The nature of this newsletter is that 90% of our focus is centered on finding early-stage opportunities and vetting them. But to have investing success – in any type of stocks – over the long haul we must follow some basic portfolio management strategies.

This month I’m laying out five simple tips that you should follow when investing in the stock I feature in these pages. There is nothing that’s super innovative or worth discussing at a cocktail party here. No hedging or options trading techniques. Just solid, basic, common sense tips that will help you reduce risk, increase your probability of success, and sleep better at night.

Despite the headwinds of trade tensions and pundits worrying about China growth, our Explorer portfolio holdings Sea, Alibaba, Luckin Coffee and Huya all reported outstanding financial results this week.

The Emerging Markets (EEM) Timer is still positive as we introduce a new resource recommendation with operations at the very heart of Asia-Pacific growth.

The major indexes continue to hit new highs, all Cabot’s market timing indicators remain positive, and our portfolio is solid, with no particular worry spots today.

Of course, that will change, and when it does, we will adjust our stance, but there’s no predicting where the trouble will come from, so for the moment we’re standing pat with our portfolio, making no changes.

As for today’s new recommendation, it’s in a traditional industry, but growing fast thanks to acquisitions—and on a pullback right now that offers an attractive entry point.

Details in the issue.

Current Market Outlook


The major indexes have now rallied five weeks in a row, with most having at least eked out to new highs during that time. That push higher has created a few short-term yellow flags among overbought and sentiment measures; similar readings during the past few months have preceded multi-week, tedious retreats in the market. What happens this time around will be key: With the trends up and longer-term measures supportive, we’re optimistic the market has changed character for the better, but should the market and leading stocks suffer a deep retreat, that would probably put us back in the soup. In the meantime, we’re going with the evidence, which continues to improve both for the indexes and new leading stocks.

This week’s list has another round of stocks that have recently enjoyed outsized accumulation. It’s a tough choice, but our Top Pick is United Rentals (URI), which looks like a potential leader among cyclical stocks.

Stock Name	Price	Buy Range	Loss Limit
Cirrus Logic Inc. (CRUS)	0.00	66-69	58.5-60
Dexcom (DXCM)	421.36	196-205	177-181
InMode Ltd. (INMD)	38.86	40-43	34-36
Insulet (PODD)	175.69	168-174	154-156
MKS Instruments (MKSI)	109.43	108-112	97-99
State Street (STT)	79.42	69-71	62.5-63.5
Tesla, Inc. (TSLA)	818.87	320-335	280-290
United Rentals, Inc. (URI)	0.00	151-156	136-138
Visteon (VC)	89.82	91-95	82-83.5
Winnebago (WGO)	48.56	47.5-49.5	42.5-43.5

We’ve been writing for months that the market’s next big move was likely up, and it now looks like that upmove could be underway, with the major indexes in uptrends, our market timing indicators looking good and little selling pressure recently despite a good run. Short-term, a dip wouldn’t be shocking to see, but the path of least resistance finally appears to be up.

The major indexes have been hitting new highs in recent days, all Cabot’s market timing indicators are currently positive, and our portfolio looks good!

However, there is one sale—of a strong stock that now has less upside potential—as well as one downgrade to hold and one upgrade to buy. Details in the issue.

As to the new addition, with true growth stocks turning strong again, I’m recommending one of the strongest, a provider of hardware that enables ever-faster movement of data in the cloud-computing environment.

Details in the issue.

Let’s turn our attention to additional profitable opportunities

In that light, I added four extra stocks at the end of this month’s issue; bonus stocks that won’t permanently join the portfolios, but nevertheless offer excellent money-making opportunities today.

Current Market Outlook


It’s not a wild, rampaging bull market, but there’s no question the evidence has improved during the past couple of weeks—earnings season has offered more good than bad, with a decent number of positive reactions and breakouts, and for the first time in months, we’re seeing some follow-on buying (strength leading to more strength), which is typical of what you see in a sustained uptrend. There are still hurdles to overcome (most indexes are still testing the top of multi-month ranges), and short-term, investors are a touch complacent, so we wouldn’t be shocked to see some wiggles or further crosscurrents. But with more stocks acting well and with the trends of the major indexes pointed up, we think extending your line makes sense. We’re nudging our Market Monitor up to a level 7 on tonight’s issue.

This week’s list is chock-full of recent earnings winners, including many that appear to be early in new uptrends. Our Top Pick is Qorvo (QRVO), a well-traded chip maker that’s just staged a wild earnings gap. Start small and preferably on weakness.

Stock Name	Price	Buy Range	Loss Limit
Agnico Eagle Mines (AEM)	79.05	58-61	53-55
Bristol-Myers (BMY)	66.24	54-56	50.5-51.5
Garmin (GRMN)	97.45	92-94.5	84.5-86
Inphi (IPHI)	120.16	68.5-71	61.5-63
Leggett & Platt, Incorporated (LEG)	49.79	49-51	43.5-44.5
MasTec, Inc. (MTZ)	66.65	68-71	62-63
MurphyUSA (MUSA)	118.21	113-117	98-100
Qorvo (QRVO)	129.47	97-102	87-90
TopBuild (BLD)	111.00	103.5-107	94-96
TransDigm (TDG)	599.41	520-540	480-490

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.

The following is a quick update to show you that the road forward for marijuana investments continues to improve.

One of the stocks in our portfolio reported a huge first quarter earnings beat and many of our other portfolio stocks are rising.

This tech company is expected to grow by 35% on average, in the next five years.

One stock reports a slight first quarter earnings beat; and another moves from Strong Buy to Hold.

This small-cap stock has a number of catalysts that should boost revenues and profits in the near-term.

One Stock reports great first quarter results; and two more will report first quarter results on April 17 and 18.

Despite this social media giant’s recent data privacy scandal, there are lots of reasons why the company is here for the long-term. Buy it now at discounted prices.

The shares of this restaurant company were recently upgraded by Deutsche Bank to ‘Buy’.

Two stocks move from Strong Buy to Hold and there is bullish price action another.

Both Citigroup and UBS recently initiated coverage of the shares of this financial behemoth with a ‘Buy’ rating.

The top five holdings in this fund are: Medy-Tox Inc (086900.KS, 2.83%); Cavium Inc (CAVM, 2.58%); Copart Inc (CPRT, 2.35%); Trex Co Inc (TREX, 2.27%); and Knight-Swift Transportation Holdings Inc A (KNX, 2.17%).

This tech services company beat analysts’ estimates by $0.06 per share 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.