Issues
Emerging and global markets had a good week with some standout performers such as NIO and SEA. Zero progress on U.S.-China talks was overshadowed by anticipated interest rate cuts. Today we recommend a stock from the Watch List and upgrade an idea in the portfolio.
Congratulations to our Top Picks for 2019! For the first half of the year, the Dow Jones Industrial Average was up 11.8%; the S&P 500 gained 14.3%, and the NASDAQ has returned 16.1%. Our Top Five picks averaged gains of 68.02%!
The broad market remains in fine health, with all major indexes trending higher and sentiment measures still telling us this market has not yet reached the stage where amateurs are sucked in to buying at the top. Thus I continue to recommend that you be heavily invested in a diversified portfolio of stocks that fit your investment needs.
However, I will note that the fact that the Cabot Stock of the Week portfolio is now full, and that it is difficult to choose a stock to sell, is a sign that, at least in the short term, the market is high and thus ripe for a correction. If that makes sense to you, you might want to hold off on new investments.
In any case, today’s recommendation is a true diversification play, a small but high-potential Indian company that is destined to benefit from that country’s growth and the growth of tourism in the years ahead.
However, I will note that the fact that the Cabot Stock of the Week portfolio is now full, and that it is difficult to choose a stock to sell, is a sign that, at least in the short term, the market is high and thus ripe for a correction. If that makes sense to you, you might want to hold off on new investments.
In any case, today’s recommendation is a true diversification play, a small but high-potential Indian company that is destined to benefit from that country’s growth and the growth of tourism in the years ahead.
Current Market OutlookThere remain some imperfections in the market’s armor, including a continued lack of pep from small- and mid-cap indexes. And there are still plenty of uncertainties, including the upcoming earnings season and the ongoing U.S.-China trade negotiation/battle. But you can always find things to worry about in the stock market—the key is to focus on a handful of time-tested indicators and let them guide you. For us, that involves the trends of the major indexes (intermediate- and longer-term trends are pointed up), the action of Top Ten stocks (vast majority look solid) and, to a lesser extent, sentiment (which remains neutral at best). You should still be following your loss limits and stops, and on the buy side, picking your stocks (and your spots) carefully, especially if something has earnings coming up in a couple of weeks. But overall, you should remain in a constructive stance.
Impressively, this week’s list has a nice batch of growth-oriented stocks with solid stories. Our Top Pick is Sunrun (RUN), which is a bit thin and wild, but has shown fantastic action lately and has a solid growth story.
| Stock Name | Price | ||
|---|---|---|---|
| Amarin (AMRN) | 14.06 | ||
| Arconic (ARNC) | 17.00 | ||
| Avalara (AVLR) | 102.00 | ||
| Baozun (BZUN) | 44.24 | ||
| First Solar (FSLR) | 83.74 | ||
| Illumina Inc. (ILMN) | 289.74 | ||
| MercadoLibre, Inc. (MELI) | 980.83 | ||
| Royal Gold, Inc. (RGLD) | 129.66 | ||
| Sunrun (RUN) | 38.40 | ||
| Zscaler (ZS) | 126.22 |
It was a great month for the markets, with the Dow Jones Industrial Average gaining more than 1,400 points. The economy remains sound; housing prices have mitigated somewhat; unemployment is healthy; and consumers are still confident.
That’s a nice setting for our Top Picks issue. Our contributors—so far in 2019—have had a banner year.
I have to brag a bit here about our Cabot contributors, as they took the top three spots!
But, seriously, the thriving market—and some good stock picking—served us well.
That’s a nice setting for our Top Picks issue. Our contributors—so far in 2019—have had a banner year.
I have to brag a bit here about our Cabot contributors, as they took the top three spots!
But, seriously, the thriving market—and some good stock picking—served us well.
As we begin the second half of the year, the odds continue to favor higher prices for the market down the road, so we remain in a generally bullish stance. Of course, the short-term will likely be news driven (trade talk, war fears and earnings season), but the big picture is looking sunny.
Individual growth stocks are a bit more divergent, with some looking tired but other, newer leaders looking peppy.
Individual growth stocks are a bit more divergent, with some looking tired but other, newer leaders looking peppy.
A large number of our portfolio stocks are experiencing bullish price action right now. Unless something ugly hits news headlines in the next few days, we’re probably going to enjoy a strong stock market in the first half of July. I hope you’re not sitting on the sidelines!
The broad market remains in fine health, with all major indexes trending higher and sentiment measures telling us this market has not yet reached the stage where amateurs are sucked in to buy at the top. Thus I continue to recommend that you be heavily invested in a diversified portfolio of stocks that fit your investment needs.
Today’s recommendation is a very large company in an industry that has major ebbs and flows due to circumstances that are beyond this company’s control. But right now, conditions are excellent, and the 4.3% yield is an indication that the stock is cheap as well.
As for the other stocks in the portfolio, they look great, with six at or near their all-time highs. Details inside.
