The cannabis sector remains in a correction, weighed down in part by fears of vaping illness, but many stocks are doing considerably better than the sector and our challenge is to own the right ones—so that we can succeed both short-term and long-term.

A huge new industry is being born in American energy exports. Because of new technologies in fracking and horizontal drilling, America has gone from being hopelessly dependent on energy imports to the world’s preeminent energy powerhouse and the number one producer of both oil and gas in less than ten years. In order to export natural gas across the oceans, it needs to be converted to liquid form (LNG), loaded onto tankers and shipped overseas. Until recently, the US did not have the facilities necessary to do that. But one company was the first to have such facilities and it’s up and running. And business is booming with no end in sight. This month’s “featured buy” operates the first and largest US LNG terminal, while LNG is the fastest growing commodity in the world. The stock has blown away the returns of the S&P 500 at a time when stocks in the energy sector were the worst performing on the market. Yet the stock is still reasonably valued and pays monstrous and growing 5.15% yield.

The market remains healthy, with all major indexes in uptrends and no major signs of divergence, and thus I continue to recommend heavy investment in stocks that meet your portfolio’s goals.

This week’s recommendation is an American apparel company whose stock is cheap and thus has great capital gains potential. Plus it pays a 5.8% dividend!

As for the current portfolio, most of our stocks are performing fine; a few are hitting record highs; and one or two stocks have become worrisome, but not enough to cause me to take action.

Welcome to the first Issue of Cabot Early Opportunities. This month’s Issue delves into a number of fast growing software names that look good on modest pullbacks, as well as one that’s brand new to the public market. I also cover some early-stage stocks posting big growth from beyond U.S. borders. We don’t venture too far down the market cap curve, or get into any pre-revenue names this month. But we will, once this modest growth to value rotation is behind us. Enjoy!

Current Market Outlook


Last week began with a reaction to an attack on Saudi Arabia’s oil infrastructure, moved on to a confusing Fed statement concerning future rate moves and ended with fears that U.S.-China trade talks were breaking down. But despite all of that and a solid rally the week before, the major indexes held firm, which is a constructive sign and keeps the intermediate-term trend pointed up. Individual stocks remain mixed, with lots of crosscurrents among different sectors and themes, though we are seeing an increasing number of solid charts and set-ups. Overall, the evidence tells us this is still a bull market, which isn’t to be forgotten—you should be keeping your optimist’s hat on. But with individual stocks still a bit topsy-turvy, you should pick your spots (and stocks) carefully. We’ll leave our Market Monitor at a level 6, though a bit more positive action could push that up.

This week’s list includes many fresher names that money is now flowing into. Our Top Pick is Pinduoduo (PDD), which, after a big earnings-induced breakout and run higher, has pulled back in an orderly fashion.

Stock Name	Price	Buy Range	Loss Limit
Apollo Global Management (APO)	39.69	39-40.5	35.5-36.5
Boot Barn (BOOT)	43.24	35-37	31.5-32.5
GDS Holdings Limited (GDS)	80.15	41-43	37-38.5
Generac Holdings (GNRC)	86.60	78-80	71-72
HUYA (HUYA)	21.51	26-27.5	23-24
J.B. Hunt (JBHT)	115.27	110-114	102-104
KB Home (KBH)	36.05	30-32	27-28
KLA Corp. (KLAC)	158.80	150-154	136-139
Pinduoduo (PDD)	87.53	32-33.5	27.5-28.5
TopBuild (BLD)	111.00	93-96	86-87.5

A Fed rate cut was offset by Mideast uncertainty but our portfolio soldiered on having another positive week. The Emerging Market Signal is just short of turning positive due to the lack of a clear uptrend but we have a new recommendation at the heart of “The Internet of Things”.

Last month’s Cabot Wealth Summit was a great success, with many of our subscribers coming together to share investment ideas and strategies. Overall, the mood was very positive with most attendees falling into the bullish category. That sentiment is supported by my surveys of our contributors, as you’ll see in our Market Views, as well as in our Advisor Sentiment Barometer.

