This stock and its peers are experiencing a game-changing situation within its industry. The stock therefore deserves a second look by growth investors.

Traders will be happy to see this stock joining the Buy Low Opportunities Portfolio for the third time in less than a year. Let’s see if we can accomplish a trifecta!

Current Market Outlook


The selling pressure that appeared two weeks ago carried through to last week, with many leading stocks breaking down and others falling back into consolidations. That said, it’s not the end of the world—many major indexes are now testing their 50-day lines, and a bunch of stocks are in the same boat. There’s no question that the evidence has worsened lately, which is why our Market Monitor is back down to a reading of 6 (out of 10), but we’re most interested in what happens from here, which will probably go a long way toward determining the market’s next intermediate-term move. All told, you should still hold your strong, profitable stocks, but we also think it’s best to cool your heels a bit, keeping new buys small and holding some cash as we wait to see the market show its hand.

In the meantime, we’re using this brief period of market weakness to identify the stocks unaffected by the selling, as those will likely do the best when the market resumes its major advance. This week’s list has plenty to choose from, and our Top Pick is Wayfair (W), which is unusually strong—keep positions small and try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Five Below (FIVE)	134.58	93-97	83-85
Ligand Pharmaceuticals (LGND)	267.14	202-211	185-188
Netflix, Inc. (NFLX)	423.92	385-400	345-355
Oasis Petroleum (OAS)	12.57	12.1-12.9	11-11.3
Supernus Pharmaceuticals (SUPN)	52.50	54-57	49-51
Teladoc, Inc. (TDOC)	127.95	56-60	49-51
Ultragenyx Pharmaceutical Inc. (RARE)	87.63	74-78	66-68
Wayfair (W)	167.03	112-117	100-104
WellCare Health Plans, Inc. (WCG)	271.83	238-245	220-225
WPX Energy (WPX)	0.00	17.4-18.5	16-16.7

With the MSCI Emerging Markets Index headed steeply down since June 13, we have been moving quickly to cut our exposure and kick losers out of our portfolio. It’s not pleasant, but it’s the only way to stay profitable in a volatile sector like emerging market stocks. Today’s bounce in the markets was a welcome relief from the selling pressure, but we will discount the good news until the Cabot Emerging Markets Timer gives us the all-clear.

The market rolled over this week, but it’s too early to say if it’s the start of another correction or just some turbulence. Either way, we’re well prepared, with exposure to a broad range of sectors, including some benefiting from the uncertainty.

As to this week’s stock, once again I’m trying to buy low, with a recommendation of Crista Huff that should soon see improved earnings thanks to last year’s huge merger.

Current Market Outlook


May and June were generally great for leading stocks, but some yellow flags began to appear during the past couple of weeks—the major indexes were showing widening divergences, sentiment reached giddy levels and some stocks (like many recent IPOs) went vertical. Some sort of retreat was likely, but the severity of the selling in recent days looks abnormal; many stocks are pulling back after big runs, but a bunch of others are cracking, and the lagging indexes look sick—the NYSE Composite is below its 200-day line! We don’t advise hitting the panic button, as most indexes and stocks are still above intermediate-term support, so you can hold your strong, profitable stocks. But given the evidence, it’s smart to pare back—honor your stops and loss limits, and on the buy side, keep new positions small until support appears.

This week’s list has stocks that have been yanked down recently, but the action looks normal after strong prior advances. Our Top Pick is Carvana (CVNA), which is early stage and holding up well after a big run. Again, keep new positions small and try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Carvana (CVNA)	82.90	36-39	32-34
Cheniere Energy (LNG)	63.82	64-67	59.5-61.5
Darden Restaurants (DRI)	106.63	104-107	96-98
Heron Therapeutics (HRTX)	35.25	38-40	33-34.5
Illumina Inc. (ILMN)	289.74	271-276	255-258
Spotify (SPOT)	272.82	166-171	154-157
Stitch Fix (SFIX)	36.79	26-27.5	23-24
Trade Desk (TTD)	468.02	86-90	78-81
Turtle Beach (HEAR)	26.70	19.5-21.5	15.5-17
Wix.com (WIX)	302.53	96-99	87-89

The market’s evidence remains mostly bullish, so we do, too, but it’s a selective advance—most indexes are doing just OK, but growth-oriented stocks and sectors have put on a great show. In the near-term, there are signs of exuberance, and while that doesn’t mean you should sell your strong stocks, it is a sign to keep your feet on the ground.

