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Current Market Outlook


After a straight-up move in recent weeks, the major indexes had a couple of wobbles during the past few days, which has done some damage to certain areas—small-cap indexes are standing right on top of their 50-day lines and many individual stocks and sectors have come back down to earth, even among large-cap stocks. Even so, the vast majority of major indexes and Top Ten stocks are still acting well, with more than a few racing up the charts following positive earnings reactions. We have our eyes open should the weak broad market “infect” leading stocks, but so far, the market’s recent rest looks normal to us. Thus, you should stick with a bullish stance, giving your strong stocks a chance to continue advancing, while looking for entry points as stocks pause.

This week’s list has something for everyone, with some healthcare, some energy (for the first time in a while) and some true growth stocks. Our Top Pick is Planet Fitness (PLNT), a great cookie-cutter story that just surged on earnings. Buying on some weakness is your best bet.

Stock Name	Price	Buy Range	Loss Limit
AbbVie Inc. (ABBV)	93.53	92-95	86-88
Alnylam Pharmaceuticals (ALNY)	143.58	129-134	117-119
Continental Resources (CLR)	66.19	43-45.5	39.5-41.5
Micron Technology, Inc. (MU)	43.31	43-45	39.5-40.5
NVIDIA Corporation (NVDA)	242.42	205-213	188-192
Planet Fitness (PLNT)	0.00	28.5-30.5	26.5-27.5
ProPetro (PUMP)	23.30	15.8-16.8	14.5-15
Red Hat (RHT)	0.00	120-124	111-113
ZTO Express (ZTO)	28.84	16.1-17.2	14.5-15
Zendesk (ZEN)	82.19	33-35	30.5-32

In the January Issue of Cabot Early Opportunities I highlight five standout growth stocks that should have meaningful upside from current levels. Recognizing that the current risk-off environment has these types of stocks acting erratically (probably an understatement) I’ve focused first and foremost on companies I like rather than getting hung up on their recent share price performance. In terms of buying, we’ll start very, very slow. The three smaller companies I feature go straight to the Watch List as we’ll try to be opportunistic buyers when things feel more secure. Even with the two larger companies we start with half positions.



Enjoy!

Following the huge lift-off in February, a pullback was likely, and the Ukraine-related tensions have been the excuse for persistent selling (especially among growth stocks) during the past couple of weeks. At this point, we think it’s fair to say the situation is on the fence—many leading stocks are down to key support, so if all’s well, the major indexes and individual names should find support soon. If they don’t, it’s likely that the market is in for a deeper consolidation; if they do (today was a decent start), then this news-driven pullback could be near an end. We’ll be watching.

In the meantime, this week’s list has many new names, including many that have just began their major advances within the past few months. Our Top Pick is Freescale Semiconductor (FSL), part of the strong chip group and a stock that is pulling back for the first time since an ultra-powerful breakout.

Stock Name	Price	Buy Range	Loss Limit
XPO Logistics (XPO)	0.00	30-31.5	28-28.5
Tesla, Inc. (TSLA)	818.87	220-235	190-200
TripAdvisor (TRIP)	55.14	100-105	91-92
Salix Pharmaceuticals (SLXP)	0.00	108-112	97-99
Palo Alto Networks (PANW)	236.92	74-77	68-69
Ligand Pharmaceuticals (LGND)	267.14	75-77	64-66
GT Advanced Technologies (GTAT)	0.00	16-17	13-14
Freescale Semiconductor (FSL)	0.00	21-22.5	19-19.5
Diamondback Energy (FANG)	0.00	62-64	56-57
AngloGold Ashanti (AU)	20.45	18-19	16-17

Very few people are buying stocks right now. Or are they? Insider buying has picked up of late, especially in the following companies.

It’s time to look beyond the pandemic. It may seem like it will drag on forever. And it may still be a while yet before it’s behind us. But it will pass. In the grand scheme of things, it is a very temporary situation.

The overwhelming majority of your investing career from here will be in the post pandemic environment. And the virus has created opportunities. While the market indexes are at all time highs, many of the more cyclical and real economy stocks are still historically very cheap. But these stocks will be lifted by the inevitable recovery ahead.



In this issue, I identify two industry leaders with stock prices that are temporarily depressed in the current environment. Yet, they present fantastic opportunities if we look beyond the haze.

