Current Market Outlook


Last week saw some vicious rotation early in the week, with the super-strong growth names coming down to earth while money gushed into cyclical sectors, but the leaders stabilized as the week wore on and the broad market remains positive, too. From a big-picture perspective, the 90% Blastoff signal last week (90% of NYSE stocks above their 50-day lines) bodes well for the overall market, and the fact that few (if any) leading stocks have cracked is a good sign. All in all, further potholes, rotations and shakeouts are relatively likely given the big run over the past two months and the divergent environment, but until proven otherwise, we continue to think the path of least resistance is pointed up. We’re moving our Market Monitor up another notch to a level 8.

This week’s list has a good mix of setups, with some recent earnings winners, some that have pulled back and others that are in persistent uptrends. Our Top Pick is Arconic (ARNC), which is one of the few cyclical stocks to appear in Top Ten since the uptrend got underway.

Stock Name	Price	Buy Range	Loss Limit
Adaptive Biotechnologies Corporation (ADPT)	39.41	37.5-39.5	34-35
Arconic (ARNC)	17.00	14-15	11.7-12.2
Bill.com Holdings (BILL)	88.76	69-73	60-62.5
Dynatrace (DT)	36.59	35-37	31-32.5
II-VI Incorporated (IIVI)	48.64	45.5-48	40-41.5
LiveRamp Holdings (RAMP)	46.54	48-50	43-44
Pan American Silver (PAAS)	27.28	27-29	24-25
Seattle Genetics (SGEN)	150.85	156-160	140-143
Tractor Supply Company (TSCO)	122.24	115-119	103-105
Zscaler (ZS)	126.22	103-108	89-92

U.S. and international markets staged a rally this week alongside momentous events in Asia as China imposes its will on Hong Kong through the passage of national security law. America indicates it will withdraw trade preferences for Hong Kong, viewing it as indistinguishable from China. China cracks down on Hong Kong as legislation advances in the U.S. to potentially delist international and Chinese companies that do not meet U.S. disclosure standards. Meanwhile, we have a new recommendation this week that has been in the news regarding Covid-19 and how we should all look at the economics of discovering new drugs.

This biopharmaceutical firm acquires, rebrands and reprices drugs for sale in the U.S., with many that treat inflammatory conditions, including a few that take aim at rare diseases.

Since the COVID-19 crash ended just over weeks ago, the market has been impressively strong, with marijuana stocks some of the strongest, as they left behind a two-year bear market.

So even though some of these stocks seem a bit over-extended today, short-term, they still have enormous upside potential in the long-term.



Full details in the issue.

The broad market remains in an uptrend, according to our intermediate-term market timing indicator, but our longer-term timing indicator, while improving, remains in a negative state. Thus, it remains possible that a major pullback is right around the corner—and if one comes, it will be handy to have cash at the bottom. So I’m still working to avoid being fully invested, though it’s getting tough because our stocks acting so well.
For today’s selection, I’m going with a small company that’s taken a proven path to growth—consolidating a fractured industry. The stock was originally recommended by Tyler Laundon in Cabot Early Opportunities and here are Tyler’s latest thoughts.

Current Market Outlook


Last week brought some upside-down action, with the leading growth stocks doing OK (some up, some down) while the lagging names (small- and mid-caps, economically sensitive sectors) did very well. And that trend continued today, with growth stocks getting hit while the major indexes ramped up. Overall, the upmove in the beaten-down areas means the intermediate-term trend has survived its first test, and while taking on some water, growth stocks remain in fine shape, with very little abnormal selling. (In fact, pullbacks in some of the hot names could offer up some solid entry points, but we’ll see how that goes.) All in all, the divergent environment isn’t ideal and will probably lead to further crosscurrents; it remains important to pick your stocks and entry points carefully, and taking some partial profits on the way up isn’t a bad idea, either. But overall, most of the evidence remains positive, so you should, too. Our Market Monitor remains at a level 7.

This week’s list has many names that have just come to life after long rest periods. Our Top Pick is Spotify (SPOT), which has always had a good story, but now has decisively broken out following a meaningful catalyst.

Stock Name	Price	Buy Range	Loss Limit
Allogene Therapeutics (ALLO)	48.94	46-48.5	40.5-41.5
Big Lots (BIG)	43.12	31-33	27-28
BJs Wholesale (BJ)	36.69	34-36.5	30.5-32
Guardant Health (GH)	88.34	87.5-91.5	79-81
Horizon Therapeutics (HZNP)	49.89	45.5-48	40.5-42
Neurocrine Biosciences (NBIX)	123.40	114-119	104-107
1Life Healthcare (ONEM)	34.01	32.5-35	28.5-29.5
Spotify (SPOT)	272.82	184-191	166-169
Wayfair (W)	167.03	152-162	126-130
Wix.com (WIX)	302.53	195-205	175-180

Welcome to the inaugural issue of Cabot Income Advisor. It is my pleasure to share investment ideas that can provide you with a high income in today’s low interest rate world.
In this issue I highlight three stocks that are great buying opportunities right now for income investors. The stocks are chosen for their high yields, ability to generate attractive call premiums and the likelihood of capital appreciation over time.


