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.

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.

I’m putting Wynn (WYNN), one of our growthiest names, back on Buy today after the stock finally broke out of its multi-month trading range.

This week, financial markets bring us earnings reports from Adobe and FedEx (and possibly Carnival), and a speech by Fed Chairwoman Janet Yellen.

This looks like a classic buy-the-dip scenario. Nothing is for certain, but my best guess is we regain the small-cap 50-day moving average line next week, and after a week or two of choppy action, are trading at another 52-week high.

Volatility returned to the stock market during the past week. Investors are concerned about the possibility of a Fed interest rate hike next week after a batch of weak economic news indicated that the U.S. economy will continue to sputter.

The Emerging Markets Timer is still pointed up, but it’s clearly seen some selling volume over the last week. So while we’re still bullish, we’re not looking to push for further exposure at this point. The only change in the portfolio is the sale of Telkom Indonesia (TLK) that we recommended in a Special Bulletin on Wednesday.

One of our positions reported middling third-quarter results this morning, and the stock opened 6% lower, although it’s already making up some of those losses. As a result, we’re moving it to Hold.

In the last 30 days, 25 analysts have increased their EPS estimates for this insurer.

Following Friday’s meltdown, the market attempted to bounce this morning, but was overwhelmed with selling pressures again, resulting in another round of huge losses. As a result, this caused one of our positions to dive below long-term support on big volume and it’s time to sell. This sale will raise our cash position to around 78%, which is obviously a highly defensive stance.

This convenience store business beat analysts’ estimates by $0.06 last quarter.

This global beverage company beat consensus analysts’ estimates by $0.27 per share last quarter.

This publisher has just made a nice acquisition, boosting its online business.

Tyler reports on the Lockup Expiration of one stock and the Partial Sale of another.

Two stocks in our Portfolio each reported strong earnings beats this morning.

This engineering company is forecast to grow at an annual rate of 50.17% over the next five years.

Our second recommendation is a sale of a previous idea.

Our first idea today is a tech company that beat analysts’ estimates by $0.25 in the last quarter.

Today, we’re selling a stock from the Growth & Income 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 Momentum 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 Momentum Trader features.