The market’s evidence has worsened of late, with our Cabot Tides flipping to bearish earlier this week, and going along with that is a dearth of stocks hitting new highs. To be fair, it’s not all bad news — we’re seeing fresher leadership hold up relatively well, even during this latest decline, while the longer-term signposts are still positive — but we continue to think a relatively cautious stance is appropriate. Since the last issue, we’ve had a couple sells and three buys (repositioning the portfolio into some more resilient names), but we’re still holding onto about 44% in cash.

In tonight’s issue, we go over all our positions (including the new buys, which we think are battling for pole position for the market’s next advance) and talk about one simple chart tool that can help you spot other potential leaders going forward, too.

The incredible rally from the March lows has been disrupted. After soaring a remarkable 60% from the March lows, the S&P has pulled back more than 8% from the high. The selloff was long overdue and frankly healthy. It couldn’t continue the torrid pace higher forever.

The recent pullback has put several high quality stocks back in the buy range. In this issue, I highlight one of the very best large companies on the market. The recent turbulence has caused a rare pullback in the price that presents a buying opportunity in a stock that is rarely ever cheap. It also generates substantial call premiums and fantastic income potential.

This week we are going right back to a stock that we were involved with last month, which has handled the market weakness very well.

Current Market Outlook


Today’s market dip pulled all the major indexes we track below their 50-day lines, which officially puts the kibosh on the intermediate-term uptrend. Since we pulled in our horns weeks ago, we’re not changing our stance much: We remain cautious, with the indexes having issues and rotation coming fast and furiously among individual stocks. That said, we’re not sticking our head in the sand, either, as we’re seeing a decent number of issues either show signs of bottoming out (some of the virus winners are finally finding support) or holding firm despite the market’s wobbles. We continue to advise taking it slow and holding some cash given the overall environment, but select nibbling is OK, preferably on dips and shakeouts.

This week’s list has many names acting well, though their day-to-day action remains volatile. Our Top Pick is Seattle Genetics (SGEN), which looks like it’s starting to emerge from a two-month correction; we think you can start small here or on dips.

Stock Name	Price	Buy Range	Loss Limit
AGCO Corporation (AGCO)	70.77	68.5-71.5	63-65
Brinker International, Inc. (EAT)	44.58	42-44.5	36.5-37.5
Exelixis (EXEL)	25.80	24.5-26	22-23
Kingsoft Cloud Holdings (KC)	36.80	35-37	32-33
NIO Limited (NIO)	18.80	17-18	15-15.5
Norfolk Southern (NSC)	214.26	204-208	191-193
Pinterest (PINS)	36.85	35-37	31-32
Seattle Genetics (SGEN)	178.88	175-180	158-161
Toll Brothers Inc. (TOL)	47.02	44.5-47	40-41.5
TopBuild (BLD)	157.72	149-154	136-139

With this morning’s broad selling, the intermediate-term of the market is now down—but the long-term trend is still up! How you handle this depends partly on your own risk tolerance and partly on how your stocks are acting. If your stocks look good, I favor holding, but if they’re falling, I recommend selling.

In this advisory, the only immediate change is the sale of one stock, LGI Homes (LGI) to create room for our new one.



And that new one, by the way, comes from a sector that is definitely outside our usual hunting ground. But fundamental trends look good, so this just might turn into a great investment!



Full details in the issue.

The markets have been a bit choppy of late, with the Dow Jones Industrial Average rising to 29,000 at the beginning of the month, then retreating and rising again. It looks like Fall may be a little volatile. As you’ll see in our Advisor Sentiment Barometer and Market Views, sentiment remains bullish, with a hint of caution.

That stands to reason, as we’ve been on a fairly unstoppable uptrend for quite some time. So, a period of catching our breath is not necessarily a bad thing. Especially, as the economy continues to hold its own, with consumer credit, job openings and the CPI all steadily improving. Unemployment, of course, remains the biggest challenge, but hopefully, the eventual end of COVID-19 will restore some semblance of normality to our hospitality and entertainment industries, which have suffered the most.

In the meantime, our contributors have continued to find some very interesting stock picks. We begin this month’s issue with our Spotlight Stock, a REIT with above average yield, and a Dividend Aristocrat. In my Feature article, I further explore the REIT industry and explain why it’s almost always a good time to hold a REIT or two in your portfolio.

The market’s uptrend is under a bit of pressure and the Fed’s dovish stand on interest rates is a sign of weakness that is unlikely to impress Wall Street. Nevertheless, Sea Limited (SE) has regained its momentum and NovoCure (NVCR) is up 35% over the past two weeks. And our emerging markets timer (EEM) is positive. This week we go to Australia for a new fintech idea that has been on a tear, but fortunately has pulled back for a decent entry point.

The markets have been a bit choppy of late, with the Dow Jones Industrial Average rising to 29,000 at the beginning of the month, then retreating and rising again. It looks like Fall may be a little volatile. As you’ll see in our Advisor Sentiment Barometer and Market Views, sentiment remains bullish, with a hint of caution.

