Markets, led by Nasdaq’s leading companies, had an impressive winning streak broken by concerns over an acceleration of coronavirus cases. Our Emerging Markets signal (EEM) stays positive as the virus is being handled well in Asia outside of China but is exploding in Latin America. The Explorer portfolio is well positioned with cash to deploy and stocks holding up well.

Today, we’ll look inside the indexes to see what’s working and also explore what more participation by individual investors in 2020 might mean for markets. Then we move north to Canada for a promising new recommendation that has all the characteristics of a winning gold stock.

This is a fantastic environment for income. The upward bias of the market is creating high call premiums. And certain pockets of the market still offer deep value and higher dividend yields than have existed in many years.

In this issue I identify three excellent dividend stocks to buy now.



One is a high yielding energy play with a stratospheric, but safe, yield. Another is one of the most defensive and reliable income generating stocks in the market that still offers good value and a strong yield. And the third is a technology stock that sells at a reasonable price with an incredibly strong catalyst for the stock price to shoot up in the future.



The issue also includes covered calls on these same stocks that will provide a double digit income in a short time if the stocks move higher, and a great income return if they don’t.

After eleven weeks up, the broad market has been correctingfor the past fethreew weeks, and the marijuana stocks are also in gear, totally synchronized—which is good. Bottom line, this correction provides a fine buying opportunity.

I’m taking advantage of this opportunity to average up in Canada’s leading producer, Aphria (APHA). And I’m sticking with all the other portfolio stocks because I truly think we have a portfolio that will thrive as this industry matures.



Full details in the issue.

In what came as a shock to many, some brick-and-mortar retailers actually did quite well during the shutdown. This retailer emerged as one of the winners in the locked down economy, keeping all its stores open during the pandemic and reporting strong online business (+45%) and higher comparable store sales in April.

The market remains in good health, so I continue to recommend that you be heavily invested in a diversified portfolio of the best stocks, both strong momentum stocks (we have several) and lower-risk dividend-paying slower growers. In the portfolio this week, the only change is an upgrade of Vertex Pharmaceuticals (VRTX) to buy.

As for the newest recommendation, it’s unusual in that it’s not one stock; it’s actually an ETF of a market sector that I think holds spectacular promise in the long term.

Current Market Outlook


After three weeks of rotation, where cyclical stocks took the reins and growth stocks rested (and some broad selling pressure showed up June 11-12), the reverse occurred last week, with the leaders again ramping up and cyclical stocks sagging. Still, while the endless rotation isn’t ideal, it hasn’t changed the big picture—most of the evidence remains bullish, so we’re still optimistic the path of least resistance is higher. That said, it’s important to keep your feet on the ground, too; looking for solid entry points and not hesitating to book some partial profits on the way up are still good ideas, as some selling pressure or another bout of rotation isn’t out of the question. We’re leaving our Market Monitor at a level 8.

This week’s list has a bit of a secondary feel to it, but many are showing solid setups; ideally some of these will be the next wave of names big investors focus on. Our Top Pick is Restoration Hardware (RH), which has a strong story and is resting nicely after a very strong run.

Stock Name	Price	Buy Range	Loss Limit
Big Lots (BIG)	43.12	32.5-35	27.5-28.5
Immunomedics (IMMU)	34.23	32.5-35	28-29
LGI Homes (LGIH)	86.04	84-87	74-75.5
MercadoLibre, Inc. (MELI)	980.83	910-940	810-830
Mersana Therapeutics (MRSN)	22.28	20-22	16-17.5
Nuance Communications, Inc. (NUAN)	25.35	23.5-25	21-22
PagSeguro Digital (PAGS)	35.09	33.5-35.5	29-30
RH Inc. (RH)	252.93	240-255	210-217
Teradyne (TER)	82.83	78-81	69-71
Yeti Holdings (YETI)	42.80	36-38	31.5-33

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There remain some yellow flags in the market, but when you look at the big picture, there remains far more good than bad. It’s vital to remain flexible of course, as in 2020, things have changed on a dime a couple of times, but with most of the evidence still positive, we remain mostly bullish.

Markets rebounded this past month, albeit with plenty of volatility. But the net result was a 1,500+ gain in the Dow Jones Industrial Markets.

Unemployment, of course, is still pressuring the economy, with some 29.5 million Americans without jobs. However, the housing market perked up, with starts and building permits rising. Retail sales—reflecting the reopening of the economy—were also up.



It’s worrying that coronavirus is rising in about 20 states, but, hopefully, if people begin once again following social distancing, the new cases won’t push us off the economic reopening strategy.



Advisors and consumers are back on the bullish track, as you’ll see in our Barometer, as well as Market Views.



Despite the market’s rise, there are still plenty of undervalued stocks in the marketplace. And we begin this issue with our Spotlight Stock, a technology company that is gaining market share in the highly competitive field of cybersecurity—in this case, specializing in ID authentication for employees and customers. My feature article explores the industry in more depth, as well as additional reasons for adding our Spotlight Stock to your portfolio.

