The broad market remains strong, and all Cabot’s market timing indicators are currently positive, so I remain optimistic that we’ll see higher prices in the month ahead.

This week’s recommendation is a growth-oriented medical stock with great potential; it was originally recommended by Mike Cintolo last November and it’s currently hitting new highs.



And as for the current portfolio, most of our stocks look fine, but because I limit the portfolio to 20 stocks, one has to go—and it’s the weakest.



Details in the issue.

Current Market Outlook


Usually when the market is stretched and sentiment is complacent, the market latches onto a reason to retreat, and last week provided it, with the Middle East conflict offering an excuse for sellers to get active and buyers to pull in. The good news is, thus far, the retreat has been reasonable—the major indexes are still even above their 25-day lines, and few stocks have cracked key support or flashed any abnormal action. That said, we’re leaning toward the view that, Iran or not, the short-term is likely to remain tricky, with rotation, potholes and news-driven moves likely to be the norm for a while. Thus, we remain bullish, but continue to advise picking your spots—many stocks have etched nice month-long rest periods, though some others probably need time to consolidate.

This week’s list has a bunch of names that haven’t appeared in Top Ten for a long time (if ever). Our Top Pick is Alibaba (BABA), which has finally kicked back into gear after a long time in the wilderness. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Alibaba (BABA)	254.81	208-216	192-196
Bilibili (BILI)	28.71	20.5-22	18.5-19.5
Coupa Software (COUP)	262.20	157.5-162.5	143-146
Eldorado Resorts (ERI)	0.00	56-58	51-52
Global Blood Therapeutics (GBT)	0.00	76.5-80	66.5-68.5
Lumentum (LITE)	87.00	76-79	69.5-71
SolarEdge Technologies Inc. (SEDG)	124.37	95-97.5	86-87.5
Tenet Healthcare (THC)	0.00	35.5-37	32.5-33.5
WPX Energy (WPX)	0.00	13.2-13.7	11.7-12.0
Scorpio Tankers (STNG)	0.00	37.5-39	33.5-34.5

Today’s addition is a familiar story – a small software company with a purpose-built solution that works better than the patchwork of legacy solutions many companies still rely on, but which don’t work very well.

But there is another angle. This company is transitioning from an on-premise to a Software-as-a-Service (SaaS) business model. The switch should accelerate growth and make the stock a lot more attractive to investors.



Shares did very well in 2019. And there should be plenty more gas left in the tank.



All the details are inside.

It’s a New Year, but the market’s evidence remains unchanged--big picture, it’s a strong bull market, though short-term risks are rising, telling us to be choosy on the buy side and to hold a chunk of cash. That said, we’re still holding on tightly to our winners and think a few of our current stocks can enjoy sustained runs from here.

In tonight’s issue, we write about how many stocks that have recently had big moves actually look to be early in their overall advances; pullbacks, in other words, should offer buying opportunities. We also dive into our stocks and write about a couple of names on our watch list could be our next buys.

The stock market’s strong and resilient upward march this year to a 32% total return was great. Yet, few, including us, expected such an uplifting outcome in 2019.

In this issue, we give our turnaround market outlook for 2020.

This stock has always had a great story—the company looks like one of the best cookie-cutter stories in construction-related retail, operating large (75,000 square feet on average) warehouse-style locations that specialize in hard flooring (tile, wood, stone, laminate and the like).

The broad market remains strong, and all Cabot’s market timing indicators are currently positive, so as we head into the New Year, I remain optimistic that we’ll see higher prices in the month ahead.

However, there’s always room for portfolio improvement, and as we head into January, there are a number of laggards in the portfolio that may be cut soon if they don’t shape up. Additionally, there is one stock you can sell this week for a quick five-week profit—though you can hold for longer-term gains if you choose.



As for the new addition, it’s an English stock (which is rare), but it has a good story as well as a good chart, so prospects are good. The stock was originally recommended by Tyler Laundon in Cabot Early Opportunities.



Details in the issue.

Current Market Outlook


As the year winds to a close, nothing has changed with the market’s overall stance—big picture, it’s a bull market, and numerous factors tell us that the uptrend has farther to go; the odds favor higher prices when looking months down the road. Shorter-term, though, there are also many signs that tell us risk is elevated—that doesn’t necessarily mean a huge correction is on tap, but we think it’s safe to say that the next few weeks are likely to be more challenging than the past few weeks, with potholes, rotation and news-driven moves possible. As we’ve been writing, that’s no reason to bail out, but being discerning on the buy side (good entry points, starting small, etc.) and booking some partial profits makes sense.

Our last list of 2019 is a broad mix of strong stocks, including turnarounds, recent breakouts and fresh setups. Our Top Pick is Crocs (CROX), which is benefiting from some rotation into retail titles and a string of solid quarterly reports.

