Current Market Outlook


First off, a heads up: Our offices will be closed Thursday and Friday, and next week is one of the two scheduled weeks that we take a break from Top Ten all year. We’re likely to send a brief update this Wednesday with updated stops, but after that, your next update will come Friday, December 4. Have a great long weekend!

As for the market, there remain a couple of flies in the ointment (the Nasdaq still hasn’t reached a new high; sentiment is a bit bubbly), but it’s fair to say the recent action has been constructive, with leading stocks avoiding another bout of selling so far and more individual names perking up. You should still go slow, but we’re increasingly optimistic.

This week’s list has a wide variety of names (big, small, growth, cyclical) that are all finding strength, another good sign for the market. Our Top Pick is Halozyme (HALO), which acts powerfully and has terrific metrics. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Alcoa (AA)	19.82	18.3-19.7	15.2-16.2
Bilibili (BILI)	63.31	57.5-60.5	51-53
Celsius Holdings (CELH)	33.73	31.5-34	25.5-27.5
Halozyme Therapeutics (HALO)	40.00	38.5-41	33.5-35
Huazhu Group (HTHT)	51.33	49.5-51	44.5-45.5
II-VI Incorporated (IIVI)	66.45	61-64	54-56
Inspire Medical Systems (INSP)	183.30	172-182	150-155
Moderna (MRNA)	100.92	95-98	84-86
Omnicell (OMCL)	106.80	100-104	90-92
Sonos (SONO)	21.41	20.5-22	17-18

October was a surprisingly good month for the markets, until the very end, when investors took a rest. But since the election, they’ve come in off the sidelines and the markets are now close to all-time highs. Investors love the idea of a divided Congress.

As well, the unemployment picture continues to improve, although with the coronavirus causing more widespread shutdowns, we may see a temporary rise—at least until the vaccinations begin distribution. And that certainly looks promising, with both Pfizer and Moderna sharing terrific stats this past week.

Housing continues to be a mixed report. Inventories continue to decline, down 38.3% in October, and prices rose 12.2%. Mortgage rates are at a 5-year low. Once the pandemic eases, I expect the number of listed houses to rebound and sales to rise precipitously, at least until inventory is normalized.

Our issue this month, is focused primarily on growth companies, although we certainly offer plenty of dividend opportunities. We begin with our Spotlight Stock, a provider of technology, primarily to the U.S. Defense Department. This company is right on the cutting-edge of advanced technologies—the future of defense. In my Feature article, I discuss the coming technologies and CACI’s potential to harness and profit from them.

Moving on, our Growth stocks include companies from the payments, construction, and virtual healthcare arenas. In Growth & Income, we offer ideas in the equipment, tools, building products, toys, consumer goods, e-tail, and media sectors.

Our Financial picks are both from the insurance industry, and our Healthcare offerings include a contract research organization, a testing business, and biopharma. In Technology, you’ll find ideas from the cloud, cybersecurity, CRM, e-commerce, hardware, and streaming industries.

We have one Low-Priced Stock—a hybrid trading or emerging biotech, and a couple of banking ideas, as well as a company that serves the marijuana industry, in Preferred Stocks & REITs.

Our contributors still like High Yield, and here, we add companies from the insurance, banking, pest control, hardware, and communication sectors. And this month, we also feature a Short-Sale opportunity.

Lastly, our Funds & ETFs focus on growth, banking, energy MLP’s, and marijuana.

I wish you and your families a healthy and happy Thanksgiving, and look forward to hearing from you. Please don’t hesitate to email me with your feedback and questions.My address is nancy@financialfreedomfederation.com.

Our issue this month, is focused primarily on growth companies, although we certainly offer plenty of dividend opportunities. We begin with our Spotlight Stock, a provider of technology, primarily to the U.S. Defense Department. This company is right on the cutting-edge of advanced technologies—the future of defense. In my Feature article, I discuss the coming technologies and CACI’s potential to harness and profit from them.

There remain a ton of crosscurrents and news-driven action out there, but after a vicious rotation a week and a half ago, growth stocks have firmed up and the overall market is in good shape. Thus, we’re starting to put some money to work, averaging up in one of our stocks and starting a half-sized position in another. And if the good vibes continue, it shouldn’t take us long to get heavily invested.
In tonight’s issue, we review all of our stocks, talk about a couple of rare, blastoff-type measures that flashed that bode well for the major indexes and highlight a couple of smaller names in one growth sector that have great stories, numbers and charts.

In November’s Issue of Cabot Early Opportunities we discuss the supposed rotation from growth stocks into value stocks and the underlying reasons, which we think could drive erratic market action in the coming weeks. Despite the somewhat conflicting trends out there, we serve up a menu of compelling opportunities spanning Medtech, manufacturing, software and even health and beauty products, which we can all use a little of these days!

This Friday is the expiration of November options, and I’m happy to report that our three covered call positions expiring this week are in great shape. As is always the case, on Thursday afternoon or Friday morning, I will send a detailed breakdown of those positions expiring Friday breaking down our profits, and if we need to make any adjustments. Be on the on the lookout for that email.

