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Sabrient Quantitative Investment Research

Financial Advisors & Investment Professionals

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News & Announcements - 2019                                      USER GUIDE

12-05-19:  Earnings Busters Alerts for Friday, 12-6-19
    BUY (RENEW):  NMI Holdings, Inc. (NMIH)
Details are in the Earnings Busters newsletter.

12-3-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

11-21-19:  Earnings Busters Alerts for Friday, 11-22-19
    BUY:  Telefonaktiebolaget LM Ericsson (ERIC)
    SELL:  The Mosaic Company (MOS)
Details are in the Earnings Busters newsletter.

11-19-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

11-12-19:  Sector Detector: The ducks continue to line up positively for equities
by Scott Martindale
President, Sabrient Systems

The market this year has been oscillating between fear and optimism, risk-off and risk-on. Until 8/27/19, risk-off defensive sentiment was winning, but since that date a risk-on sentiment has taken hold, and the historic divergence favoring secular growth, low-volatility and momentum factors, defensive sectors, and large caps (i.e., late-stage economic cycle behavior) over cyclical growth, value and high-beta factors, cyclical sectors, and small-mid caps (i.e., expansionary cycle behavior) continues to reverse, as fickle investors have become optimistic about at least a partial resolution to the trade war (including the lifting of tariffs), an improving outlook for 2020-21 corporate earnings, and resurgent capital investment. Investors have moved from displaying tepid and fleeting signs of risk-on rotation to full-blown bullish enthusiasm and reluctance to sell in a fear of missing out (FOMO), even though the short-term technical picture has become overbought.

The late-August risk-on rotation came in the nick of time. Last year at that same time of the year, the S&P 500 was marching higher until peaking on 9/20/18, but it was doing so on the backs of defensive sectors along with secular-growth Tech mega-caps, and I was opining at the time that the rally would fizzle if there wasn't some rotation into the risk-on cyclicals and small-mid caps -- which as you know didn't happen, leading to the Q4 selloff. But, happily, this year has played out quite differently. Read more at Scott Martindale's blog

11-8-19:  Earnings Busters Alerts for Friday, 11-8-19
    BUY:  Marriott Vacations Worldwide Corporation (VAC)
    SELL:  AAR Corp. (AIR)
Details are in the Earnings Busters newsletter.

11-5-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

10-25-19:  Aggressive accounting of restructuring costs and other non-GAAP adjustments: Where is the SEC?
by Ryan Frederick
Equity Analyst, Gradient Analytics LLC (a Sabrient Systems Company

(Note: Many of Sabrient's newsletter subscribers have expressed interest in receiving articles on additional topics, including forensic accounting and earnings quality from our wholly-owned subsidiary Gradient Analytics.)

In 2003, the SEC first officially adopted rules (following Sarbanes-Oxley in 2002) related to the reporting of non-GAAP financial metrics. The new regulations called for a reconciliation of GAAP versus non-GAAP results to be included in various investor resources and to refrain from excluding non-recurring items from non-GAAP metrics if they are reasonably likely to reoccur, which is subject to wide interpretation. Since then, it seems the perceived importance among investors of non-GAAP financial performance has been elevated above traditional GAAP measures. Between 2015 and 2017, less than 10.0% of companies in the S&P 500 did not report a non-GAAP income calculation. However, the ability for management to subjectively decide what is or is not relevant to a company's core business leaves plenty of room for earnings manipulation. Read more . . .

10-24-19:  Earnings Busters Alerts for Friday, 10-25-19
    BUY:  KB Home (KBH)
    SELL:  HollyFrontier Corp (HFC)
Details are in the Earnings Busters newsletter.

10-22-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

10-18-19: Baker's Dozen Model Portfolio for October 2019 Has Launched
Sabrient Baker's Dozen Model Portfolio for October 2019 was launched on October 18, 2019. This portfolio, like all Baker's Dozen portfolios, comprises 13 top-ranked stocks from a cross-section of market caps and industries based on our GARP approach, i.e., growth at a reasonable price. Sabrient believes each of these stocks is positioned to perform well for the next 12 months. The portfolio will terminate on October 19, 2020. To follow the performance of this and previous Baker's Dozen portfolios, please visit Sabrient Baker's Dozen website.

10-16-19:  Sector Detector: Stocks are itching for a year-end breakout rally, but who will lead it?
by Scott Martindale
President, Sabrient Systems

The early weeks of September were looking so promising as a brief but impressive surge gave hope of a revival in the long-neglected market segments. This sustained risk-on rotation seemed to be marking a bullish change of market character from the risk-off defensive sentiment that I have been writing about extensively for the past 18 months (ever since the China trade war escalated in June of last year), specifically the massive divergence favoring the low-volatility, growth, and momentum factors, defensive sectors, and large caps over the value and high-beta factors, cyclical sectors, and small-mid caps.

