The overall market continues to look healthy—though we still haven’t yet received an “all-clear” signal from our long-term timing indicator—and our stocks, in general, continue to reward, with many hitting new highs in recent days as the economic outlook improves.

Long-term, the prospects for the economy and market have improved, but short-term, the relative elation of recent days has brought numerous growth stocks to what seem like unsustainable heights—so I’ve lowered the ratings on three of our positions to Hold, and if you’d like to take partial profits, that’s fine with me.



As for today’s recommendation, it’s a very unusual one for me. But the chart is strong and the story has some validity, so we’ll give it a shot!



Full details in the issue.

Current Market Outlook


This morning’s positive news of a possible COVID vaccine helped the major indexes surge, but it also revealed some of the crosscurrents that remain—today saw a big bout of rotation, as leading growth titles were mostly lower while the lagging (usually economically-sensitive) areas did well. Even so, we don’t advise getting too involved in the day-to-day news or gyrations; overall, there’s still more positive evidence than negative, with the intermediate-term trend still up (today’s action helped on that front) and just about every leading stock remaining in a firm uptrend. Given the crosscurrents, we don’t advise going hog wild on the buy side, but we continue to think holding your strong performers (maybe with some partial profits here or there) and looking for decent entry points on strong names is the way to go. While we were going to knock our Market Monitor down late last week, the action of the past two sessions has us keeping it at a level 7.

This week’s list is a bit more diversified than in recent weeks, with strength seen in a few more sectors. Our Top Pick is PayPal (PYPL), which appears to have resumed its run after a multi-month rest period. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Avalara (AVLR)	102.00	97-100	88-90
Beyond Meat (BYND)	132.87	122-128	109-113
Fastly (FSLY)	39.31	36-39	31.5-33.5
Fortinet Inc. (FTNT)	137.53	137-143	123-127
Inphi (IPHI)	120.16	105-110	94-97
MyoKardia (MYOK)	108.56	106-110	92-95
Ollie’s Bargain Outlet (OLLI)	103.94	73-77	64-66
PayPal (PYPL)	147.00	142-147	129-132
Scotts Miracle-Gro (SMG)	155.72	139-145	125-128
Tesla, Inc. (TSLA)	818.87	770-815	680-705

Markets have pulled back a bit over the last few days as investors hit the pause button to digest a Nasdaq in the black for 2020 while the real economy struggles to reopen. Congress begins work on the next stimulus spending bill and international stocks come under consideration, as they have not rebounded anywhere near as much as U.S. markets.

Our emerging market (EEM) momentum timer has turned positive by the slightest of margins as we replace one China idea with another.

The market has rallied like crazy over the past seven weeks. It’s up over 30% from the low in March. The market is already looking beyond the coronavirus to a strong economic recovery.

But stocks are trading on a rosy scenario that may not come true. While the market is always difficult to predict in the near term, there is at least a good chance of disappointment going forward. The overall market may have gotten ahead of itself and it is prudent to prepare for the possibility of more turbulence ahead.



For those reasons, the Cabot Dividend Investor portfolio is only buying very selectively. While the overall market may be shaky at this point, certain companies are thriving during the pandemic. There are niches where business is actually booming.



In this issue I highlight two stocks that are selling at bargain prices, have businesses barely affected by the pandemic, and stand to thrive in the post-Covid-19 market as well.

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.

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: Medexus Pharmaceuticals.

From its modest beginning as an online textbook hub, this recommendation grew into a multi-pronged educational platform.

Current Market Outlook


The market performed well last week, and nothing has changed from a top-down point of view—the intermediate-term trend remains up for the major indexes and many stocks, so we remain optimistic the path of least resistance is up. That said, it’s really all about what you own: Many indexes (small- and mid-caps) and sectors (industrials, financials, transports) look OK, nothing great, but growth oriented stocks are lighting up the sky, with more big earnings-induced breakouts last week than we’ve seen in a very long time. In the near-term, these hot stocks might be a bit too hot; some potholes (or even rotation out of them and into the broad market) could certainly be on the table. But we also think that, assuming the general market holds up, the first retreats in many of these names are likely to provide solid entry points, as the fresh breakouts bode well overall. We’re moving our Market Monitor up to level 7.

This week’s list has many of last week’s most powerful gaps and a few others with solid setups and/or persistent uptrends. It was hard to settle on one, but we’ll go with Chegg (CHGG) for our Top Pick, as it just emerged from a picture-perfect consolidation on earnings.

