First, a reminder that the market is closed for the Memorial Day holiday next Monday so we’ll publish our next issue on Tuesday, June 1.

This week, the broad market continues to give mixed messages, with growth stocks as a whole lagging, but some newer stocks giving bullish signals. One of those is today’s featured stock. It came public in March and on Friday it broke out to a new high!



As for the current portfolio, there are no changes. Everything is working at the moment!

Current Market Outlook


After a couple of horrid weeks for growth stocks, we’ve seen a ray of light lately, as many found solid support with some volume beginning to show up in some stocks as they rally, an early sign that big investors are engaged. Thus, we’ll chalk it up as a nice first step, and definitely a change from the recent carnage, but we still need to see more—many indexes are now doing more chopping than rising (the overall intermediate-term trend is basically neutral at this point), and most of the action in recent days has been among stocks that took the biggest hits (and thus still have a ton of overhead to chew through). Don’t get us wrong, we’re intrigued by what we see—it could prove to be the early stages of a change in character for growth stocks after three months in the outhouse—but the bulls still have more to prove before we meaningfully increase our exposure.

This week’s list remains mixed, with lots of turnaround and cyclical situations, but with a few growth-y issues too. Our Top Pick is Analog Devices (ADI), which has come back to life after a three-month rest thanks to great earnings, huge cash flow and a pending acquisition.

Stock Name	Price	Buy Range	Loss Limit
Acuity Brands (AYI)	180	176-181	162-165
Analog Devices (ADI)	163	159-164	145-148
Avery Dennison Corp. (AVY)	219	215-220	197-200
Blackstone Group (BX)	91	86-89	79-81
Children’s Place (PLCE)	95	90-93	80-82
EOG Resources, Inc. (EOG)	80	78-81	70-72
EPAM Systems (EPAM)	485	465-475	425-430
Owens Corning (OC)	105	101-104	92-94
Progyny (PGNY)	59	54.5-57.5	48-50
Roblox Corporation (RBLX)	89	85.5-89.5	73.5-76.5

Here is your May Wall Street’s Best Digest issue 841.

Earnings season is upon us! According to FactSet, this may be a quarter with the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008. So far, 91% of companies in the S&P 500 have reported, and 86% have reported a positive EPS surprise and 76% have reported a positive revenue surprise. These positive surprises were led by Consumer Discretionary stocks, whose earnings grew by 50.3%.



That’s good news for the markets—which despite a small downturn a week ago—continues to hold its own. The Dow Jones Industrial Average is up about 1,400 points since our last issue. Our advisors are still cautiously bullish, and overall investment sentiment remains the same.



Job openings are up, unemployment claims are down, and Q2 GDP is forecast at a rousing 8.2%. That sounds like a strengthening economy to me!



And, as you know, earnings drive stock prices, and that bodes well for the remainder of 2021.



We begin this issue with an equipment rental company that weathered the pandemic very well, and is now in a position to see a big growth spurt as the economy gets back on track. Next, our Growth stocks include companies from the furniture, crypto, aviation, cruise line, and gaming industries. In Growth & Income, you’ll find ideas from the chemical, fertilizer, RV, consumer products, and motorcycle sectors.



Moving on to Financials, a sector that is quickly recovering, our contributors are recommending several banks, a research, and a FinTech company. In Technology, we offer a hardware, speaker components, and a semiconductor stock. Our Resources & Energy ideas include companies from the mining and production, as well as utility sectors.



We give you one Low-Priced Stock this month, heralding from the communications industry. And in High-Yield and REITs, you’ll see ideas in the communications and mortgage REIT sectors.



Lastly, our Funds & ETFs section includes some income, as well as growth ideas.



Don’t forget to register for my monthly webinars, along with Kate Stalter, my partner on the Wall Street’s Best Stocks and Wall Street’s Best ETF newsletters. The next one is June 8 at 2 p.m. And I hope to see you (virtually, at least!) at our August 17-19 Summit, entitled Smarter Investing, Greater Profits. You can register here.



Please note, our publication date for Wall Street’s Best Digest is changing to the second Thursday of the month, so please watch your inbox for our next issue in just a few weeks.



Please don’t hesitate to send me your feedback and questions. My new address is nancy@financialfreedomfederation.com.

Big picture, this year’s growth stock correction still looks normal, and encouragingly, we are now seeing some names bounce decently after the destruction of the prior two weeks. However, just going with the evidence, there’s still a lot of work to do, with few stocks in position to breakout and little in the way of upside power.

There will be another sustained rally (or two) down the road, but right now, we’re mostly biding our time, holding a lot of cash and fine tuning our watch list for whenever the buyers retake control.



In tonight’s issue, we dive into some precedent analysis that gives us confident in the big-picture point of view, and also highlight three new-ish additions to our watch list. In the Model Portfolio, we’re standing pat, but we could nibble if things continue to stabilize in the days ahead.

In the May Issue of Cabot Early Opportunities we acknowledge the increasingly choppy action in the market and the unprecedented nature of the current recovery.

Similar to last month, we focus on diversifying new buys across different end markets, offering up names with exposure to everything from mobile gaming to oil services to off-road suspension, and more. In short, there’s something for everyone and, we think, enough variety to capture the upside in a wide range of spring and summer market conditions.



Enjoy!

