New Trade for November 4th, 2020

Investors are piling into tech stocks this morning in early trading, with Nasdaq futures pointing to a gain of more than 400 points.  Futures for all the major benchmarks are up this morning after some bumpy overnight action.  Volatility can be expected as voting results trickle in for the remaining states.  

Many of our readers have profited since we signaled a “BUY” alert for Nvidia back in early May, or for AMD in July.  Semiconductor stocks have soared in 2020 and we hope that your portfolio has grown as a result.  Today we’re highlighting a relatively small company in the market segment whose product is essential to the chipmakers.  

Cabot Microelectronics (CCMP) isn’t a chipmaker itself.  Rather Cabot supplies chipmakers with chemicals and cleaning products used in the semiconductor manufacturing process.  The company operates in 20 countries with 36 manufacturing plants.  

The semiconductor industry can be volatile, as chip designs come and go, but overall growth for chip production seems to be steady.  Cabot’s results have been steady as well.  The historical EPS growth rate for CBT is 34.5%.  The company’s projected EPS is expected to grow 8.5% this year, crushing the industry average, which calls for EPS growth of 3.6%  

Right now, year-over-year cash flow growth for Cabot is 84% which is higher than many of its peers.  In fact, the rate compares to the industry average of 0.9%.  Looking back, the company’s annualized cash flow growth rate has been 33.2% over the past 3-5 years versus the industry average of 4%.

 The company is scheduled to report earnings on Monday November 9th.  It’s also worth noting that there have been upward revisions in current-year earnings estimates for Cabot.