In the first week of 2019, a better overall stock market, weaker U.S. dollar, bargain hunting, and hopeful signs of a temporary truce in the U.S.-China trade war have all helped push our Emerging Markets Timer back into a bullish mode.

As with our prior signals, we’re not advising you to jump in with both feet since there is still a fair amount of uncertainty out there and the iShares EM Fund (EEM) needs to demonstrate staying power and work through some resistance. Still, we are extending our line a bit with our two new buys in today’s issue.

Congratulations to our big winners and thank you to all of our contributors. It was a difficult market last year, but these results reflect how—with the right expert help—it is possible to beat the markets.

In this issue, we recap our big winners from last year, and have a very nice—and diversified list—of a group of stocks that promise great potential for 2019.

The market has begun 2019 with a bang, and it well could go on longer—though prediction is a fool’s game. It’s far better to simply follow proven systems of investing, whether growth or value or hybrid, and continually work to maintain a portfolio of high-potential stocks.
This week’s recommendation, for example, is a solid grower, nothing fancy. But the stock withstood the selling of December and is now at an attractive entry point, primed to break out to new highs in the weeks or months ahead.

Today’s stock is another specialized medical device company. It plays in the highly specialized market for organ transplant surveillance. It has all the attributes of a good stock—it’s expanding its end market potential with new products, is almost profitable, and the chart looks great!

Current Market Outlook


The market’s rebound continues, and encouragingly, we’re seeing some power develop—stocks have shown two major accumulation days (one the day after Christmas, when the Dow rose 1,000 points, and the other last Friday after soothing words from the Fed) and breadth has been terrific. We can’t say we’re out of the woods yet; even after today’s rally, the intermediate-term trends of the major indexes are clearly down (all indexes are still near their 25-day moving average, in fact). But even so, there’s no denying the rally is off to a good start, and to this point, the market and potential leading stocks are doing what they “should” to carve out a sustainable low. You should still keep plenty of cash on the sideline, but we’re not opposed to adding some small positions in potential leaders and seeing how things progress. We’re nudging our Market Monitor up a notch.

This week’s list has a broad mix of stories and charts, but all of them look like they want to head higher if the market cooperates. Our Top Pick is Chipotle Mexican Grill (CMG), which, after a massive shakeout, looks primed to continue its turnaround.

Stock Name	Price	Buy Range	Loss Limit
AZUL (AZUL)	29.41	26.5-28	24-25
Buenaventura (BVN)	16.23	15.5-16.5	14-14.5
Chegg (CHGG)	74.21	28.5-30	25-26
Chipotle Mexican Grill (CMG)	773.32	465-485	425-435
Etsy (ETSY)	112.97	49-51.5	42-43.5
Incyte Corporation (INCY)	76.98	70-73	64-66
Kirkland Lake Gold (KL)	51.30	24-25.5	21.5-22.5
Okta, Inc. (OKTA)	148.41	63-66	54-56
Telephone & Data (TDS)	35.36	33.5-35	30.5-31.5
Workday (WDAY)	194.88	157-164	143-147

Believe it or not, there are some legitimate reasons for hope as 2019 begins--the market’s December meltdown produced some historic extremes in sentiment and breadth, readings that have almost always occurred near the start of a bottoming process. If all goes well, the market will work in the weeks ahead to bang out a sustainable low, while the best stocks set up in pole position for the next advance.

Amidst a bearish stock market, we’re adding one big-dividend stock to our portfolios today. Lacking much stock market excitement and lower-risk near-term capital gain opportunities, I decided to post some corporate news and price action on a couple stocks—not featured in our portfolios, but still of interest to many investors.

I don’t see much downside risk for the market here but I do see a lot of upside, though the challenge is knowing which stocks are going to lead the next advance. Happily, one of the advantages of investing in a basket of stocks recommended by Cabot Stock of the Week is that you can own an extremely well diversified portfolio, which means that as the market’s bounce continues, you have a good chance of owning some of the leaders.

It is useful (if also humbling) to review how our prior year’s forecast turned out.

In this issue, we take a look back - and a look forward - as we assess our moves.

For value-focused investors, this year’s prologue has been a welcome change from the turmoil experienced in early 2025.

In just the past few weeks, some of last year’s most ignored or underappreciated laggards have posted outsized gains, with rallies that have made even momentum-driven tech stock traders envious. Even more remarkable is the fact that much of that strength has been concentrated in ultra-defensive areas of the market like consumer staples, utilities and healthcare.

The market rotation continues to be the main story out there this week, though rumblings of a potential strike on Iran, an update from the January FOMC meeting, and a slew of earnings reports and economic data releases have been giving investors plenty to think about.

In terms of the rotation, the equal‑weight S&P 500 ETF (RSP) is up 5.5% so far this year, illustrating that leadership is broadening beyond the narrow group of mega‑cap stocks that drove much of last year’s performance.

Year to date, the S&P 600 SmallCap Index is up 8.3% and the S&P 400 Mid‑Cap Index is up 7.9%. Both are comfortably outperforming the S&P 500, which is up just 0.1%, and the Nasdaq, which is down 2.1%.

