Current Market Outlook


The market continues to look fine, with both primary (trend) and secondary (new lows, etc.) evidence boding well—not to mention many of the longer-term signposts like blastoff indicators telling us this is a bull market. But for leading growth stocks, it’s tricky out there; while there haven’t been a rash of breakdowns, there’s plenty of iffy action, with low volume rallies, selling on strength and relatively few stocks hitting new highs. (While the Nasdaq tested new-high ground today, the number of stocks doing so was half of what we saw a week and a half ago.) We certainly don’t think you should be holed up in your bunker, and we’re staying flexible, but given the prolonged run and the recent sloppiness, we think moving closer to shore makes sense, especially if you own some sluggish performers.

Interestingly, while the leaders of the April-July move rest, we’re seeing other names (both growth and cyclical) perk up. This week’s list has plenty of both, and our Top Pick is Quanta Services (PWR), which has decisively broken out on the upside.

Stock Name	Price	Buy Range	Loss Limit
Berry Global (BERY)	64.22	51.5-53.5	47-48
Builders FirstSource (BLDR)	44.12	28-29.5	24.5-25.5
Cerence (CRNC)	107.77	53.5-56.5	46-47
First Solar (FSLR)	83.74	69-72	62-64
HubSpot (HUBS)	582.89	267-277	240-246
Innovative Industrial Properties (IIPR)	214.38	116-121	103-105
iRhythm Technologies (IRTC)	51.15	168-174	149-152
L Brands (LB)	79.48	26-28	22.5-23.5
Quanta Services (PWR)	91.45	48.5-51.5	42.5-44
Shift4 Payments (FOUR)	89.97	47.5-49.5	42-44

The market remains in good health and trending higher, though there is some rotation going on from growth stocks to cyclicals—not unusual for this stage of a bull market.

This week’s recommendation is a big cap global technology stock benefitting from both the spread of communications technology and the company’s dominant position in the global supply chain.



As for the current portfolio, there are no stocks that look like they should be sold, but I must sell one to respect my portfolio cap, and the victim will be Brookfield Infrastructure Partners (BIP), where we have a modest profit.



Full details in the issue.

The market remains in good shape, but growth stocks have come under pressure -- for the first time in months, we’re seeing a good amount of abnormal action. Longer-term, we’re still quite bullish, both on the market and on leading stocks, but given the action (and our solid gains this year), we’ve been paring back, with numerous partial profits and one outright sale, which has us holding a 37% cash position.

In tonight’s issue we write about all our latest thoughts on the market, and how to handle big winners that begin to act iffy. We also write up a handful of names we’re watching should growth stocks stabilize.

These are uncertain times. Risks abound, yet the market forges to new all-time highs. With so many things we can’t know about the virus and the election, it’s a good time to focus on what we do know.

Certain powerful trends will continue regardless of what the economy does or who’s President. One such undeniable trend is the aging population. The population is older now than it has ever been before. And it’s getting still older, at warp speed. The aging population is an irrefutable fact. And older people will require more health care.



This mega trend is literally transforming the demographics of the human race. It will be a huge tailwind for the health care sector in the future. At the same time, many great health care stocks haven’t gotten nearly as pricey as the overall market. And they tend to hold up well if things turn south.



In this issue I highlight one of the very best health care companies in the world. The stock is defensive and barely budged when the market crashed. Yet there are huge growth opportunities ahead as it sells cutting-edge treatments and drugs for illnesses and diseases to a public that will demand them like never before.

Today, we are getting defensive and recommending a micro-cap consumer staples company.

While this issue’s new recommendation is defensive, it has many other attractive attributes:

• Strong historic revenue growth (24% CAGR)
• Over 50% insider ownership
• A strong balance sheet
• A cheap valuation (P/E of 15.0x)

All the details are inside this month’s Issue. Enjoy!

With nearly four million apps in Google Play Store, developers face the daunting task of targeting potential customers. Today’s recommendation makes this effort easier by simplifying the app advertising, delivery and tracking process, helping developers and digital advertisers increase revenue and user engagement at scale.

Current Market Outlook


Two weeks ago we saw a bunch of positive earnings reactions that bolstered leading stocks, but last week was mostly the reverse—the leaders that had been running for months took on water, often reacting poorly to earnings and/or share offerings. Of course, while we see a few storm clouds, it’s not a hurricane, as the major indexes are in good shape and there are a growing number of “fresher” leaders (just getting going in the past few weeks) that are still acting just fine. All in all, the majority of the evidence is bullish, so we are as well, but it’s a stock-by-stock environment—many names look fine and are even buyable (preferably on weakness), but if you do have some extended stocks that are wobbling, have a plan in place (tightening stops, partial profits, etc.) in case the sellers gain strength.