Markets rebounded this past month, albeit with plenty of volatility. But the net result was a 1,500+ gain in the Dow Jones Industrial Markets.

Unemployment, of course, is still pressuring the economy, with some 29.5 million Americans without jobs. However, the housing market perked up, with starts and building permits rising. Retail sales—reflecting the reopening of the economy—were also up.

It’s worrying that coronavirus is rising in about 20 states, but, hopefully, if people begin once again following social distancing, the new cases won’t push us off the economic reopening strategy.

Advisors and consumers are back on the bullish track, as you’ll see in our Barometer, as well as Market Views.

Despite the market’s rise, there are still plenty of undervalued stocks in the marketplace. And we begin this issue with our Spotlight Stock, a technology company that is gaining market share in the highly competitive field of cybersecurity—in this case, specializing in ID authentication for employees and customers. My feature article explores the industry in more depth, as well as additional reasons for adding our Spotlight Stock to your portfolio.

Remain optimistic, but for growth stocks, you should wait for your pitch. The market is consolidating normally following its heady post-election run, and with our market timing indicators positive, we expect higher prices ahead. Tonight, though, we’ll stand pat, with the Model Portfolio 70% invested.

With this week’s light trading volume, most of our holdings have been treading water, so we’ll keep this week’s update short and focused on stocks that reported some news over the past week.

The price charts on the S&P 500 and the Dow Jones Industrial Average are looking more and more like they’re just resting before beginning another run-up. Insurance and bank stocks’ price charts look identical, while energy stocks’ charts are more actively bullish.

On average, our portfolio is outperforming the Russell 2000 Small Cap Index (the most common benchmark for small caps) in 2016. We have a few stocks lagging the index, largely because of a drop in a few stocks over the past few days.

In this Weekly Update, I summarize information for four Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or other noteworthy news during the past week. I also include questions from subscribers along with my answers.

The Emerging Markets Timer is now fully negative, as the iShares Emerging Markets Fund (EEM) has gapped down to near its November lows. Our only additional move today is to move Pampa Energia (PAM) to a Hold.

This weekly update takes a look at how to handle bond investments when interest rates are rising. Bond prices and interest rates work like a seesaw: when interest rates rise, bond prices fall, and vice versa.

Three Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news during the past week.

Let’s maintain our current course, make incremental adjustments when they seem to make sense, and see how this plays out. I suggest one such incremental move today.

The market continues to act well, and we’re finally starting to see a bit of improvement among growth stocks, which showed solid accumulation last week and have begun to tighten up. That said, cyclical stocks remain strong, so tonight, we’re adding one to the Model Portfolio, giving us seven stocks (out of a possible 10) and a cash position around 30%.

The divergences that I mentioned in our last update disappeared last week, as the major indexes all rose over 3%, notching five consecutive positive days to hit record highs. I have one rating change today: Pembina Pipeline (PBA) moves to Buy thanks to renewed technical strength.

We’ve had nice run-ups in the DJIA and the S&P 500. Please expect a pullback, which would be perfectly normal and healthy too. The Dow could fall 6% to 18,600, and the S&P could fall 3% to 2,190. Unless a disruptive event happens, I would expect a stock market correction to be quite temporary.

This bank beat earnings estimates by $0.16 last quarter, 14 analysts have recently raised their EPS estimates for the company, and coverage of its shares was just initiated at Barclays with an ‘Overweight’ rating.

This global software company is expected to grow at an annual rate of 22.65% over the next five years, and four analysts have increased their earnings forecasts for the company in the past 30 days.

This Chinese e-commerce company is expected to grow at an annual rate of 29.8% over the next five years.

This Top Pick bank has just extended its share repurchase program to 642,785 shares.

In the past 30 days, six analysts have raised their EPS estimates for this beauty retailer.

The market was brutalized again today, with another avalanche of selling after yesterday’s disappointing Fed rate hike and press conference. One of our positions fell through support and it’s time to sell. This leaves use with two positions and 84% in cash in the model portfolio.

As you noticed, yesterday’s issue of Cabot Dividend Investor was jointly edited by Chloe Lutts Jensen, for whom it was the final issue, and Tom Hutchinson, for whom it was the first.

This Indian solar power company saw its revenues rise by 22% in its second quarter.

As we approach the end of the year, and the entire investing world seems to be worrying about interest rates and tariffs, the question in my mind is whether now is a good time to buy some more marijuana stocks.

This optical and photonics maker beat analysts’ estimates by $0.29 last quarter and five analysts have recently raised their EPS forecasts for the company.

We’ve held on to quarter-sized stakes in a few positions in the event that the market firms up and turns north. That hasn’t happened, so it’s time to step completely aside from two stocks in the portfolio.

Our second recommendation is a sale of an underperforming stock.

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.