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It Took North Korea to End the Dow's Streak

The August episode of the Zacks Ultimate Strategy Session is now available for viewing! Tune in to this "must-see event" when Steve Reitmeister, Sheraz Mian, Dr. John Blank, David Bartosiak and Eric Dutram discussed the investment landscape from most every angle. Don't miss your chance to hear: 

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Simply log on to Zacks.com and view the August episode here. And please let us know what you think of the new format. Email all feedback to mailbag@zacks.com.


Geopolitical concerns finally put an end to the Dow’s impressive run, which reached 10 straight days of gains and nine new all-time highs. The market looked set to continue these advances (which also included a new high for the S&P yesterday), but then news came out that North Korea has a mini nuclear warhead that can fit inside its missiles. That was followed by the already famous “Fire and Fury” tweet from President Trump. Needless to say, stocks lost all appetite to continue moving higher. 

The Dow declined by 0.15% to 22,085.3 on Tuesday, while the S&P slipped 0.24% to 2474.9 and the NASDAQ was down 0.21% to 6370.5. “Not bad for a day when headlines are screaming about nuclear war on the horizon,” said Dave in Momentum Trader

No one knows what’s going to happen with this North Korea issue moving forward, which means the market has a new round of uncertainty to deal with. But the editors are ready to make sure that your portfolio remains healthy, whether that means taking advantage of short-term concerns or protecting from a more pronounced pullback. On Tuesday, editors were busy doing both. 

In what seems kind of clairvoyant today, TAZR felt like volatility was going to rise in August, so it picked up an insurance policy. Meanwhile, Stocks Under $10 is broadening its parameters to get back up to 20 names, and today added a new position that focuses more on value. Finally, Short List replaced four names this week and banked three profits. Give it all a look below: 

Today's Portfolio Highlights: 

Stocks Under $10: Brian decided to “widen the net” to find better ideas for the portfolio, including looking more to the value end of the spectrum. With that in mind, the editor made Clear Channel Outdoor (CCO) the newest addition. CCO is a Zacks Rank #2 (Buy) advertising company with a market cap of $1.6 billion. The company has beaten earnings twice and met once in the past three quarters, while the topline met expectations after missing the previous four quarters. Brian is not exactly impressed with such results, but does like the rising earnings estimates and the good potential for multiple expansion. Read a lot more about this new addition in the complete commentary.

TAZR Trader: After yesterday’s buying spree, the portfolio was almost fully invested this morning. But Kevin thinks that volatility will rise again this month, so he put the 4% left in cash to work by buying shares of IPath S&P 500 VIX Short-Term Futures ETN (VXX). Basically, this position offers some cheap insurance just in case a negative catalyst rushes investors toward the exits. Read more in the full write-up. 

Zacks Short List: The portfolio short-covered four names in this week's adjustment, and three of them turned out to be positive. The stocks leaving the portfolio include: 

• PTC Inc. (PTC, +5.6%)
• EQT Corp (EQT, +2.6%)
• Williams Companies (WMB, +3.3%)
• Charter Communications (CHTR) 

The new additions that replaced these names are: 

• Cavium Inc. (CAVM)
• Oneok Inc. (OKE)
• Teradata Corp (TDC)
• Vulcan Materials (VMC) 

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

Home Run Investor:
Dave always had a good feeling about Tactile Systems Technology (TCMD), which is why he added it to the portfolio in June. The editor felt that this provider of medical devices for home treatment of chronic diseases was at the forefront of a big breakout. Yesterday, it reported second quarter earnings per share that beat the Zacks Consensus Estimate many times over, sending shares soaring by 12.3% today. Therefore, TCMD was the best performing stock of all the portfolios on Tuesday. The runners up were the Top 10’s Snyder’s-Lance (LNCE, +12%) and the Short List’s PDC Energy (PDCE, +11.9%). 

Surprise Trader: "(The Dow's) streak probably would have kept going if it wasn’t for concerns over North Korea and Trump’s tweet that further threats from the DPRK would be met with ‘fire and fury’.  

"But while the streak finally comes to an end, the overall picture has been more robust. So far this year, the Dow has managed to gain over 12%, so it isn’t as though the index has just been inching higher in 2017. The North Korea issue is definitely a concern, but it is something that has been an issue for a while. Nothing has really changed on this front so a focus on earnings is what is really going to be the key for the market in the near term.  

"It also doesn’t hurt when you consider the top holdings of the Dow. Top holding Boeing is up an absurd 50% so far in 2017, while Apple, McDonald’s, and United Health—all top six holdings—have all gained more than 20% too. With leadership like that out of some of the country’s biggest companies, Korean concerns—at least at their current stage—shouldn’t be an issue." -- Eric Dutram  

All the Best,
Jim Giaquinto

 

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