Despite the market coming under pressure in the last several weeks, the Cabot Profit Booster portfolio continues to perform spectacularly! And heading into expiration this Friday, our five May covered calls are all in terrific shape, and potentially on track to their full profits. As is always the case, I will update you where we stand with these positions on Friday morning.

Growth stocks remain under pressure in the market; we sold two last week and I’m recommending selling three more today. When it comes to growth stocks, cutting losses short (and taking profits while you have them) is important.

Still, the market as a whole remains in an uptrend, so I remain bullish long-term. Plus, Cabot’s analysts continue to find plenty of attractive stocks, using a variety of methods. Today’s recommendation is actually a growth stock, boasting both accelerating revenue growth and an attractive chart pattern. This may be an ideal buying point.



Details inside.

Current Market Outlook


Last week, the selling that had been concentrated in growth names spread to the rest of the market through Wednesday, though a late-week bounce helped a bit. Still, not much has changed with the overall environment—growth stocks remain in the dumps, and while bounces are possible (many fell 20% to 30% in just the past three weeks), there’s a lot of damage to repair. The broad market is obviously in better shape, where we still see some good opportunities (mostly after bullish earnings pops), but even there the action is turning choppy and challenging, with news-driven moves, rotation and whipsaws. Overall, we’re fine taking a swing or two at stocks and sectors that are still in favor, but we also think it’s best to stay relatively cautious until we see broad buying power emerge.

This week’s list is almost all turnaround and cyclical-type stories, and our Top Pick is International Game Technology (IGT), which is benefiting from both the reopening of casinos and also the growth wave in sports betting.

Stock Name	Price	Buy Range	Loss Limit
AutoNation (AN)	105	101.5-104	91.5-93.5
Callaway Golf (ELY)	34	32.5-34.5	28.5-29.5
Camping World Holdings (CWH)	45	44-46	39-40
CF Industries (CF)	55	52.5-55	47-48.5
Cimarex Energy (XEC)	74	71.5-74.5	61-63
International Game Technology (IGT)	22	21-22.5	17.5-18.5
Leggett & Platt, Incorporated (LEG)	56	53-55	49-50
Summit Materials (SUM)	34	31.5-33	28.5-29.5
WestRock Company (WRK)	62	58.5-60.5	53-54
Yeti Holdings (YETI)	86	83.5-86.5	76-77

I think it’s fair to say most market observers were not surprised that stocks retreated in late-2018.

The MSCI Emerging Market (EM) basket of 25 emerging market countries pulled back 15% in dollar terms, the Japan market was down 12%, and China’s Shanghai Composite index got clobbered, falling 25%. India ended the year down only 4.2% thanks to pro-business economic policies and an infrastructure boom.

Down markets are a fact of life in investing. Don’t fear them. Embrace them. They offer short term angst and long term bliss for those bold enough to take advantage. With today’s update, just one rating change but overall we’re in good shape.

I’m first coming to you in the midst of an awful market. We are unofficially in a bear market (down 20% from the high).

Remain defensive. Stocks are finally mustering a bounce today, though after the market’s meltdown of recent weeks, the intermediate- and longer-term trends remain firmly down.

As we finish 2018, let’s recap some timely investing and economic topics.

One big picture thing worth mentioning: We’ve all seen various data points about just how bad this market is and how it’s “the worst” in this dimension or that. All of this stuff is just saying what we know—the market stinks and is breaking a bunch of undesirable records.

The usual suspects—trade war, Brexit and the Fed—continue to dog the market, and the situation for emerging market stocks has worsened.

U.S. stock markets continue to suffer, wiping out year-to-date gains that had previously culminated in all-time-high prices on the S&P 500, Dow Jones Industrial Average and NASDAQ indexes. If you’re looking for “the bright side” of this dour news, take heart that none of these market indexes have retraced their early-2018 lows.

The Japanese phrase, hara hachi bu, translates into something like “belly 80 percent full,” or “eat until you are eight parts full.”

Following last week’s big decline, the market has shown some resilience, and we continue to see a growing number of stocks showing great resilience. Even so, our Cabot Tides green light from two weeks ago has disappeared and the longer-term Cabot Trend Lines remain down, so we continue to advise a cash-heavy posture as we patiently wait for confirmation the buyers have taken control. We have no changes in the Model Portfolio tonight.

This small-cap medical device stock has grown at an annual rate of more than 28% for the past five years.

This biotech is forecasted to grow at a 25% rate next year.

This lithium producer is poised to break out with a potential major source.

Our first move in 2020 is going to be to modestly reduce our exposure by dropping a few stocks that are looking weak right now.

This midstream energy company trades at a P/E ratio less than 13 and pays a high dividend yield of 6.29%, paid quarterly.

In light of last night’s events in the Middle East, and this morning’s market declines, I wanted to update where we stand with our Cabot Profit Booster positions. The good news, despite today’s wobbles, is that all are working very well!

Here are the top five holdings in this gold fund.

The shares of this gold royalty company recently hit a 52-week high, and the future looks promising.

This industrial machinery company is expected to grow 75.5% next year.

This pharmacy company has been under pressure due to the drug industry’s ups and downs.

Coverage of this marijuana stock was also recently initiated at Buckingham and B. Riley, with ‘Buy’ ratings.

This electric car company earned $1.86 per share in its latest quarter, surprising Wall Street and analysts who had forecasted -$.42.

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.