Universal Electronics (UEIC) is being added to the Buy Low Opportunities Portfolio at Strong Buy. We have an opportunity to buy a stock that fell a ridiculous amount based on minor news at a low price today.

The market remains in good shape, with the major indexes hitting slightly higher highs and most stocks acting well. Granted, many growth stocks have been consolidating their strong mid-May to early-June advances, but we’re actually encouraged by that—despite strong run-ups back to (or somewhat above) their springtime highs, the sellers haven’t been able to make any headway. Sure, that could always change, but right now there’s no question that selling pressures are light and the buyers remain in control. Hence, it’s best to remain bullish and pick up shares of new leaders either on powerful breakouts or on dips toward support.

This week’s list has more solid growth ideas than we’ve seen in many weeks. Our favorite idea is GasLog (GLOG), which has gotten a boost from international events, but whose short- and long-term growth story is compelling. Last week, the stock blasted off on its heaviest volume ever.

Stock Name	Price	Buy Range	Loss Limit
TripAdvisor (TRIP)	55.14	99-104	92-93
SunPower (SPWR)	12.26	38-39	34-35
Royal Gold, Inc. (RGLD)	129.66	70-75	65-66
Palo Alto Networks (PANW)	236.92	77-81	70-71
Lithia Motors Inc. (LAD)	146.30	90-93	78-80
GasLog (GLOG)	21.39	28-31	26-26.5
Electronic Arts (EA)	0.00	35-37	31-32
Celgene (CELG)	0.00	160-166	148-150
Arris Group (ARRS)	0.00	31.5-33.5	30-30.5
Apple (AAPL)	248.94	89-91	83-84

Current Market Outlook


Last week, the market took another step on the road to health, as the intermediate-term trend of the major indexes began to turn up and many potential growth leaders showed strong accumulation. That’s enough for us to nudge up our Market Monitor another notch and, assuming you’ve been in a relatively defensive stance, you should begin to put some money to work. That said, we also think it’s best to go slow—the longer-term trend remains sideways-to-down, very few stocks have hit new highs (as many new lows as new highs on the Nasdaq today) and there’s still a bunch of overhead for most indexes, stocks and sectors to chew through. Still, despite the potential issues, we’re growing more positive as the market’s action has improved in recent weeks.

This week’s list is full of stocks from a variety of sectors that look poised to do well if the market’s recent strength continues. Our Top Pick is Workday (WDAY), which, while it could pull back a bit, is acting like a liquid leader of any sustained advance that develops.

Stock Name	Price	Buy Range	Loss Limit
Amedisys (AMED)	174.06	133-138	120-123
Delta Air Lines (DAL)	54.28	58.5-60.5	54.5-55.5
Glaukos Corp. (GKOS)	67.84	65-68	57.5-59.5
Omnicell (OMCL)	81.03	72.5-75	67-69
PRA Health Sciences Inc. (PRAH)	96.08	114-118	105-107
Tesla, Inc. (TSLA)	818.87	350-360	323-318
Trade Desk (TTD)	468.02	142-147	123-126
Veeva Systems (VEEV)	180.23	97-100	89-91
Workday (WDAY)	194.88	160-166	145-148
Xilinx (XLNX)	134.50	89.5-93	82-84

Current Market Outlook


The market had a brutal day today, with the major indexes (especially the Nasdaq, which had been the strongest index) plunging on big volume. (The reason, Facebook’s naughtiness, doesn’t matter much to us.) Today’s dramatic move calls into question the market’s recent rally—most indexes we track are still hovering above key support, but net-net, there hasn’t been any progress for the past eight to 10 weeks, which isn’t ideal. As for leading growth stocks, they did get hit today, though most remain in good shape on their charts. All in all, we’re still in favor of holding your strong, profitable stocks and giving them a chance to consolidate. But with the market evidently still not out of the woods, it’s best to go slow on the buy side and make sure you honor your stops and loss limits while we watch to see how the market reacts to this selling wave.

This week’s list is more full of what we’d term secondary leaders—still great potential, but not the liquid leaders we’ve seen pop up in recent weeks. One exception: Nutanix (NTNX), which looks like an emerging blue chip of sorts, is our Top Pick—pullbacks would be very tempting after its super-powerful breakout.

