Current Market Outlook


After a very strong rally from the late-January lows, the major indexes are again in the midst of a pullback—during the past week and a half we’ve seen a few days of churning and distribution as worries over inflation (and a less-loose Federal Reserve) cause some profit taking, and today saw a big rotation out of growth stocks. Could this be the start of a “real” correction? It could be, as the intermediate-term advance is long in the tooth and sentiment remains giddy. That said, we never anticipate, and so far, we really haven’t seen much abnormal action yet—while a few stocks have fallen apart after earnings, most leaders are intact and even the weakest major index (Nasdaq) is near its 25-day line, which is acceptable. Given some of the yellow flags out there, our antennae are up, but with most of the evidence still positive, we’re keeping our Market Monitor at a level 7.

This week’s list has many recent earnings winners, including a few that are busting loose from good-sized bases (regular or post-IPO). Our Top Pick is Wix.com (WIX), which has a great story, accelerating growth and just staged a very powerful breakout.

Stock Name	Price	Buy Range	Loss Limit
The AZEK Company (AZEK)	47	45-47.5	40.5-41.5
Deere & Company (DE)	338	318-328	288-294
DraftKings Inc. (DKNG)	60	59.5-62.5	52-53.5
Magna International Inc. (MGA)	87	81-85	73-75
Mohawk Industries (MHK)	174	162-168	146-149
MongoDB (MDB)	392	395-407	355-365
SelectQuote (SLQT)	30	27-29	24-25
Sonos (SONO)	38	34.5-36.5	29.5-30.5
Teck Resources Limited (TECK)	23	21-22	18.7-19.5
Wix.com (WIX)	335	333-346	295-305

The bull market is alive and well, and our holdings, in general, are delivering as expected, with the usual zigs and zags to keep us on our toes.

Today’s recommendation is a big solid technology company that should benefit for years from the ongoing 5G communications rollout—and it pays a nice dividend, too.



As for our current holdings, there are no changes. With the new addition, the portfolio is once again fully invested.



Details inside.

Here is your February Wall Street’s Best Digest issue 838.

Now that we have the presidential inauguration and former president’s impeachment behind us, let’s hope we can get onto the business of business for 2022! Almost 45 million in the U.S. have now been vaccinated against COVID-19, and we can almost see past the pandemic to a time when we can all get back to some semblance of ‘normality.’



Although, some of the trends that surfaced during the pandemic are sure to be with us for many years to come, including more remote workers, Zoom meetings, and home remodeling. Fortunately, for us, those trends should continue to make us money!



For now, the markets are holding up well; there are rumblings of an economic recovery on the way, and both investors and our investment pros remain bullish, as you’ll see in our Advisor Sentiment Barometer, as well as our Market Views.



This month, our Spotlight Stock is the largest commercial mortgage REIT, who managed to remain profitable during the pandemic. My Feature article further highlights that industry as well as some of the unique properties of the REIT.



We offer a host of Growth stocks this month, spread across the automobile, steel, infrastructure, marijuana, online dating, and airline industries. In Growth & Income, you’ll find opportunities in the music publishing, rental, retail, and homebuilding sectors.



Next, Financial stocks are finally beginning to gain ground, and here we include ideas from the insurance, investment, and commercial banking areas. Healthcare brings us two biotech stocks. And in technology—which is continuing to shine—our contributors like semiconductors, hardware, navigation tech, e-commerce, and telecom.



This month, while Utilities have not yet made their mark on 2021, we have one midwestern company that looks very interesting. We also offer you a couple of Low-Priced stocks to put some zing in your portfolio. And our REITs & Preferred Stocks section include companies from the commercial and data center sectors, as well as a preferred issue from an investment bank.



Lastly, our Funds & ETFs are well-diversified, with ideas in healthcare. Utilities, materials, yield, airlines, and small cap arenas.



I wish you a healthy and prosperous ‘rest of the winter’, and look forward to your feedback and questions. My address is nancy@financialfreedomfederation.com.



Happy Investing,



Nancy K. Zambell
Editor and Chief Analyst
Wall Street’s Best Digest

Stocks seemed to wobble a bit this week and yesterday there was a mild sell-off among some tech stocks. Still, of the 400 S&P 500 companies that have already reported earnings, 80% had beaten analysts’ expectations, according to FactSet. Overall, the Explorer portfolio has performed relatively well with Fisker (FSR) up 17% and Virgin Galactic (SPCE) doubling since the beginning of 2021. This week’s new recommendation is from a sector in an uptrend due to a combination of higher demand and tight supply.

In February’s Issue of Cabot Early Opportunities we dig into the red hot IPO market.

We take a closer look at five recent IPOs that have been on my shopping list. It is not an Issue for the faint of heart. Several of these stocks have made significant moves in their short history as public companies.



There are strategies to mitigate the risks, however. And as we scan the universe of attractive stories today it is not hard to envision several of these stocks trading significantly higher a year from now.



Sit back and enjoy.

The stock market added to its gains last week up for a second straight week with the S&P 500 up 1.2% while the Nasdaq jumped 1.7%. Of note, February expiration is upon us this week. And all three of our February positions (Alcoa, Kohl’s and Snap) are in great shape, and likely to expire for full profits. But rest assured I will send you a full breakdown of these positions on Friday morning prior to expiration.

