This Friday is the expiration of our December covered calls, and I am happy to report that all five of our positions are in good/great shape. As is always the case, expect an email from me Friday morning breaking down where we stand with each position.

Market trends remain very positive as we head toward the end of the year, so I continue to recommend that you remain heavily invested—but with one eye on the exit door. The fact is, sentiment is very high, which means risk is growing—but I can’t argue with trends.

Today’s recommendation is a fast-growing cybersecurity stock with a special focus on the cloud, and great upside potential. Aggressive investors should like it.



But to fit it into the portfolio, I’ve got to sell something, and the victim is another hot growth stock, recommended just five weeks ago and now being sold for a quick 39% profit.



Full details in the issue.

Current Market Outlook


We could pretty much cut our intro from the past couple of weeks and paste it in this week—the primary evidence (trends and overall action of the market and leading stocks, fresh breakouts, blastoff-type green lights from mid November) remains very encouraging, with most of the major potholes seen lately coming from very speculative situations. The main worry is that few investors are worried (in stark contrast to earlier this year, when the market was kiting higher but few believed it), which tells us that risk is rising. Thus, we remain bullish and think putting money to work is the best course of action, but it’s also important to keep your feet on the ground and focus on the best-looking stocks while trailing stops higher and taking partial profits as things stretch higher.

This week’s list is relatively split between growth situations and those benefiting from cyclical/turnaround buying. Our Top Pick is Axon Enterprise (AAXN), which continues to gain sponsorship and has just tightened up nicely for five weeks.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	34.99	32.5-34.5	28.5-30
Align Technology (ALGN)	504.11	485-515	430-445
Ambarella (AMBA)	90.94	84-88	74-76
AAXN (AAXN)	127.31	124-129	111-114
Baker Hughes Company (BKR)	21.72	20.8-21.8	18-18.7
fuboTV Inc. (FUBO)	27.15	24.5-26.5	20.5-21.5
The Michaels Companies (MIK)	11.68	10.9-11.8	9.4-9.8
Micron Technology, Inc. (MU)	71.54	66-69	60-62
PagerDuty (PD)	44.18	41.5-43.5	36.5-37.5
Stitch Fix (SFIX)	64.06	57-61	48-50

A stimulus bill looks like it is right around the corner but we need to get through this winter before vaccines are widely available. Facebook faces a real challenge to break it up and accept legal liability for content. An EU-China summit is cancelled after China tried to limit speakers critical of China’s clampdown of Hong Kong. On the Explorer front this past week, MP Materials (MP) and NovoCure (NVCR) were particularly strong as Sea Limited (SE) briefly made a new high at 200. As promised, our new idea this week hails from Brazil and is a monopoly play on the most essential of all resources.

Due to the holidays, the next issue of Cabot Global Stocks Explorer will be published on January 7, 2021.

Today, we are recommending a micro-cap stock in the virtual lease-to-own market.

I think this stock has ~100% upside over the next year or so.



This company’s characteristics include:

• Secular revenue growth
• Significant operating leverage
• Company insiders own over 20% of shares outstanding
• Recent insider buying

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

The vaccine is changing everything. Stocks that had been left for dead by the market recovery are springing back to life and leading the market higher.

One area of opportunity ahead of the New Year is in banks stocks. As a cyclical sector, banks took it on the chin during the pandemic. They crashed during the bear market and have lagged the recovery. But they are rising fast and have great momentum ahead of what looks to be a promising year for the sector.



In this issue, I highlight one of the very best and most profitable banks in the country. It still sells at a great value, pays one of the highest dividends in the industry and now has solid upward momentum.

As 2020 winds to a close, and as the market races to all-time highs, our six open covered call positions are all doing very well ... especially our December positions set to expire next Friday, December 18.

Current Market Outlook


If you’re looking at the trends of the major indexes, the price/volume action of leading stocks (both cyclical and growth) or the breadth of the overall market, it’s hard to find much to fault—the buyers are clearly in control as most stocks, sectors and indexes trend higher. About the only thing to worry about is that there’s not much to worry about; sentiment measures of all stripes (money flows, option activity, surveys) as well as some market action (huge moves in many speculative stocks) tell us that things are a bit hot and heavy right now. To be clear, that’s no reason to dramatically alter your game plan, but it’s a reminder that risk is rising, so keep your feet on the ground, look for good entry points and, once you’re in, honor your stops and book some profits (or partial profits) on the way up.

This week’s list features a wide mix of stocks, including many that have recently staged longer-term breakouts. One of those is our Top Pick: Applied Materials (AMAT) sports accelerating growth and a beautiful chart, and while short-term dips are possible, a major advance looks to be underway.