That stands to reason, as we’ve been on a fairly unstoppable uptrend for quite some time. So, a period of catching our breath is not necessarily a bad thing. Especially, as the economy continues to hold its own, with consumer credit, job openings and the CPI all steadily improving. Unemployment, of course, remains the biggest challenge, but hopefully, the eventual end of COVID-19 will restore some semblance of normality to our hospitality and entertainment industries, which have suffered the most.



In the meantime, our contributors have continued to find some very interesting stock picks. We begin this month’s issue with our Spotlight Stock, a REIT with above average yield, and a Dividend Aristocrat. In my Feature article, I further explore the REIT industry and explain why it’s almost always a good time to hold a REIT or two in your portfolio

In September’s Issue of Cabot Early Opportunities we continue our search for companies that have some of that special sauce that can take them from good to great. We serve up a mix of software, consumer and MedTech names, as well as a Top Pick that’s growing like a weed despite participating in a seemingly stodgy industry. Enjoy!

I’ve been watching for opportunities to add companies to the Cabot Undervalued Stocks Advisor portfolios that are outside the financial, energy and construction sectors and industries. Today, I’m adding an aerospace manufacturer to the Growth Portfolio as a Strong Buy.

All things considered, the past week has been tame. The S&P 600 Small Cap Index retreated 1.4% to get back to its 50-day moving average, while the S&P 500 Index traded sideways.

Stock indexes are situated just a tad below all-time highs, yet tech stocks are sitting on quicksand, energy prices are dropping, and President Trump’s policy agenda is falling apart. The bears have plenty of reasons to push prices lower, but stocks keep rising.

The iShares EM Fund has been trading effectively sideways since the middle of May, and that has kept the Emerging Markets Timer above its moving averages. We have one portfolio move tonight.

The market looks healthier today than it has in nearly two weeks. After its big drop on June 9, the Nasdaq found support repeatedly last week, and this Monday brought an impressive surge in all the indexes.

We could see a stock market correction in the near future, due to an abnormal concentration of capital in technology stocks and S&P 500 index ETFs (exchange traded funds).

Small caps broke above their six-month trading range last Friday (albeit very modestly and very briefly) even as tech was selling off hard. The reason appears to be that money was flowing out of small cap tech and, potentially, into small cap financials, industrials and consumer staples.

In this Weekly Update, I report on a sell candidate, plus four companies that raised their dividends. I also include one question from a subscriber with my answer.

We’re focused on seeing how the market and leading growth stocks act following the Friday/Monday wave of selling; so far, there’s been some abnormal selling but most stocks are holding key support. The overall market is also still in good shape, and thus, we’re generally standing pat, with around 22% in cash.

For now, the long-term trend remains up, and so do most of our Cabot Dividend Investor positions. Here’s what’s going on with each of them as we enter summer.

While I don’t think we just saw the end of the run-up in technology stocks, I do think investors should begin to pare back their tech holdings and do these two things: raise cash, and buy undervalued stocks in other sectors.

Market continues to climb a wall of worry. I don’t know if this is the last hurrah of the bull market. A final push before a major retreat. But I do know that we should be mindful of the risks out there.

Analysts expect this grocer to grow by double-digits next year.

Growth stocks were hit hard today, though they found some support in the afternoon. Bigger picture, we remain optimistic that the market’s next big move is up, as our long-term Cabot Trend Lines are still bullish. Near term, however, the market has clearly lost some steam. Near term, however, the market has clearly lost some steam and we are selling one position today as a result.

Rather than wait until Thursday, I would like to let you know that I’m moving one stock to a sell following its 7% decline Tuesday following disappointing news that electric vehicle subsidies in China are being cut 50%.

The top five holdings of this defense fund are: Boeing Co (BA, 20.27%); Northrop Grumman Corp (NOC, 11.93%); General Dynamics Corp (GD, 9.19%); TransDigm Group Inc (TDG, 6.27%); and Spirit AeroSystems Holdings Inc (SPR, 4.99%).

Technology stocks are the leaders, gaining an average 18.7% so far in 2019.

The shares of this auto parts supplier were recently upgraded at Guggenheim to ‘Buy’.

Two stocks in the portfolios have reported earnings and there is news on one other.

Secondly, we are taking some profits.

Three analysts have raised their EPS estimates for our first pick today, and secondly, we are taking some profits.

Coverage of the shares of this enterprise cloud computing company were recently initiated at Mizuho, with a ‘Buy’ rating, and at Stephens & Co. and Atlantic Equities, with an ‘Overweight’ rating.

While the long-term prospects for this industry remain very bright, and I’m thrilled to be your guide to these opportunities, the short-term risks are now high. Which means that someday, there will be a correction, and some investors, particularly those who bought at the top, will lose a lot of money. And I don’t want you to be one of them.

Eight analysts have increased their EPS estimates for this Chinese internet company in the past 30 days.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

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.