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While I don’t think we just saw the end of the run-up in technology stocks, I do think investors should begin to pare back their tech holdings and do these two things: raise cash, and buy undervalued stocks in other sectors.

Growth stocks were pummeled today, reversing yesterday’s rebound and driving the Nasdaq to its 50-day line. At day’s end, the Dow lost 168 points and the Nasdaq closed down 90 points.

Our trend following indicators remain bullish and most growth stocks are still in good shape, so we’re sticking with our current stance. Our only change tonight is that we’re placing one of our stocks on Hold.

There’s been some turbulence in our portfolio this week, but nothing we haven’t experienced at some point in 2017. Small caps are up 1% from last week, and would have been up more if not for another bout of selling in technology stocks yesterday.

With the longer-term trend clearly up and most leading stocks holding above support (and some pushing toward new highs), we remain mostly bullish.

I’ve been watching for opportunities to add companies to the Cabot Undervalued Stocks Advisor portfolios that are outside the financial, energy and construction sectors and industries. Today, I’m adding an aerospace manufacturer to the Growth Portfolio as a Strong Buy.

We still see more positive than negative evidence, though the gap has shrunk a lot during the past week. At this point, we still think the onus is on the bulls to step up after this three-and-a-half-week retreat. Until they do that in a decisive fashion, you should limit new buying to small positions and, of course, honor your stops for any stocks that are weakening.

As expected, the Federal Reserve reported on the capital plans of 34 U.S. banks yesterday, following the annual stress test. Of the dozen banks that I reviewed, here are the best stocks to buy today:

Oracle (ORCL) has reached its Minimum Sell Price and should be sold. Kroger (KR) is expected to flounder in the 21.5 to 23 area for an extended period of time so it’s a Sell too.

The iShares EM Fund has been trading effectively sideways since the middle of May, and that has kept the Emerging Markets Timer above its moving averages. We have one portfolio move tonight.

Not much has changed with the market environment—the overall market is good, not great, with most indexes above their 50-day lines and the S&P 500 making some progress. The action of the Nasdaq and leading growth stocks, however, remains outstanding, as they continue to race up their charts with minor pullbacks.

Current Market Outlook


If you look at the weekly charts, the trends of the major indexes and most stocks are pointed up—i.e., this is still a bull market, and the trends and other factors (such as the unusual strength seen two weeks ago) portend higher prices down the road. That said, there’s no question the environment remains extremely news-driven (mostly with vaccine news, but also economic reports and government policy outlooks), with plenty of crosscurrents depending on the day. Encouragingly, today’s vaccine news didn’t dent the growth leaders like it did a week ago, which is a step in the right direction. Net-net, we remain optimistic, but the details remain vital; getting decent entry points and position sizing correctly (not too big so you can handle the swings) is key, as is focusing on stocks (cyclical or growth) that have shown good-volume support of late.

This week’s list has something for everyone, including stocks with fresh growth stories as well as some stodgy, cyclical names. Our Top Pick is Lam Research (LRCX), which looks like a leader in the resilient chip equipment sectors.

Stock Name	Price	Buy Range	Loss Limit
Albemarle Corporation (ALB)	128.90	121-126	106-109
Canopy Growth (CGC)	24.77	23.5-25	19-20
Lam Research (LRCX)	439.40	415-435	375-385
Marvell Technology Group (MRVL)	43.29	41.5-43.5	37.5-38.5
Norfolk Southern (NSC)	247.09	235-245	215-220
ShockWave Medical, Inc. (SWAV)	94.95	87.5-91	75.5-78
Snap Inc. (SNAP)	39.08	37.5-39.5	31.5-33
STAAR Surgical (STAA)	79.31	76-79.5	67-69
The Timken Company (TKR)	73.04	69-72	61-62.5
Upwork (UPWK)	33.08	29.5-31	24-25

The huge market rally earlier this week gives us a taste of what lies ahead on the other side of this pandemic. The lockdowns will end and the economy will boom. Many stocks that have not participated in the market recovery will come alive.

