The market has done about as good a job as could be expected rebounding off its March 23 low, and that makes for an interesting setup next week: If the major indexes can continue to strengthen, we could get a Tides buy signal, and that could also coincide with some bullish blastoff signals, too. To this point, though, the trends have yet to turn up, so we advise a defensive stance -- but we’re certainly keeping our eyes peeled for further unusual strength.

After a better than 30% plunge at record speed, the market has staged an epic rally from the bottom. The S&P 500 has moved more than 20% higher from the lows in late March. It is likely sensing an end to the economic shutdown sooner rather than later.
That’s good news, and the market usually gets it right. But even if the economy opens back up in May and June, there is a good chance of more trouble ahead. Terrible earnings and economic reports will come and consumers will be wounded for a while.


While I believe the economy and the markets will recover, there is a good chance of another down leg in the market. In this issue, I seek to take advantage of that possibility by targeting great companies to buy and below current prices. These are fantastic companies to own that are only ever cheap in bear markets like this.


The market will come back, but probably not yet. Taking advantage of another down move is a fantastic way to profit from the market’s eventual recovery.

Organic food is a nearly $50 billion-per-year industry in the U.S., comprising 6% of total food sales in 2018, and it’s growing at 6% annually. Whole Foods is the obvious, well-known chain that’s capitalizing on this trend, with Trader Joe’s being another that’s popular in certain areas of the country. Less famous, but with a bright future, is this U.S. supermarket chain specializing in natural and organic foods, focusing on fresh produce, bulk foods, vitamins and an array of household wares.

Current Market Outlook


Since the March 23 low, the market has pretty much followed the plan, with a good initial rally, a little upside follow through and lots of up/down, news-driven moves since. To be fair, that is more descriptive than predictive—a few big moves in one direction or the other could change the outlook, and today’s action was encouraging for the bulls. Right now, though, the overall evidence remains unchanged: The trend of the major indexes and most stocks is still pointed down, and while many names are doing a good job of hanging in there, few stocks are in true uptrends. Looking ahead, the first sign of light would be a batch of growth-oriented stocks bursting to new highs, followed by the intermediate-term trend of the major indexes turning up (likely to take another week even if all goes well). Given the unprecedented situation, we’re open to anything, but until the buyers show more muscle, we advise sticking with a mostly defensive stance.

The good news is that we continue to see quite a few stocks that institutions have been accumulating in recent weeks. This week’s list has a few, with our Top Pick being Livongo (LVGO), a newer, fast-growing name that’s popped up of late.

Stock Name	Price	Buy Range	Loss Limit
Five9 (FIVN)	78.35	74.5-78	66-68
Livongo Health Inc. (LVGO)	33.34	27.5-30	23-24.5
Newmont Mining (NEM)	57.31	48-51	42.5-44.5
Novavax, Inc. (NVAX)	65.95	13-14.5	10.5-11.5
Peloton (PTON)	53.03	27-29	23-24.5
Pinduoduo (PDD)	87.53	36.5-38.5	33-34
Regeneron Pharmaceuticals (REGN)	512.96	470-490	415-425
RingCentral (RNG)	238.73	213-225	187-192
Sprouts Farmers Market (SFM)	19.00	18.5-19.5	16-16.5
Zscaler (ZS)	126.22	61-64	54-55.5

The market was up big today, and a couple of our stocks hit new highs—which is impressive considering the recent crash—but the market’s major pattern is one of bottom-building, and that takes time.
In the meantime, the action of the best growth stocks gives us a clue as to developing leadership, and the best value stocks are absurdly cheap. Plus, many are paying huge dividends! That’s the case with today’s recommendation, a giant in the oil industry.


As for the rest of the portfolio, it’s acting well (with a couple of very strong stocks in the mix), and thus I have no changes today.


Full details in the issue.

After a strong rebound early in the week, markets sold off a bit over the past two days as investors battle uncertainty on the virus and economic impact fronts. We remain positive on our seven Cabot Global Stocks Explorer stocks and will put some of our 35% cash position to work today with a high quality Singapore bank many of you are familiar with. Our emerging market signal stays negative.

Also, I have a special alert regarding Luckin Coffee (LK), which is down very sharply this morning.

This month we’re looking past all the current uncertainty in the market at a profitable, young company that should hold its own during this rough patch then accelerate growth into the back half of 2020 (assuming the pandemic eases as we move into the summer months).

The company offers intelligent identity solutions for global enterprises. These solutions are strategic imperatives because they help workers do their job from anywhere and help companies streamline customer experiences.



It’s not the type of stock that’s likely to surge on expectations of an immediate surge in demand, like Zoom Video (ZM) or Teladoc (TDOC). But with 115% net revenue retention the company should grow with current clients in the near-term, then grab its fair share of new business once economic activity picks up again.



We start today with a half position given the market conditions. All the details are inside.

With consumers focused on social distancing and lockdowns to help prevent the spread of the coronavirus, many restaurants have no revenues, while others are generating a little income through delivery and pick-up. Yet, despite this uncertain outlook, the crisis will eventually subside.

In this issue, we highlight six restaurant companies with both the survivability and price discount traits.

Today’s featured companies are benefiting from the current focus on healthcare, online commerce, dining at home and limited travel behaviors.

