The market was up big today, and a couple of our stocks hit new highs—which is impressive considering the recent crash—but the market’s major pattern is one of bottom-building, and that takes time.
In the meantime, the action of the best growth stocks gives us a clue as to developing leadership, and the best value stocks are absurdly cheap. Plus, many are paying huge dividends! That’s the case with today’s recommendation, a giant in the oil industry.


As for the rest of the portfolio, it’s acting well (with a couple of very strong stocks in the mix), and thus I have no changes today.


Full details in the issue.

After a strong rebound early in the week, markets sold off a bit over the past two days as investors battle uncertainty on the virus and economic impact fronts. We remain positive on our seven Cabot Global Stocks Explorer stocks and will put some of our 35% cash position to work today with a high quality Singapore bank many of you are familiar with. Our emerging market signal stays negative.

Also, I have a special alert regarding Luckin Coffee (LK), which is down very sharply this morning.

This month we’re looking past all the current uncertainty in the market at a profitable, young company that should hold its own during this rough patch then accelerate growth into the back half of 2020 (assuming the pandemic eases as we move into the summer months).

The company offers intelligent identity solutions for global enterprises. These solutions are strategic imperatives because they help workers do their job from anywhere and help companies streamline customer experiences.



It’s not the type of stock that’s likely to surge on expectations of an immediate surge in demand, like Zoom Video (ZM) or Teladoc (TDOC). But with 115% net revenue retention the company should grow with current clients in the near-term, then grab its fair share of new business once economic activity picks up again.



We start today with a half position given the market conditions. All the details are inside.

Today’s featured companies are benefiting from the current focus on healthcare, online commerce, dining at home and limited travel behaviors.

All of the stocks that I follow with any regularity finished falling in March, and began to rebound. I’m glad for that, and happy to be buying low. However, there’s still a dark cloud on the horizon. The longer the quarantine situation lasts in the U.S. and in foreign lands, the uglier the economic situation will become. That’s because many companies are scrambling for cash to pay their employees, rent, utilities, etc. while they’re not actually selling any products that can replenish the cash flow.



There are various stocks in today’s issue that I indicated would be good for traders. “Good for traders” bears no resemblance to “good for buy-and-hold investors”, okay? Please read my recommendations carefully. When in doubt, send me an email with your questions.



Lastly, take your time investing cash positions. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges. To that end, I’ve listed short-term upside price resistance targets on quite a few of the stocks. When the stocks rise to those targets, you’re going to tell yourself “my stock is going to keep rising!” Instead, odds are very strong that your stock will turn down. This will be a trader’s market for much of 2020. If you’ve ever toyed with the idea of buying and selling within a stock’s trading range, this is the year to do it! Best of luck to you!

With consumers focused on social distancing and lockdowns to help prevent the spread of the coronavirus, many restaurants have no revenues, while others are generating a little income through delivery and pick-up. Yet, despite this uncertain outlook, the crisis will eventually subside.

In this issue, we highlight six restaurant companies with both the survivability and price discount traits.

With COVID-19, plunging oil prices, credit/health worries and central bank printing, it’s a time of maximum uncertainty—and such uncertainty plays right into the hands of gold, which has popped back toward multi-year highs. The world’s second-largest gold mining company, is well positioned to benefit from this strength.

As the market gets back on its feet after the recent 33% drawdown, all Cabot analysts are looking for opportunities—with the growth-oriented analysts looking for strength and the value-oriented analysts looking for value—and it’s value that describes today’s featured stock perfectly. A well-known pharmaceutical giant, the stock is a bargain today.

Current Market Outlook


There are no sure things, especially in this unprecedented environment, but we think it’s a decent bet that last Monday represents a workable low in the indexes, bolstered by short-term positive divergences in the broad market and some encouraging snapback action among a good number of growth stocks. Given that the evidence is slightly better, we’re open to some nibbles here or there, especially among the stocks that have shown strong signs of accumulation. That said, we still believe it’s best to be mostly defensive—the intermediate-term trend remains strongly down, and even if a bottoming process has begun, the odds favor a volatile, news-driven few weeks (and, of course, there’s always the chance stocks break their lows down the road). Long story short, the rain has stopped for now, but the overall storm system hasn’t yet moved out to sea.

Encouragingly, for the second straight week, Top Ten is finding a lot of growth-oriented stocks that are showing peppy action. Our Top Pick is Seattle Genetics (SGEN), which has a nice four-month launching pad and isn’t far from new highs.

