This is a great time to sell covered calls.

The recent upward movement in the market increases upside speculation, and call premiums have risen. It’s a great time to take advantage of the recent surge in certain stocks to secure a high-income return. Even if the stock gets called, you are taking profits in a very high market ahead of what is likely a choppier environment.



In this issue, I highlight a covered call on the recently red-hot Qualcomm (QCOM). The stock soared 50% in a little over a month but has leveled off in recent days. It’s a great time to secure a huge call premium and lock in a huge income to go along with recent appreciation.

Rare Earths Lift Off
Driven by strong demand in the magnet market, prices for rare earths like neodymium and praseodymium have skyrocketed and achieved a position of relative strength among the metals in November. Lithium, meanwhile, is also still a strong performer along with nickel, thanks to growing electric vehicle (EV) battery demand and tight supplies. Rising “green technology” demand has further served to fuel the bull market in both metals.

With the short holiday week and only three trading days since last week’s update, we will go directly to a new recommendation. Markets welcomed the nomination of Jerome Powell as head of the Fed for another term, believing that he will keep interest rates low through early next year. As for our stocks, Cloudflare (NET) had a down day yesterday but we have no change in recommendation.

Have a great Thanksgiving holiday.

The market is in the midst of a short-term consolidation, which usually dishes out some pain and offers tedious action, which is what we’re seeing so far—earlier this week, we cut bait with one stock and have tight leashes on a couple of others. Further near-term shenanigans are possible, even likely, so we’re taking things on a stock-by-stock basis, but we’re also not opposed to putting money to work in resilient leaders—which we’re doing tonight, starting a half-sized position in a name we’ve long thought has the characteristics of a future winner.

This month’s issue of Cabot Marijuana Investor comes a week early, due to Thanksgiving holiday next week. And that’s good, because the sector is finally looking healthy again.

In last week’s update, I recommended averaging up in two stocks and buying two new stocks, and in this week’s issue, I give you the whole picture. It’s not too late to buy.



Full details in the issue.

To borrow a phrase usually deployed when tax cuts are rolled out, the infrastructure bill has “released the animal spirits” in Greentech. Our sector is bullish and appears to be working off of a strong base built since May.

This issue we have two new additions to our portfolios – one is an American company that suddenly has global market leadership in a crucial part of utility solar. The other is one of those companies long touted to be a game changer when in its start-up phase, so much so that Bill Gates backed it. It’s now public and fills an important energy niche with a delightfully simple approach.

Inflation was the focus last week with the release of the much-anticipated producer price index (PPI) and the consumer price index (CPI). Both came in well above expectations. CPI came in at 6.2%, which was the highest level seen in over 30 years, while the PPI was 8.6%, the highest in more than 10 years. These data points flamed the inflation fears that many had been anticipating for the past several months.



And while inflation is going to continue to be a worry for the bulls, as of last Friday, 460 of the companies that reside in the S&P 500 have reported earnings, with 80% outperforming expectations, a number which has far outperformed analyst expectations.



Speaking of strong earnings, this brings to me to this week’s idea which is a global leader in the tire market, and which just reported a strong third-quarter earnings report.

Note: There will be no issue of Cabot Stock of the Week next Monday, as our publishing schedule is fifty issues a year. I hope you have a great holiday with family and friends.

As for the market, it’s still strong, and our portfolio is still fully invested, and today we’re jumping back into the marijuana market (the focus of my other advisory) with a young marijuana stock that just came public this year.



On the sell side, CrowdStrike (CRWD) gets the ax today, as it is going the wrong way.



Details inside.

First off, due to our regular schedule (two weeks off all year), there will be no Top Ten next Monday (November 22), though we will likely do a Movers & Shakers update pre-Thanksgiving.

Onto the market, big picture, we remain quite bullish, but near term, we think there’s the possibility of further shenanigans—we’re seeing a few stocks crack key levels, and with most measures of sentiment showing complacency/giddiness, more pain could be in store to raise the discomfort level. We advise following the tried-and-true method of holding your strong, resilient stocks, while keeping stops in place on names that are beginning to wobble. We’re pulling our Market Monitor back down to a level 7 to respect the recent iffy action, though we still think the next big move is up.