Today’s recommendation is a very large company in an industry that has major ebbs and flows due to circumstances that are beyond this company’s control. But right now, conditions are excellent, and the 4.3% yield is an indication that the stock is cheap as well.
As for the other stocks in the portfolio, they look great, with six at or near their all-time highs. Details inside.
Updates
The results are in for the month of April. It was fabulous. The S&P rose 9.6%, making it the best single month for the market in six years. It hit an all-time high on Friday.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of minor skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of minor skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings.
Now before you call me crazy concerning today’s newsletter headline, hear me out.
Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”
Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”
The market is digesting the push and pull of higher oil prices, a deeply divided Federal Reserve, prospects for a prolonged blockade of the Strait of Hormuz and fading momentum from the AI trade that helped push markets to all‑time highs earlier this month.
Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.
Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.
Yesterday, four tech giants, Alphabet, Amazon, Meta and Microsoft, representing 22% of the S&P 500’s market value, reported strong quarterly earnings that highlighted the importance of AI.
You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.
You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.
It’s been a glorious April following a miserable March for the market. What happens in May may determine which direction stocks are headed for the rest of the year.
That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.
That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.
What war? This market is moving on. We may not be out of the woods yet, but investors are looking beyond the Iran war.
Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.
Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.
The other day I was paid a visit by a roving ISP salesman who was pitching his company’s fledgling internet service over the local monopoly’s. We struck up a conversation and he asked what I did for a living. When I told him, his eyes lit up and he asked, “Got any good stocks you can recommend?”
Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation
Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation
Note: I’m out of town this week, so I’ll be a bit briefer on the update today—but I’m still checking my laptop a couple of times a day if you have any questions or comments. I’ll be back at my desk come Monday. Cheers.
WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.
WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.
Despite all the headline noise lately we’re marching deeper into first‑quarter earnings season with the market’s path of least resistance still pointing higher.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
The old saying, “History doesn’t repeat itself, but it rhymes,” is an apt one for the stock market these last two years.
In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.
In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.
The market turned on the afterburners. The S&P 500 made up all the March losses and catapulted to a brand new high in a remarkably short time. It’s a market that sure looks like it wants to go higher. But stocks are being held back this week by more war uncertainty.
The current ceasefire with Iran expires on Wenesday night. Talks may not happen, and war talk is growing. The resumption of the war will almost certainly prompt a decline in the market. Aside from that near-term threat, investors are clearly looking past this war. Hopefully, it won’t last much longer.
The current ceasefire with Iran expires on Wenesday night. Talks may not happen, and war talk is growing. The resumption of the war will almost certainly prompt a decline in the market. Aside from that near-term threat, investors are clearly looking past this war. Hopefully, it won’t last much longer.
The market came roaring back to new highs last week after a tough March. But the war isn’t over yet, and there could be more bouncing around in the weeks ahead.
Investors are clearly already looking past this war, as there is a high degree of optimism that hostilities will soon end. There is probably still a big rally or two left in the tank when the war actually ends. Sure, there is still headline risk in the meantime. But the war is clearly fading as the biggest market catalyst and giving way to earnings.
Investors are clearly already looking past this war, as there is a high degree of optimism that hostilities will soon end. There is probably still a big rally or two left in the tank when the war actually ends. Sure, there is still headline risk in the meantime. But the war is clearly fading as the biggest market catalyst and giving way to earnings.
Alerts
This software provider’s earnings estimates were just raised by 16 analysts.
Cronos Group is expected to be elevated today from the Nasdaq International Designation program (where it has traded as PRMCF) to the Nasdaq Global Market, where it will trade under the ticker symbol CRON. In Canada, it will continue to trade under the symbol MJM.
The recent rally has been enough to turn our Cabot Tides positive, as three of the five indexes we track are clearly above their 50-day lines. That’s certainly a positive and tells us to put some money back to work.
This Chinese retailer’s shares were recently upgraded by HSBC, to ‘Buy’ and Bernstein, to ‘Outperform’.
Seven analysts have increased their EPS forecasts for this infrastructure company in the past 30 days.
Two of our stocks reported earnings yesterday.
This $100 or so stock just announced a special dividend of $5—great return on investment for shareholders of record as of February 27.
Analysts expect this real estate marketing company to grow at a rate of more than 58% this year and 45% in 2019. Two companies have recently upgraded the shares: KeyBanc and Morgan Stanley, both to ‘Overweight’.
To be safe, I’m moving one of our stocks to Hold today after it dipped yesterday.
Coverage of the shares of this oil and natural gas company were just initiate by several brokerages: Deutsche Bank, to ‘Buy’; Baird, to ‘Outperform’; and Credit Suisse, to ‘Outperform’.
Our first idea is a retailer with a lot of momentum and 10 analysts who have recently raised their EPS forecasts.
Our second recommendation is profit-taking on a recent pick.
Portfolios
Strategy
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.