Investor received a well-deserved wake-up call last week but the big-picture trends are still positive and growth stocks continue to be where the action is. In this month’s Issue of Cabot Early Opportunities, we take a look at a diverse mix of fresh opportunities that are all linked by one commonality – they give investors exposure to some of the most interesting and durable growth trends out there.

The Cabot Profit Booster Portfolio continues to do very well … though depending on which sectors are in favor and which are not on any given day, we have had some stocks moving up and down violently.

Current Market Outlook


Last Thursday’s massive selloff was a shot across the market’s bow, and today saw the broad market take another punch to the gut. That said, the evidence remains mostly bullish at this point—the trends of the major indexes are up, nearly all institutional-quality leading growth stocks are still acting fine and many secondary indicators (such as the number of stocks hitting new lows, which remains microscopic) are also pointing higher. Of course, 2020 has been all about staying flexible, and right now isn’t a time for complacency; it’s always possible the 11-week advance is going to lead to a sharper correction or consolidation. Thus, you should be open to any possibility, but right now, the evidence remains bullish, so we advise remaining heavily invested.

This week’s list has a bunch of growth-oriented titles that are showing attractive setups. Our Top Pick is Lululemon (LULU), which could pull in further after earnings, but our guess is that this dip will give way to higher prices in the weeks ahead.

Stock Name	Price	Buy Range	Loss Limit
Argenx SE (ARGX)	222.54	208-215	187-191
Bandwidth Inc. (BAND)	129.19	117-121	102-105
Coupa Software (COUP)	262.20	225-231	198-201
CrowdStrike (CRWD)	105.02	93-97	84-86
DraftKings Inc. (DKNG)	38.26	37-41	30-33
Fiverr (FVRR)	71.41	60-64	51.5-53.5
Lululemon Athletica (LULU)	304.69	291-301	264-269
Novavax, Inc. (NVAX)	65.95	47-50.5	39-41
Peloton (PTON)	53.03	47-50	40-41.5
Redfin (RDFN)	40.40	30.5-32.5	25.5-27

Last week’s sharp market selloff may have made headlines, but far more important than any one day’s action are patterns and trends, and today the patterns and trends I look at are still positive.

Still, diversification remains a key factor in successful portfolios, so today’s recommendation swings back to the conservative side; it’s a big global company with a healthy 4.8% dividend.



As for the current portfolio, while we sold two stocks last week just before the big drop, today I have no changes. All our stocks are behaving well.



Full details in the issue.

Our emerging markets signal (EEM) is decisively positive after relative outperformance by emerging market stocks over the last couple of weeks. The Fed signals that rates will likely stay near zero through 2022 and the Fed chairman promised to “run stimulus programs forcefully, proactively and aggressively for years, if necessary.”

Although jobs numbers surprised on the upside, it looks like the market is shrugging off that GDP will gap down about 6% in 2020 and the federal budget deficit reached $400 billion for one month – May!



Today, we have a new recommendation that is at the heart of technology and hedges the growing tension and risk in Asia.

This week, we profile an under-the-radar podcast hosting company in secular growth that is about to announce the results of a strategic review.

Our micro-cap recommendations have performed well in aggregate. Nonetheless, I believe my open BUY recommendations remain significantly undervalued as they have been left behind in this surging market.



Micro caps don’t benefit from passive investing as they are not owned by any indexes or ETFs. Nonetheless, the historical performance (~18% annual CAGR) of micro caps speaks for itself.

If we continue to patiently buy undervalued micro caps, we should do quite well over time.



If you have not already, I recommend that you read my Cabot Micro-Cap Insider Guide. It will help you get the most out of your Cabot Micro-Cap Insider membership, and make your investing decisions easier and more profitable. It will also explain much of the shorthand we use in Cabot Micro-Cap Insider, and explain our ratings.



Our monthly member call will take place this Thursday, June 11, 2020 at 2 p.m. ET. We will review all open recommendations and answer subscriber questions. You can register here.



If you have any questions about any of my recommendations, I encourage you to reach out to me directly at rich@cabotwealth.com.



Now let’s get into my newest recommendation.

Despite the fact that the market indexes have come roaring back near the old highs, many stocks are still cheap. Cheap dividend stocks have created some of the highest yields in a decade. While there is great opportunity, it’s not as easy as it might seem.

There is also great risk. In most cases, stock prices have fallen because the coronavirus lockdown has seriously hurt business. The financial pain is yet to be realized. Many of these high-yielding stocks will be forced to cut the dividend to free up much needed cash.



It is only those rare cheap, high-yielding stocks with safe dividends that offer great opportunity for dividend investors in this market. In this issue I highlight one of the very best. It is one of the best high-yield opportunities in a decade.

Today’s Covered Call idea is a recent earnings winner that broke out to new highs last week, and has pulled back in marginally early this week.

Current Market Outlook


From a top-down perspective, there’s not much to complain about when it comes to the current market—the intermediate-term trend of the major indexes is firmly pointed up, and the broad market has come alive in a big way, with two major blastoff indicators turning green in the past two weeks. Thus, for the overall market, the outlook is mostly sunny, though there’s always the chance of a passing shower. However, leading growth stocks are now on the run a little bit; it’s been two weeks of on-and-off selling, and many are beginning to approach key support areas. As we’ve written lately, the good news is that breakdowns have been few and far between; the pullbacks have been normal thus far, but the next few days should be telling to see if growth names are in for a deeper retreat or whether everything can get in gear with the broad market on the upside.

