While the coronavirus concerns are still high, stocks have recovered their footing, as China has taken steps to stimulate its economy and markets.

The Cabot Global Stocks Explorer portfolio is holding up well, though Luckin Coffee (LK) sold off hard and then sharply rebounded this week. Our emerging markets timer (EEM) is marginally positive, and in an uptrend in the last month.



Today’s recommendation is a leader in fintech with a great growth story, strong numbers and an attractive entry point.

This month we’re going deep into the world of high-speed sensing and communications with an unknown micro-cap stock specializing in fiber optic technologies.

This isn’t another of those boom-to-bust components manufacturers that crush it when data centers are expanding and fall apart when capex falls. Rather, it’s a company that specializes in fiber optics for industrial, transportation and construction applications, such as in airplanes, vehicles, buildings and space stations.



It’s not a low-risk investment. But the potential is huge – if management can execute on its growth plan.



Zoom into the February Issue for all the high-speed details!

Today’s featured stocks reported fourth quarter results this morning; we have a new addition to the Growth & Income Portfolio; which could deliver quick capital gains when they report earnings; and another company which gave an informative presentation at the recent Needham Growth Conference.

I also discuss the coronavirus, which could easily cause stock market turbulence through April, even if the virus dissipates quickly.

Today’s recommendation is a British outfit that, as its stock symbol suggests, is thriving thanks to offerings that help workplace teams plan, interact, engage, track progress and more, all of which is becoming more difficult as workplaces become more mobile.

The much-needed market correction is now two weeks old and thus still quite young, but as it evolves, and we adapt to its actions, we will continue to cultivate a portfolio of the best stocks by selling our laggards and holding our leaders.

Last week that meant selling four stocks, but this week it means only a couple of downgrades to hold, along with one upgrade to buy.



As for this week’s recommendation, it’s a big old high-tech company that is currently range bound, but whose valuation and chart are attractive, so long-term investment should work out well. Plus it pays a dividend of 4.3%.



Details in the issue.

Current Market Outlook


The market rebounded nicely today, and we won’t pooh-pooh that, as a show of support is always a positive. That said, we need to see more to conclude the sellers have left the building—the intermediate-term trend, for instance, remains on the fence, and while there are no sure things, it’s likely the market will need more than six days to consolidate a four-month advance. Bigger picture, nothing has changed our view that this is a bull market, though, so we’re certainly not advising you to become overly defensive, but we’d stick with the plan of holding some cash, keeping your weakest stock or two on a tight leash and being careful on the buy side, especially when it comes to buying on strength (most moves to new highs are being met with selling). Our Market Monitor will remain at 6 for now, though we’re obviously watching things closely.

Believe it or not, many stocks did well last week, and today’s list features some of them. Our Top Pick is Yeti (YETI), which is set up nicely ahead of earnings in two weeks; you could nibble here, or just wait until you see a powerful breakout.

Stock Name	Price	Buy Range	Loss Limit
Atlassian (TEAM)	182.16	143-147	133-135
Dynatrace (DT)	36.59	28-30	25-26
Fortune Brands Home & Security (FBHS)	81.02	67.5-69.5	63-64
Franco-Nevada (FNV)	125.51	108-111	100-101.5
Momenta Pharma (MNTA)	31.63	27.5-30	23.5-25
Penn National Gaming (PENN)	45.38	28-30	25-26
PulteGroup (PHM)	45.93	43.5-45	40-41
ServiceNow (NOW)	341.86	328-336	303-306
Tandem Diabetes (TNDM)	74.77	73-76	65-67
Yeti Holdings (YETI)	42.80	35.5-37.5	32.5-33.5

With the market near record highs, many stocks are trading well above the $1,000/share price level. Investors tend to dismiss stocks with basement-level prices, so we explored this maligned group in search of neglected value.

In this issue, we look at the several of our recommended stocks in this range.

The long-awaited pullback appears to have arrived, with fears and uncertainty surrounding the coronavirus and its impact on economic growth bringing out the sellers; our Cabot Tides, in fact, are now on the fence. In the near-term, the odds favor some more pain being dished out, not necessarily because of the virus, but as the market consolidates its strong four-month advance. Big picture, though, this is still a bull market, so while we’ve trimmed a bit, we’re aiming to hold our strong, profitable stocks, thinking higher highs are likely once this pullback does its work.

In the Model Portfolio, we took partial profits on DocuSign and ProShares S&P 500 Fund earlier this week, which lifted our cash position to around 20%. And from here, we’ll just take it as it comes, as we explain in tonight’s issue.

The latest issue of Cabot Marijuana Investor is now available, with my current advice on the fifteen stocks in the portfolio.

While coronavirus fears infect the broad market, the good news is that marijuana stocks seem to have an immunity, mainly because they already had their correction last year. Many stocks in the sector are looking better, and I’m now recommending averaging up in three stocks already in the portfolio.



These changes will reduce the portfolio’s cash level to roughly 12%, so we will be well positioned to benefit from the sector’s resumption of its big uptrend.



Full details in the issue.

STMicroelectronics is one of the world’s largest semiconductor companies, delivering solutions that are key to the smartphone and automotive markets. Major customers include Apple and Tesla, though the firm (which is based in Switzerland) sports more than 100,000 customers around the globe.

Price targets are standard practice on Wall Street. But sometimes, they can act as an artificial ceiling.

For example, say Truist sets a price target on an up-and-coming growth stock that’s 25% higher than its current share price. For a growth stock, a 25% return isn’t much. But then again, the stock could be a total flop, which is the natural boom-or-bust tradeoff growth investors must endure in trading off increased risk for massive upside. So, a price target on a growth stock seems almost like an unnecessary cap on a stock that has the potential to go through the roof.

