Issues
Today’s stock is another specialized medical device company. It plays in the highly specialized market for organ transplant surveillance. It has all the attributes of a good stock—it’s expanding its end market potential with new products, is almost profitable, and the chart looks great!
Believe it or not, there are some legitimate reasons for hope as 2019 begins--the market’s December meltdown produced some historic extremes in sentiment and breadth, readings that have almost always occurred near the start of a bottoming process. If all goes well, the market will work in the weeks ahead to bang out a sustainable low, while the best stocks set up in pole position for the next advance.
I don’t see much downside risk for the market here but I do see a lot of upside, though the challenge is knowing which stocks are going to lead the next advance. Happily, one of the advantages of investing in a basket of stocks recommended by Cabot Stock of the Week is that you can own an extremely well diversified portfolio, which means that as the market’s bounce continues, you have a good chance of owning some of the leaders.
Amidst a bearish stock market, we’re adding one big-dividend stock to our portfolios today. Lacking much stock market excitement and lower-risk near-term capital gain opportunities, I decided to post some corporate news and price action on a couple stocks—not featured in our portfolios, but still of interest to many investors.
It is useful (if also humbling) to review how our prior year’s forecast turned out.
In this issue, we take a look back - and a look forward - as we assess our moves.
In this issue, we take a look back - and a look forward - as we assess our moves.
Current Market OutlookThe first three weeks of December were a complete disaster for the market, with most major indexes falling 16% to 19% during that time. The good news is that, after some historic oversold extremes (we saw three straight days of more than 1,000 stocks hitting new lows on both the NYSE and Nasdaq!), stocks have finally begun to bounce; ideally this upmove lasts for at least a couple more weeks and gives the market a low to work from, while some new leadership takes pole position for the next sustained uptrend. Still, as we have all year, we advise just taking things as they come—right now, the trends of the major indexes and the vast majority of stocks are pointed down (just 15% or so of stocks are north of their 200-day lines), so we’re sticking with a defensive stance and waiting patiently for the bulls to make a stand.
That said, we’re still seeing a good number of resilient ideas, including many with great growth stories. If you’re looking to nibble, our Top Pick this week is Planet Fitness (PLNT), which has a unique, independent growth story that continues to attract big investors.
| Stock Name | Price | ||
|---|---|---|---|
| Alteryx (AYX) | 132.78 | ||
| Atlassian (TEAM) | 182.16 | ||
| Broadcom Limited (AVGO) | 266.26 | ||
| Crocs (CROX) | 0.00 | ||
| Deckers Outdoor Corp. (DECK) | 141.68 | ||
| Elastic (ESTC) | 86.17 | ||
| Planet Fitness (PLNT) | 0.00 | ||
| ServiceNow (NOW) | 341.86 | ||
| Tencent Music Entertainment (TME) | 18.41 | ||
| Zscaler (ZS) | 126.22 |
Like the broad market, many of the stocks in the portfolio have had a rough time over the past month, as investors have been spooked by fears of inflation and trade wars. But as the end of the year approaches, so does the incentive to take losses for tax purposes, and my optimistic reading is that most of the marijuana stocks have bottomed—though it may take a while for uptrends to be reestablished
The way the markets have been acting, it won’t be a chore to say goodbye to 2018. We’ve avoided the worst of the declines of the second half of the year, but the bears have definitely had the upper hand for months. That’s why I’m featuring an unaccustomed defensive stock in today’s issue.
Updates
What a difference a month can make! What an April! The S&P rose 9.6% in April, 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 some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.
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 some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.
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.
Alerts
The top five holdings of this ETF are Itau Unibanco Holding SA ADR (ITUB.SA, 9.00% of assets); Vale SA ADR (VALE.SA, 7.56%); Bank Bradesco SA ADR (BBD.SA, 7.09%); Ambev SA ADR (ABEV.SA, 6.00%) and America Movil SAB de CV Class L (AMXVF.MX, 4.89%).
Our first idea is a healthcare company that is expected to grow at double-digit rates for the next five years. For the second recommendation, we’re taking some money off the table.
Our first idea is a healthcare company that is expected to grow at double-digit rates for the next five years. For the second recommendation, we’re taking some money off the table.
Coverage of the shares of this biotech were recently initiated at HC Wainwright with a ‘Buy’ rating.
We have three rating changes today.
Here’s an emerging markets stock that beat analysts’ earnings by $0.08 last quarter.
This boating manufacturer’s shares were just upgraded by BMO Capital to ‘Outperform’.
Here’s an update on the stock which rating has been upped to BUY.
Here’s an update on a few of our stocks.
Wall Street analysts are expecting 50% annual growth over the next five years for this IoT company.
Loop Capital and SunTrust Robinson Humphrey just upgraded the shares of this mega-tech company to ‘Buy’.
Today brought a wave of selling that took the major market indexes (and most of the stock in our portfolio) down a peg or two. Despite the selloff, most of our stocks remain in their recent trading ranges and look like they will do just fine unless the market takes another leap off the end of the dock tomorrow.
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.