As you’d expect, this week’s list is heavier in names that have more recently come to life, including a few cyclical-related names. Our Top Pick is Autodesk (ADSK), a growth-y name that should also get a boost from the economic recovery, and the stock has leapt nicely to new highs.

Stock Name	Price	Buy Range	Loss Limit
ASML Holding (ASML)	350.01	330-340	300-305
Autodesk (ADSK)	229.00	220-230	198-203
Carrier Global Corporation (CARR)	26.23	21.5-23	18.5-19.5
Datadog (DDOG)	81.52	72.5-77	62-64.5
Elastic (ESTC)	86.17	78.5-82.5	70.5-72.5
Marvell Technology Group (MRVL)	36.88	32.5-34	28.5-29.5
Square, Inc. (SQ)	91.04	85-89	74-76
Thor Industries (THO)	104.76	101-106	89-92
Trade Desk (TTD)	468.02	338-358	298-308
Trex Company (TREX)	117.56	117-122	103-105

Eleven weeks off the market bottom, with the S&P 500 up 45% from its low, the news is finally getting good—which to me says that short-term, investing in stocks is likely to become a bit more challenging. That’s one reason I’m recommending selling two stocks today—and putting another two on hold.

Long-term, however, the future remains bright, especially for companies like the one featured today, which are serving global mass markets with products that they’re (literally) hungry for.



Full details in the issue.

The stock market has been having quite the party over the past month. Since November 8, the date of the election, the S&P 500 is up by 4.8%. Small caps have crushed that performance, rising by almost 16% over the same timeframe.

In this Weekly Update, I report on five Cabot Benjamin Graham Value Investor companies that reported quarterly financial results or had other noteworthy news during the past week.

Our two portfolio moves today are to buy a half position in Pampa Energia (PAM) bringing the portfolio to 45% invested and moving Melco Crown (MPEL) to a Hold after a Chinese government move knocked it lower.

We have no rating changes today; I continue to recommend you focus on what’s working, while keeping your personal investing goals in mind. The healthiest stocks in our portfolio today are the financials, Prudential (PRU) and US Bancorp (USB), dividend growth tier holding Carnival (CCL) and safe income tier recommendations Automatic Data Processing (ADP) and UPS (UPS).

11 Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news during the past week. I also include questions from subscribers along with my answers.

Continue to lean bullish, but also keep some powder dry as we wait for growth stocks to kick into gear. The overall market remains in great shape, and with the trends pointed up, we expect higher prices down the road. However, growth stocks aren’t participating, with many still under pressure. Our one change tonight is that we’re placing Proofpoint (PFPT) on Hold.

Today I want to talk about energy stocks, because I’m seeing a growing correlation between quality and share price performance. Also, Royal Caribbean (RCL) moves from the Growth Portfolio to the Growth & Income Portfolio, and Tesoro (TSO) joins the Buy Low Opportunities Portfolio.

The Emerging Markets Timer is still negative, although investors are edging back into the sector, moving the MSCI Emerging Markets Fund (EEM) higher over the past week. Our only portfolio move today is to buy a half position in Vale (VALE) bringing the portfolio to 40% invested.

We head into the holiday with a trimmed-back portfolio after locking in partial profits on three positions, courtesy of the Trump Bump. It feels to me like the market is ready for a modest pullback given the intense buying since the election (early trading today supports this assertion).

We don’t have any rating changes today—we’ve sold three underperforming stocks this month, so our portfolio is in fighting shape. If you’re underinvested, focus on our Buy-rated recommendations, and try to start new positions on pullbacks.

I’m excited about all of the recent price action in the stock market! For many months—or several years?—investors’ stock portfolios alternated between treading water and surviving market corrections. Finally, the markets seem to have been set free, adding bullish stock movements into the mix.

Today I move two stocks back to Buy: Aspen Aerogels (ASPN) looks like a relatively low-risk buy given a very big recent pullback, and Primo Water (PRMW) has begun to act like it should after announcing a big acquisition. Other than that, all guidance remains the same. That means we have five of our 10 stocks rated Hold.

Our first idea is a B2B company that is a leader in several industries.

Our second recommendation is some very nice-profit-taking on a previous pick.

As reported by Zacks, the EPS estimates on our first pick today “have surged 266.7% to 11 cents.”

The three largest sectors for this Japanese fund are: Industrials (26.4% of assets); Consumer Cyclicals (19.38%); and Technology (16.08%).

Our portfolio includes a few stocks that we took partial gains on a while back and which haven’t been able to get going in the right direction since. And one that never got going in the first place.

This electronics manufacturer beat Wall Street’s earnings estimates by $0.09 last quarter, and five analysts have raised their EPS forecasts in the past 30 days.

This building products company’s EPS forecasts have just been increased by one analyst, and consensus estimates expect the company to grow by an annual rate of 15.76% over the next five years.

Wall Street expects this pharma to grow by 19.9% annually over the next five years.

Analysts for this retailer are increasing quarterly and yearly earnings guidance.

This defense contractor has a bright future with hefty new military contracts, but shares are very sold-off.

Downgrading to a sell.

This sports network company is trading at bargain levels, yet is expected to grow more than 10% this year.

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.