Stock Name	Price	Buy Range	Loss Limit
Applied Materials (AMAT)	89.25	85-90	75-78
Cleveland-Cliffs (CLF)	12.62	11.5-12.3	9.8-10.3
Pinduoduo (PDD)	146.82	140-147	119-123
Qorvo (QRVO)	167.01	158-163	143-146
Snowflake (SNOW)	388.38	360-380	313-323
Tapestry, Inc. (TPR)	29.75	27-28.5	24-25
Uber (UBER)	53.80	51.5-54	45-47
Vale S.A. (VALE)	16.29	14.7-15.7	12.8-13.3
United States Steel Corporation (X)	17.20	15.3-16.3	12.7-13.2
Zscaler (ZS)	178.17	174-180	154-158

The bull market remains alive and well, and I continue to recommend that you be heavily invested in a diversified portfolio of stocks.

This week’s recommendation is a very small medical technology company focused on the business of processing and testing cells, as accurately and efficiently as possible. Long-term potential is big.



But to make room for it in the portfolio, something has to go, and this week it’s Digital Realty (DLR), which never really got going for us.



Full details in the issue.

I spent a good portion of this past week working on my 2018 Small-Cap Outlook. We’ll be publishing that soon, but I wanted to share a few thoughts from it today, starting with my year-end target for the S&P 600 Small Cap Index.

The iShares EM Fund (EEM) is well on top of its moving averages, which keeps the Emerging Markets Timer remains firmly positive. We have one change tonight.

The U.S. economy is showing modest growth with improvement in capacity utilization, home sales and industrial production, and the bull market continues with Dow closing above 26,000 yesterday.

The stock market remains very strong, and a third of S&P stocks hit new 52-week highs on Friday. The Dow traded over 26,000 for the first time ever yesterday, although all the major indexes then pulled back to end the day lower. Interest rates continue to rise, causing more pain for REITs and utilities, and earnings season has begun in earnest.

Cabot analyst Tyler Laundon writes the introduction to this week’s update. Unsurprisingly, it related to small-cap stocks, which is Tyler’s focus in Cabot Small-Cap Confidential. One rating change.

Our portfolio has soared over the past week right along with the market. Our average gain is 3.2%, and our stocks are beating their benchmark by around 20%.

Remain bullish, but be a bit choosy on the buy side. The market has had a good run but the normal January crosscurrents are pushing around some of last year’s winners. The portfolio now has 10 stocks and a cash position near 16%.

As you can tell by glancing at the portfolio summary table at the bottom of this update, the market is healthy. I’m putting two stocks back on Buy today.

When I do research for this weekly update, I review the consensus earnings per share (EPS) estimates for each portfolio stock. The consensus estimate represents the average of all the estimates of the Wall Street analysts who do research on the company. This past week, estimates surged more than I’ve ever seen, involving a majority of our portfolio stocks, and involving much more than the typical one- or two-penny per share increases.

The iShares EM Fund (EEM) has raced past its 25-day (upper) moving average, giving us a solid buy signal from the Cabot Emerging Markets Timer that is supported by similarly strong performance from the Golden Dragon ETF.

There were again no significant movements among our stocks in the past week, but many of our stocks went up to their fair values.

Trading remained muted this week, with markets closed Monday for New Year’s Day. Wall Street began to return to work yesterday, and got the New Year off to a good start with solid gains in all the major indexes. On the flip side, some conservative high yield investments, like utilities and preferred shares, declined.

Three portfolio stocks report earnings.

This tech company beat earnings estimates by $0.07 last quarter.

Our emerging markets signal turned negative as EEM lost 3.67% today.

The Dow imploded 767 points today, while the Nasdaq plunged 278 points.

This is a very short message—the point of which is essentially to say we’re not making any dramatic changes in the portfolio right now.

The cannabis sector is still in correction mode ... looking for a bottom somewhere.

The top three sectors in this Growth fund are: Financial Services (25.93% of assets), Consumer Cyclical (20.77%), and Technology (18.58%).

This stock took a beating on earnings disappointment, but analysts forecast a 17.5% growth rate for this year.

While long-term prospects for the cannabis industry remain excellent, the sector as a whole remains in correction mode today, with the big Canadian stocks under the greatest pressure—and no one knows where the bottom is, though history tells us it will come when the last holdout capitulates.

Crista is changing the rating on two stocks and retiring another.

Earnings for this social media site were recently raised by 34%, and the company is forecasted to grow at an annual rate of 67.4% over the next five years.

Two stocks in the portfolio recently reported earnings.

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.