Last week’s recommendation, Virgin Galactic (SPCE), took off like a rocket and this week we go underground to recommend a premier global company that provides the backbone for future-oriented technologies such as green energy and electric vehicles.

Looking at the big picture impacting global stocks, U.S.-China haggling continues but the NAFTA redo looks like a done deal as we head into the end-of-year rush. As a result, our Emerging Markets Timer (EEM) moved into a stronger bullish position, putting some distance between its 25- and 50-day averages as it moves back towards 44.

Big data is big and growing bigger. The market is forecast to reach $103 billion by 2022, with every person generating 1.7 megabytes of data every second, with internet users as a whole expected to generate some 2.5 quintillion bytes of data each day.

The major indexes continue to hit new highs, all Cabot’s market timing indicators remain positive, and our portfolio is solid, overall, with the exception of Designer Brands (DBI), which reported third-quarter earnings this morning; more on that in the update section.



As for today’s new recommendation, it’s a brand new business with a familiar name—a high-risk/high-potential investment. It’s not for everyone, and it will be volatile. But it could change the world!



Details in the issue.

Current Market Outlook


The market hit a little turbulence early last week on renewed trade worries but bounced back nicely, with the major indexes finishing flat (S&P 500 and Nasdaq) to up (small- and mid-cap) on the week. Short-term, though, we wouldn’t be surprised to see some further ups and downs as the market and many stocks/sectors consolidate their two-month runs; we still favor buying pullbacks rather than breakouts at this time. The good news is that we continue to think current pullbacks and consolidations are leading to some good-looking entry points in a variety of leading stocks. All in all, we remain bullish, though it’s still best to be a bit choosier on the buy side at the moment, while giving some stocks that you own breathing room to consolidate if they’ve enjoyed a good run.

This week’s list has many leaders that are retreating toward support or are otherwise showing solid setups. Our Top Pick is Seattle Genetics (SGEN), which looks like a leader in the biotech field, and the stock is now pulling back for the first time after a big run.

Stock Name	Price	Buy Range	Loss Limit
Amedisys (AMED)	174.06	161-164	146-148
The Walt Disney Company (DIS)	144.76	144-147	136-138
DocuSign (DOCU)	107.98	72-75	64-66
GSX Techedu (GSX)	97.59	18-19	15.5-16
Incyte Corporation (INCY)	76.98	92-95	84-86
Qorvo (QRVO)	129.47	105-109	94-96
Seattle Genetics (SGEN)	150.85	112-115	103-105
Splunk (SPLK)	207.67	145-150	132-135
TransDigm (TDG)	599.41	550-565	515-525
Tesla, Inc. (TSLA)	818.87	333-353	303-308

This month’s Issue of Cabot Small-Cap Confidential features a newly public company that’s trying to do what seems impossible – make the healthcare system work better.

It’s essentially a big data software company for this highly complex market. But it has a services and consulting segment too that’s central to the growth story because so many clients need help getting organized before they can even implement a software system.

Revenue growth tops 30%. And the story remains relatively unknown. All the details are inside the December Issue of Cabot Small-Cap Confidential.

As US trade disputes spread to Latin America, Europe and a China deal may be pushed into 2020, markets struggled early in the week but rebounded yesterday.

Hong Kong retail sales were hammered in October but China’s manufacturing finally turned upward. Our emerging market signal is positive with EEM trading just above its 50-day moving average.



We will continue to diversify the portfolio and today rise above worldly concerns with a new recommendation that just may capture your imagination and make you money in 2020.

The market has finally begun to consolidate after a heady eight-week run in the major indexes and leading stocks. It’s never fun to see things retrench, and we do think the next couple of weeks (very roughly speaking) could see more choppy, tedious trading. But our focus remains on the intermediate- and longer-term picture, and on that front, the evidence remains bullish, so we remain heavily invested.



The Model Portfolio has been steadily putting money to work, including filling out two positions last week. We now have eight stocks and a cash position of around 14%.



In tonight’s issue, we give our latest thoughts on all our positions and write about yet another unique, longer-term bullish occurrence that bodes well going forward.

Heading into the last month of the year, the prospects for the market remain very good, with a plethora of technical indicators telling us the market will be higher in the years ahead, and thus I continue to recommend that you be heavily invested.

Forget tariffs, forget trade negotiations, forget politics, and forget all the “problems” of the outside world. Just hold a portfolio of carefully selected high-potential stocks, and all will be well.

Today’s recommendation is a fast-growing company that’s a major participant in the 5G communications revolution.

Details in the issue.

The high-flying AI stocks got crushed on Friday. But those stocks started this week higher. Where do we go from here?

The technology-heavy Nasdaq index fell 4% on Friday, and the S&P 500 fell for the week for the first time in 10 weeks. A couple of things spooked investors. The AI trade turned sour after Broadcom (AVGO) reported earnings that included slightly lower revenue projections for its AI chips than were expected. Also, a blowout jobs report strengthened the case for a Fed rate hike by the end of the year.