Stock Name	Price	Buy Range	Loss Limit
Atlassian (TEAM)	182.16	139-144	126-128
Barrick Gold (GOLD)	27.20	18-19.5	15.5-16.5
Dexcom (DXCM)	421.36	257-273	228-233
GDS Holdings Limited (GDS)	80.15	55-58	49-51
Netflix, Inc. (NFLX)	423.92	355-375	320-330
NVIDIA Corporation (NVDA)	242.42	250-270	220-226
Okta, Inc. (OKTA)	148.41	118-126	106-108
Quidel Corp. (QDEL)	93.49	91-95	80-84
Seattle Genetics (SGEN)	150.85	110-116	97-100
Slack (WORK)	24.12	26-27.5	21.5-22.5

The Emerging Markets Timer is flashing a buy signal and our stocks are behaving well. Our only move tonight is buying a half position in New Oriental Education (EDU).

Earnings season is well underway and is causing some divergences among stock market sectors. Financials, always among the first companies to report, are finally seeing some investors return after most of the major U.S. banks posted solid earnings numbers late last week.

The S&P 500 index had a nice breakout last week. I consider the move to be the beginning of a trend that could easily last for many months. Along the way, there will be pullbacks that will provide good buying opportunities.

Almost everything is up over the past week. The S&P 600 small cap index jumped 4.8% higher to hit 738. It is now up 10% in 2016, sits just four points below its 2015 high, and is officially above my year-end target of 730. None of our stocks were down over the past week.

Fastenal (FAST 43.30) reported sluggish second-quarter results. Sales inched ahead 2% and EPS fell 4%, after increasing 4% and 2% respectively during the prior quarter. Sell (FAST)

All of our market timing indicators are now positive, and yesterday brought yet another “blastoff” signal, so the odds strongly favor higher prices during the next few months. In the Model Portfolio, we’re adding Ligand Pharmaceuticals (LGND) and averaging up on ProShares Ultra S&P 500 Fund (SSO) tonight. Combined with Monday morning’s new buys, that will leave us with about 8% in cash.

We have one portfolio change today: we’re finally putting Costco (COST) back on Buy, after the stock broke out of its trading range to the upside last week. Elsewhere, I encourage you to do a little buying if you’re underinvested, taking advantage of pullbacks to start new positions in stocks that are acting well.

The S&P 500 appears to be breaking past price resistance, which it has repeatedly pushed up against since early 2015. This is great news! I expect the stock market to surprise people by rising to new highs and establishing a new, higher trading range.

Stock-specific news flow is still relatively light, but we’re marching toward the beginning of the second-quarter earnings season. A few of our companies have already announced their earnings release dates. We have no ratings changes this week, meaning there are still plenty of stocks rated Buy.

Four Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news.

The Emerging Markets Timer remains effectively neutral as the market hacks around in its three-month trading range. We have no changes to the portfolio today.

It’s an interesting time to be an income investor, to say the least. Interest rates have plummeted post-Brexit, as investors flee to the safety of fixed income just as central bankers are promising more stimulus for shaky markets. The yields on U.S. 10-year and 30-year treasuries are at record lows, while yields on more and more global bonds are going negative.

As we draw closer to October 17, the day cannabis is legal across Canada, there are growing projections that the supply of legal cannabis will be insufficient to meet demand in the early months.

Stocks don’t go straight up, right? Unless you began your stock-investing career two weeks ago, you know that stocks bounce around. They bounce upward during bull markets and they bounce downward during bear markets. We are currently experiencing a price correction during a bull market.

October 1, 2018, this company completed its spin-off from ServiceMaster.

While we have been holding a large amount of cash in the portfolio and have only a short list of stocks rated buy, the market’s assault has reached unacceptable levels.

Generally speaking, our strategy is to average in on the way up, and out on the way down. That means we need to take one more step today to protect our hard-earned gains.

This healthtech company is expected to grow at 30% annually for the next five years.

The market was on edge last week and reached a tipping point yesterday on concerns that the 10-year yield has broken well above 3% and could move higher still if the Fed continues to tighten (as it has signaled it will).

This restaurant chain beat analysts’ estimates by $0.03 last quarter.

The major indexes finished deep in the red again today, with growth stocks taking another pounding. Our Cabot Tides are now firmly negative, and we’ve been raising cash steadily during the past week. We have two more sales tonight raising our cash position to 52%.

This dredging company just announced a $48 million base contract award on the Big Bend Channel of the Port of Tampa Bay, from the United States Army Corps of Engineers.

The shares of this real estate services firm have been on the minds of Wall Street lately, with Morgan Stanley upgrading the shares to ‘Overweight’; William Blair to ‘Outperform’; and new coverage by JMP Securities, with an ‘Market Outperform’ rating; and Goldman Sachs with a ‘Buy’ rating.

The market weakened further today, with growth stocks in particular hit hard, and now our Cabot Tides has turned negative, telling us the intermediate-term trend of the market is down. Our focus is on risk minimization so that means selling another position from the portfolio.

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.