The market finished modestly higher yesterday after the Fed decided to hold interest rates steady but hinted at cuts down the road. At day’s end, the Dow was up 38 points while the Nasdaq finished higher by 33 points.
The good news is that the recent market action—starting with the strong rebound two weeks ago, followed by the tight trading last week, and now with the solid upside follow-through—has been enough to return our Cabot Tides to bullish territory. Combined with our other positive market timing indicators (Cabot Trend Lines have been bullish since February, and our Real Money Index tells us investors panicked out of stocks last month), it’s telling us the odds favor higher prices ahead.
That doesn’t mean we advise buying hand-over-fist—we wouldn’t be shocked if the market zigged and zagged a little bit, and finding reasonable entry points is always important. But it is a sign that the May correction is likely over and with a good-sized cash position in the Model Portfolio (38% after Monday’s sale of Array Biopharma on its buyout), we’re putting some cash to work.
Today, we’re going to make two moves.
First, we’re buying a full-sized (10% of the Model Portfolio) position in Blackstone (BX), which is our favorite Bull Market stock that should benefit from a strong environment for asset values as well as its conversion into a C-Corp. The stock isn’t a barnburner, but it’s shown great strength of late and we think it will do well as this bull market progresses.
Second, we’re going to buy a half-sized position (5%) in Zillow (Z), the leading online real estate outfit, whose stock has changed character as the firm’s move into directly buying and selling houses is off to a great start and promises to be a big growth driver going forward.
These actions (both stocks will be added today, June 20) will bring our cash position down to 23%. We have some other moves we could make soon—including filling out our Coupa Software (COUP) position—but today we’ll stick with these two moves and see how it goes.
We’ll have a full Cabot Growth Investor issue for you tonight (June 20) with further details. Don’t hesitate to email with any questions – mike@cabotwealth.com