Search

The news of a new virus variant came out of left field late last week, whacking the major indexes on Friday … though today brought a so-so rally as some think the economic impact of omicron won’t be as bad as feared. We’re not in our storm cellar, but we’re not ignoring the action, either—on the buy side, we advise going slow and starting small, while for names you own, you want to honor your stops and make sure bad situations (losses, etc.) don’t get much worse.

That said, there remain many stocks that are pulling back or consolidating normally despite all the hectic action. Our Top Pick is one of those that already went through the wringer this year, broke out recently and is holding up well

Current Market Outlook


Ever since the mini-blowoff we saw in growth stocks in mid June, the market has been choppy, narrow and tough to maneuver, with many individual stocks going nowhere and a handful of leaders flashing abnormal intermediate-term action. But the character of the market seems to have changed during the past couple of weeks—the day-to-day rotation is gone, leading growth stocks have generally resumed their advances and the major indexes have moved to new highs. It’s still not 1999 out there, of course, and a big factor will be how the market reacts once big investors return from the beach next week. But there’s no question the evidence continues to improve, so we’re bumping up our Market Monitor to a level 8 (out of 10).

This week’s list has a bunch of good setups and great breakouts from growth-oriented stocks. Our Top Pick is Pure Storage (PSTG), which looks like it has recovered from the choppy action of the past few quarters.

Stock Name	Price	Buy Range	Loss Limit
Autodesk (ADSK)	229.00	150-155	137-140
DocuSign (DOCU)	107.98	63-66	55-57
Horizon Therapeutics (HZNP)	49.89	19.5-20.5	17.5-18.5
Nordstrom Inc (JWN)	60.72	58-61	53.5-55.5
Novocure (NVCR)	0.00	38-40	33-34
PetIQ (PETQ)	30.82	35.5-38	30-31.5
Pure Storage (PSTG)	25.64	25-26.5	22.5-23.5
SailPoint Technologies (SAIL)	31.60	29-31	26.5-27.5
Splunk (SPLK)	207.67	117-122	105-108
Williams-Sonoma (WSM)	64.96	66-69	61-62.5

If you invest in the stock market through mutual funds, you know the year-end distributions can be taxable. Here’s how to minimize that.

Stocks have exceeded expectations so far this year. The S&P has rallied 20% from the October bottom and is up over 9% YTD. But there is a plethora of issues in the way of a further rally.

Even if we get past this debt ceiling issue without consequence, there’s inflation and the Fed. There’s also an increasing possibility of a recession later this year or early next year. The market rarely performs well ahead of a recession. A bear market rally should be about out of gas. And it’s difficult to see how stocks can soar into the next bull market until there is more clarity on these issues.

It still makes sense at this point to only buy the defensive stocks that are below the targeted price as well as sell covered calls for income when a stock gets near the top of the recent range.

In this issue, I highlight a covered call in a solid defensive stock that has recently rallied near the high point of the recent range. It’s a terrific way to get a high level of current income at a time when the market isn’t giving much else.

Oil stocks are being ignored by investors, but not by energy company executives who’ve been doing some major insider buying.

Current Market Outlook


The market was due for a pullback after three straight good weeks, and that’s what we’re seeing now as investors ponder 50-50 polls on Britain’s upcoming E.U. vote (a yes vote is generally considered bearish), the Fed’s meeting this week and Sunday’s horrible terrorist attack. The bottom line is that many indexes are approaching their 50-day lines, though few leading stocks have broken down. As always, you should play it by the book: By our measures, the market’s trends are still sideways-to-up, so we’re sticking with our overall bullish stance; dips following strong advances still look buyable. That said, you should also honor your stops and loss limits, jettisoning any stocks that break support. Further market weakness would have us turning cautious, but today we’ll keep our Market Monitor where it’s been.

Encouragingly, we had no problem finding some great-looking stocks. Our Top Pick is Dave & Buster’s (PLAY), which has a newer retail concept that’s working well, and the firm is on a solid expansion pace.