WHAT TO DO NOW: Continue to trim your sails. In the Model Portfolio, we’ve been getting closer and closer to shore as growth funds and indexes are under pressure and AI stocks cascade lower. Tonight we’re going to further trim Marvell (MRVL) given its ugly action, selling a third of what we have left. That will leave the portfolio with a big 58% cash position. We could put some of that to work if growth names find support, but we want to see key growth measures firm up before buying.

After a brief pause last week, small caps are once again leading the pack.

Through Wednesday’s close, the S&P 600 Small Cap Index is up roughly 21% year to date, compared to gains of about 15% for the S&P 400 MidCap Index, 17% for the Nasdaq and 11% for the S&P 500.

Its earnings season again! That’s a good thing. Earnings just might save the day in an otherwise confusing and uncertain market.

The market is causing whiplash. The Iran peace deal changed things. Stocks held back by high oil prices, and the resulting higher inflation and interest rates, reignited as oil prices came back down after the peace deal. But hostilities with Iran have resumed.

The peace deal may be on hold again. But stocks are hanging in there so far.

The ceasefire with Iran is over and hostilities have resumed. That sounds like a bigger bummer than it’s been in the market so far. Falling oil prices enabled previously beleaguered stocks to soar higher again as the prognosis for inflation and interest rates simultaneously improved. But that rally is over if oil prices spike higher again.

It’s no surprise that summer often brings lower market volatility levels as Wall Street heads to the Hamptons and participation rates diminish.

Indeed, what we’re seeing right now has all the classic symptoms of a low-participation environment, with investor sentiment being remarkably muted. This can be seen across a number of sentiment indicators for several different markets, most of which are flashing decisively “neutral” signals.

The divide between value and growth stocks is widening, as the Nasdaq is now more than 5% off its highs after peaking in early June while the Vanguard Value Index ETF (VTV) is hovering near its late-June apex and is up 3% in the last month.

That can flip in an instant, of course, as we saw in April and May. But the bottom line is that value stocks have risen 15% year to date, compared to an 11% gain in the Nasdaq and a 9.5% boost in the S&P 500.

After a very strong run from the March lows, the market appears to be going through an uncomfortable but healthy rotation. Many of the biggest winners from the AI and semiconductor trade have come under pressure, while value stocks, equal-weight indexes and other areas that had lagged earlier in the year have held up much better.

Markets are facing more inflation as the Iran mess gets messier. Concerns over high AI capital spending are a cloud over a resilient market. On the bright side for our portfolio, however, International Business Machines (IBM) shares were up 7.4% this week following last week’s 8.9% gain. Sea Limited (SE) shares leapt 9.6% this week and are up about 20% over the past month. MercadoLibre (MELI) shares are up 11.6% over the last two weeks.

I remain bullish on stocks, but I am turning more cautious, winding down leverage, and letting some cash build up in my non-marginable accounts.

The reason is that spooky season lies just around the corner. September and October are typically the weakest months of the year. We also often see weakness in July and August, perhaps as investors get nervous about those looming difficult months.

After a very strong run since the March lows, the market appears to be going through a healthy, albeit somewhat uncomfortable, rotation.

The biggest winners from the AI and semiconductor trade are finally seeing some profit-taking, with Goldman Sachs (GS) noting that momentum stocks recently suffered their worst two-day decline since 2020. UBS (UBS) just said that the momentum factor is down roughly 20% from its June peak, marking the seventh-largest drawdown of the last decade and the fastest decline of that magnitude on record.

The S&P 500 was down in June after rising sharply in April and May. But that doesn’t tell the whole story.

Most stock sectors had a strong month in June. The four best-performing sectors and their returns over the last month include the following: health care (11.2%), financials (8.44%), industrials (6.87%), and utilities (6.64%). Information technology, which drove the S&P higher in April and May, is the worst-performing sector over the last month with a negative 8.75% return.

This biotech stock was recently upgraded to ‘Outperform’ by Evercore ISI Group: In-Line.

On June 21, 2018, the world learned the shocking news that Intel Corp.* (INTC – yield 2.3%) CEO Brian Krzanich was required to step down from his position at Intel due to a relationship with an employee that violated company policy.

Markets pulled back yesterday and the Dow, S&P 500 and Nasdaq all closed lower. A couple of our holdings were hit particularly hard, so I wanted to send a quick update on two of our positions even though I’m not recommending any action.

Analysts are forecasting higher earnings for this medical device company, which has recently announced to acquisitions, boosting its product offerings.

This morning, the company reported third quarter earnings per share of $0.41 vs. the consensus estimate of $0.42 (August year-end), and revenue of $1.2 billion vs. the expected $1.29 billion.

This oil company beat analysts’ estimates by $0.04 last quarter, and eight analysts have increased their EPS estimates for the company in the past 30 days.

This agriculture company turned in a stellar quarter, with adjusted EBITDA of $61.9 million in 1Q18, a 38.4% increase, year over year.

This largest manufacturer of iron-ore pellets in North America may see renewed interest due to steel tariffs.

This fintech company beat earnings estimates by $0.03 last quarter, and it is forecasted to grow 22.3% this year.

This semiconductor measurement systems company was recently recommended by Zacks, based on an 84% estimated earnings growth rate for this year.

The following is a brief unscheduled update—not only on developments in the marijuana investing sector but also on my thinking about the investment prospects in the industry going forward. I hope you find it useful.

This restaurant business beat analysts’ earnings estimates by $0.07 last quarter.

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.