Our issue this month, is focused primarily on growth companies, although we certainly offer plenty of dividend opportunities. We begin with our Spotlight Stock, a provider of technology, primarily to the U.S. Defense Department. This company is right on the cutting-edge of advanced technologies—the future of defense. In my Feature article, I discuss the coming technologies and CACI’s potential to harness and profit from them.

In November’s Issue of Cabot Early Opportunities we discuss the supposed rotation from growth stocks into value stocks and the underlying reasons, which we think could drive erratic market action in the coming weeks. Despite the somewhat conflicting trends out there, we serve up a menu of compelling opportunities spanning Medtech, manufacturing, software and even health and beauty products, which we can all use a little of these days!

This Friday is the expiration of November options, and I’m happy to report that our three covered call positions expiring this week are in great shape. As is always the case, on Thursday afternoon or Friday morning, I will send a detailed breakdown of those positions expiring Friday breaking down our profits, and if we need to make any adjustments. Be on the on the lookout for that email.

Current Market Outlook


If you look at the weekly charts, the trends of the major indexes and most stocks are pointed up—i.e., this is still a bull market, and the trends and other factors (such as the unusual strength seen two weeks ago) portend higher prices down the road. That said, there’s no question the environment remains extremely news-driven (mostly with vaccine news, but also economic reports and government policy outlooks), with plenty of crosscurrents depending on the day. Encouragingly, today’s vaccine news didn’t dent the growth leaders like it did a week ago, which is a step in the right direction. Net-net, we remain optimistic, but the details remain vital; getting decent entry points and position sizing correctly (not too big so you can handle the swings) is key, as is focusing on stocks (cyclical or growth) that have shown good-volume support of late.

This week’s list has something for everyone, including stocks with fresh growth stories as well as some stodgy, cyclical names. Our Top Pick is Lam Research (LRCX), which looks like a leader in the resilient chip equipment sectors.

Stock Name	Price	Buy Range	Loss Limit
Albemarle Corporation (ALB)	128.90	121-126	106-109
Canopy Growth (CGC)	24.77	23.5-25	19-20
Lam Research (LRCX)	439.40	415-435	375-385
Marvell Technology Group (MRVL)	43.29	41.5-43.5	37.5-38.5
Norfolk Southern (NSC)	247.09	235-245	215-220
ShockWave Medical, Inc. (SWAV)	94.95	87.5-91	75.5-78
Snap Inc. (SNAP)	39.08	37.5-39.5	31.5-33
STAAR Surgical (STAA)	79.31	76-79.5	67-69
The Timken Company (TKR)	73.04	69-72	61-62.5
Upwork (UPWK)	33.08	29.5-31	24-25

The market continues to strengthen, and thus you should become more heavily invested; it’s possible this strength could run to the end of the year!

But predictions aren’t necessary; what’s necessary is listening to your stocks and acting accordingly.



Today, doing exactly that leads us to sell one stock, so that we can make room for today’s recommendation, a company that’s built one of the biggest brands in the world.

The potential vaccine and mixed election results pushed the market forward this past week, but the acceleration of the pandemic and near-term uncertainty in Washington pulled it back. It is a time to be a bit cautious. Emerging markets are showing some strength, as our timing indicator turns decidedly positive. Rotation into international stocks may be coming.

Alibaba (BABA) is a good example of the push and pulls. The Chinese e-commerce giant raked in a record-breaking $56 billion in sales in the first 30 minutes of China’s Singles’ Day on Wednesday, much higher than the $38 billion total in the entire 24-hour period last year. In comparison, Amazon booked $10.4 billion during its two-day Prime Day event last month. Yet, Alibaba’s stock was down sharply for the week. Find out why inside, where you can also learn about this week’s new SPAC recommendation.

The huge market rally earlier this week gives us a taste of what lies ahead on the other side of this pandemic. The lockdowns will end and the economy will boom. Many stocks that have not participated in the market recovery will come alive.

While the market indexes have recovered, many stocks and sectors have not. Technology may be booming but energy, travel and hospitality, finance and other industries are still wallowing in bear market oblivion. It is these stocks that came alive this week and they should benefit when the virus fades and the recovery gains full traction.



It’s time to invest for the other side of the pandemic. In this issue, I highlight one of the very best income stocks in the history of the market. While the company has remained profitable, it has experienced a disproportionate selloff. The stock is still cheap but starting to move ahead of the next phase of this recovery.

