Search

This month we’re jumping into a highly specialized financial services company that helps immigrants send money to friends and families overseas.

You can think of it as the modern version of Western Union (WU). But there’s more to the story than that. Starting with a vision that’s a lot more about helping customers than overcharging them.

The hook is that revenue growth is off the charts. And it’s profitable!

All the details are inside this month’s Issue.

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.

WHAT TO DO NOW: Remain cautious but stay alert. The five-week drubbing for the broad market and many growth titles has caused sentiment to really drop (a good thing), and this week’s bounce (as interest rates dipped) is intriguing … but at this point, we’ve seen one decent day of action after five tough weeks, so we’ll stand pat with our large (60%-ish) cash position and watch closely to see how this rally develops.

The market is in a tough spot, and has been for about a month and a half. It doesn’t mean the bull market is on borrowed time – remember, we had a much deeper correction in July and August, only to have stocks roar to all-time highs by Labor Day – but it does make for a tricky environment in the short term. A news-heavy week (inflation data, the start of earnings season, two big industry conferences) could potentially help turn the tide. But right now, the bears are in control. One subsector that has mostly avoided the recent selling is the airlines. So today, we add one of the stronger airline stocks, courtesy of Cabot Turnaround Letter editor Clif Droke.

Details inside.

The market has regained its footing, and here comes Nvidia (NVDA).


All eyes are on the Nvidia earnings report scheduled to come out after the closing bell on Wednesday. It was an Nvidia earnings report two years ago that featured a massive demand for artificial intelligence products and services that sparked the AI craze and ignited a powerful rally in technology stocks.

It’s been a great market for a while. But it has leveled off since the middle of May. I expect more of the same going forward.

The S&P 500 pulled back in early April after a five-month rally as sticky inflation soured the interest rate narrative. The index then recovered to new highs in the middle of May on an improved interest rate outlook. But stocks have since leveled off as the interest rate outlook got stuck in the mud.

The market has been good for a while. The S&P 500 is up roughly 11% YTD and about 30% since late October. But I expect choppier waters ahead.

The main driver of the S&P has been the technology sector, which is being driven higher by the artificial intelligence catalyst. Most of the rest of the market seems to be at the mercy of the interest rate narrative. And that seems to change every couple of weeks nowadays.

Current Market Outlook


Earnings season is always important, but it looks even more so this time—many growth stocks have been sitting around for the past two to three months (some even longer), while a decent number of cyclical names have been mostly up-and-down for the past four to five weeks. Thus, a collection of positive, powerful reactions to earnings could result in a bunch of good-looking buying opportunities … but, as always, we have to wait to see that happen before pouncing. Just going with what’s in front of us, nothing much has changed, with a lot of good setups but also a lot of selling in names that approach their old highs. Once that changes (due to earnings reports or anything else), it will be time to get more aggressive, but right now we’re sticking mostly with a buy-on-dips approach and waiting for buyers to really flex their muscle.

This week’s list has a broad mix of names, though most are more cyclical or turnaround plays. Our Top Pick is Steel Dynamics (STLD), which just leapt to new highs out of a tight area on huge volume. You can start a position here or (preferably) on weakness.

Stock Name	Price	Buy Range	Loss Limit
Burlington Stores (BURL)	321	312-318	285-290
Floor & Décor (FND)	113	109-113	97-100
Goldman Sachs Group, Inc. (GS)	343	335-345	305-310
Harley-Davidson Inc. (HOG)	48	45-47	40.5-41.5
The Middleby Corporation (MIDD)	181	176-182	160-163
Okta, Inc. (OKTA)	285	275-282	248-252
Qorvo (QRVO)	199	194-200	173-176
Seagate Technology (STX)	93	85-89	76-78
Steel Dynamics (STLD)	55	52.5-55	46-47.5
Tractor Supply Company (TSCO)	191	183-187	167-170

The sellers continue to come out of the woodwork, with a generally weak environment hitting a big air pocket to end last week, decisively dragging all indexes and the vast majority of individual stocks lower—we’re even seeing the selling spread to the commodity arena, with even the impenetrable defensive areas taking hits. At this point, the major indexes are retesting their January-March lows, and we’re still seeing positive divergences under the surface, but as we’ve been saying for most of the past few months, you have to see it to believe it—right now, there’s no question the trends are pointed down, so we advise staying mostly on the sideline. Our Market Monitor is now at a level 4.