But then, for the next few weeks, those risk-on market segments were once again lagging, as fickle investors keep returning to stocks displaying stronger balance sheets, high dividend yields, and/or secular growth stories -- in spite of high valuations -- rather than the more speculative cyclical growth stocks selling at attractive valuations that typically lead an upside breakout. It appeared that the fledging bullish rotation was caput -- or perhaps not. Suddenly, there have been positive developments in the trade negotiations and in the Brexit saga, and the past several days have brought back renewed signs of a pent-up desire to take stocks higher. Signs of a better-than-expected Q3 earnings season may be the final catalyst. Read more at Scott Martindale's blog

10-15-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

10-10-19:  Earnings Busters Alerts for Friday, 10-11-19
    BUY:  Assurant, Inc. (AIZ)
    SELL:  II-VI Incorporated (IIVI)
Details are in the Earnings Busters newsletter.

10-8-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

10-7-19:  New Sabrient Dividend UIT Launched
A new Sabrient Dividend UIT Portfolio (Ticker: FGSCIX) -- 29th in the series -- was launched by First Trust Portfolios on October 7, 2019. This UIT seeks companies with above-average total return through a combination of capital appreciation and dividend income. The stocks are selected through an investment strategy process developed by Sabrient. The portfolio will terminate on October 7, 2021. For more information, a prospectus, or a fact sheet, please visit First Trust Portfolios.

10-7-19:  New Dividend Opportunity UIT Launched
The seventh portfolio in the Sabrient Dividend Opportunity UIT Series (Ticker: FHBTLX) was launched by First Trust Portfolios on October 7, 2019. This UIT seeks companies with above-average total return through a combination of capital appreciation and dividend income. The stocks are selected through an investment strategy process developed by Sabrient. The primary difference between the Dividend Opportunity portfolio and the other Sabrient Dividend portfolios, is the length of term. The Dividend portfolios have a 2-year term, while the Dividend Opportunity Portfolio has a 15-month term,. This Dividend Opportunity portfolio will terminate on January 7, 2021. For more information, a prospectus, or a fact sheet,please visit First Trust Portfolios.

10-1-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

9-26-19:  Earnings Busters Alerts for Friday, 9-27-19
    BUY:  IMAX Corporation (IMAX)
    SELL:  Domtar Corporation (UFS)
Details are in the Earnings Busters newsletter.

9-24-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

9-20-19: Baker's Dozen Model Portfolio for September 2019 Has Launched
Sabrient Baker's Dozen Model Portfolio for September 2019 was launched on September 20, 2019. This portfolio, like all Baker's Dozen portfolios, comprises 13 top-ranked stocks from a cross-section of market caps and industries based on our GARP approach, i.e., growth at a reasonable price. Sabrient believes each of these stocks is positioned to perform well for the next 12 months. The portfolio will terminate on September 21, 2020. To follow the performance of this and previous Baker's Dozen portfolios, please visit Sabrient Baker's Dozen website.

9-17-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

9-15-19:  Sector Detector: Stocks take a bullish rotation into neglected market segments, but will it last?
by Scott Martindale
President, Sabrient Systems

In case you didn't notice, the past several days have brought an exciting and promising change in character in the US stock market. Capital has been rotating out of the investor darlings -- including the momentum, growth, and low-volatility factors, as well as Treasury bonds and "bond proxy" defensive sectors -- and into the neglected market segments like value, small-mid caps, and cyclical sectors favored by Sabrient's GARP (growth at a reasonable price) model, many of which have languished with low valuations despite solid forward growth expectations. And it came just in the nick of time.

In Q3 of last year, the S&P 500 was hitting new highs and the financial press was claiming that investors were ignoring the trade war, when in fact they weren't ignoring it at all, as evidenced by narrow leadership coming primarily from the mega-cap secular Technology names and large cap defensive sectors (risk-off). In reality, such market behavior was unhealthy and doomed to failure without a broadening into higher-beta cyclical sectors and small-mid caps, which is what I was opining about at the time. Of course, you know what happened, as Q4 brought about an ugly selloff. And this year, Q3 was looking much the same -- at least until this sudden shift in investor preferences. Read more at Scott Martindale's blog

9-13-19:  Earnings Busters Alerts for Friday, 9-13-19
    BUY:  JetBlue Airways Corp (JBLU)
    SELL:  Spirit AeroSystems Holdings, Inc. (SPR)
Details are in the Earnings Busters newsletter.

