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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 world is about to change in a major way. So much so that you may look back ten years or even five years from now and realize how profoundly different things are since 2019.

The rapidly advancing rollout of 5G will be a technological tipping point that crosses a threshold into the digital age where everything is connected to the internet. Today, only a few things are connected. In a few years, the whole world will be computerized.



5G is such a game changer that many companies and governments can’t afford to be left behind. The current Administration has labeled 5G a national security priority. It seems 5G is the news arms race.



Those are the stakes. And it’s coming fast. In this issue, I identify a company that is at the epicenter of the 5G rollout. It holds vital technology that is light years above the competition and is necessary to connect any device to 5G. Earnings and revenues should skyrocket as the rollout proceeds in haste.

The broad market remains in an uptrend, according to our intermediate-term market timing indicator, but our longer-term timing indicator, while improving, remains in a negative state. Thus, it remains possible that a major pullback is right around the corner—and if one comes, it will be handy to have cash at the bottom. So I’m still working to avoid being fully invested, though it’s getting tough because our stocks acting so well.
For today’s selection, I’m going with a small company that’s taken a proven path to growth—consolidating a fractured industry. The stock was originally recommended by Tyler Laundon in Cabot Early Opportunities and here are Tyler’s latest thoughts.

Current Market Outlook


Last week brought some upside-down action, with the leading growth stocks doing OK (some up, some down) while the lagging names (small- and mid-caps, economically sensitive sectors) did very well. And that trend continued today, with growth stocks getting hit while the major indexes ramped up. Overall, the upmove in the beaten-down areas means the intermediate-term trend has survived its first test, and while taking on some water, growth stocks remain in fine shape, with very little abnormal selling. (In fact, pullbacks in some of the hot names could offer up some solid entry points, but we’ll see how that goes.) All in all, the divergent environment isn’t ideal and will probably lead to further crosscurrents; it remains important to pick your stocks and entry points carefully, and taking some partial profits on the way up isn’t a bad idea, either. But overall, most of the evidence remains positive, so you should, too. Our Market Monitor remains at a level 7.

This week’s list has many names that have just come to life after long rest periods. Our Top Pick is Spotify (SPOT), which has always had a good story, but now has decisively broken out following a meaningful catalyst.

Stock Name	Price	Buy Range	Loss Limit
Allogene Therapeutics (ALLO)	48.94	46-48.5	40.5-41.5
Big Lots (BIG)	43.12	31-33	27-28
BJs Wholesale (BJ)	36.69	34-36.5	30.5-32
Guardant Health (GH)	88.34	87.5-91.5	79-81
Horizon Therapeutics (HZNP)	49.89	45.5-48	40.5-42
Neurocrine Biosciences (NBIX)	123.40	114-119	104-107
1Life Healthcare (ONEM)	34.01	32.5-35	28.5-29.5
Spotify (SPOT)	272.82	184-191	166-169
Wayfair (W)	167.03	152-162	126-130
Wix.com (WIX)	302.53	195-205	175-180

U.S. and international markets staged a rally this week alongside momentous events in Asia as China imposes its will on Hong Kong through the passage of national security law. America indicates it will withdraw trade preferences for Hong Kong, viewing it as indistinguishable from China. China cracks down on Hong Kong as legislation advances in the U.S. to potentially delist international and Chinese companies that do not meet U.S. disclosure standards. Meanwhile, we have a new recommendation this week that has been in the news regarding Covid-19 and how we should all look at the economics of discovering new drugs.

The overall market continues to look healthy—though we still haven’t yet received an “all-clear” signal from our long-term timing indicator—and our stocks, in general, continue to reward, with many hitting new highs in recent days as the economic outlook improves.

Long-term, the prospects for the economy and market have improved, but short-term, the relative elation of recent days has brought numerous growth stocks to what seem like unsustainable heights—so I’ve lowered the ratings on three of our positions to Hold, and if you’d like to take partial profits, that’s fine with me.



As for today’s recommendation, it’s a very unusual one for me. But the chart is strong and the story has some validity, so we’ll give it a shot!



Full details in the issue.

Eleven weeks off the market bottom, with the S&P 500 up 45% from its low, the news is finally getting good—which to me says that short-term, investing in stocks is likely to become a bit more challenging. That’s one reason I’m recommending selling two stocks today—and putting another two on hold.

Long-term, however, the future remains bright, especially for companies like the one featured today, which are serving global mass markets with products that they’re (literally) hungry for.



Full details in the issue.

The market has pulled back a bit in recent days, but not enough to change our stance. By our measurements, the market’s intermediate-term trend remains up, while the long-term trend is still working to turn up.

More important, however, is how the stocks in our portfolio are acting, and the answer is “pretty good!” In fact, we’ll continue to hold them all today.



As for today’s recommendation, it’s a very well-known U.S. meat company that reported earnings just this morning—and the dip that followed that report now makes the stock an even better bargain!



Full details in the issue.

The market has rallied like crazy over the past seven weeks. It’s up over 30% from the low in March. The market is already looking beyond the coronavirus to a strong economic recovery.

But stocks are trading on a rosy scenario that may not come true. While the market is always difficult to predict in the near term, there is at least a good chance of disappointment going forward. The overall market may have gotten ahead of itself and it is prudent to prepare for the possibility of more turbulence ahead.



For those reasons, the Cabot Dividend Investor portfolio is only buying very selectively. While the overall market may be shaky at this point, certain companies are thriving during the pandemic. There are niches where business is actually booming.



