Portfolios Making Up For Lost Time

Remember, the latest episode of the Zacks Ultimate Strategy Session will be available for viewing no later than this Wednesday, January 9. Kevin Matras, Tracey Ryniec, Ryan McQueeney and Kevin Cook will cover the investment landscape from several angles in this informative event.

Don’t miss your chance to hear:

• Tracey and Ryan Agree to Disagree whether Apple (NASDAQ:AAPL) is “doomed” going forward given the decline in iPhone sales and lack of visionary leadership
• Kevin M. answers your questions in Zacks Mailbag
• Kevin C. and Ryan choose one portfolio to give feedback for improvement
• And much more

So be sure to mark your calendar then log on to Zacks.com and bookmark this page.


The market returned from the weekend with the U.S. and China already talking trade in Beijing. Could we be in store for even more good news after Friday’s twofer of a strong jobs report and a “patient” Fed?

Well, let’s not get ahead of ourselves. There was precious little good news in the final three months of 2018 that mattered to the market, so it wouldn’t be smart to get too confident right now.

But a little bit of optimism is certainly warranted after the run we’ve enjoyed since Dec 26. Stocks have come back from the brink of a bear market, which is officially considered to be a 20% decline from the highs. The S&P got within 0.22% of that mark, but has since rallied more than 8.5%.

On Monday, the major indices managed another session of gains. The NASDAQ jumped 1.26% to 6823.47, while the S&P advanced 0.70% to 2549.69. The Dow was up 0.42% (or just under 100 points) to 23,531.35. As you'd expect, it was a volatile session with each of the major indices closing well off their highs. For example, the Dow was up more than 200 points today at its best.

Another sign of optimism moving forward is that the editors are sounding more and more bullish. Like a lot of investors, they’ve spent most of the past several months waiting for the correction to hit bottom. On Monday, we saw one of the more active sessions in a long while as portfolios took advantage of recent gains to bank solid profits while also adding new stocks that were beaten down in the market plunge. Let’s get right to all the action…

Today's Portfolio Highlights:

Home Run Investor: Back in early November, fashion accessories retailer Fossil Group (FOSL) reported a solid quarter with a positive surprise of 272%! But the market was too concerned with the correction at the time to give the stock any love. In fact, the shorts pounced on FOSL and took a huge 30% short interest position. However, the situation has changed here in early January. With the correction seemingly over and the holidays looking strong, Brian Bolan thinks the shorts are going to be squeezed big time. Therefore, he added this Zacks Rank #1 (Strong Buy) on Monday and might be buying again on Wednesday. Read the full write-up for more.

Counterstrike: The market correction didn’t leave many opportunities for the editors to secure really nice returns, so Jeremy is taking advantage of the recent bounce back to put some money in his pocket. He sold software solutions provider Splunk (SPLK) for a 14% return in just a little over two weeks. The editor also cashed in half of the portfolio’s position in Lululemon (LULU). This yoga apparel retailer was the service’s best performer, so it makes sense to take a nice 14.5% profit but still keep half just in case the momentum continues.

The portfolio also bought a couple names on Monday, including a 5% position in footwear retailer Shoe Carnival (NYSE:CCL) (SCVL). Rising earnings estimates have Jeremy thinking that this Zacks Rank #1 (Strong Buy) is set for a seventh straight beat when it reports again in March. Plus, the editor was impressed with how well SCVL held up during the correction.

In a completely different type of move, Jeremy also decided to short sell Jack-in-the-Box (JACK) with a 7% allocation. The chart for this popular restaurant company is on a clear downward path, especially after a negative earnings surprise in its most recent quarter and its status as a Zacks Rank #5 (Strong Sell) due to lowered earnings estimates. The bounce back in the market has lifted JACK to the point where the editor thinks it’s a good short candidate. Read a lot more about today’s moves in the full write-up.

Healthcare Innovators: It’s a good day for biotech after news that Eli Lilly (NYSE:LLY) would buy cancer fighter Loxo Oncology, along with positive data on a postpartum depression treatment at Sage Therapeutics. Kevin acted fast on Monday to buy Sangamo Therapeutics (SGMO) while the biotech was still around $12. Though not a takeover candidate, SGMO’s pipeline and R&D progress means it should capitalize on any positive trends in the industry.

Axsome Therapeutics (AXSM) also enjoyed some positive trial data for a depression treatment, but Kevin decided to sell this name and secure an impressive 164.2% return. The editor thinks the company will use this data and recent brokerage upgrades to secure additional funding for operations and R&D with a secondary offering. Read the complete commentary for more on all of today’s moves.

Stocks Under $10: The short sellers just keep pressing their luck with GoPro (GPRO), having increased their short interest by 7% to 30.6 million quite recently. Brian Bolan thinks it’s a pretty dangerous move as the situation for this wearable action cameras company appears to be improving. It has beaten the Zacks Consensus Estimate for three straight quarters now and analysts believe it will be profitable in 2019. The editor thinks this beaten down name will find its footing now that the correction seems to be over, so he added it to the portfolio on Monday. Read the full write-up for more.

Insider Trader: Ever since adding Eldorado Resorts (ERI) in mid-November, this gaming company has been volatile. Now that stocks have been on the rise of late, Tracey decided to sell half the position to secure a nearly 10% return regardless of what happens from here. The editor will hang onto the other half and see what develops.

Technology Innovators: The shorts are really bailing on MACOM Tech Solutions (MTSI), covering about 10% in the past two weeks. However, there’s still a 14% short interest in this chipmaker, which means there’s plenty of potential for even more upside. In fact, Brian Bolan thinks this $15 name could make it $20 in the near term if the shorts keep covering. Read the full write-up for a lot more on this new addition.

Black Box Trader: The portfolio swapped out six positions in this week's adjustment and banked four profits along the way. The stocks sold today include:

• Walmart (NYSE:WMT, +9.4%)
• Hertz Global Holdings (HTZ, +5.2%)
• American Outdoor Brands (AOBC, +2.9%)
• Advance Auto Parts (AAP, +2.3%)
• RH (RH)
• TEGNA (TGNA)

The new buys that replaced these names are:

• Rent-A-Center (RCII)
• Tractor Supply Co. (TSCO)
• HCA Healthcare (NYSE:HCA)
• Sealed Air Corp. (NYSE:SEE)
• T-Mobile US (TMUS)
• MDU Resources Group (MDU)

Read the Black Box Trader's Guide to learn more about this computer-driven service designed to take the emotion out of investing.

Zacks Confidential: Stocks have rallied approximately 9% from the lows of the correction. So is it over? Have we seen the worst of this pullback? No one knows for certain, but Brian Bolan has a feeling that this selloff is over. Kevin agrees with him, which is why Brian was handed the reins to this week’s Zacks Confidential. Learn about the reasons for this rebound and why traders are getting more bullish. Also, get three recommendations by clicking: Selloff Ends, Time to Get Bullish.

All the Best,
Jim Giaquinto