Stock Name	Price	Buy Range	Loss Limit
Dave & Buster’s (PLAY)	57.01	44.5-46.5	41-42
Penumbra Inc. (PEN)	173.25	57-59	53-54
Match (MTCH)	0.00	13.5-14.5	12-12.5
LLL (LLL)	0.00	142-146	132-134
Halliburton (HAL)	0.00	43-44.5	39.5-40
Cornerstone OnDemand (CSOD)	51.01	39.5-41.5	36.5-37
CDK (CDK)	0.00	54-56	51-52
Burlington Stores (BURL)	193.95	61-63	56-57
AMN Healthcare (AHS)	0.00	38-40	35-36
Agnico Eagle Mines (AEM)	79.05	49-51	45-46

The iShares EM Fund (EEM) has popped back above its 50-day line, which is a plus, but the Emerging Markets Timer remains basically neutral, having made no net progress over the past two months.

Today I am fulfilling your dreams and profiling a company that specializes in tax collection. Three cheers for taxes!
Seriously, nobody likes taxes. With the exception of state treasurers. Taxes are just one of those parts of life that you’d prefer to ignore. But if you’re a retailer you can’t do that. In fact, retailers across the U.S. - and the world for that matter – have to devote more and more attention to sales tax compliance.
That’s the big picture trend powering one company’s growth. All the details are inside this month’s Issue. And I promise, it’s going to be more interesting than you think!

There isn’t much not to like about this market. After a strong first half of the year, the market is having a great July. And the rally is broadening out. It’s not just technology anymore.

The market took a jab to the face last week, but it still looks good. It’s still a strong market. But one that is showing some vulnerability.


After a great first half and a strong July, the market pulled back 2% last week, reversing most of the July gains. The culprit was a Biden administration announcement of new AI chip export restrictions to China. That news also combined with a perceived likelihood of a Trump presidency and the possibility of further trade frictions with China. The technology sector, and semiconductor stocks in particular, took it on the chin.

Facing the usual uncertainty and mixed earnings reports, stocks were a bit choppy this week, prompting the Explorer to exit two positions (details inside). Conversely, Novonix (NVNXF) is up over 100% since August and Cloudflare (NET) continues its strong upward trend. This week we highlight the supply-chain chaos and recommend a new company that’s helping its clients untangle and profit from the disruption.

The big-picture market outlook remains very bullish in our view, but there’s no question we’re seeing more potholes, with more stocks and sectors chopping sideways in recent weeks—and then, last week, we saw sellers step up. Of course, today’s bounce was encouraging, but the odds of a volatile rest period are growing given the prior extended run. Right here, we’ll leave our Market Monitor at a level 7, though we’re mostly taking things on a stock-by-stock basis.

The best news from the last week came from earnings season, where there were a large number of positive earnings reactions among names with solid stories and numbers. Our Top Pick is a well-run company, and now growth is strong as AI demand ramps.

The technology sector is on fire. Before the market opened on Tuesday, the sector was up 5% for the past week, 15% for the last month, and 34% YTD. It’s also up more than 2% on Tuesday. What happened?


The outlook for many sector stocks greatly improved last Thursday. AI, or artificial intelligence, had been seen as a huge growth engine going forward as companies invest heavily in the technology. Those growth projections got a huge shot of adrenaline and the AI phenomenon got real when semiconductor company Nvidia (NVDA) reported earnings last week.

Here are some common questions we’re received about Cabot Dividend Investor.

Despite more grumblings out there about how “we are due for a pullback,” stocks continue to hold up. In fact, many growth stocks have done far better than that and are jumping higher on almost a daily basis.

Just because you can’t do the same research a large investment management firm can, that doesn’t mean you can’t make the same trades.

Today I’m removing Delta Air Lines (DAL) from the Growth Portfolio. The company’s earnings outlook has deteriorated to an expectation of EPS declining 1% in 2016, and the price chart has not improved since I put the stock on Hold two months ago.