Stock Name	Price	Buy Range	Loss Limit
Atlas Air Worldwide Holdings, Inc. (AAWW)	38.45	36.5-38.5	32-33
Atlassian (TEAM)	182.16	174-179	155-158
Barrick Gold (GOLD)	27.20	25-26.5	22-23
Chegg (CHGG)	74.21	58-62	50-52
MercadoLibre, Inc. (MELI)	980.83	750-790	660-680
Peloton (PTON)	53.03	40.5-43.5	34-35.5
Schrodinger, Inc. (SDGR)	59.05	53-56	45-46.5
TG Therapeutics, Inc. (TGTX)	19.88	17.5-19	14.5-15.5
Twilio (TWLO)	183.39	175-187	149-154
Wingstop (WING)	121.52	116-122	99-103

The overall market continues to look healthy—though we haven’t yet received an “all-clear” signal from our long-term trend indicator—and our stocks are certainly behaving well, with several hitting new highs and none behaving badly.
So the only sell recommendation I have today is a bit of short-term profit-taking in one of my recent recommendations—a stock that is due for a bit of a rest.


As for today’s recommendation, it’s a very well-known U.S. telecommunications company with a solid yield that has not only held up well in recent months but that has good growth prospects as the communications revolution continues.


Full details in the issue.

Yesterday’s sharp selloff turned Cabot’s intermediate-term market timing indicators negative, so it’s time to get a little more conservative.

There are several news items and portfolio highlights in today’s update.

The Dow Jones Industrial Average was unchanged during the past week. The bullish rise in the price of oil to $50 a barrel was offset by worries about the stability of Deutsche Bank in Germany.

In today’s Update, we’ll sell the BulletShares 2016 High Yield Corporate Bond ETF (BSJG), which is maturing at the end of the year, and replace it with the BulletShares 2020 High Yield Corporate Bond ETF (BSJK), which yields significantly more.

Stick with a lean-bullish stance as we wait for the market to show its hand. Our Cabot Trend Lines and Two-Second Indicator are still bullish, but our Cabot Tides remain effectively neutral, and until that changes, stocks and indexes will see lots of choppy action. In the Model Portfolio, we’re sticking with our current 30% in cash and our crop of seven stocks.

I’m not advising any actions before the market opens today. However, I am watching all of our stocks closely for any signs that a significant decline could reduce our gains in the short-term.

The Emerging Markets Timer keeps flashing a green light, so we remain bullish. There are no changes in the portfolio tonight.

For the third time in less than a year, a portfolio stock has received a lucrative buyout offer. The board of directors of chemical company Chemtura (CHMT) unanimously agreed to accept a buyout offer from Lanxess AG in a deal valued at $2.5 billion.

The Federal Reserve, as expected, declined to raise interest rates, although Chair Janet Yellen noted that wages are picking up and further acceleration in wages is possible. I think it’s likely the Fed will raise rates in December, a move which shouldn’t surprise investors.

We don’t have much to complain about after a week when our average gain per position was 5.8%, three positions were up double digits, and our worst performing stock was down a mere 2%. That said, today I’m moving two stocks that have just rallied back to Hold, since the near-term upside appears limited in those names. Five of our positions remain Buys.

Should the market resume its uptrend, we’ll look to put our cash to work, but tonight, with our Tides still negative, we’ll sit tight.

This loyalty solutions company beat analysts’ estimates by $0.07 last quarter, and nine analysts have recently increased their EPS forecasts for the company.

We’re changing out some funds this month, recommending a growth fund.

Recommending a growth fund.

Four stocks from the Portfolios reported earnings.

On Tuesday, voters in three states continued the trend toward increased legalization of marijuana: Michigan voted to legalize the recreational use of the plant, while Utah and Missouri voted to legalize it for medical use.

These four funds focus on healthcare and offer a variety of subsectors.

Rapid7 (RPD) and Q2 Holdings (QTWO) Report Q3 Earnings

Our second recommendation is a sale of a company’s whose stock is not performing as expected.

Our first idea is an ecommerce company that is getting rave reviews from Wall Street, with 20 analysts recently increasing their estimates for the company.

Goosehead Insurance (GSHD) and Everbridge (EVBG) Report Q3 Earnings

Altair (ALTR) buys Datawatch (DWCH) and IntriCon (IIN) Reports

Technical indicators say it’s time to trade this gold ETF.

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.