This week’s list has a lot of good-looking charts, including another batch of names that recently reacted well to earnings. Our Top Pick is one of those, with a story benefiting from both housing and long-term growth trends.

Stock Name	Price	Buy Range	Loss Limit
AppLovin Corporation (APP)	103	96-101	83-86
CF Industries (CF)	66	62.5-65.5	56-57.5
Diamondback Energy (FANG)	111	107-112	98-101
Expedia Group (EXPE)	178	174-178	163-165
The Goodyear Tire & Rubber Company (GT)	23	22-23	19.5-20
GXO Logistics (GXO)	99	93-96	84-86
LendingClub (LC)	44	40-42	34.5-36
Livent Corporation (LTHM)	30	28-30	25-26
Seagate Technology (STX)	106	100-104	91-93
Trex Company (TREX)	129	126-130	110-112

The markets have responded well to the compromises that Washington pols have neared on President Biden’s two spending plans. The Dow Jones Industrial Average is up more than 5% since our last issue.



The unemployment picture, of course, is helping, with October’s unemployment rate dropping from 4.8 to 4.6. As well, both the ADP and non-farm payrolls rose much faster than economists expected, meaning the economy is definitely moving forward. Housing prices—although still rising in some parts of the country—are beginning to stabilize. And the good news from the Mortgage Bankers Association that existing home prices should fall by 2.5% next year, should help the market for buyers improve.



All in all, excellent economic reports.

Inflation stays high, infrastructure week arrives, and Rivian stock surges while markets sold off a bit yesterday. The weakness yesterday halted some good rallies among Explorer stocks. We continue to explore new ideas and for this week’s recommendation, we go into the Cloud for a familiar name.

Today, we are profiling a micro-cap bank that is focused on serving an attractive niche, the litigation industry. It looks highly compelling:

• High insider ownership (insiders own ~12.5% of shares outstanding).
  
• Strong momentum (stock is near 52 week high).
  
• ~20%+ earnings growth for the foreseeable future.
  
• Low valuation: P/E ratio of 12x.
  
• ~60% upside to fair value.

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

Today will be an important day for our retail apparel stocks.

Both large and small growth stocks continue to advance off their October lows despite all the political turmoil from the impeachment hearings.

The Cabot Global Stocks Explorer portfolio is doing well in 2019 and a number of recommendations have recently surged on the strength of impressive earnings and an improving environment for emerging and international stocks.

The market mood is always changing. Just last week the market indexes were forging new all-time highs and cyclical stocks were the best performers. What a difference a week makes.

U.S. stock markets, as represented by the S&P 500 (SPX) and Dow Jones (DJIA) indexes, continue reaching new highs. But stocks and stock markets don’t go straight up, even during bull runs.

The S&P 600 Index just made another run but called it quits at 990 and has turned south.

Continue to put money to work. The market and individual stocks are acting very well, and while there are some short-term yellow flags out there (complacency, overbought, etc.), the fact that stocks haven’t given up much ground is encouraging.

The market still has an upward bias, albeit less so than the past couple of weeks. Investors are starting to sniff out 2020.

The stock market continues to reach new all-time highs. I’m very comfortable with current market momentum.

The top five holdings are listed in our first recommendation,

Analysts expect this cloud company to grow by 58.3% this year.

This avocado (plus other foods) grower is due to report earnings on June 8.

This consultancy firm beat analysts’ EPS estimates by $0.04 last quarter and is forecasted to grow at an annual rate of more than 12% over the next five years—one of the bright spots during this pandemic.

Shares of this portfolio stock have taken a hit lately on news of a secondary offering of around $170 million, followed by the pricing announcement

Crista updates three portfolio stocks and has one rating change.

This Virginia bank just reported a good quarter and raised its dividend.

We have no changes in the Model Portfolio tonight, but we’re sending a special bulletin given the wild action in growth stocks over the past two days.

We’ve been waiting for a pullback in high-growth names and that looks to have begun this week.

We’ve been waiting for a pullback in high growth names and that looks to have begun this week.

Analysts expect this optoelectronics manufacturer to post 87.2% growth this year.

This food distributor beat analysts’ EPS forecasts by a penny last quarter.

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.