Stock Name	Price	Buy Range	Loss Limit
AAXN (AAXN)	87.11	36-38	32.5-34
Baozun (BZUN)	44.24	45.5-48.5	41.5-43.5
HCA Healthcare (HCA)	137.60	100-104	94-96
Insulet (PODD)	175.69	82-84.5	75-77
Loxo Oncology (LOXO)	186.59	115-120	104-107
MKS Instruments (MKSI)	109.43	117.5-122.5	107-110
Nutanix (NTNX)	55.91	49-52	44-46
Pegasystems (PEGA)	0.00	59-61	55-56
PTC Therapeutics (PTCT)	0.00	27.5-29.5	25-26.5
Vipshop Holdings (VIPS)	14.25	17-18.5	15-16

We wrote last week about how the unusually persistent rebound in the market bodes well going forward. And the good vibes have continued since then, with gaggles of growth stocks rising nearly every day and a vacuum of selling pressure. Also impressive is how stocks have reacted to their quarterly reports—earnings season is nearly over, but we can’t remember a time when so many stocks have gapped up on their results. Of course, the market isn’t a one-way street, and forgotten are many of the worries of a month ago; some shakeouts are sure to occur. But such power on the upside usually doesn’t just disappear. We remain optimistic.

This week’s list reveals a broad swath of strong stocks from many industries. Our Top Pick is AerCap Holdings (AER), a firm that buys and leases airplanes. Business is strong, earnings estimates are huge and a recent acquisition is a game changer.

Stock Name	Price	Buy Range	Loss Limit
Domtar (UFS)	0.00	104-110	96-97
Trinity Industries (TRN)	0.00	65-67	59-60
RetailMeNot (SALE)	0.00	41-43	36.5-37.5
O’Reilly Automotive (ORLY)	0.00	150-155	142-143
Nabors Industries (NBR)	0.00	21-22.5	19-19.5
Harman International Industries, Inc. (HAR)	0.00	102-105	93-95
Freescale Semiconductor (FSL)	0.00	21-22	18-19
FireEye (FEYE)	0.00	73-75	63-65
HomeAway, Inc. (AWAY)	0.00	45-48	41-41.5
AerCap (AER)	0.00	41-43	35-36

It’s amazing how much some of our stocks have moved over the last week while the average gain of our portfolio is almost EXACTLY the same as that of the S&P 600 Small Cap Index.

Measuring Wednesday to Thursday early morning, shares of Remitly (RELY) are up 18%, Docebo (DCBO) is up 17% and Enovix (ENVX) is down 12%. Taking a simple average of our positions’ change over the last five sessions, though, the average change is 0.7%. That compares to a 0.8% gain in the S&P 600!

It was a mostly quiet week for the market, which isn’t terribly surprising as traders have moved past the Federal Reserve event and inch towards the election. By week’s end the S&P 500 had gained 0.4%, the Dow had rallied 0.5% and the Nasdaq had fallen 0.55%.

It was a mostly quiet week for the market, which isn’t terribly surprising as traders have moved past the Federal Reserve event and inch towards the election. By week’s end the S&P 500 had gained 0.4%, the Dow had rallied 0.5% and the Nasdaq had fallen 0.55%.

While President Donald Trump hangs fire on rescheduling cannabis, we continue to get signs that support what I call the inexorable march towards greater acceptance of cannabis use and legal reform that will help public companies in the space.

We see momentum for cannabis acceptance and reform in: Ongoing federal-level evidence that Trump may actually follow through on his campaign promise to reschedule cannabis; ongoing robust state-level sales growth; opinion polls; and scientific evidence that cannabis has medical benefits.

Everybody knows Alphabet, or Google. But sometimes GOOGL stock gets surprisingly undervalued. When it happens, you need to pounce.

Life insurance stocks aren’t glamorous. But they’ve been steady, reliable risers these last three months, and remain undervalued. These five stand out.

Global stock, bond, oil and gold markets continue to bounce around as investors look for trends that signal a re-entry into stocks. Today, I’d like to review facts vs. fiction, in order to give us a little more peace as we live through the stock market correction.

The week was ticking along pretty well until this morning’s first read of GDP (1.6% vs. expectations of 2.2%) came out and shot a small hole in the “at least the economy is doing well” argument that’s helped the market hold up despite persistent inflation data.

Embedded in the GDP report were Q1 core and headline PCE inflation, both of which were a little hotter than expected and up from Q4 of 2023. March PCE data will be out tomorrow and is expected to be the biggest macro news event of the week.