their 2018 peaks. Expect them to stop rising at that point. Presuming that the earnings outlooks and valuations remain attractive, stocks will most likely either proceed to trade sideways, or fall back by a disappointing amount while they gather strength for their next run-ups.

2019 Corporate Earnings Outlook

2018 was an incredibly profitable year for corporate America.

2019 profit projections, as measured by earnings per share (EPS), appear generally strong, though not nearly as strong as the outsized profit growth we saw in 2018.

Thus far, profit projections for 2020 appear moderate, delivering slower earnings growth than in 2019.

Energy industry profit projections for 2019 and 2020 are completely out of sync with the broader stock market, especially at refining & marketing companies.

Gross Domestic Product (GDP)

u U.S. GDP rose between 1.8% and 4.2% in each of the last eight quarters. The economy is therefore growing.

u A recession would require two successive quarters of falling GDP, which has not happened in recent years.

u There is no sign of falling GDP nor economic recession.

u Stop worrying about the yield curve. An inverted yield curve often accompanies recessions, but it does not cause recessions.

u An economic recession is a normal part of the business cycle. It should not invoke panic nor cause stock market crashes.

Consumer Price Index (CPI)

u An increase in the CPI represents rising consumer prices, a.k.a. inflation.

u The CPI rose 1.9% in the 12 months ending March 2019.

u The Federal Reserve targets annual CPI growth of 2%.

u When inflation rises above the Fed’s target rate, the Fed considers increasing the federal funds rate in order to put downward pressure on inflation.

u Inflation rates are currently steady, without pressure for increases or decreases.

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Cabot Undervalued Stocks Advisor

Stock Selection Criteria uScreening ProcessuStrong Earnings Growth uDividends (optional)uLow Price/Earnings Ratio (P/E)uModerate Debt LeveluTechnical Analysis

Performance History Since October 2015

u 80 completed stock trades

u 18.11% average annualized return

u Seven takeover stocks: Axiall (AXLL), Cavium (CAVM), Chemtura (CHMT), Harman (HAR), KLX Inc. (KLXI), SanDisk (SNDK) and XL Group (XL).

+16.6% year-to-date through April 17(excluding dividends)

Top 10 Stocks to Buy and Hold for 2019

Best & Worst Top 10 Stocks thru April 15(not including dividends)

Sleep Number (SNBR) +51.9%

NXP Semi. (NXPI) +35.4%

Designer Brands (DBI) -6.52%

Mercury General (MCY) -2.55%

Great Growth & Value Stocks That Are Poised for Immediate Upside

Adobe Systems (ADBE)

u Industry: Software $133 billion large-cap stock

u Consensus EPS estimates: +42.2% in 2019 +23.7% in 2020

u Consensus revenue estimates: +28.7% in 2019 +17.9% in 2020

u Industrywide 2019 revenue growth is expected to be 10%.

u Share price $272.77 2019 PE 34.9 2020 PE 28.2

u No dividends; minimal share repurchases; moderate debt.

u Extremely bullish price chart.

ADBE appears ready to break out to new highs.The most bullish time to own a stock.Great for traders and buy-and-hold investors.

American International Group (AIG)

u Industry: Property & Casualty and Life Insurance

u New CEO May 2017; dramatic corporate transformation; many aspects of P&C operations are improving; the company is aiming for a 2019 underwriting profit; good reserve cushion; multi-year ROE expansion.

u Q1 2019 results due May 6. The consensus EPS estimate is $1.05.

u $1.17 EPS in 2018 (actual) $4.35 EPS in 2019 $5.02 EPS in 2020 (+15.4%)

u $40 billion large-cap stock Share price: $46.26 2019 P/E: 10.6

u Dividend yield: 2.8% (no recent dividend increases)

u Aggressive share repurchases throughout this decade.

AIG could rise 16% to price resistance at 54

Axis Capital Holdings Ltd. (AXS)

u Industry: Specialty Insurance & Reinsurance; based in Bermuda.

u Strong excess reserves; strong 2018 pricing trends have continued into 2019; primary focus on profitability (vs. revenue); achieving cost synergies ahead of schedule re: Novae Group plc acquisition.

u Goals: improving customer experience, improving quality of portfolio (performance, volatility, credit quality), cost controls.

u $1.92 EPS in 2018 (actual) $5.27 EPS in 2019 $5.72 EPS in 2020 (+8.5%)

u $4.8 billion mid-cap stock Share price: $57.20 2019 P/E: 10.9

u Dividend yield: 2.8% (small annual increase in January)

u Repurchased 20% of stock in the four years through December 2018.

AXS is rising from a 13-month trading range.Could rise to its March 2017 all-time high of 66.

Neither Cabot Wealth Network nor our employees are compensated by the companies we recommend. Sources of information are believed to be reliable, but are in no way guaranteed to be complete or without error. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on the information assume all risks.

Cabot Undervalued Stocks Advisor

Cabot Undervalued Stocks Advisor Chief Analyst Crista Huff uses her proprietary MarketWise™ system to identify stocks that are undervalued and likely to appreciate in value. Subscribers receive:

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Crista Huff, Chief AnalystCabot Undervalued Stocks Advisor

Email crista@cabotwealth.comTwitter @CristaHuff

Call 800-326-8826 toll-free

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