In this issue I highlight two stocks that are selling at bargain prices, have businesses barely affected by the pandemic, and stand to thrive in the post-Covid-19 market as well.

Markets have pulled back a bit over the last few days as investors hit the pause button to digest a Nasdaq in the black for 2020 while the real economy struggles to reopen. Congress begins work on the next stimulus spending bill and international stocks come under consideration, as they have not rebounded anywhere near as much as U.S. markets.

Our emerging market (EEM) momentum timer has turned positive by the slightest of margins as we replace one China idea with another.

Current Market Outlook


There are no sure things, especially in this unprecedented environment, but we think it’s a decent bet that last Monday represents a workable low in the indexes, bolstered by short-term positive divergences in the broad market and some encouraging snapback action among a good number of growth stocks. Given that the evidence is slightly better, we’re open to some nibbles here or there, especially among the stocks that have shown strong signs of accumulation. That said, we still believe it’s best to be mostly defensive—the intermediate-term trend remains strongly down, and even if a bottoming process has begun, the odds favor a volatile, news-driven few weeks (and, of course, there’s always the chance stocks break their lows down the road). Long story short, the rain has stopped for now, but the overall storm system hasn’t yet moved out to sea.

Encouragingly, for the second straight week, Top Ten is finding a lot of growth-oriented stocks that are showing peppy action. Our Top Pick is Seattle Genetics (SGEN), which has a nice four-month launching pad and isn’t far from new highs.

Stock Name	Price	Buy Range	Loss Limit
Atlassian (TEAM)	182.16	139-144	126-128
Barrick Gold (GOLD)	27.20	18-19.5	15.5-16.5
Dexcom (DXCM)	421.36	257-273	228-233
GDS Holdings Limited (GDS)	80.15	55-58	49-51
Netflix, Inc. (NFLX)	423.92	355-375	320-330
NVIDIA Corporation (NVDA)	242.42	250-270	220-226
Okta, Inc. (OKTA)	148.41	118-126	106-108
Quidel Corp. (QDEL)	93.49	91-95	80-84
Seattle Genetics (SGEN)	150.85	110-116	97-100
Slack (WORK)	24.12	26-27.5	21.5-22.5

The market was up big today, and a couple of our stocks hit new highs—which is impressive considering the recent crash—but the market’s major pattern is one of bottom-building, and that takes time.
In the meantime, the action of the best growth stocks gives us a clue as to developing leadership, and the best value stocks are absurdly cheap. Plus, many are paying huge dividends! That’s the case with today’s recommendation, a giant in the oil industry.


As for the rest of the portfolio, it’s acting well (with a couple of very strong stocks in the mix), and thus I have no changes today.


Full details in the issue.

The market remains in good health, so I continue to recommend that you be heavily invested in a diversified portfolio of the best stocks, both strong momentum stocks (we have several) and lower-risk dividend-paying slower growers. In the portfolio this week, the only change is an upgrade of Vertex Pharmaceuticals (VRTX) to buy.

As for the newest recommendation, it’s unusual in that it’s not one stock; it’s actually an ETF of a market sector that I think holds spectacular promise in the long term.

Three of today’s featured companies seem most obviously ready to begin or continue run-ups in the coming days Yesterday’s earnings report made it clear that a fourth’s dividend is safe, with a current yield of 8.4%. Plus, energy stocks are acting well recently.

Today we’re breaking into a familiar market by going back to the insurance industry.

But today’s addition is very different from our other rapid growth insurance companies in a major way (as you’ll soon see!).



The stock is acting strong and the fundamentals remain great, despite COVID-19.



All the details are inside this month’s Issue. Enjoy!

Current Market Outlook


The rapid spread of China’s coronavirus provided the impetus for a selloff that began last Friday and exploded onto the scene today. Where does that leave us? First, the intermediate-term trend of the indexes is still positive but close to the fence; the big-cap indexes look OK, but the broader measures (small and mid caps) are right around their key 50-day lines. Beyond the charts, it’s likely that more time is needed for investors to trim/hedge after four months of straight-up action. As for leading stocks, we’re taking it on a case-by-case basis—some are looking ragged and ripe for a deeper correction, but most are pulling back normally. If you’re heavily invested, our advice is to follow the usual plan: Hold most of your shares in your strong, profitable stocks, while selling or keeping tight leashes on losers and laggards. We’re moving our Market Monitor down to a level 6.

On the buy side, newer names that are holding up well should be near the top of your shopping list. This week features plenty of those, with our Top Pick being Kansas City Southern (KSU), a reliable grower that just reacted well to earnings.

Stock Name	Price	Buy Range	Loss Limit
Agios Pharmaceuticals, Inc. (AGIO)	52.43	50.5-52.5	45.5-47
Bristol-Myers (BMY)	66.24	62-64	59-60.5
Datadog (DDOG)	81.52	39.5-41.5	36.5-38
Kansas City Southern (KSU)	176.54	162-165	150-152
Sea Limited (SE)	132.86	42.5-44.5	38-39
Snap Inc. (SNAP)	16.68	18-19	16-16.5
STMicroelectronics (STM)	30.09	27.5-28.5	25-25.5
Taiwan Semiconductor (TSM)	78.41	57-58.5	53-54
Wix.com (WIX)	302.53	137.5-141	127.5-129
Zillow (Z)	76.64	46-48	42.5-44