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Just when you start to think this coronavirus crash will never end—it will. And our goal is to have a portfolio of healthy stocks when that day arrives. In the meantime, our selling has increased our cash position significantly—and there are two more recommended sales today.

As for new buying—there aren’t a lot of healthy stocks to choose from, regardless of whether you’re looking for low-risk or high-risk, but one that stands out is today’s recommendation, which benefits from the booming growth in working-from-home (WFH).



Full details in the issue.

We’re beginning to see some short-term signs of spring in the market, first via some resiliency in the broad market, and now from buyers actually stepping up to the plate. We think there’s a decent chance the market has found a workable low, and we’re encouraged to see a decent number of growth stocks bounce back. All of that is good to see, but the primary evidence -- the trends of the market and most stocks --are still pointed down. We’re not ruling out a nibble or two if the buyers keep at it, but it’s best to remain defensive until we see more than a modest bounce.

In tonight’s issue we talk about one group that has seen some very big-volume buying of late, a sign big investors were eager to jump in on weakness. And we also review our remaining positions and a few other top-notch names we think could put on big runs once the market enters a new uptrend.

The market has crashed during the past three weeks, with the major indexes down 25%-plus and many stocks down much more than that. We’re seeing some truly historic oversold extremes, which tell us a bounce could get underway at any time, but we’re also not seeing the market able to bounce from those extremes. The bottom line is the same as it’s been since late February: The sellers remain in control of the market and the vast majority of stocks, so we’re holding plenty of cash and paring back as need be.

Bigger picture, the market (and the country) will get through this pandemic in time, so it’s important not to lose your cool. There will be big money to be made down the road, and we’re on the hunt for stocks showing some minor relative strength and studying up on some new stories (a couple of which we highlight in the issue). But the goal is to get to the next uptrend in one piece--right now, you should respect the action and remain defensive.

There’s obviously a lot of uncertainty when it comes to all earnings forecasts for 2020, and it’s pretty much a given that this stock itself will miss initial forecasts in Q1. But the company looks poised to be one of the blue-chips best positioned to rebound whenever the virus storm passes.

Amazon and others have a lock on the market for large-scale e-commerce, but this stock leads a different niche, as it’s the go-to place for buyers (46 million of them at year-end, up 16% from a year ago) and sellers (2.7 million, up 20%) of homemade, handcrafted goods.

This morning’s market crash will go down in history as a big one—biggest by point drop and one of the biggest by percentage drop. But this is no time to panic. Instead, it’s time to recognize that the market is increasingly offering its wares at bargain prices, and all you need to do is have cash on hand when the climate improves.
For our portfolio, that means selling one more stock today, Endava (DAVA).
In the meantime, Cabot analysts continue to find stocks that are attractive for one reason or another and today’s featured stock is one of them—a leading chipmaker with great prospects as the world goes increasingly online and digital.

Full details in the issue.

Bottoms bring bargains, but identifying bottoms is devilishly difficult—which is why it’s better not to try but to simply reduce your risk-taking until the environment is more constructive. Last week’s recommendation of Zoom Video is off to a great start (though risk in the stock is higher now), and this week’s recommendation is a smaller Software-as-a-Service (SaaS) company with decent growth prospects in the corporate finance sector.
As for the current portfolio, we now hold eleven stocks out of a possible twenty, and many of them look like they are building a bottom here. Thus the only change is a downgrade of our weakest stock, Brookfield Infrastructure Partners (BIP) to Sell



Full details in the issue.

As the bear market continues and stocks swing wildly we have some sage advice regarding what to expect over the coming weeks. The first part of this months Issue is all about understanding the environment. We’ll get into stock talk tomorrow.

Market volatility and weakness accelerated this week through Wednesday though U.S. Senate passage of a “bailout” measure may lead to a rebound on Thursday. In general, you should sell into strength and cautiously buy into weakness. Our emerging market signal is decidedly negative with the EEM down to 30 from a mid-January high of 46. It has not been at this low a level since early 2016 and got down to 20 at the bottom of the global financial crisis in 2008. Today we do a little selling, increase our S&P 500 Inverse ETF position marginally and add JPMorgan (JPM) to the watch list.

China was the first country to be devastated by coronavirus, and although the pandemic there is not completely over (and there are doubts about the accuracy of that country’s daily virus count), it’s almost surely on a downhill swing. That’s helped the Shanghai composite to fare better than the S&P this year, and not surprisingly, many (not all) Chinese stocks have shown some interesting resilience during this crisis

After a strong rebound early in the week, markets sold off a bit over the past two days as investors battle uncertainty on the virus and economic impact fronts. We remain positive on our seven Cabot Global Stocks Explorer stocks and will put some of our 35% cash position to work today with a high quality Singapore bank many of you are familiar with. Our emerging market signal stays negative.

Also, I have a special alert regarding Luckin Coffee (LK), which is down very sharply this morning.

With COVID-19, plunging oil prices, credit/health worries and central bank printing, it’s a time of maximum uncertainty—and such uncertainty plays right into the hands of gold, which has popped back toward multi-year highs. The world’s second-largest gold mining company, is well positioned to benefit from this strength.

This month we’re looking past all the current uncertainty in the market at a profitable, young company that should hold its own during this rough patch then accelerate growth into the back half of 2020 (assuming the pandemic eases as we move into the summer months).

The company offers intelligent identity solutions for global enterprises. These solutions are strategic imperatives because they help workers do their job from anywhere and help companies streamline customer experiences.



It’s not the type of stock that’s likely to surge on expectations of an immediate surge in demand, like Zoom Video (ZM) or Teladoc (TDOC). But with 115% net revenue retention the company should grow with current clients in the near-term, then grab its fair share of new business once economic activity picks up again.



We start today with a half position given the market conditions. All the details are inside.

After a better than 30% plunge at record speed, the market has staged an epic rally from the bottom. The S&P 500 has moved more than 20% higher from the lows in late March. It is likely sensing an end to the economic shutdown sooner rather than later.
That’s good news, and the market usually gets it right. But even if the economy opens back up in May and June, there is a good chance of more trouble ahead. Terrible earnings and economic reports will come and consumers will be wounded for a while.


While I believe the economy and the markets will recover, there is a good chance of another down leg in the market. In this issue, I seek to take advantage of that possibility by targeting great companies to buy and below current prices. These are fantastic companies to own that are only ever cheap in bear markets like this.


The market will come back, but probably not yet. Taking advantage of another down move is a fantastic way to profit from the market’s eventual recovery.