Current Market Outlook


With the major indices in record territory and the leading growth stocks showing strength, it’s hard to be anything less than bullish right now. Even at these elevated levels, the market has provided us with a few attractive entry points recently. But with earnings season well underway and sentiment still elevated, the potential for near-term volatility has increased. Thus, it’s imperative not to throw caution to the wind in this news-sensitive environment. Given the weight of evidence, being selective when buying is the preferred tactic. The dominant intermediate-term trend is clearly up, though, so you don’t want to be too defensive. We’ll keep our Market Monitor at 7 and see how things go from here.

This week’s list has a nice mix of stocks across several industries benefiting from different trends. Our Top Pick this week is CarParts.com (PRTS), which recently had a high-volume breakout from a huge basing pattern.

Stock Name	Price	Buy Range	Loss Limit
Agilent Technologies (A)	128	127-129	121.5-123
Analog Devices (ADI)	160	156-161	149-151
CarParts.com (PRTS)	21	19.5-22	17-18
Chegg (CHGG)	112	105-111.5	97-100
eXp World Holdings (EXPI)	80	74-79	62-65
Freeport-McMoRan Inc. (FCX)	33	31-33	27.5-28
Johnson Controls International plc (JCI)	53	52-54	49-50
Pinterest (PINS)	89	85.5-88	76-78
Square, Inc. (SQ)	276	263-273	240-250
Twitter (TWTR)	74	68-72	63-66

The bull market is alive and well, though frothiness and investor exuberance are reminders that you shouldn’t leave your brain at the door. Always remember to manage your risk.

Speaking of risk, today’s recommendation is more speculative than most of our recommendations, so if you invest, start small. The sector it’s working in is hot, the story is interesting, and the stock’s chart is solidly positive, without being overextended, so I’m intrigued.



As for our current holdings, I’m selling one stock that achieved its target (good) and one that continues to decline and is now our biggest loser (bad).



Details inside.

As early as last summer, I predicted that the S&P 500 would continue rising into early 2018, then experience its overdue correction. I was about a month off on the timing. I was guessing March, but the correction arrived in February. I was right on the size of the downturn, though, almost to the penny. That was a small part technical analysis and a large part luck.

Thursday marked the first day of somewhat significant turbulence in our portfolio in what seems like forever, but indications are that Friday will be back to business as usual, at least for the first part of the day.

Emerging market stocks have had a volatile week, with the iShares EM Fund (EEM) popping above its 25- and 50-day moving averages on Wednesday, but slipping back to the 50-day today.

Two stocks are being sold from the portfolio.

After one strong week in the market, over half the stocks in our portfolio are either at 52-week highs or close to their year-to-date highs. And that’s both good and bad.

Several of our stocks appear capable of beginning a new run-up.

Continue to lean bullish. The market’s rebound today after yesterday’s Italy-induced selloff was very encouraging, and both of our trend-following indicators remain bullish.

There are no rating changes in today’s weekly update.

While I’m keeping most stocks at Buy this week, I do think near-term upside is somewhat limited and that being more selective with new purchases is a wise decision. Look to nibble on those stocks that aren’t overly extended but still have strong momentum.

Emerging market stocks have had another soft week, with the iShares EM Fund (EEM) below its 25-, 50- and 200-day moving averages, although Chinese stocks continue to hold steady.

This week’s retail news and earnings reports brought great surges in the share prices of two of the stocks in our portfolio.

The yield on the 10-year Treasury rose over 3.1% last week following several strong economic releases and a handful of speeches by current and incoming Fed members. That’s kept utilities and other high-yield investments depressed for another week. Most of our holdings are looking constructive and a few potentially on the cusp of big breakouts.

We’re selling one stock, but we’re going to reinvest the proceeds in two steps—first, by adding another half-sized position in one and by initiating a half-sized position in another. Our cash position will still be in the low 50% range after these moves.

This bank is expected to grow at an annual rate of 12% over the next five years.

Yesterday was the worst day of the year for cannabis stocks, with HEXO (no longer in our portfolio) leading the way down with a plunge of 22.5% after the company announced that revenue for the fiscal fourth quarter, ended July, would be $14.5 to $16.5 million, well short of analysts’ expectations of $24.8 million.

This oil and natural gas company is selling some assets, and our contributor thinks this may result in a hefty one-time special dividend.

This space tech company beat analysts’ earnings estimates by $0.19 per share last quarter.

This week’s update is both early and much shorter than normal.

The market has been changing faster than the weather here in the northeast. And like any big change it’s been a bit tough to navigate.

Coverage of the shares of this software company was recently initiated at William Blair with an ‘Outperform’ rating.

This energy company recently reported a significant rise in earnings.

This company, whose founder invented the MRI, just celebrated its 50-year anniversary.

We replaced this fund with more diversified fund.

We are replacing a fund in which 57% of assets are comprised of real estate with one that focuses on technology (36.54% of assets), industrials (23.91%) and healthcare (21.97%).

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.