The cannabis sector remains in a correction, but many of our stocks are doing considerably better than the sector. And the sector itself is very likely near a bottom—which I why today’s issue is titled “Buying Opportunity.”
For new investors, it’s a great time to get started.
However, I’m also recommending reducing positions in four of our holdings, always working to put more of our money in the leading stocks—and with these sales, our cash level will rise—hopefully briefly—to 30%.

August has featured one big whipsaw after another, with the major indexes breaking down early in the month and making many dramatic moves since. But the overall evidence really hasn’t changed much—the intermediate-term trend still isn’t up for the market or most stocks, while the longer-term evidence is still mostly bullish. Thus, we’re sticking with a cautious stance. Tonight, we’re selling a small chunk of Okta (OKTA), which leaves us with a cash position of around 36%.
Elsewhere in tonight’s issue, we write about all of our current holdings (including newer addition Carvana) and discuss one major indicator to watch closely and how to find resilient stocks in the market. If today’s rally is for real, we could be putting money to work soon, but we’re content to patiently wait for a decisive green light.

We are in the late stages of a recovery and bull market. The economy is still strong and the bull market could continue for a while. But the escalation of trade frictions with China is disrupting the situation.
Since the trade war escalated a month ago, the market has fallen every week since. And things might get worse before they get better. The trade war takes a small toll on the economy but it hurts the global economy much more. A faltering global economy would come back and bite us, and perhaps draw the next recession closer.
With no catalyst in sight to fix the current situation and a recession looming somewhere in the not-too-distant future, it makes sense to play defense. Defensive dividend paying stocks are the stars of the market now and may continue to be for a long while.
In this issue I highlight one of the very best defensive dividend stocks on the market. It has rock solid earnings in any environment and the stock should perform well in just about any market.

The market remains under pressure in the short-term, for all the well-publicized reasons, but long-term, the market trend remains up, and many of our stocks are acting well. Today’s recommendation is a repeat, a stock we made money in last year that subsequently had a big correction and is now ready to run again. And it’s got a great story, too!

Current Market Outlook


The market came close to giving an all-clear signal last week, but the endless U.S.-China trade flareup knocked the market back on Friday. Despite the headlines, we still don’t see the environment as a total disaster—the indexes themselves are still holding above their recent lows, and many individual stocks (and most we’re following) are actually more resilient than that. But the bottom line is that little money is being made, and with the intermediate-term trend continuing to point down, you should remain in a cautious stance, keeping new buying on the small side and holding some cash. From here, we’re open to anything—given the pervasive pessimism, a new uptrend wouldn’t shock us, but the onus remains on the bulls to prove they are retaking control before we become more constructive.

This week’s list has a wide mix of stocks that have resisted the market’s downward pull—with some actually advancing despite the environment. Our Top Pick is MasTec (MTZ), a stock we missed a couple of weeks ago but think it can have a sustained advance due to its exposure to many strong markets.

Stock Name	Price	Buy Range	Loss Limit
Allakos (ALLK)	77.83	80-84	66-69
Blackstone Group (BX)	49.12	47.5-49.5	42.5-43.5
D. R. Horton (DHI)	66.55	48-49.5	44.5-45
HubSpot (HUBS)	582.89	196-200	178-182
Keysight Technologies, Inc. (KEYS)	97.20	92-95	83-85
LivePerson (LPSN)	58.55	37-39	33-34.5
MasTec, Inc. (MTZ)	66.65	59-61	53.5-54.5
Pinduoduo (PDD)	87.53	28-30	24-25.5
Synopsys (SNPS)	137.53	133-137	122-124
Target (TGT)	124.77	101-105	91-93

This has been a busy week with earnings reports—the bulk of them on the positive side. China and other emerging and international companies seem to be posting good numbers but macro headwinds are weighing on markets for now.

The Hong Kong situation is one issue causing concern so this week we head back to Singapore for a high quality financial play on Asia

The market has been all over the place so far in August, with some huge daily declines and advances depending on the news of the day. While the continued rebounds are a good sign buyers are lurking out there, the fact is the intermediate-term trend isn’t up, so we think it’s best to stick with a cautious stance—jettisoning your portfolio of losers and laggards (as we’ve done in recent weeks) while looking for either undervalued or resilient stocks to take their place. Our choice this week is a blue chip that’s cheap, near support, pays a nice dividend and is in position to benefit from any bounce in interest rates.

Current Market Outlook


The good news is that the general market has been whacked two or three times during the past couple of weeks, but each time has staged a strong rally, including today’s spirited advance. That said, despite the nice Friday/Monday rebound, the intermediate-term trend is still iffy (most indexes are sitting at or below their 50-day lines and below their highs from last week), so our overall stance hasn’t changed much—you should remain cautious, limiting new buying and holding some cash, though we’re also fine sticking with your strong, profitable names, giving them a chance to resume their uptrends down the road. The game plan from here is simple: If the market fades again, we’ll remain cautious, but should the recent strength continue, we’ll gradually turn more constructive and put money to work.
This week’s list (and the past couple of weeks) are great for getting your ducks in a row should the bulls decisively retake control. Our Top Pick is Appian (APPN), which looks like a new small/mid-cap leader following a massive breakout. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
ACADIA Pharmaceuticals (ACAD)	47.84	28.5-30	25.5-26.5
AngloGold Ashanti (AU)	20.45	19.5-20.5	17-17.5
Appian (APPN)	46.48	55.5-58.5	48-49.5
Dexcom (DXCM)	421.36	160-164	148-150
eHealth (EHTH)	122.74	103-107	91-93
Five9 (FIVN)	78.35	60.5-63	54.5-56
JD.com (JD)	39.58	30-31.5	27-28
KLA Corp. (KLAC)	158.80	135-138	124-126
Q2 Holdings (QTWO)	80.81	87-90	78-80
Universal Display (OLED)	187.54	208-216	182-186

For value-focused investors, this year’s prologue has been a welcome change from the turmoil experienced in early 2025.