In the Model Portfolio, most of our stocks are performing well, but we’re standing pat for the moment, holding about 20% in cash as we look for solid entry points in fresh leading stocks.

In tonight’s issue, we review the market, all of our stocks and even write about one growth sector that’s showing extreme power of late—we already own two of the leaders in the group, but many look great. We also touch on the sentiment backdrop, while highlighting a few potential new buys if things settle down a bit.

We were having a pretty good month on the Dow Jones Industrial Average, until the trade tariffs issue raised its ugly head again. That consternation has driven the markets back to their month-ago trading levels—after a 1,000 point or so gain. While short-term trading is volatile again, most market insiders remain very bullish, as you’ll see in our Advisor Sentiment Barometer and in our Market View.

[Note: The Cabot Turnaround Letter weekly update won’t be published next Friday, June 19, due to the market being closed for the Juneteenth holiday.]

Before we get into the main topic for today’s newsletter update, a quick note on the portfolio is in order. I’m continuing our “spring cleaning” effort that we began last week by trimming a couple more of our holdings, but I’m also adding a new position to take the place of the recent deletions.

After two near-record-setting months, stocks are encountering their first real turbulence since March. It’s no surprise.

While stocks go up an average of 10% a year, they rarely do so in a straight line. And after the S&P 500 rallied nearly 20% in April and May and the Nasdaq shot up nearly 30%, a pullback of some kind – or possibly even a true correction – was to be expected. It seems it’s happening all at once.

Stocks look set to enter the summer near all-time highs, but leadership has narrowed, volatility has ticked up, and there’s been renewed scrutiny on the AI trade and valuation concerns in some of the market’s biggest winners.

At the same time, the macro backdrop remains a mix of resilience and intermittent turbulence. While economic data continues to hold up, energy prices remain elevated due to the ongoing Iran conflict – which has no end in sight – keeping upward pressure on inflation and yields.

Tech, commodity, AI, and Explorer stocks struggled this week as concern over capital expenditures increased. Mideast tensions intensified and inflation numbers came in yesterday at their highest rate in over three years, fueled by rising energy costs. The combination of anticipated higher interest rates and rising bond yields impacted the price of precious metals, with gold sliding below $4,200 an ounce and silver falling below $64 an ounce.

Stocks look to enter summer near all-time highs, but leadership has narrowed and volatility has ticked up thanks to renewed scrutiny on the AI trade and open-ended questions about valuations in some of the hottest areas of the market.

There’s also been more focus on the evolving macro landscape, which features a resilient U.S. economy but stubbornly high energy prices due to the ongoing Iran conflict, and somewhat elevated yields. We’re now looking at a higher likelihood of a Fed rate hike, with the odds of a hike by December now well over 50%.

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.

This home improvement retailer beat Wall Street’s estimates by $0.07 last quarter, posting EPS of $0.86 per share.

Tivo (TIVO) reported non-GAAP $0.40 EPS vs. the consensus estimate of $0.27. News agencies reported all of the following incorrect EPS numbers: (0.29), $0.22, $0.29, $0.30 and $0.45. Here’s the full story.

Fourteen analysts have increased their 2017 earnings forecasts for this energy company.

ADP reported strong first-quarter EPS but slightly weaker-than-expected revenue yesterday, and the stock has declined over 5%.

Updates on four of our stocks—all rated Strong Buy.

Although this equipment maker posted a loss of $0.14 per share for its first quarter, the company’s results did beat Wall Streets’ forecasts of a $0.16 per share loss.

Here are updates on four or our stocks that reported earnings, please updates on two other stocks that have shown strong price action.

Last month, this European airline began offering its customers flight-to-flight connection, lifting it from its original ‘no-frills’ strategy.

This publishing company’s financials are improving across the board—debt to equity, profit margins and return on equity.

Two analysts have increased their EPS forecasts for this financial company in the past 30 days.

Today’s Special Bulletin focuses on quarterly earnings reports from five of our stocks. There are no rating changes.

The top three sectors in this 5-star-rated fund are Industrials (22%), Consumer Cyclical (17%), and Financial Services (14%).

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.