9-13-19: New Small Cap Growth UIT Launched
The 24th Sabrient Small Cap Growth UIT Series (FBWLTX) was launched by First Trust Portfolios on September 13, 2019. The portfolio invests in top-ranked (at the time of their selection) small-cap stocks that represent a cross-section of industries that Sabrient believes are positioned to perform well in the coming year. The stocks are GARP stocks -- stocks that represent "growth at a reasonable price" -- and they are meant to be held for the full term of the trust, which terminates December 14, 2020. For a prospectus or fact sheet, please visit First Trust Portfolios.

8-29-19:  Earnings Busters Alerts for Friday, 8-30-19
    BUY:  Arconic Inc. (ARNC)
    SELL:  Post Holdings, Inc. (POST)
Details are in the Earnings Busters newsletter.

8-21-19: New Defensive Equity Portfolio Launched
A new Sabrient Defensive Equity UIT (FBWJRX), 21st in the series, was launched by First Trust Portfolios on August 21, 2019. This UIT seeks to find companies that are positioned to perform well in environments of falling stock prices but also those companies that have the potential to provide solid performance in rising markets. The stocks in the portfolio are selected through an investment strategy process developed by Sabrient. The portfolio will terminate on November 23, 2020. For a fact sheet or prospectus, please visit First Trust Portfolios.

8-20-19:  Baker's Dozen Model Portfolio for August 2019 Has Launched
Sabrient Baker's Dozen Model Portfolio for August 2019 was launched on August 20, 2019. This portfolio, like all Baker's Dozen portfolios, comprises 13 top-ranked stocks from a cross-section of market caps and industries based on our GARP approach, i.e., growth at a reasonable price. Sabrient believes each of these stocks is positioned to perform well for the next 12 months. The portfolio will terminate on August 21, 2020. To follow the performance of this and previous Baker's Dozen portfolios, please visit Sabrient Baker's Dozen website.

8-15-19:  Earnings Busters Alerts for Friday, 8-16-19
    BUY:  Pilgrim's Pride Corp (PPC)
    SELL:  Wabash National Corporation (WNC)
Details are in the Earnings Busters newsletter.

8-13-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

8-12-19:  12th Rising Rate Portfolio Launched
A new Sabrient Rising Rate Portfolio (FEQZDX)) -- 12th in the series -- was launched by First Trust Portfolios on August 12, 2019. Historically, certain stocks have outperformed the market in periods during which longer-term Treasury bonds have rising yields, and Sabrient believes 10-year and longer Treasury yields are likely to rise over the next several years. The Sabrient Rising Rate Portfolio is a unit investment trust that seeks to find companies that Sabrient believes are positioned to perform well in environments of rising Treasury yields. The portfolio will terminate on August 12, 2021. For a fact sheet or prospectus, please visit FirstTrustPortfolios.com.

8-7-19:  Sector Detector: Strong July gives way to volatile August as trade war escalates
by Scott Martindale
President, Sabrient Systems

July was yet another solid month for stocks, as the major market indexes eclipsed and held above psychological barriers, like the S&P 500 at 3,000, and the technical consolidation at these levels continued with hardly any give-back at all. But of course, the last day of July brought a hint of volatility to come, and indeed August has followed through on that with a vengeance. As the old adage goes, "Stocks take the stairs up but ride the elevator down," and we just saw a perfect example of it. The technical conditions were severely overbought, with price stretched way above its 20-day simple moving average, and now suddenly the broad all-cap indexes (S&P 500, Dow, Nasdaq) are challenging support at the 200-day moving average, while the small cap Russell 2000 index has plummeted well below its 200-day and is now testing its May low.

For the past 18 months (essentially starting with the February 2018 correction), investor caution has been driven by escalating trade wars and tariffs, rising global protectionism, a "race to the bottom" in currency wars, and our highly dysfunctional political climate. However, this cautious sentiment has been coupled with an apparent fear of missing out (aka FOMO) on a major market melt-up that together have kept global capital in US stocks but pushed up valuations in low-volatility and defensive market segments to historically high valuations relative to GARP (growth at a reasonable price), value, and cyclical market segments. Until the past few days, rather than selling their stocks, investor have preferred to simply rotate into defensive names when the news was distressing (which has been most of the time) and then going a little more risk-on when the news was more encouraging (which has been less of the time). I share some new insights on this phenomenon in today's article. Read more at Scott Martindale's blog

8-6-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

8-1-19:  Earnings Busters Alerts for Friday, 8-2-19
    BUY:  Athene Holdings Ltd. (ATH)
    SELL:  MRC Global Inc. (MRC)
Details are in the Earnings Busters newsletter.

