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In today’s letter, I’m adding a consumer staples stock to the Safe Income Tier, positioning the portfolio to take advantage of a possible rebound in the sector. If it doesn’t come to pass, we’ll still be happy to own the stock, a Dividend Aristocrat with near-perfect Dividend Safety and Growth scores.
Elsewhere, I’m selling half of a laggard in the Dividend Growth Tier, and have included earnings expectations for all of our stocks. And at the end of the issue, you’ll find a fresh explanation of a tried-and-true method for boosting your yield.

The market’s main trend remains up, with many major indexes hitting new highs in recent days—and many of our stocks doing the same. Those are the stocks you should hang onto tightly—because there’s no telling how far they’ll run.

Current Market Outlook


The major indexes didn’t do much last week, as big investors seemed content to wait for the deluge of earnings report in the days ahead to hit the wires. We continue to think the majority of the evidence is positive (trends are up, most leading stocks are in good shape), which is why we’re still bullish; the odds continue to favor higher prices down the road. But, clearly, it’s not 1999 out there—relatively few stocks are hitting new highs and we’ve seen a lack of upside follow-through on the names that did reach virgin turf. Thus, be sure to pick your spots and to have a plan as earnings season ramps up—our guess is that the market’s reaction to the reports of leading stocks will determine whether a new leg up is underway or whether the market has more consolidating to do.

This week’s list is again heavy on growth stocks, though a couple of turnarounds make the list, too. Our Top Pick is one of the first earnings winners of the season—V.F. Corporation (VFC) is a steady-eddy type of company that just lifted from a six-month consolidation after topping estimates.

Stock Name	Price	Buy Range	Loss Limit
Green Dot (GDOT)	85.11	79-82	72-74
Keurig Dr Pepper (KDP)	25.35	23.5-25	21-22
Madison Square Garden (MSG)	298.38	309-319	280-287
Sarepta Therapeutics (SRPT)	120.93	125-135	109-115
SiteOne Landscape Supply (SITE)	98.49	87-90	80-82
Square, Inc. (SQ)	91.04	67-70	59-61
Trex Company (TREX)	117.56	65-67	60-61
TripAdvisor (TRIP)	55.14	57.5-60	52-54
VF Corp. (VFC)	92.46	89-92	83-84.5
Zogenix (ZGNX)	46.50	55-58	48-50

While the market mourns the misfortunes of poor Mark Zuckerberg, we actually have a little ray of light in emerging markets, as the Cabot Emerging Markets Timer is showing a very new green light. New buy signals are pretty delicate, but we’re taking this one seriously, doing a little new buying and shifting another stock from a Hold to a Buy rating. As the artillery of the trade war rumbles, it’s nice to have something to celebrate. Read on for details.

With the market on edge we’re going with a slightly larger company than normal with this month’s Cabot Small-Cap Confidential selection. But we’re not being overly conservative. Shares of this software stock have been climbing steadily after a breakout move in May. The reasons? Growth is reaccelerating, profit margins are climbing, and the proportion of recurring revenue is going up.

The overall bull market remains in good shape, with most indexes and stocks trending up. But earnings season, which is now underway, will likely have a big impact—even today we saw lots of distribution among growth stocks ahead of their reports this week and next.

Current Market Outlook


The strength that began around July 4 continued last week as big investors returned to their desks, pushing most major indexes to marginal new recovery highs. There’s still plenty of news-driven action (volume was light even through last week), and earnings season, which is beginning to get underway in earnest, is sure to have an impact. But the intermediate-term trend (which was iffy in late June) has rejoined the longer-term trend on the upside, and many leading stocks have either snapped back to new highs or are building sound launching pads. We’re always on the lookout for renewed selling pressure, but the evidence has improved, so we’re moving our Market Monitor back to a level 8.

This week’s list is again heavy on growth stocks, though there are a couple of special situations presented as well. Our Top Pick is ZTO Express (ZTO), a young, volatile Chinese stocks with huge growth and a very strong chart. Start small, ideally on dips.

Stock Name	Price	Buy Range	Loss Limit
Energen (EGN)	77.04	72-75	65-67
Etsy (ETSY)	112.97	40.5-43	35.5-37
GDS Holdings Limited (GDS)	80.15	41.5-43.5	37-38
Grand Canyon Education (LOPE)	121.03	114-117	106-108
Madrigal Pharmaceuticals (MDGL)	234.07	270-290	230-240
Palo Alto Networks (PANW)	236.92	212-217	198-201
Roku, Inc. (ROKU)	150.46	45.5-47.5	40.5-42
Sonic Corp. (SONC)	35.22	34-36	31.5-32.5
Workday (WDAY)	194.88	130-134	121-124
ZTO Express (ZTO)	28.84	21-22	18.5-19

The shift from Wednesday’s pullback to today’s nice market bounce is just par for the course as investors scramble to figure out the fallout from alarming headlines and conflicting predictions. It’s not an easy market to navigate, and the portfolio is dealing with it by holding a heavy (50%) cash position and cutting back on most buying. But we’re still finding attractive stocks for our watch list, and will be ready when we finally get a green light from the Cabot Emerging Markets Timer.