This week’s list is a potpourri of names that are holding well, including some that have lifted thanks to huge earnings beats. Our Top Pick is one of those and, if all goes well, could be part of a new group move.

Current Market Outlook


The selling pressure that we saw emerge two weeks ago really picked up last week, with the vast majority of leading growth stocks cracking intermediate-term support. That said, the rest of the market has refused to follow the Nasdaq’s lead; there’s been some damage and plenty of wobbles, but so far the broader indexes have held up, and buying in many cyclical areas has picked up. Just going with the evidence, we’d be shying away from growth stocks while looking for opportunities in the strong sectors should they rest or shakeout. Our biggest thought, though, is that making money has become much harder during the past month and a half, with wild moves, rotation and volatility, so now’s a time to go slow and give some thought to capital preservation until we see the buyers really flex their muscles. We’re moving our Market Monitor to a level 5.

As expected, this week’s list is heavy on cyclical and re-opening themes, with many names showing excellent action. Our Top Pick is Marriott Vacations (VAC), which has soaring earnings estimates and a stock that just lifted out of a three-year base on huge volume.

Stock Name	Price	Buy Range	Loss Limit
Abercrombie & Fitch (ANF)	32	28.5-30.5	24.5-25.5
Affiliated Managers Group, Inc. (AMG)	139	134-140	119-123
Applied Materials (AMAT)	106	102-107	92-94
Diamondback Energy (FANG)	84	76-80	66-68
Lyft (LYFT)	64	58-62	51-53.5
Marriott Vacations (VAC)	184	177-183	154-158
The Middleby Corporation (MIDD)	166	162-167	144-147
Nucor Corporation (NUE)	66	63-65	56.5-57.5
PDC Energy (PDCE)	38	34-36.5	28-29.5
Texas Roadhouse (TXRH)	95	91.5-94	82.5-84

The story remains mostly the same: When it comes to rubber-meets-the-road evidence, nothing has changed—the intermediate-term trend of the major indexes remains down, and growth funds and individual stocks are in the same boat. Until some of that changes, it’s telling you the bulls are swimming upstream, so it’s best to be defensive. However, we also don’t want to ignore many secondary measures that are showing some encouraging action, including the indexes holding above their recent lows and increasingly negative sentiment. The pieces are in place for some sort of turnaround, but we’ll have to see it happen before taking action.


This week’s list is again heavy in commodity-type names, though a few other areas popped up as well. For our Top Pick, we’re going with a growth-y name that’s holding well—it’s probably the best-looking non-commodity stock in the market today.

The rotation into the year’s underperformers that started last week has continued, while taking on some aspects of a generic risk-on trade. Financial stocks have outperformed all others since our last update, and tech stocks are up again this week. Materials and industrials also continue to do well.

Stocks keep rolling into spring on the heels of an excellent first quarter. Can the next three months match the previous three (or five)? Probably not. But bull markets don’t normally die of old age, and there are plenty of reasons to believe stocks will be higher by the end of Q2. With that in mind, today we add another beneficiary of artificial intelligence, though a company that’s not entirely dependent on AI. Instead, it’s one that’s found new life thanks in part to AI – similar to Microsoft (MSFT) when we added it to the portfolio a year ago. It’s been in Carl Delfeld’s Cabot Explorer portfolio for months, and today we welcome it to Stock of the Week.

Oil prices have rebounded nicely from historic lows. As energy stocks rise, these three oil ETFs are an efficient way to play the rally.