A major economic narrative that took shape in recent years was the decline and (presumptive) inevitable death of the so-called “petrodollar,” as a growing number of countries diversified their foreign exchange reserves away from the U.S. dollar and toward gold and alternative currencies like the Chinese yuan.

WHAT TO DO NOW: The overall market remains in good shape, though we are seeing some exuberance on the upside and also a few leaders begin to act sloppy. Near term, then, it’s still a coin flip as to what comes, but the vast majority of intermediate-term evidence remains bullish. In the Model Portfolio, we took partial profits in Marvell (MRVL) earlier this week; tonight, we’re buying a half-sized position (5% of the account) in Bloom Energy (BE), which is extremely volatile but also strong and coming off a few weeks of rest. Our cash position will now be around 28%.

This market just keeps going higher.

Sure, there’s uncertainty out there. The war isn’t over. Inflation and interest rates are still too high. But stocks didn’t get the memo. After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30 and are continuing to make new highs this week.

Despite the negative headlines and volatility, stocks just keep going.

After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30. It’s also worth noting that despite the ongoing Iran war, the price per barrel of West Texas Intermediate crude oil closed down 17% for the month of May.

This week’s Memorial Day observance marked the traditional onset of the summer vacation season for millions of Americans. It’s a time of traveling, sightseeing, picnics and parties. It’s also the peak season for enjoying cold, carbonated beverages like soda pop and energy drinks.

With this dynamic in play, I think it’s time that we give some attention to our holding in PepsiCo (PEP), which is entering a critical period of its sales year.

On the heels of a miserable March and a euphoric April, I wrote several weeks ago in this space that I thought May would determine which direction the market is truly headed, at least in the intermediate term. We have our answer, and it’s a definitive “up.”

All three major U.S. indexes are touching record highs as of this writing, with the S&P 500 up 4.3% in May, the Nasdaq up 7%, and the slower-moving Dow Jones Industrial inching higher by 1.6%. That’s despite the ongoing Iran war and the accompanying sky-high oil and gas prices, escalating inflation, bond yields at multi-year highs, possible Fed rate hikes later this year, and record-low consumer sentiment.

Stocks have largely shrugged off this week’s dust‑ups in the Middle East as investors continue to bet on a near‑term memorandum of understanding (MOU) that would reopen the Strait of Hormuz and push bigger sticking points between the U.S. and Iran down the road.

Yields have cooled off this week and continue to do so this morning, thanks to a slightly lower‑than‑expected core PCE reading. April core PCE rose 0.2% month over month, below both March’s 0.3% reading and consensus, giving the Fed some breathing room as policymakers weigh the competing forces of inflation and growth.

The $145 trillion global bond market is under some stress due to runaway debt. The 30-year U.S. Treasury bond yielded over 5% last week, up from 4.63% at the end of February. Americans are struggling to keep up with their debt payments, as the cost of borrowing money increases. This is a global story. In Japan, the 30-year government bond yield just hit a record of 4.15%, and U.K. government debt jumped to 5.85% earlier this month.

Nothing stops this market. The S&P 500 hit another new high this week.

The spectacular earnings season helped power the rally. Average earnings growth on the S&P 500 is over 28% in the first quarter. That is far better than the expected 13.1% and the highest level of growth for any quarter since 2021.

We’ve all seen it before: the owner of a home in dire need of structural repair decides to “flip” the house for a quick profit by contracting a restoration service. Instead of making sorely needed foundational repairs, the cleanup crew focuses on superficial fixes like painting, tiling, flooring, etc., in hopes that a shiny new veneer will hide the problems that exist beneath the home’s exterior.

Crude though the analogy may be, I think it’s an apt description of what we sometimes encounter as turnaround investors.

WHAT TO DO NOW: The market and especially most leaders have finally shaken out a bit in recent days, and there are some worries we’re watching, including the rise in Treasury rates and the health of the broad market (our Two-Second Indicator is now negative). Even so, the primary evidence remains in good shape, and while this rest phase could easily take longer if the worries persist, the odds favor higher prices down the road. Tonight we’re making one small move: Averaging up on Axsome Therapeutics (AXSM), buying another 3% position. Our cash position will be around 34%, which we’ll be looking to put to work should the market continue to act properly.

Our second recommendation is a short on an auto parts retailer, as a result of so-so sales.

Eight analysts have raised their EPS estimates on this home improvement retailer in the past 30 days.

This financial company is forecast to grow by more than 30% annually for the next five years.

This manufacturer of hi-tech beds is coming back from a rough quarter, but analysts expect it to produce 21.5% growth this year and 24.3% in 2019.

Our second recommendation is to sell the remaining shares of Weibo.

Revenues were up 59% in the most recent quarter for this Chinese tutoring company, and eight analysts have increased their EPS estimates in the past 30 days.

We’re selling our position in one stock today.

This medical device company beat analysts’ estimates by $0.09 last quarter and 13 analysts have increased their EPS estimates for the company in the past 30 days.

This defense company’s shares are just about at the buying level again.

We will provide the top five holdings in this Value fund.

Analysts expect this medical device company to post 20% annual growth for the next five years.

Analysts expect this blockchain company to grow at 19.5% annually over the next five years.

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.