7-30-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

7-19-19:  Baker's Dozen Model Portfolio for July 2019 Has Launched
Sabrient Baker's Dozen Model Portfolio for July 2019 was launched on July 19, 2019. This portfolio, like all Baker's Dozen portfolios, comprises 13 top-ranked stocks from a cross-section of market caps and industries based on our GARP approach, i.e., growth at a reasonable price. Sabrient believes each of these stocks is positioned to perform well for the next 12 months. The portfolio will terminate on July 20, 2020. To follow the performance of this and previous Baker's Dozen portfolios, please visit Sabrient Baker's Dozen website.

7-18-19:  Earnings Busters Alerts for Friday, 7-19-19
    BUY:  GoDaddy Inc. (GDDY)
    SELL:  ConocoPhillips (COP)
Details are in the Earnings Busters newsletter.

7-17-19:  Weekly Stock Ratings Changes Now Available
This week's Stock Ratings Changes report is available for downloading.

7-12-19:  Sector Detector: Defensive sectors have led indexes to new highs, but cyclicals are perking up
by Scott Martindale
President, Sabrient Systems

The major cap-weighted market indexes continue to achieve new highs on a combination of expectations of interest rate cuts and optimism about an imminent trade deal with China. Bulls have been reluctant to take profits off the table in an apparent fear of missing out (aka FOMO) on a sudden market melt-up (perhaps due to coordinated global central bank intervention, including the US Federal Reserve). But investors can be forgiven for feeling some deja vu given that leadership during most of the past 13 months did not come from the risk-on sectors that typically lead bull markets, but rather from defensive sectors like Utilities, Staples, and REITs, which was very much like last summer's rally -- and we all know how that ended (hint: with a harsh Q4 selloff). In fact, while the formerly high-flying "FAANG" group of Tech stocks has underperformed the S&P 500 since June 2018, Barron's recently observed that a conservative group of Consumer sector stalwarts has been on fire ("WPPCK") -- Walmart (WMT), Procter & Gamble (PG), PepsiCo (PEP), Costco (COST), and Coca-Cola (KO).

This is not what I would call long-term sustainable leadership for a continuation of the bull market. Rather, it is what you might expect in a recessionary environment. When I observed similar behavior last summer, with a risk-off rotation even as the market hit new highs, I cautioned that defensive stocks would not be able to continue to carry the market to new highs (with their low earnings growth and sky-high P/E ratios), but rather a risk-on rotation into cyclical sectors and small-mid caps would be necessary to sustain the uptrend. Instead, the mega-cap Tech names faltered and the market went into a downward spiral. Many analysts and pundits have been forecasting the same for this year. Read more at Scott Martindale's blog

7-12-19:  28th Sabrient Dividend UIT Launched
A new Sabrient Dividend UIT Portfolio (Ticker: FORPBX) -- 28th in the series -- was launched by First Trust Portfolios on July 12, 2019. This UIT seeks companies with above-average total return through a combination of capital appreciation and dividend income. The stocks are selected through an investment strategy process developed by Sabrient. The portfolio will terminate on July 12, 2021. For more information, a prospectus, or a fact sheet, please visit First Trust Portfolios.

7-12-19:  6th Dividend Opportunity UIT Launched
The sixth portfolio in the Sabrient Dividend Opportunity UIT Series (Ticker: FSCRHX) was launched by First Trust Portfolios on July 12, 2019. This UIT seeks companies with above-average total return through a combination of capital appreciation and dividend income. The stocks are selected through an investment strategy process developed by Sabrient. The primary difference between the Dividend Opportunity portfolio and the other Sabrient Dividend portfolios, is the length of term. The Dividend portfolios have a 2-year term, while the Dividend Opportunity Portfolio has a 15-month term,. This Dividend Opportunity portfolio will terminate on October 13, 2020. For more information, a prospectus, or a fact sheet, please visit First Trust Portfolios.

7-5-19:  Earnings Busters Alerts for Friday, 7-5-19
    BUY:  Strategic Education, Inc. (STRA)
    SELL:  ArcBest Corporation (ARCB)
Details are in the Earnings Busters newsletter.

7-1-10: New Forward Looking Value UIT Launched The 7th Sabrient Forward Looking Value Portfolio (FNOWLX) was launched by First Trust Portfolios on July 1, 2019. This portfolio seeks companies that are positioned to perform well in the near future by "looking forward" at anticipated earnings over the next few years. The stocks in the portfolio are selected by applying a comprehensive investment strategy developed by Sabrient. The portfolio will terminate on October 7, 2020. For a prospectus or fact sheet, please visit FirstTrustPortfolios.com.



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