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In the past week or two we’ve written that near-term risk is elevated for a few reasons (complacent sentiment, indexes extended to the upside, late September is almost always tricky, etc.), and this week we saw some of that come home to roost—after a good Monday, the indexes pulled in and a few highfliers hit air pockets while the broad market took some hits, too.

As we roll into the fourth quarter, it’s mostly the same story for the stock market—the indexes continue to grind higher, led by the big-cap indexes (up more than 1% on the week coming into today), though all the indexes were in the black coming into Friday.

The standout action this week has been in tech stocks, and it hasn’t been good. With the Nasdaq starting off the week with a big drop and large-/mega-cap leaders like Amazon (AMZN), Microsoft (MSFT) and Netflix (NFLX) moving materially lower as the week progressed it has felt somewhat disheartening to those with heavy tech exposure.

Happy New Year to everyone - I wish you and your families a healthy and prosperous New Year. As we turn the page to 2022, let’s review some trends before getting to a company with a new device to shake up and lower costs in healthcare at home and around the world.

In today’s note, we discuss pertinent developments and institutional ratings changes for some of the stocks in the portfolio, including Alcoa (AA), Duluth Holdings (DLTH), SLB Ltd. (SLB) and the SPDR S&P Retail ETF (XRT).

The fabled “Santa Claus Rally” failed to appear this season, prompting concern for the early part of 2025 among many investors. We discuss what it entails for our investment approach.

Old-school value managers like Benjamin Graham and Warren Buffett used to have a funny way of describing their investing style.

They said value stocks were like cigar butts on the sidewalk that had a few puffs left in them.

I’d like to offer an updated version of this metaphor. I think cannabis stocks have a few more puffs left in them between now and the end of the year.

Cannabis names are thoroughly unloved and abandoned once again.

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Centuri Holdings (CTRI), GE Aerospace (GE), Intel (INTC), Pan American Silver (PAAS) and Paramount Global (PARA).

Intel (INTC) is reportedly mulling a sales of its network and edge businesses as part of an ongoing focus on streamlining the company.

Pan American Silver (PAAS) stands to benefit from recent gold-to-silver ratio readings.

With the arrival of earnings season and perhaps some indications that the 10-year US Treasury yield will peak at around 5%, the broad stock market appears to have found at least momentary stability. Whether this is just another “eye of the storm,” or a true end to the bear market, is unknown and unknowable.

Home Depot stock has been thriving at a time when most retail stocks are wilting. Can it keep the rally going? Yes, and here are three reasons why.

Most brick-and-mortar retail stocks are struggling these days, but one surprising retail stock is bucking the trend to online shopping.

In the August Issue of Cabot Early Opportunities, we talk about what happened to the summer stock rally and dig into five companies selling everything from coffee to sporting goods to mobile advertising tools.

Enjoy!

Friday’s big surge upward—200 points for the Dow—was a clear bullish sign, a reminder that there’s lots of cash sitting on the sidelines waiting for a reason to get back into the market, and a reminder that when those billions of dollars eventually do find their way back into stocks, prices will skyrocket! Yet it’s been hard for the market to maintain a strong uptrend as the tug-of-war between stocks and bonds continues. And it’s not the yields keeping people in bonds these days, it’s simply fear. Thus our Market Monitor remains in the neutral zone—which means while it’s fine to target some attractive situations, you should keep some cash in reserve until the broad market is more supportive, and you should continue to practice risk management. That means buying on dips, not at new highs. It means taking some profits off the table when they come easily. And it means cutting losses short when things go against you.

We’re still very enthusiastic about the homebuilding sector, and our Editor’s Choice this week is Ryland, a homebuilder that’s appeared here this year twice before and has great potential to keep on climbing. Also attractive are companies in fertilizer, energy, electronic health records and more. Enjoy the issue and enjoy the summer!

Stock Name	Price	Buy Range	Loss Limit
Agrium (AGU)	0.00	87-90	-
Athenahealth (ATHN)	0.00	78-80	-
Cabot Oil & Gas (COG)	0.00	38-41	-
CLGX (CLGX)	0.00	19-20	-
Marathon Petroleum Corporation (MPC)	0.00	43-46	-
Ryland (RYL)	0.00	23-26	-
Spirit Airlines (SAVE)	57.03	21-23	-
TripAdvisor (TRIP)	55.14	42-44	-
Weyerhaeuser (WY)	0.00	22.5-23	-
Zillow (Z)	76.64	39-41	-

Tesla’s goal is big—to be the leading force in the movement to obsolete the internal combustion automobile.

The S&P 600 Small Cap Index, which hadn’t broken above 1,000 for most of 2019, is now comfortably above that level and appears to be heading higher.

Current Market Outlook


The holiday-shortened week was a relatively quiet one, with most indexes and sectors mostly meandered in tight ranges. After the prior two and a half weeks of constructive action, we consider the lack of selling a positive; to this point, the bears haven’t really come around for many names despite some decent rallies and a few breakouts. But now the real test will begin—if the former leaders that have run right into some tough resistance can hold firm, if recent breakouts can build on their gains and fresh breakouts can emerge, this rally could gain steam ... but if the sellers return, things could go back in the soup within a few days. Right now, we’re still in the trust-but-verify mode of the rally, slowly increasing exposure but also keeping a close eye to see if cracks show up.

This week’s list has a wide array of stocks, including a few cyclical names that are pushing up after a few weeks of consolidation. Our Top Pick is Marathon Oil (MRO), which showed some real power last week as oil stocks came to life.

Stock Name	Price	Buy Range	Loss Limit
Apellis Pharmaceuticals (APLS)	59	54-56.5	48-49.5
Callon Petroleum (CPE)	48	45.5-48	40-41.5
Discover Financial Services (DFS)	124	118-122	108-110
General Motors Company (GM)	63	62-64	56-57
Jabil Inc. (JBL)	58	55.5-57	51-52
Logitech (LOGI)	133	126-130	112-115
Marathon Oil (MRO)	14	13.0-14.0	11.5-12.0
SeaWorld Entertainment Inc. (SEAS)	58	56-58.5	50-51
United Parcel Service (UPS)	213	209-214	193-196
Vale S.A. (VALE)	22	21.5-22.5	19.3-19.8

The consensus opinion right now is that the market is strong because it’s looking favorably on the prospects of a clear-cut winner in the upcoming presidential election and that the likelihood of another round of stimulus is going up.

WHAT TO DO NOW: Remain cautious, though remain flexible. The market’s initial bounce this week was good to see but it didn’t offset the recent weakness, and today’s Meta-inspired selloff didn’t help the cause. All told, our Cabot Tides remain negative, and most growth stocks are still in rough intermediate-term shape—though the long-term picture is still positive. After selling the rest of our Arista (ANET) position last Friday, our cash position is 44%—we’ll sit tight tonight with our remaining names and our cash and see how earnings season continues to play out.

There’s been a jump in volatility among individual stocks and some sectors (gold, oil, retail investor favorites, etc.), but at an index level, things continue to be pretty smooth. The S&P 600 SmallCap Index is trading higher than it was a week ago.

There were a lot of headlines over the last couple of days about the emerging small-cap rally.

That’s because small caps surged on both Tuesday and Wednesday after a somewhat cool CPI inflation report drove expectations for a 25bps September rate cut to 99%.

On Wednesday, the S&P 600 SmallCap Index jumped 2.0%, trouncing the 0.3% rise in the S&P 500 Index.