The market remains in an uptrend, and many of our leading stocks have been hitting new highs, even though the major indexes haven’t—yet. Thus I continue to recommend that you be heavily invested in a diversified portfolio of stocks—growth, value, dividend-paying and more. Someday, it will become appropriate to be more cautious, but that time is not now.
Today’s stock is a young technology stock with great growth prospects as it supplies its customers with the tools needed to secure digital operations of all types and sizes. It’s an aggressive, high-risk investment, but the trend is strongly up.
As for the current portfolio, six of our stocks have hit new highs in recent days, so we’re making great progress. The only changes this week are two downgrades from Buy to Hold. Details inside.

Current Market Outlook


The market’s snapback last week was very encouraging, with the major indexes and most leading stocks leaping back toward (or in some cases, out to) new highs. As we wrote last week, there are a couple of short-term issues to keep an eye on—namely, we saw some non-confirmations, as small- and mid-cap indexes didn’t bounce that much and far fewer stocks hit new highs even as the S&P and Nasdaq did. At this point, that action is more descriptive than predictive; it does raise the odds that the market could throw us another curveball over the next week or two, but it’s not something we’d necessarily trade off of. Big picture, we remain mostly bullish, though for new buying, we still favor entering on weakness.

This week’s list is just about all tech, med tech and biotech, and we’re happy to see some improved setups after the past two to three weeks of action. Our Top Pick is Zendesk (ZEN), which looks like it wants to continue its breakout from a few weeks back.

Stock Name	Price	Buy Range	Loss Limit
Amarin (AMRN)	14.06	18-20	16.5-17.5
Cree, Inc. (CREE)	67.96	54.5-57	49.5-51
Exact Sciences (EXAS)	116.91	88-92	80-82.5
iQIYI (IQ)	0.00	25.5-27.5	22.5-23.5
Paycom Software (PAYC)	0.00	176-183	159-163
Q2 Holdings (QTWO)	80.81	66-69	60.5-62
Ubiquiti Networks (UBNT)	170.11	137-142	125-128
Ulta Beauty (ULTA)	331.95	326-343	290-300
Xilinx (XLNX)	134.50	119-125	108-112
Zendesk (ZEN)	82.19	79-83	72-73.5

After a well-deserved pullback during the past two weeks, the strong action this week from most major indexes and leading stocks is a good sign. Short-term, further wobbles are certainly possible after the strong nine-week advance off the market’s major bottom, but big picture, we remain very bullish and heavily invested.
In tonight’s issue, we write about a couple of simple tips for handling some off-the-bottom names in last year’s high-fliers, as well as reviewing our nine stocks and a couple others that look tempting.

Happy spring! The Bradford Pear trees and daffodils are beginning to flower here in Tennessee—one of my favorite times of the year!

And this year, with the market continuing to “bloom,” the unemployment rate steady at 3.8%, retail sales rising, and the housing market healthy, it sounds like spring is ushering in a happy period. Both investors and advisors agree, as you’ll see in our bullish barometer and Market Views.

The market remains in an uptrend, though the correction that started last week may do a little more damage. If so, try to take advantage of it, remembering that buying low is the goal.
Today’s stock is a name you know—a name all Americans know—and I think it’s a good buy here after correcting 39% last fall. Crista Huff is the Cabot analyst who recommended it most recently, in part on fundamental grounds, and my reading of the chart confirms her conclusion.
As for the current portfolio, we continue to make great progress, but there’s always room for improvement. The only changes this week are two upgrades from Hold to Buy. Details inside.

Current Market Outlook


After nine strong up weeks, the past two have seen most of the market hesitate (at first) and then pull back (the S&P 500 fell all five days last week), resulting in a few stocks hitting potholes along the way. In the short-term, we think some further consolidation could easily come, shaking out some weak hands. But bigger picture, the recent action looks normal to us—none of the major indexes and very few leading stocks cracked any meaningful intermediate-term support, and today’s sharp rally is a good sign that buyers are still lurking. Be sure to watch your stops and loss limits, and it’s a good idea to be discerning on the buy side, focusing on strong stocks that have pulled back to solid entry points. Market-wise, though, we remain bullish and are keeping our Market Monitor at a level 7.

This week’s list has stocks from all corners of the market, which we see as an encouraging sign. Our Top Pick is RingCentral (RNG), a leader in a new cloud communications field with a stock that’s acting great.

Stock Name	Price	Buy Range	Loss Limit
Carvana (CVNA)	82.90	48-51	41.5-43.5
EPAM Systems (EPAM)	188.24	155-160	142-145
Keysight Technologies, Inc. (KEYS)	97.20	81-85	73.5-75.5
Lending Tree (TREE)	411.51	307-322	278-288
Omnicell (OMCL)	81.03	80-84	73-75
Planet Fitness (PLNT)	0.00	62-64	57-58
Rapid7 (RPD)	63.52	45-47.5	40-41.5
RingCentral (RNG)	238.73	100-105	91-94
Sea Limited (SE)	132.86	22-24	18-19.5
Tandem Diabetes (TNDM)	74.77	61-65	52-55

Emerging markets (EEM) stay in a confirmed uptrend with the support of generally upbeat earnings. Investors have piled about $86 billion into emerging-market stocks and bonds this year, more than in the last nine months of 2018 combined.

We have some earnings updates and a new recommendation that actually delivers the strong e-commerce growth—a leading consumer theme of emerging markets.

The market continues to drive forward, and sentiment remains bullish, as you’ll see in our Market Views. Investors are taking all the D.C. hoopla in stride, and seem content with the favorable economy which continues to provide low unemployment and a strong housing market.

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.

Our first idea is a tech stock whose earnings estimates have been increased by 31 analysts in the past 30 days.

Our second recommendation is a sale of a company whose shares have recently been pummeled.

Steel stocks are surging today, most likely triggered by the unfortunate news of corruption at Kobe Steel. The Cabot Undervalued Stocks Advisor portfolios currently hold two steel stocks.

The top five sectors in this fund are: Consumer Discretionary (27.8% of assets); Technology (18.9%), Financial Services (16.9%), Industrials (11.1%) and Consumer Staples (8.6/5).

The top three sectors in this fund are Technology (40.39% of assets), Financial Services (15.27%), and Consumer Cyclicals (11.47%).

After Madison Square Garden and Brink’s this fund’s next three largest holdings include: Twenty-First Century Fox Inc Class B (FOX, 8.36%); S&P500 Emini Fut Sep17 Esu7, 6.18%) and Encore Capital Group Inc (ECPG, 4.81%).

I want to point out a problem that I foresee, potentially on the scale of the technology bubble in 2001 and the housing bubble in 2007. I think we’re going to have an “inverse ETF bubble.”

Wall Street is expecting double-digit growth from this beverage company over the next five years, and the shares were just initiated at Macquarie, with an ‘Outperform’ ranking.

Two of our stocks are closing in on price targets, plus a list of great stocks to buy today.

I’m pleased to introduce myself as the new chief analyst of Cabot Benjamin Graham Value Investor. I look forward to serving you with the best value stock recommendations to help you reach your investing goals. But first, let me tell you a bit about myself and my investing philosophy.

Our first idea is an income-property owner whose shares recently crossed above their 50-day moving average—a bullish indicator. Our second recommendation is a sale of a financial company.

Our second recommendation is a sale of a financial company.

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.