The market’s nascent bounce two weeks ago has morphed into a very impressive rally, led by a gaggle of growth stocks that are acting better than they have since late last year and early 2021. We’re not completely out of the woods, and earnings season can always throw a wrench into things, but there’s no question the evidence has improved. We’re putting some more money to work tonight, averaging up in one name and adding a familiar face back to the portfolio as well.

In the October Issue of Cabot Early Opportunities we continue to snap up shares of high-growth software stocks, while adding a couple of consistent growers in the landscaping and waste management arenas to round out our market exposure.

Enjoy!

Greentech’s made some modest strides the past week and is indicating some bullishness for the first time in three months. There’s still some work to be done to shake the bears loose, but we’re encouraged by recent action. We still believe the market is weighed down by a lack of progress on the proposed infrastructure and long-term spending bills. We’ve said a few times recent history shows clean energy doesn’t need Federal support to thrive, but the promise of still-murky regulatory action has investors wary of making commitments.

Before we dive too deep into this week’s idea I have decided to sell our PureStorage (PSTG) stock position, which will leave us without a stock or option positions, as the stock has not been participating in the recent market rally. This could prove to be a mistake, but I would prefer to lock in our small profit, while at the same time raise some cash for upcoming trades.



Moving on …



The market added to recent gains last week, as the S&P 500 had its best week since July. The S&P 500 rose 1.8%, the Dow climbed 1.6%, and the Nasdaq added 2.2%.



The rally came on the back of better-than-expected earnings from several well-known stocks. The big banks dominated the earnings calendar and the sector’s pandemic-era trading boom fueled the continued bullishness.

Markets rallied strongly last week, with growth stocks in particular showing strength, so the odds are improving that the recent correction is over and new highs are ahead. If so, today’s recommendation of a data-warehousing company will likely thrive.

As for selling, I have no recommendations today, just one downgrade to hold. And I’ll be following Tesla carefully, reading the quarterly report on Wednesday, and watching the stock’s reaction.



Details inside.

This year has been about as choppy and tricky as we can remember, so nothing the market would throw at us from here would come as a surprise. That said, there’s no question the snapback of the past couple of weeks has been very encouraging—the major indexes have rebounded beautifully, with many regaining their 50-day lines, and individual stocks (especially growth stocks) have done great, with more and more moving back to (or out above) their prior highs. We also like that the bounce has been broad, with the on-again, off-again, rotational action taking a backseat to outright buying. Obviously, the market isn’t totally out of the woods, as most indexes are still range-bound and earnings season is upon us, which will often change the trajectory of things. But we always go with what we see, and the odds are increasing that the September/early October correction is over. We’re moving our Market Monitor back up to a level 7, and could go higher than that if the good vibes continues.

This week’s list represents the broad advance of late, with stocks of all different spots and stripes making the cut. Our Top Pick is Zscaler (ZS), which has lifted to new price and relative performance highs after a six-week pullback.

Stock Name	Price	Buy Range	Loss Limit
Atlassian (TEAM)	415	392-405	360-365
Cameco Corporation (CCJ)	26	25-27	21.5-22.5
Continental Resources (CLR)	52	49-51	42.5-43.5
Datadog (DDOG)	157	152-158	135-138
MGM Resorts (MGM)	48	47-48.5	42.5-43.5
Range Resources (RRC)	24	21.5-23	18.5-19
Snowflake (SNOW)	338	322-333	286-292
Tesla, Inc. (TSLA)	870	845-865	760-770
XENE (XENE)	31	29.5-31.5	25-26
Zscaler (ZS)	301	292-302	262-268

Here is your October Wall Street’s Best Digest.

In the past month, the markets have been seesawing—mostly due to Washington shenanigans—but the overall long-term picture continues to be bright. The rise in housing prices seems to be mitigating, the unemployment rate dropped to 4.8%, and FactSet expects the S&P 500 companies to produce earnings growth of more than 27% for this quarter. So, the fundamentals appear to be in place for a longer bull run, although as I often say—it’s a stock-picker’s, not a dartboard, market.



And with that in mind, our contributors have found some very interesting companies for you this month.

In a market facing inflation, a Taiwan potential takeover, rising oil prices, Explorer stocks had a good week, especially Cloudfare (NET), up twenty points for the week and Sea (SE) is back up to 350, up 7% yesterday. We need to remain confident and my pick today is a niche player in corporate aviation markets.

Today, we are recommending a South African company that trades in the U.S. It looks highly compelling:

• High insider ownership (insiders own ~45% of shares outstanding)
• Strong momentum (stock is near 52 week high)
• 100%+ revenue growth
• Reasonable valuation: P/E ratio of 13x
• Low share count (only 5.4MM shares outstanding)
• No debt

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

The market seems to want to move higher, albeit slowly and with rude interruptions from the headlines. The S&P 500 is within less than 1% off the all-time high set in July, although the index has been somewhat range-bound since June.

When market pundits toss about terms like “growth stocks” and “value stocks,” it seems as if they’re saying “companies that are growing” vs. “companies that are not growing,” so we sugar-coat these companies and pretend that they have ‘value.” That’s not really what “growth vs. value” means!

There is a lot of uncertainty out there, which isn’t an entirely new scenario. We’ll continue to try and play it a little safe right now by keeping all stocks previously rated hold at the same rating.

While we’re growing more optimistic that the next big move will be up, we continue to advise a cautious stance as the market’s numerous crosscurrents continue—the indexes are still range bound, there’s rotation under the surface and relatively few stocks are hitting new highs.

The market is once again flirting with all time highs. The good week was driven largely by the announcement of a partial trade deal with China. But the main event will be earnings going forward.

There’s been a variety of news pertaining to airlines, and also to the Boeing 737 MAX jet problem, in recent weeks. It can be hard to know which industry-specific stocks to own and which to ignore. I always use profit growth as my first line of defense when deciding which stocks might join my portfolios, on the theory that rising profits should theoretically lead to rising share prices.

Today marks the first face-to-face talks between senior officials from America and China since July.

The indexes are near all-time highs in what is now the oldest bull market and recovery in history. And risks are mounting. There’s the trade war with China, the sputtering global economy, weaker growth at home and impeachment. The market is really struggling to muster the enthusiasm to forge higher from here.

The markets have been quiet, heading into earnings season, which begins next week with financial stocks and a couple of our stocks move to Buy recommendations today after recent pullbacks.

Be cautious. The selling pressure has spread to the rest of the market, with the recent decline cracking a bunch of stocks and causing our Cabot Tides to turn negative.

This portfolio stock was up 18.3% yesterday in anticipation of earnings that were released after the market closed.

This candy company has grown at an annual rate of nearly 20% in the last five years.

Three portfolio stocks reported earnings today, and we’re selling one for a nice profit.

This global beverage company is adjusting sales due to the coronavirus pandemic, but new products and initiatives should keep it growing steadily.

Three portfolio stocks reported earnings today, and one moves to Hold.

Three portfolio stocks recently reported earnings and one moves to Strong Buy.

This gaming company is benefiting from stay-at-home orders.

This portfolio stock has exploded over 25% to all-time highs following a beat and raise Q1 that seemed in the cards, but still comes very much as a surprise to me.

Several portfolio stocks recently reported earnings and move to Strong Buy.

This technology company’s stock has almost recovered from the March market rout and is closing in on its 52-week high.

Several portfolio stocks recently reported earnings.

This newly-merged defense and aerospace company is forecasted to grow by 23.5% next year.

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.