Stock Name	Price	Buy Range	Loss Limit
Bed Bath & Beyond (BBBY)	0.00	16-17	14.3-14.9
Cardlytics (CDLX)	0.00	58-61	51-52.5
Carvana (CVNA)	82.90	91-94	83-85
Crocs (CROX)	0.00	39-41	35.5-36.5
Floor & Décor (FND)	68.03	49-51	45.5-46.5
GSX Techedu (GSX)	97.59	19.5-20.5	17-18
Luckin Coffee (LK)	0.00	34-36.5	30-31.5
Paycom Software (PAYC)	0.00	257-267	237-241
Sea Limited (SE)	132.86	38-39.5	34-35
United Rentals, Inc. (URI)	0.00	163-167	150-152

Cannabis company earnings season is back. In the past two weeks, virtually all of our model portfolio companies have reported first-quarter results.

To save you the time of listening to lengthy earnings calls and plowing through press releases and filings, I recently did this for you to distill out the major trends that could benefit us as cannabis investors. Below are the top 10 sector trends in the space and what they mean for you, the cannabis investor.

The market’s record run is starting to show signs of fatigue. After powering higher since the March 30 lows, momentum has stalled and breadth has narrowed as a combination of rising yields, higher energy prices and renewed geopolitical uncertainty begins to weigh on sentiment.

The 10‑year Treasury yield has climbed from roughly 4.23% in mid‑April to 4.48% as of mid-morning today (matching the March high, and highest level since last July), meaning that financing costs are going up just as inflation concerns resurface. April’s CPI and PPI inflation reports both came in hotter than expected.

The market hit another new high this week. But earnings season is mostly over, and the war just won’t go away.

While there is still headline risk, investors are looking beyond the war. The earnings season has been great. According to FactSet, the average S&P 500 earnings growth rate, with 89% of companies having reported, is 27.7%.

If you have the feeling that this year’s boom in the tech sector—and the corresponding record highs in the major averages—isn’t being felt on a market-wide basis, you’re not imagining it.

As it turns out, the record lift in the Nasdaq and S&P is being driven by a troublingly small number of stocks. The result of this narrowing market is that value-focused investors like us have been forced to exercise patience while waiting for the boom to visit our corner of the market (more on that in a minute).

WHAT TO DO NOW: Big picture, the market and most leaders look great, and our market timing indicators are in fine shape. Near-term, though, there’s little doubt things have gotten a bit giddy, with many names and indexes extended to the upside. Tonight, we’re placing Cava (CAVA) on Hold as that stock has been caught up in some group weakness; we’ll hold our 45% cash position for now, but stay tuned, as we’d like to add some new names (or add to existing names) in the near future.

What a difference a month can make! What an April! The S&P rose 9.6% in April, making it the best single month for the market in six years. It hit an all-time high on Friday.

Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.

The results are in for the month of April. It was fabulous. The S&P rose 9.6%, making it the best single month for the market in six years. It hit an all-time high on Friday.

Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of minor skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings.

Now before you call me crazy concerning today’s newsletter headline, hear me out.

Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”

The market is digesting the push and pull of higher oil prices, a deeply divided Federal Reserve, prospects for a prolonged blockade of the Strait of Hormuz and fading momentum from the AI trade that helped push markets to all‑time highs earlier this month.

Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.

Yesterday, four tech giants, Alphabet, Amazon, Meta and Microsoft, representing 22% of the S&P 500’s market value, reported strong quarterly earnings that highlighted the importance of AI.

You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.

It’s been a glorious April following a miserable March for the market. What happens in May may determine which direction stocks are headed for the rest of the year.

That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.

What war? This market is moving on. We may not be out of the woods yet, but investors are looking beyond the Iran war.

Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30^th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.

Our first Top Pick update is a Chinese cloud company whose shares were recently initiated at Guggenheim with a ‘Buy’ rating.

Our new Top Pick makes cutting-edge medical devices to prevent surgical burns.

Our first Top Pick beat analysts’ estimates by $0.02 last quarter, and Wall Street expects the company to grow at a rate of 112.5% next year.

Analysts expect this health care technology company to grow by more than 12% next year.

This infrastructure construction company beat Wall Street’s estimates by $0.14 last quarter, and analysts expect the company to grow by 15.71% annually over the next five years.

This bank’s shares have recently been upgraded by Wedbush, to ‘Outperform’ and by PiperJaffray to ‘Overweight’.

The shares of this bank holding company were recently upgraded to ‘Buy’ by Compass Point.

This gold royalty company is adding to its coffers with small acquisitions and a strong pipeline.

Our article today begins with why investing in stocks is the best way to increase your wealth.

This owner of financial exchanges beat earnings estimates by $0.03 last quarter, and four analysts have increased their EPS forecasts for the company in the past 30 days.

This online travel service company beat Wall Street’s earnings estimates by $1.30 per share last quarter

The markets remained under heavy selling pressure today, with stiff losses in both the Golden Dragon ETF (PGJ) that tracks Chinese ADRs and the iShares MSCI EM ETF (EEM) that represents the broader emerging markets. As a result, we are selling one of our stocks tonight.

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.