Happy Chinese New Year! The year of the horse is upon us.

China is expecting an incredible 9.5 billion trips to be made during the 40-day Lunar New Year travel period. Chinese automakers are also on the move as the country’s numerous brands sold nearly 200,000 vehicles in Britain last year, doubling their market share to almost 10%.

As U.S. investors have shifted from risk-on to risk-off mode in recent months, a clear disparity between the “haves” and the “have-nots” has materialized.

Let’s start with the “have-nots.” Financials have fared the worst so far this year (-4.7%), followed by technology (-3.1%), communication services and consumer discretionary (-2.8% each). The downturn in the two tech-related sectors in particular is a stark departure from recent years, when technology led the charge of the current bull market.

Cyclical stocks are soaring and technology is floundering in the transformed market.

The bull market is turned upside down. For most of the first three years, technology, and particularly AI stocks, soared while most other stocks did very little. Now, previously meandering stocks are killing it while technology sinks.

Strong fourth-quarter earnings are confirming what the market was already doing.

Current estimates based on earnings reported so far are for 13.2% overall S&P earnings growth for the quarter. It’s a solid quarter and the fifth straight quarter of double-digit earnings growth. In terms of sector performance, cyclical companies are killing it, and technology is floundering, just like before earnings.

Like many coffee aficionados, I have something of a love/hate relationship with Starbucks (SBUX). My main gripe is that the company’s food and beverage offerings have always been pricey compared to the fare served in most fast-food restaurants and run-of-the-mill coffee houses.

The outperformance of small caps continues.

Through Tuesday’s close, the S&P 600 is up 10% year to date versus just 1.6% for the S&P 500.

All but three small-cap sectors are outperforming their large-cap counterpart. The strongest small-cap sectors are materials (+20%), energy (+23%), industrials (+17%), and tech (+11.4%).

Let’s talk about the power of staying invested.

Sure, when the market turns south – and I’m not even sure last week’s mini-dip qualifies – it makes sense to pare back on your weakest stocks and put a larger portion of your portfolio in cash. But taking your ball and going home – selling out of all of your stocks when times are tough – is not a winning strategy. Here’s why.

NOTE: We’re sending this a day early as I’m soon to embark on a trip with the kiddos over the next week. I will be working a good amount from the road, though, and will have updates if need be. Also, next week’s issue will be published as scheduled.

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WHAT TO DO NOW: The market remains very mixed, with growth measures still generally pointed sideways to down, while the broad market remains in solid shape. What’s interesting, though, is that we’re seeing more growth stocks kick into gear, along with some huge buying action in a few “cyclical growth” names. Tonight we’re making one move—adding a half-sized stake in Macom Tech (MTSI)—but are keeping our eyes open for a broader character change among growth stocks. Our cash position will be around 53%.

Today could be a big day for cannabis stocks.

The reason: We may get an important update on the rescheduling timeline.

Cannabis investors will be watching closely today to see whether Attorney General Pam Bondi offers a rescheduling update when she appears before the House Judiciary Committee. Upbeat comments could spark a sharp cannabis sector rally. The hearing starts at 10 a.m. EST.

I’m excited to share a couple of enhancements to Cabot Early Opportunities —improvements designed to sharpen our focus and better help you stay on top of the stocks we own.

This video gaming company continues to lead the sector with innovations to extend game life and increase player engagement.

Three analysts have increased their EPS forecasts for this IoT company in the past 30 days.

The top five holdings of this video game ETF are Glu Mobile Inc (GLUU, 5.52% of assets); Take-Two Interactive Software Inc (TTWO, 5.04%); NEXON Co Ltd (NEXOF, 4.95%); Webzen Inc (069080.KS, 4.87%) and Ubisoft Entertainment (UBSFF.PA, 4.79%).

One of our stocks reported much better-than-expected third-quarter results yesterday afternoon. Investors reacted by pushing the share price up about 8% since the market opened this morning.

One of my top recommendations lost close to 30% on Tuesday after releasing disappointing Q3 earnings results. The quarterly loss was hard to predict because most of the loss was due to unforeseen circumstances.

The big picture is looking better this week. Small caps rode the momentum from the end of last week to a 52-week high yesterday. And early market action today suggests they’ll be able to hold onto those gains.

This jeweler handily beat earnings forecasts, crushing analysts’ estimates by $0.29.

One of our stocks is now rated Sell, simply because it has come so far so fast.

This miner beat analysts’ estimates by $0.05 last quarter and in the last 30 days, 10 analysts have increase their EPS estimates for this year.

The recently-rumored merger between semiconductor companies Marvell Technology Group (MRVL – yield 1.2%) and Cavium (CAVM) was announced this morning.

Cummins, which makes engines for trucks, heavy machinery and other industrial and transport applications, fell 4.6% on Friday after Tesla unveiled its new electric semi-truck, increasing competition in the long-haul trucking market. Cummins also held an analyst day on Friday, but apparently failed to impress.

This wood products company beat analysts’ estimates by $0.12 last quarter, and four analysts have increased their EPS forecasts for the company in the past 30 days.

Our Cabot Top Ten 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 Top Ten features.