All of the stocks that I follow with any regularity finished falling in March, and began to rebound. I’m glad for that, and happy to be buying low. However, there’s still a dark cloud on the horizon. The longer the quarantine situation lasts in the U.S. and in foreign lands, the uglier the economic situation will become. That’s because many companies are scrambling for cash to pay their employees, rent, utilities, etc. while they’re not actually selling any products that can replenish the cash flow.



There are various stocks in today’s issue that I indicated would be good for traders. “Good for traders” bears no resemblance to “good for buy-and-hold investors”, okay? Please read my recommendations carefully. When in doubt, send me an email with your questions.



Lastly, take your time investing cash positions. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges. To that end, I’ve listed short-term upside price resistance targets on quite a few of the stocks. When the stocks rise to those targets, you’re going to tell yourself “my stock is going to keep rising!” Instead, odds are very strong that your stock will turn down. This will be a trader’s market for much of 2020. If you’ve ever toyed with the idea of buying and selling within a stock’s trading range, this is the year to do it! Best of luck to you!

With COVID-19, plunging oil prices, credit/health worries and central bank printing, it’s a time of maximum uncertainty—and such uncertainty plays right into the hands of gold, which has popped back toward multi-year highs. The world’s second-largest gold mining company, is well positioned to benefit from this strength.

All of our market timing indicators are now positive, and yesterday brought yet another “blastoff” signal, so the odds strongly favor higher prices during the next few months. In the Model Portfolio, we’re adding Ligand Pharmaceuticals (LGND) and averaging up on ProShares Ultra S&P 500 Fund (SSO) tonight. Combined with Monday morning’s new buys, that will leave us with about 8% in cash.

We have one portfolio change today: we’re finally putting Costco (COST) back on Buy, after the stock broke out of its trading range to the upside last week. Elsewhere, I encourage you to do a little buying if you’re underinvested, taking advantage of pullbacks to start new positions in stocks that are acting well.

The S&P 500 appears to be breaking past price resistance, which it has repeatedly pushed up against since early 2015. This is great news! I expect the stock market to surprise people by rising to new highs and establishing a new, higher trading range.

Stock-specific news flow is still relatively light, but we’re marching toward the beginning of the second-quarter earnings season. A few of our companies have already announced their earnings release dates. We have no ratings changes this week, meaning there are still plenty of stocks rated Buy.

Four Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news.

The Emerging Markets Timer remains effectively neutral as the market hacks around in its three-month trading range. We have no changes to the portfolio today.

It’s an interesting time to be an income investor, to say the least. Interest rates have plummeted post-Brexit, as investors flee to the safety of fixed income just as central bankers are promising more stimulus for shaky markets. The yields on U.S. 10-year and 30-year treasuries are at record lows, while yields on more and more global bonds are going negative.

Three of my Benjamin Graham companies reported quarterly financial results or other noteworthy news.

With our Cabot Tides negative, we’ve moved to a half-in, half-out stance—we’ve sold three stocks during the past week (one before Brexit, two after), which leaves us with five stocks and a cash position near 50%. The powerful bounce of the past two days is very encouraging, but the odds favor some backing and filling at the very least (if not further weakness) before a sustained uptrend gets underway. We have no changes in the Model Portfolio tonight.

I don’t have a sense that the current market correction will last very long. I am comfortable buying now, as opposed to waiting a few weeks, as I did in the early 2016 market correction. I have two rating changes today: Johnson Controls (JCI) moves from Hold to Buy, and Robert Half (RHI) moves from Buy to Hold.

The U.K. has voted to leave the E.U. in a close vote with 52% saying leave and 48% saying stay. Few people really thought the vote would turn out this way.

Six Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news.

While we have been holding a large amount of cash in the portfolio and have only a short list of stocks rated buy, the market’s assault has reached unacceptable levels.

Generally speaking, our strategy is to average in on the way up, and out on the way down. That means we need to take one more step today to protect our hard-earned gains.

This healthtech company is expected to grow at 30% annually for the next five years.

The market was on edge last week and reached a tipping point yesterday on concerns that the 10-year yield has broken well above 3% and could move higher still if the Fed continues to tighten (as it has signaled it will).

This restaurant chain beat analysts’ estimates by $0.03 last quarter.

The major indexes finished deep in the red again today, with growth stocks taking another pounding. Our Cabot Tides are now firmly negative, and we’ve been raising cash steadily during the past week. We have two more sales tonight raising our cash position to 52%.

This dredging company just announced a $48 million base contract award on the Big Bend Channel of the Port of Tampa Bay, from the United States Army Corps of Engineers.

The shares of this real estate services firm have been on the minds of Wall Street lately, with Morgan Stanley upgrading the shares to ‘Overweight’; William Blair to ‘Outperform’; and new coverage by JMP Securities, with an ‘Market Outperform’ rating; and Goldman Sachs with a ‘Buy’ rating.

The market weakened further today, with growth stocks in particular hit hard, and now our Cabot Tides has turned negative, telling us the intermediate-term trend of the market is down. Our focus is on risk minimization so that means selling another position from the portfolio.

This instrument and software company is expected to grow at a rate of more than 12% annually over the next five years.

This financial software company just announced the acquisition of Agiletics, Inc., a Florida-based provider of sophisticated escrow, investment, and liquidity management solutions for commercial bank customers.

Growth stocks took another massive hit today, as money rotated to safer areas. Our Cabot Tides remains on the fence, growth-oriented indexes have either already broken down or, in the case of the Nasdaq, are looking iffy. As a result of today’s action, we are selling 1/3 in two of our positions.

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.