While the market indexes have recovered, many stocks and sectors have not. Technology may be booming but energy, travel and hospitality, finance and other industries are still wallowing in bear market oblivion. It is these stocks that came alive this week and they should benefit when the virus fades and the recovery gains full traction.



It’s time to invest for the other side of the pandemic. In this issue, I highlight one of the very best income stocks in the history of the market. While the company has remained profitable, it has experienced a disproportionate selloff. The stock is still cheap but starting to move ahead of the next phase of this recovery.

The market continues to strengthen, and thus you should become more heavily invested; it’s possible this strength could run to the end of the year!

But predictions aren’t necessary; what’s necessary is listening to your stocks and acting accordingly.



Today, doing exactly that leads us to sell one stock, so that we can make room for today’s recommendation, a company that’s built one of the biggest brands in the world.

The potential vaccine and mixed election results pushed the market forward this past week, but the acceleration of the pandemic and near-term uncertainty in Washington pulled it back. It is a time to be a bit cautious. Emerging markets are showing some strength, as our timing indicator turns decidedly positive. Rotation into international stocks may be coming.

Alibaba (BABA) is a good example of the push and pulls. The Chinese e-commerce giant raked in a record-breaking $56 billion in sales in the first 30 minutes of China’s Singles’ Day on Wednesday, much higher than the $38 billion total in the entire 24-hour period last year. In comparison, Amazon booked $10.4 billion during its two-day Prime Day event last month. Yet, Alibaba’s stock was down sharply for the week. Find out why inside, where you can also learn about this week’s new SPAC recommendation.

There remain a ton of crosscurrents and news-driven action out there, but after a vicious rotation a week and a half ago, growth stocks have firmed up and the overall market is in good shape. Thus, we’re starting to put some money to work, averaging up in one of our stocks and starting a half-sized position in another. And if the good vibes continue, it shouldn’t take us long to get heavily invested.
In tonight’s issue, we review all of our stocks, talk about a couple of rare, blastoff-type measures that flashed that bode well for the major indexes and highlight a couple of smaller names in one growth sector that have great stories, numbers and charts.

Current Market Outlook


The market had been under some pressure since early October, but last week was a different animal, with the sellers coming out of the woodwork and cracking numerous leading stocks and major indexes. Longer-term, this is still a bull market, with the past two months being a (very) tedious up-and-down consolidation period following the huge March-August advance; we still think the next major move is up. Near-term, though, stocks are back in the soup, and while the headlines will be coming fast and furiously this week (earnings and the election), the onus is on the buyers to step up. Until that happens, we advise a cautious stance—holding a good chunk of cash makes sense, while keeping new positions on the small side and honoring your stops and loss limits. We’re pulling down our Market Monitor another notch to a level 5.

Meanwhile, it’s easiest to spot strength in a down market, so the next couple of weeks should be telling. This week’s list has a broad array of stocks and sectors on it, and our Top Pick is Pinduoduo (PDD), one of many resilient Chinese names that’s actually picking up steam while the market sags.

Stock Name	Price	Buy Range	Loss Limit
Bunge Ltd (BG)	57.98	56-58.5	49.5-51
Cloudflare (NET)	51.96	49-52	42.5-44.5
Five9 (FIVN)	144.12	136-140	124-127
Martin Marietta Materials (MLM)	270.94	263-273	238-243
Mattel, Inc. (MAT)	13.95	13-13.5	11.5-11.8
Novocure (NVCR)	112.15	110-115	99-102
Pinduoduo (PDD)	91.62	86-90	77-79
Pinterest (PINS)	58.56	53-56	45-47.5
Quanta Services (PWR)	66.45	62-65	55.5-57
Ultragenyx Pharmaceutical Inc. (RARE)	95.53	90-94	83-85

In November’s Issue of Cabot Early Opportunities we discuss the supposed rotation from growth stocks into value stocks and the underlying reasons, which we think could drive erratic market action in the coming weeks. Despite the somewhat conflicting trends out there, we serve up a menu of compelling opportunities spanning Medtech, manufacturing, software and even health and beauty products, which we can all use a little of these days!