In just the past few weeks, some of last year’s most ignored or underappreciated laggards have posted outsized gains, with rallies that have made even momentum-driven tech stock traders envious. Even more remarkable is the fact that much of that strength has been concentrated in ultra-defensive areas of the market like consumer staples, utilities and healthcare.

The market rotation continues to be the main story out there this week, though rumblings of a potential strike on Iran, an update from the January FOMC meeting, and a slew of earnings reports and economic data releases have been giving investors plenty to think about.

In terms of the rotation, the equal‑weight S&P 500 ETF (RSP) is up 5.5% so far this year, illustrating that leadership is broadening beyond the narrow group of mega‑cap stocks that drove much of last year’s performance.

Year to date, the S&P 600 SmallCap Index is up 8.3% and the S&P 400 Mid‑Cap Index is up 7.9%. Both are comfortably outperforming the S&P 500, which is up just 0.1%, and the Nasdaq, which is down 2.1%.

Happy Chinese New Year! The year of the horse is upon us.

China is expecting an incredible 9.5 billion trips to be made during the 40-day Lunar New Year travel period. Chinese automakers are also on the move as the country’s numerous brands sold nearly 200,000 vehicles in Britain last year, doubling their market share to almost 10%.

As U.S. investors have shifted from risk-on to risk-off mode in recent months, a clear disparity between the “haves” and the “have-nots” has materialized.

Let’s start with the “have-nots.” Financials have fared the worst so far this year (-4.7%), followed by technology (-3.1%), communication services and consumer discretionary (-2.8% each). The downturn in the two tech-related sectors in particular is a stark departure from recent years, when technology led the charge of the current bull market.

Cyclical stocks are soaring and technology is floundering in the transformed market.

The bull market is turned upside down. For most of the first three years, technology, and particularly AI stocks, soared while most other stocks did very little. Now, previously meandering stocks are killing it while technology sinks.

Strong fourth-quarter earnings are confirming what the market was already doing.

Current estimates based on earnings reported so far are for 13.2% overall S&P earnings growth for the quarter. It’s a solid quarter and the fifth straight quarter of double-digit earnings growth. In terms of sector performance, cyclical companies are killing it, and technology is floundering, just like before earnings.

Like many coffee aficionados, I have something of a love/hate relationship with Starbucks (SBUX). My main gripe is that the company’s food and beverage offerings have always been pricey compared to the fare served in most fast-food restaurants and run-of-the-mill coffee houses.

The outperformance of small caps continues.

Through Tuesday’s close, the S&P 600 is up 10% year to date versus just 1.6% for the S&P 500.

All but three small-cap sectors are outperforming their large-cap counterpart. The strongest small-cap sectors are materials (+20%), energy (+23%), industrials (+17%), and tech (+11.4%).

Let’s talk about the power of staying invested.

Sure, when the market turns south – and I’m not even sure last week’s mini-dip qualifies – it makes sense to pare back on your weakest stocks and put a larger portion of your portfolio in cash. But taking your ball and going home – selling out of all of your stocks when times are tough – is not a winning strategy. Here’s why.

NOTE: We’re sending this a day early as I’m soon to embark on a trip with the kiddos over the next week. I will be working a good amount from the road, though, and will have updates if need be. Also, next week’s issue will be published as scheduled.

==

WHAT TO DO NOW: The market remains very mixed, with growth measures still generally pointed sideways to down, while the broad market remains in solid shape. What’s interesting, though, is that we’re seeing more growth stocks kick into gear, along with some huge buying action in a few “cyclical growth” names. Tonight we’re making one move—adding a half-sized stake in Macom Tech (MTSI)—but are keeping our eyes open for a broader character change among growth stocks. Our cash position will be around 53%.

Today could be a big day for cannabis stocks.

The reason: We may get an important update on the rescheduling timeline.

Cannabis investors will be watching closely today to see whether Attorney General Pam Bondi offers a rescheduling update when she appears before the House Judiciary Committee. Upbeat comments could spark a sharp cannabis sector rally. The hearing starts at 10 a.m. EST.

I’m excited to share a couple of enhancements to Cabot Early Opportunities —improvements designed to sharpen our focus and better help you stay on top of the stocks we own.

This Chinese human resources company beat analysts’ estimates by $0.15 in its latest quarter and Wall Street expects the company to grow by more than 24% in the next year.

Only lost 27 cents per share in the latest quarter.

This emerging markets fund is trading at a discount and is an opportunity to gain exposure to some large tech stocks.

Tonight we’re going to sell our remaining half position in one stock and hold the cash. (We sold the first half of our position on April 20 for a small profit.)

This homebuilder is on track for recovery, or perhaps, a buyout.

One stock moves from Strong Buy to Hold, and another moves from Strong Buy to Buy

This ETF offers an opportunity to invest in the lesser known midcap oil companies.

I’ve been pounding the table on “takeover stocks” for half a year now.

Our second idea is a sale of a stock experiencing seasonal weakness.

Our first recommendation is a small-cap fund.

One of the stocks in the portfolio reported strong earnings and a revenue beat—it moves from Buy Low Opportunities Portfolio to Growth Portfolio.

And our second recommendation is to bank some profits.

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.