Current Market Outlook


If you look at the weekly charts, the trends of the major indexes and most stocks are pointed up—i.e., this is still a bull market, and the trends and other factors (such as the unusual strength seen two weeks ago) portend higher prices down the road. That said, there’s no question the environment remains extremely news-driven (mostly with vaccine news, but also economic reports and government policy outlooks), with plenty of crosscurrents depending on the day. Encouragingly, today’s vaccine news didn’t dent the growth leaders like it did a week ago, which is a step in the right direction. Net-net, we remain optimistic, but the details remain vital; getting decent entry points and position sizing correctly (not too big so you can handle the swings) is key, as is focusing on stocks (cyclical or growth) that have shown good-volume support of late.

This week’s list has something for everyone, including stocks with fresh growth stories as well as some stodgy, cyclical names. Our Top Pick is Lam Research (LRCX), which looks like a leader in the resilient chip equipment sectors.

Stock Name	Price	Buy Range	Loss Limit
Albemarle Corporation (ALB)	128.90	121-126	106-109
Canopy Growth (CGC)	24.77	23.5-25	19-20
Lam Research (LRCX)	439.40	415-435	375-385
Marvell Technology Group (MRVL)	43.29	41.5-43.5	37.5-38.5
Norfolk Southern (NSC)	247.09	235-245	215-220
ShockWave Medical, Inc. (SWAV)	94.95	87.5-91	75.5-78
Snap Inc. (SNAP)	39.08	37.5-39.5	31.5-33
STAAR Surgical (STAA)	79.31	76-79.5	67-69
The Timken Company (TKR)	73.04	69-72	61-62.5
Upwork (UPWK)	33.08	29.5-31	24-25

The market continues to strengthen, and thus you should become more heavily invested; it’s possible this strength could run to the end of the year!

But predictions aren’t necessary; what’s necessary is listening to your stocks and acting accordingly.



Today, doing exactly that leads us to sell one stock, so that we can make room for today’s recommendation, a company that’s built one of the biggest brands in the world.

The Office of the U.S. Trade Representative and the Department of Commerce have taken a decidedly different approach to U.S. participation in international trade since November 2016. I realize that international trade can be somewhat of a dry topic, but since these decisions are affecting the bottom line in U.S. industry, stock market opportunities are unfolding before us.

Global markets were all mixed up this week as old world-type stocks moved higher and new world stocks—mostly tech—sold off. Things have normalized a little over the past two sessions however as investors appear to have come to their senses and realized that, while tech might have moved too far too fast, many high-flying technology stocks are doing so well because they’ve been growing at high rates, quarter after quarter, and they look like they’ll continue to do so.

The iShares EM Fund (EEM) has dipped decisively below its 25- and 50-day moving averages, which pushes the Cabot Emerging Markets Timer into negative territory. We have one change tonight, moving one stock from Buy to Hold.

One stock is now rated Sell, and three stocks are rated Sell a Portion.

It remains to be seen whether the market’s rotation from tech into older economy names is a temporary tax-bill-related phenomenon or a longer-term cycle. But historically, a day like last Wednesday, when the Nasdaq closes more than 1% lower and the Dow closes at least 0.4% higher, is followed by at least a month of Dow outperformance.

The economy continues to show robust recovery led by a robust housing market. New single-family house sales unexpectedly rose 6.2% to a seasonally adjusted annual rate of 685,000 this October. We are near-term bullish on our home improvement- and construction-related recommendations.

Raise a little cash. Today’s huge selling wave in growth stocks isn’t the end of the world, as the trends of the major indexes and most leading stocks is still up. Thus, it’s vital to take things on a stock-by-stock basis, selling those that are raising red flags and holding (or buying) those that are dipping normally.

After a dismal airline profit situation in 2017, in which only two of the 10 U.S. airlines in today’s research saw a profit increase, the industry is looking forward to a decisive turnaround in 2018. One company’s numbers will soar above all its peers. That stock is joining the Growth Portfolio today.

The iShares EM Fund (EEM) has rebounded sharply and is well above both its 25- and 50-day moving average. That keeps the Buy signal in the Cabot Emerging Markets Timer shining brightly. We have one rating change tonight.

The stock market finally experienced a big shakeout last Wednesday, and the S&P 500 closed down more than half a percent for the first time in 50 days. But the major indexes bounced Thursday to end the week about flat, and yesterday saw another big rally.

Many of the undervalued growth stocks that I follow have neutral or bearish price charts right now. No doubt they’re tuckered out from the bullish price action in 2017!

In light of the House tax reform bill, one thing you can do is hold onto a bunch of small-cap stocks, since they have a far higher average tax rate than large caps, and stand to benefit more from a corporate tax cut.

Three of our portfolio stocks reported second-quarter (2Q) results. Here’s what you need to know.

This staffing firm just purchased two consulting firms, which should be immediately accretive.

The broad market is in fine shape, with most major indexes at or near their highs and all Cabot’s market-timing indicators bullish.

Two analysts have raised their earnings estimates for this drug company in the past 30 days.

Our second recommendation is a little profit-taking.

Zacks rates our first idea today—a gold miner—‘Strong Buy’ based on rising volume and earnings estimates.

Every now and then one of our stocks is the target of a short report by a myriad of research houses that try to make the case that a company is garbage and its stock is wildly overvalued.

Goldman Sachs just upgraded this tech company’s shares to ‘Buy’.

This connected device company is expected to grow by 39.4% next year.

One of our portfolio stocks reported strong second-quarter (2Q) results this morning, benefiting from higher fares and fuller planes.

Three analysts have raised the EPS estimates of this medical device company in the last 30 days.

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.