Portfolios Active As Market Pulls Back

Stocks have been pretty good lately at climbing back from morning weakness. And the major indices did it again today…though they couldn't make it all the way back to positive ground. The market is still concerned with what tax reform will look like and whether or not it can get passed. Today’s session was also impacted by a drop in crude oil prices.

By the closing bell, the major indices had come well off their lows…but still registered losses. The NASDAQ dipped 0.29% to 6737.9, while the S&P declined 0.23% to 2578.9 and the Dow slipped 0.13% to 23,409.5.

“Two days in a row the overnight session put the US in an early hole. Two days in a row the market tried to dig itself out,” said Dave in Momentum Trader and Surprise Trader. “Today, however, the market didn’t make it all the way into the green. Typical of earnings season as far as I’m concerned. This sort of chop is par for the course."

The editors took advantage of this weak session to make all kinds of moves. We saw several buys and several sells with double-digit returns. Enough talk…here’s what was happening in the portfolios today:

Today's Portfolio Highlights:

Options Trader: The bull call spreads in Lennar (NYSE:LEN) expire on Friday and have amassed 93% of the potential maximum gain. That’s enough for Kevin, who decided to close out those bull call spreads for a gain of 131% in just 5 months! Basically, the editor is playing it safe since there wouldn’t be enough time to recover if something negative were to happen in the next few days. But that’s not all...

Heading into its quarterly report on November 21, Signet Jewelers (SIG) has an impressive positive Earnings ESP of more than 69%. This Zacks Rank #2 (Buy) also has great fundamentals and a bullish inverted head and shoulders chart pattern. The analysis is telling Kevin that SIG will post a positive surprise and enjoy a positive price reaction, so he added two bull call spreads in the name by buying to open 2 April 75.00 Calls AND selling to open 2 April 80.00 Calls. If SIG can close at or above $80 by expiration in mid-April, then the portfolio will make 194%. Read the full commentary for more on today’s moves.

Home Run Investor: The portfolio had two double-digit winners on Tuesday, as Brian Bolan decided it was time to take some profits. He sold Wix.com (WIX) and Ichor Holdings (ICHR) for returns of approximately 70% and 17%, respectively. WIX is a cloud-based development company that’s been in the portfolio since July 2016, while ICHR is a chip manufacturing company that was added less than 6 months ago. The editor will have at least one replacement tomorrow.

Surprise Trader: That 69% Earnings ESP for Signet Jewelers (SIG) also attracted Dave, who used today’s pullback in the market to buy a 12.5% allocation in the jewelry retailer on Tuesday. Meanwhile, the editor thinks that this will be a big turnaround quarter for Hewlett Packard Enterprises (HPE), so he added it to the portfolio with another 12.5% allocation. Both of these companies report on November 21. Read the full write-up for more.

Insider Trader: The market weakness is giving Tracey an opportunity to make a few changes to the portfolio. One of those moves was selling Magnachip Semis (MX). This small-cap maker of analog and mixed-signal semiconductor solutions has already moved sharply higher and then given it all back. With small caps under pressure, the editor decided to sell MX today and take a nice 16% return while she still could. Milacron (MCRN) was sold on Tuesday for a nearly 4% profit, as well.

The portfolio also bought the following two stocks with about 10% allocations each:

• Univar (UNVR) is a global chemical distributor that’s in turnaround mode. Last week, a director bought shares in what was the first open market purchase by anyone at the company since January 2017.

• Installed Building Products (IBP) is the country’s second-largest home insulation installer and it is right around new highs, so it was a very good sign when a director bought shares last week. Again, this was the first insider purchase on the open market in a while...since March 2016.

Read the full write-up for a lot more specifics on all of today’s moves.

Stocks Under $10: Low-priced stocks can sometimes run into a few problems around earnings season. But Brian Bolan doesn’t have to worry about that with his latest pick, since it has already reported. Limelight Networks (LLNW) is in the content delivery business, and it recently beat quarterly expectations on both the top and bottom lines. LLNW has actually beaten the Zacks Consensus Estimate in five of the last six quarters and in the last four straight, while revenue growth has been slow and steady. The stock is also a Zacks Rank #1 (Strong Buy). Read Brian’s full analysis of this new pick in the complete commentary.

Momentum Trader: Shares of Everbridge (EVBG) are breaking out yet again on Tuesday. The software company reported a strong quarter earlier this month, including a positive earnings surprise of more than 66%. The stock challenged $30 after the report, but then pulled back a bit. “Today it’s knocking on the door again and this time, it’s going to break it down,” said Dave. He added it to the portfolio today with a 12.5% allocation.

Zacks Short List: The portfolio short-covered three names on Tuesday as part of its weekly adjustment, and two of them were positive. Plus, one was also a double-digit winner. The stocks that left the portfolio were:

• Electronics for Imaging (EFII, +10.4%)
• Liberty Global (NASDAQ:LBTYA, +3.9%)
• Mercadolibre Inc. (MELI)

The new buys that replaced these names are:

• Akorn Inc. (AKRX)
• Live Nation Entertainment (LYV)
• Zayo Group (ZAYO)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Have a Great Evening,
Jim Giaquinto

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