This week’s list contains many of those fresher leaders mentioned above, including a few that have taken off on earnings. Our Top Pick is Zillow (Z), which should be a great bet to benefit from the new housing boom.

Stock Name	Price	Buy Range	Loss Limit
Agnico Eagle Mines (AEM)	79.05	79.5-82.5	71-73
Chart Industries (GTLS)	72.05	69-73	59-61
Digital Turbine (APPS)	24.75	21.5-24	17.5-19
Freeport-McMoRan Inc. (FCX)	13.78	13.3-14.5	11.5-11.9
Freshpet (FRPT)	107.99	99-102.5	89-91
LivePerson (LPSN)	58.55	55-58.5	47-49
Maxar Technologies (MAXR)	27.02	22-23.5	20-20.5
Ollie’s Bargain Outlet (OLLI)	103.94	100-103.5	91-93
Taiwan Semiconductor (TSM)	78.41	75-78	68-70
Zillow (Z)	76.64	77-80	67-68.5

The market continues to hum along, with the S&P 500 closing in on its February highs. Thus, it makes sense to maintain a full portfolio of 20 stocks. To get there, and make room for our newest recommendation, we have to say goodbye to AbbVie (ABBV), which has given us a nice profit in four months but has started to weaken.

Taking AbbVie’s place is a name that’s likely familiar to you, and one that’s showing greater strength than it has in years thanks in part to a new mega-deal. We’re also upgrading Big Lots (BIG) to Buy after a big second quarter.



Full details in the issue.

AbbVie’s (ABBV) earnings failed to impress last week, the stock is stuck in a trading range with a slight downward bias, and the biotech rally has failed—or at least been delayed—once again.

Buy-Rated Stocks Most Likely to Rise Near-Term: Adobe Systems (ADBE) and Tesoro (TSO). Today’s Portfolio Changes: Adobe Systems (ADBE) moves from Strong Buy to Buy, Federated Investors (FII) moves from Hold to Sell, and Schnitzer Steel Industries (SCHN) is added to the Buy Low Opportunities portfolio.

Our stocks will start to report the week after next. And with nothing looking totally overstretched or completely beat up (though a few positions bruised), we’re holding the line today.

Fourteen Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news during the past week.

All of our market timing indicators remain bullish, and the major indexes and many stocks are attempting to resume their post-election uptrends. In the Model Portfolio, we have three changes tonight.

As we enter 2017, big changes are afoot, both economically and politically. News media is currently laser-focused on which stocks are or are not likely to fare well with a new political administration in Washington D.C. This is a good time to remind you why I make my investment decisions based on numbers and price charts, not on trending news topics.

We booked a few profits after the big post-election runup in stocks. And with most of our positions holding firm right now, were sitting pat.

Four Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news during the past week.

The Emerging Markets Timer continues to flash a buy signal, as the iShares Emerging Markets Fund remains above both its 25- and 50-day moving averages, and the lower (25-day) has both turned up and gotten back on top of the 50-day. We have no changes in the portfolio today.

This software company beat analysts’ estimates by $0.05 last quarter, and Wall Street expects it to grow 45.5% next year.

The market appears to have firmed up a little over the last week.

This bank beat earnings estimates by $0.16 last quarter, 14 analysts have recently raised their EPS estimates for the company, and coverage of its shares was just initiated at Barclays with an ‘Overweight’ rating.

This global software company is expected to grow at an annual rate of 22.65% over the next five years, and four analysts have increased their earnings forecasts for the company in the past 30 days.

This Chinese e-commerce company is expected to grow at an annual rate of 29.8% over the next five years.

This Top Pick bank has just extended its share repurchase program to 642,785 shares.

In the past 30 days, six analysts have raised their EPS estimates for this beauty retailer.

The market was brutalized again today, with another avalanche of selling after yesterday’s disappointing Fed rate hike and press conference. One of our positions fell through support and it’s time to sell. This leaves use with two positions and 84% in cash in the model portfolio.

As you noticed, yesterday’s issue of Cabot Dividend Investor was jointly edited by Chloe Lutts Jensen, for whom it was the final issue, and Tom Hutchinson, for whom it was the first.

This Indian solar power company saw its revenues rise by 22% in its second quarter.

As we approach the end of the year, and the entire investing world seems to be worrying about interest rates and tariffs, the question in my mind is whether now is a good time to buy some more marijuana stocks.

This optical and photonics maker beat analysts’ estimates by $0.29 last quarter and five analysts have recently raised their EPS forecasts for the company.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Momentum Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Momentum Trader features.