While the market indexes have rebounded strongly from the March lows, many individual industries and stocks are still dirt cheap and high yielding, In fact, this is the best market in over a decade in which to find high yields in quality stocks.


Of course, the market is still dangerous and many high yielding stocks are in a precarious financial condition. Many will have to cut the dividend and the price will likely fall. While quality high yields are out there, stocks must be chosen wisely.


These three stocks are a great way to lock in high income and start to build your high income portfolio. Now is the time to embark on your journey to higher income and a more rewarding financial future. I look forward to being your trusted partner.

While we are definitely not out of the woods yet—with the economy and the markets—we are making progress. The Dow Jones Industrial Average has had a nice bounce back, albeit, with some volatility. We can expect that to continue, probably through year-end. As you can see by our Advisor Sentiment Barometer and our Market Views section, we are turning more bullish.

As most of the economy is just beginning to reopen, unemployment remains a big issue. So far, some 38 million people have lost their jobs, bringing the unemployment rate in the U.S. to almost 15%. We can expect that to continue rising for the near future, also.

But in better news, housing seems to be holding up pretty well, and building permits this week were better than expected, around 1.074 million.

Of course, the bright side is that as more businesses reopen, we will start a steady climb back to normal.

Thirteen Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news. Included in my summaries are three new sell recommendations: BJ’s Restaurants (BJRI), W.W. Grainger (GWW) and iShares Minimum Volatility USA ETF (USMV).

Not much has changed with the market during the past week, so we’re sticking with our stance—the Model Portfolio has 40% in cash and holding six resilient stocks. We continue to believe the next major market move is up, but in the near-term, you should take your cues from the market and individual stocks. We have no changes tonight.

Two of our stocks—Reynolds American (RAI) and U.S. Bancorp (USB)—reported earnings this morning (details are below). So far, earnings season is off to a good start, with the big banks and Netflix (NFLX) beating estimates in recent days.

After reaching new highs this summer, the S&P 500 index has receded to price support around 2,120. That’s frustrating for investors because most good stocks will move somewhat in tandem with the S&P, so your stock portfolios have probably been a disappointment in recent weeks.

I move one stock to Hold this week. And I may make a move or two in the coming days depending on intra-day trading action.

Five Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news. This update also includes three questions from subscribers along with my answers.

The Emerging Markets Timer has shifted to a warning signal, so we are turning more cautious and raising some cash. The markets have taken some of our stocks lower over the past few days, but the portfolio is in pretty good shape overall. Tonight we’re selling MercadoLibre (MELI) and Silicon Motion (SIMO), and putting Baozun (BZUN) and Line Corporation (LN) on Hold.

Yesterday’s sharp selloff turned Cabot’s intermediate-term market timing indicators negative, so it’s time to get a little more conservative.

There are several news items and portfolio highlights in today’s update.

The Dow Jones Industrial Average was unchanged during the past week. The bullish rise in the price of oil to $50 a barrel was offset by worries about the stability of Deutsche Bank in Germany.

In today’s Update, we’ll sell the BulletShares 2016 High Yield Corporate Bond ETF (BSJG), which is maturing at the end of the year, and replace it with the BulletShares 2020 High Yield Corporate Bond ETF (BSJK), which yields significantly more.

Stick with a lean-bullish stance as we wait for the market to show its hand. Our Cabot Trend Lines and Two-Second Indicator are still bullish, but our Cabot Tides remain effectively neutral, and until that changes, stocks and indexes will see lots of choppy action. In the Model Portfolio, we’re sticking with our current 30% in cash and our crop of seven stocks.

The market was slammed today as a quiet open turned into a huge wave of distribution. In the Model Portfolio, we are selling two positions as both plunged through long-term moving averages.

This turnaround stock has new management and its shares are a discounted opportunity.

Now in its seventh year, MJBiz.com has over 1,000 exhibitors and more than 26,000 attendees, an increase of 137% from the year before. It’s BIG!

Analysts are forecast 25% annual growth for this construction aggregate company over the next five years.

Analysts expect this managed services firm to grow at 30% annually over the next five years.

This domain provider’s shares were recently upgraded by Baird to ‘Outperform’.

One of our stocks moves to Strong Buy.

Wall Street is latching on to this lithium producer.

One of our stocks is surging over 50% today on news that Vista Equity Partners will buy the firm.

This loyalty solutions company beat analysts’ estimates by $0.07 last quarter, and nine analysts have recently increased their EPS forecasts for the company.

We’re changing out some funds this month, recommending a growth fund.

Recommending a growth fund.

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.