The market looks great today. The correction is over and buyers are back in control, so I recommend heavy investment in stocks that meet your portfolio’s goals.
Last week I made a slew of ratings changes to our portfolio to get back in synch with the market, but today all looks well so there are no changes at all—though of course that will change!
As for this week’s recommendation, it’s a bit unusual, in that it’s a recent IPO that got very little notice (unlike giant Uber for example), but it has a good growth story, and could even thrive in the next recession.

Current Market Outlook


We’re still of the mind that going slow makes sense—following the vicious rotation of the past week or two, there’s still a chance of continued crosscurrents going forward, especially with the weekend news in Saudi Arabia and the usual batch of uncertainties that are out there (Fed this week, U.S.-China trade, etc.). But at the end of the day, most of the evidence out there is tilted to the bull case: The intermediate- and longer-term trends of the major indexes are up, the broad market is very strong (very few stocks hitting new lows every day) and, while leadership has definitely shifted, we’re seeing a good number of stocks and sectors that are under strong accumulation. We still favor starting with smaller-than-normal positions and holding some cash, but we also wouldn’t be in your storm cellar as the buyers are (mostly) in control.
This week’s list features stocks where the buying has been concentrated of late—and these aren’t beaten-down names, as many are at or near new-high ground. Our Top Pick is Floor & Décor (FND), a mid-sized building-related retailer that has tightened up nicely.

Stock Name	Price	Buy Range	Loss Limit
ACADIA Pharmaceuticals (ACAD)	47.84	42-44	34-35
Arconic (ARNC)	17.00	26.5-27.5	24.5-25
Elastic (ESTC)	86.17	90-93	82-84
Floor & Décor (FND)	68.03	48-50	44-45
Lam Research (LRCX)	268.47	227-232	207-210
Medpace (MEDP)	76.28	81-83.5	73-75
Micron Technology, Inc. (MU)	43.31	48-50	44-45
Shake Shack (SHAK)	92.08	95-98	85-87
Teladoc, Inc. (TDOC)	127.95	67-69	60-62
Teradyne (TER)	82.83	56-58	51-52

With war being one of the most dominant themes of the last four years, it stands to reason that investors should position their portfolios to account for this conspicuous (and unwelcome) trend.

And lest one be tempted to think that the warfare theme will diminish anytime soon, last week’s article by NPR deflates that illusion: It revealed that global military conflicts are at their highest level since WWII.

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 market’s strength last week and today’s calm action was enough to turn our Cabot Tides back to a positive stance, flipping the intermediate-term trend back to bullish. Given that the Model Portfolio isn’t holding a ton of cash, we’ll start slow with one new addition tonight.

This company of non-physician-owned medical centers just made a strategic agreement with a major hospital chain.

Nine analysts have increased their earnings estimates for this fitness company in the past 30 days.

Aerospace and oilfield service supply company KLX Inc. (KLXI) reported a strong fourth-quarter 2018 earnings beat this week (January year-end). Non-GAAP earnings per share (EPS) were $1.00 vs. the expected $0.88.

This homebuilder beat earnings estimates by $0.03 last quarter, and forecasts for the next five years are for more than 26% annual growth.

The Chinese biotech market is heating up and the stock of this company is rapidly gaining momentum.

Following what seemed to be a perfectly successful quarterly report on Monday evening, YY opened up today but then plowed steadily lower all morning. The stock found support at 117, and rebounded slightly finishing the day near 120.

Stifel Nicolaus has recently upgraded this chemical company’s shares to ‘Buy’, and nine analysts have raised their earnings estimates for the company in the past 30 days.

The Boards of Directors of AXA and XL Group (XL) have unanimously agreed that AXA will purchase property & casualty insurer and reinsurer XL Group for $57.60 cash per share, a 33% premium to the March 2 closing price and a 59% premium to the XL share price when it joined the Buy Low Opportunities Portfolio on December 6, 2016.

Despite less-than-stellar media reports. analysts still expect this investment bank to post double-digit growth.

The selloff has put a fork in our brief Cabot Tides buy signal from earlier this week, telling us the correction that began in late January isn’t over. The recent bout of weakness isn’t totally surprising given the market’s V-shaped recovery.

This fund two times the inverse (-2x) of the daily performance of silver bullion as measured by the London Silver Price.

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.