Today, we are recommending a micro-cap turnaround stock. If you look at the long-term stock chart, it looks like a company in secular decline. But once you look under the hood, you will realize the company has transitioned into a software/tech enabled services company with recurring revenue.

I think this stock has ~200% upside over the long term.



This company’s characteristics include:

• Near-term tailwinds from the booming IPO and SPAC market
• A draconian valuation
• An activist investor with a 10% equity stake (ensuring aligned incentives)
• Low capex requirements

All the details are inside this month’s Issue. Enjoy!

The good news is the election has passed, and there is hope in the race to find a coronavirus vaccine. The bad news is that these two developments aren’t necessarily great news for all stocks, as money viciously rotated yesterday out of hyper-growth stocks, and into cyclicals.

The market strength of the past week has turned our intermediate-term market timing indicator positive once again, so it’s a good time to buy, especially if you focus on the leaders, like this week’s recommended stock, which has a novel and effective treatment for cancer.

As for our current holdings, some are hitting new highs today, while some have taken a hit, as investors sell stocks (like Zoom) that benefitted from the pandemic. But one day does not a trend make; we’re selling nothing today.

Over the past week, small caps looked particularly good as most sectors outperformed their large-cap peers. Our asset class is now up 4% year-to-date, a vast improvement after being flat a week and a half ago.

In this Weekly Update, I summarize the latest news for the only one of our companies to report quarterly results during the past two weeks.

In the short-term, the market could be ready to rest and there’s some rotation going on, which could affect leadership. But, big picture, the intermediate- and longer-term trends are pointed up and even the broad market is returning to health.

The Dow and S&P 500 both closed at all-time highs yesterday, as the Dow notched its eighth straight day of gains. Financials were the week’s best-performing sector, as interest rates suddenly reversed direction to post big gains.

After two months of sideways trading, the three major U.S. stock market indices are rising and reaching new highs.

The market backdrop is much improved this week and small caps posted another week of encouraging action (up 2.1% over the last five sessions). The S&P 600 had that sketchy drop below the 200-day line (red line in chart) in mid-August, but the index has come back strong since.

The iShares EM Fund is holding up in fine style, holding well above its 25-day moving average, so our Buy signal remains in place. While our stocks are generally holding up well, there has been a slight increase in volatility.

The week has brought some impressive rebounds, and I’m putting two stocks back on Buy today. That brings our total number of Buy-rated positions to six (plus our bond ladder), a slightly more constructive stance than we’ve taken in recent weeks.

There’s a lot on my mind lately: hurricanes, child-rearing, college freshmen, human tragedy and Dollar Tree (DLTR).

The market didn’t change much over the past week but it feels like it’s on more solid ground. Perhaps that’s because it’s been three weeks since we were on the brink of a bigger leg down. Or because earnings-related volatility is calming down. Or because after two weeks of gains, a week of consolidation feels like the right next step.

In this Weekly Update, I summarize the latest news for one company. I also include pertinent questions from subscribers with my responses.

Growth stocks and many indexes perked up nicely during the past couple of weeks, but the intermediate-term trend is effectively neutral and we still haven’t seen much big-volume buying. We’re optimistic, but advise you to continue being selective on the buy side and holding a chunk of cash on the sideline.

Our Cabot Tides turned negative today, telling us the intermediate-term uptrend has broken.

This semiconductor stock has recently received two analyst upgrades: from KeyBanc, to ‘Overweight’, and Goldman Sachs, to ‘Buy’.

One stock announces first-quarter results and M&A activity and moves from Strong Buy to Hold and another announces first-quarter results, a dividend decrease and an intention to separate into two companies.

Zacks Research also recently recommended this genetic information company stock based on rising sales and increasing analyst price targets.

Three stocks in the portfolio reported earnings.

One portfolio stock reports a disappointing first quarter.

This construction company beat analysts’ estimates by $0.19 last quarter, and five analysts have raised their EPS forecasts for the company in the past 30 days.

Four stocks in the portfolio reported earnings.

This medical device company beat analysts’ earnings estimates by $0.08 last quarter.

Further bad news on the U.S.-China trade front prompted another sharply lower open today, and unlike Monday, the buyers never showed up. At day’s end, the Dow had fallen 473 points and the Nasdaq plunged 160 points.

Analysts expect this consulting company to grow by 16.9%, annually, over the next five years.

This semiconductor supplier beat analysts’ estimates by $0.47 last quarter.

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.