Validea is an advisory service which assesses stocks based on the investing criteria of many of the ...
A Coolcat Trio
08/15/2016 10:00 am EST
Kevin Kennedy, editor of the Coolcat family of newsletters, discusses the fundamental and technical aspects of his investing strategy, and shares three recommendations from his model portfolios – an immuno-therapy play, a logistics firm, and a biotech ETF.
Steve Halpern: Our very special guest today is Kevin Kennedy, editor of the Coolcat family of newsletters. How are you doing today, Kevin?
Kevin Kennedy: I'm doing great, nice to talk to you.
Steve Halpern: Well, thanks for taking the time. We're going to talk about each of your services, but first I'd like to begin with your overall strategy. In fact this is a strategy that's lead to gains of over 12% annualized for over 16 years. Could you walk us through what you referred to as the three M's of investing?
Kevin Kennedy: Sure. Basically, I just try to kind of capsulize my approach in a simple to remember acronym -- I guess you might say.
So the three M's are basically market time, momentum stocks, and money management and basically the first component, market timing, you have to be in a fairly strong market to see substantial gains.
Obviously it helps a lot in some stock full of struggle in weaker market conditions so it's nice to have the market running in your favor.
Momentum stocks -- basically the strongest stocks tend to be the best performers and basically price and volume action show the way there.
And then once you've got the market and then the right stocks you need to have some kind of plan to manage them to buy and when to sell.
Steve Halpern: Now, could you also briefly touch on the technical characteristics or that the trading characteristics that you look for when selecting stocks or ETFs.
Kevin Kennedy: Sure, and again, I think there's any number of approaches, but I think and pretty much in all cases, I'm looking primarily for technical stuff. Obviously, if it's backed up by the fundamentals as well, that's great, but pretty much I want to see some price gains.
Even if it's in as little of period as a week, I'd like to see a stock that maybe has been going down or sideways or whatever kind of in a slow period and all of the sudden boom, it's up 20% in a week in a really strong volume.
So basically, price and volume advances, new highs, breakouts over key resistance points on a technical basis is the kind of thing that I look for.
Steve Halpern: Let's turn to a couple of stock examples. In your Coolcat Explosive Small Cap Growth Stock Report you particularly like Advaxis (ADXS). Could you tell our listeners a little bit about this service as well as this stock idea?
Kevin Kennedy: Sure, well the newsletter, that's the oldest newsletter I've been publishing since 1997 and again it focuses kind of on the smaller stocks -- micro-caps, small-caps -- and Advaxis is a recent stock that came to our attention. Basically, it went up about more than 70% last week.
They're a biotech firm and they have a cancer immunotherapy solution -- ADXS-NEO. They're a smaller company, but when you're a smaller company, you're looking to play with the big boys and they really landed the giant last week when they got a deal with Amgen (AMGN).
So Amgen's going to market this drug and in exchange for $40 million up front and they can earn additional milestone payments of almost $500 million as well as some royalty payments on top of that and the company's only got a market cap of about $500 million. I could see a lot more upside from here.
Steve Halpern: Now in your Coolcat Stock Market Momentum Leaders Report you highlight XPO Logistics (XPO). Again, could you explain the overall difference behind this newsletter and the story behind XPO.
Kevin Kennedy: Sure, I mean this newsletter is looking for similar stocks with similar characteristics, but it has two portfolios -- one looks at larger stocks and basically I'm looking for stuff with market caps of more than a billion. That's in one portfolio.
XPO is kind of an interesting company. It went up almost 800% from 2008 to 2014 and then last year it kind of pulled back; it lost a little bit more than 30% and fell more than 50% off its high earlier this year.
But then last week they basically gapped up on some big volume like 9.5 million shares last Thursday, which is about six times more than they usually trade and it finished the week up 24%.
Just shy of a 52-week high, but at an 11-month high and basically — what they did — this is a company that's grown rapidly by kind of rolling up a lot of companies in the supply and chain solutions area and so they've got annual sales of $10.5 billion, but their market cap is only about 4 billion.
And the significant thing that happened last week was for the first time in five years they actually produced a profit. Thirty-five cents a share is a lot more than what was expected.
And their CEO has basically said that they're going to kind of chill out on the acquisitions and allow the company to growth. Looks like a pretty good situation.
Steve Halpern: Now, finally, you also publish a newsletter that focuses on exchanged created funds call the Coolcat ETF Report and here you like the SPDR S&P Biotech ETF (XBI). What's the attraction in this situation?
Kevin Kennedy: Well again, the newsletter, it has, similar to the other ones, has two model portfolios; one's a more actively traded portfolio that focuses on the ETFs with the strongest six-month price gain so a lot of silver and gold funds obviously on that list and other things that have more momentum.
The other portfolio there is more of a buy and hold long-term approach and again kind of a guide where I track basically 30 of the most widespread and popular ETFs and give basically some longer term signals.
Now, biotech obviously has been a huge winner over the last few years, but it kind of started to lose a lot of luster earlier this year. January and February really cratered and a lot of these biotech indexes lost like half their value.
This one's no different, but recently it's kind of steadied and broken out again above its 200 day moving average and above feel like about a six month high so it looks like it's pretty poised to resume a leadership role in the market.
Steve Halpern: Again, our guest is Kevin Kennedy of the Coolcat family of advisory newsletters. Thank you so much for your time today.
Kevin Kennedy: Thanks Steve, always a pleasure.
Editor’s Note: Kevin Kennedy will be a featured speaker at the upcoming San Francisco MoneyShow, August 23-25. He will offer workshops on generating big returns from small cap stocks as well as building retirement portfolios using long-term ETFs. To register, click here.
By Kevin Kennedy, Editor of the Coolcat family of newsletters
Related Articles on STRATEGIES
The Roman philosopher Seneca wasn’t talking about the stock market when he wrote that “T...
The Dow Theory was originally referred to as “Dow’s Theory,” since it was based on...
When stocks are selling at valuation extremes and consumer optimism is at one of the highest levels ...