Since the last issue, five stocks have declined and 10 gained more than 10%. Many are now at or near fair value, and eight are rated Sell or Sell a Portion. Also in this issue, I recommend two new stocks and profile a new small-cap stock that’s on my watch list.

The Cabot Emerging Markets Timer is sitting firmly on the fence and some of our stocks are taking breathers. It’s not anything like a time to over-react, but we’re pulling in our horns in an appropriate way. We also have a new stock that does a brilliant job of balancing a national presence with thorough local focus.

As you’ll see in our Market Views, our contributors remain bullish, as do the Advisor and Investor Surveys we follow. And our contributors continue to find investing ideas with which to stuff your stocking—in just about every sector.

The market weakness that I mentioned last week has vanished, and with it my cautious stance. Thus, this week’s stock is what we call a zinger—a stock that has been hot, and will likely remain hot for a substantially longer period of time as investors learn about its great growth story.

Current Market Outlook


Growth stocks have stabilized and the market has quieted down following the sharp Nasdaq-led selloff, allowing some stocks to bounce back nicely and other new leaders to flex their muscle. Short-term, we wouldn’t be surprised to see some follow-on selling in some of the damaged areas (we still think chip stocks, for instance, look iffy), and some year-end uncertainties (tax reform, government shutdown) could always cause some wobbles. But you know us—we go with the evidence in front of us, and with the major trends of the major indexes and most leading stocks pointed up, we remain mostly bullish. As always, you want to sell stocks that are breaking down and focus new buying on fresher leadership stocks that have shown excellent volume clues.

There are many such examples in this week’s list, which has a wide variety of good-looking charts and stories to choose from. Our Top Pick is Etsy (ETSY), a niche online retailer that’s just turning profitable and has powerfully broken out during the past week.

Stock Name	Price	Buy Range	Loss Limit
Ally Financial (ALLY)	30.44	27.5-29	24.5-26
Boise Cascade (BCC)	0.00	38-40	35-36
Charles Schwab (SCHW)	0.00	49-51.5	46-47.5
D. R. Horton (DHI)	66.55	48-50	44-45.5
Etsy (ETSY)	112.97	18.5-20	16.5-17
First Solar (FSLR)	83.74	64-68	56-59
G-III Apparel (GIII)	45.25	32-34.5	28-30
Global Blood Therapeutics (GBT)	0.00	41-44	36-38
NetApp (NTAP)	0.00	56-58	51-52.5
Roku, Inc. (ROKU)	150.46	43-47	35-37.5

We’ve pared back during the past few days in the Model Portfolio, but we\'re not sticking our heads in the sand and are giving our profitable stocks room to consolidate. In tonight’s issue, we dive into our game plan for our remaining stocks, and we also do some sector analysis, including two areas that are launching new leaders.

Today’s featured stocks include two new additions to the portfolios and a stock that seems ready for a huge price rebound.

Today’s recommended stock is an old-world company in a prosaic business, and its prospects are bright as it reaps improved efficiencies from its recent big merger.

Current Market Outlook


The past week saw yet another round of rotation, but this one was the sharpest and most violent we’ve seen all year, with many leading growth stocks getting crunched while other areas of the market (especially those benefiting from likely lower corporate taxes) surged. Our advice, as usual, is to follow the plan—some growth stocks look very toppy after long, uninterrupted runs, and for those, selling (or partial selling) makes sense. But other growth stocks are pulling back normally, and some new leadership is emerging. It makes sense to pull in your horns a bit, possibly holding some cash until the market settles down; we’ve nudged our Market Monitor down to reflect that. Right now, we advise taking things on a stock-by-stock basis, holding your resilient/advancing issues, while honoring your stops and selling names that break down.

This week’s list is heavier on cyclical, building and retail stocks, all of which have caught huge updrafts during the past few days. Our Top Pick is Warrior Met Coal (HCC), a big turnaround play in the coal sector. Buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Beacon Roofing (BECN)	0.00	60-63	55-56.6
CH Robinson (CHRW)	0.00	84-87	78-79.5
E*Trade Financial (ETFC)	0.00	48-50	44.5-46
Gardner Denver (GDI)	0.00	30-32	27.5-28.5
GrubHub (GRUB)	140.03	64-67	57.5-59.5
Michael Kors Holdings Limited (KORS)	73.22	55.5-57.5	51-52.5
Peabody Energy Corporation (BTU)	43.32	32.5-33.5	29.5-30.5
Tyson Foods (TSN)	0.00	80-83	74-76
USG Corp. (USG)	0.00	36.5-38	34-35
Warrior Met Coal (HCC)	0.00	21-22.5	17.5-18.5

While flashier, more star-studded teams like Lionel Messi’s Argentina, Kylian Mbappe’s France and Erling Haaland’s Norway garnered most of the headlines at the just-completed World Cup, Spain was the best team. There was nothing flashy about Spain: no mega-stars, not a ton of goals, no relentless attack. Instead, they dominated the tournament with precision passing, immaculate ball control and near-impenetrable (just one goal allowed all tournament!) defense.

The market rolls sideways amidst a slew of conflicting forces.

The S&P 500 has bounced around and is at the same level it was in the middle of May. The primary culprit is technology. That sector has been in a funk. The S&P 500 is hard-pressed to generate any lasting traction while this massive sector, accounting for over 40% of the index, flounders.

The market has gone sideways since May. It seems to be deciding what to do.

It’s encouraging that the resumption of hostilities with Iran has not sent the market lower. It’s also positive that oil prices aren’t rising back to the $100 level earlier in the war, although prices have risen. It’s also another earnings season and analysts expect a big one.

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.

Marrone Bio (MBII) reported yesterday after the close. The bottom line was a good quarter, with remarkably few surprises. And at this point, “good” is great.

Our Cabot Tides turned positive today, and while the market is still very volatile and divergent, there’s no question the evidence is improving.

The momentum for emerging market stocks in general, and Chinese stocks in particular, has taken a big turn for the worse.

The Board of Directors of Harman International Industries (HAR) has come to a definitive agreement with Samsung Electronics, in which Samsung will acquire Harman for $8 billion. Harman’s shareholders will receive $112 per share in cash. The deal is expected to close in mid-2017.

Big gains in the stock market during the past week have pushed some stock prices to unsustainable heights. Benchmark Electronics (BHE) and Prudential Financial (PRU) have reached their Min Sell Prices and should be sold.

Sell Harman (Har) due to buyout offer from Samsung, plus other portfolio updates.

Harman International Industries (HAR) agreed to be acquired by Samsung, South Korea for $112.00 per share all cash.

Knight Transportation (KNX 33.85) reached its Minimum Sell Price of 33.84 on Friday, November 11.

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.