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Inflation stays high, infrastructure week arrives, and Rivian stock surges while markets sold off a bit yesterday. The weakness yesterday halted some good rallies among Explorer stocks. We continue to explore new ideas and for this week’s recommendation, we go into the Cloud for a familiar name.

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.

In choosing today’s stock, I leaned conservative, and found a dividend-paying stock with strong growth prospects. When I selected it yesterday, the stock was at the bottom of its recent range, but today it shot up to near the top of that range. It’s still a good story, but I’d like it better where it was yesterday.

Note: To accommodate our Thanksgiving week schedule, there will be no issue of Cabot Stock of the Week published next week. The next issue will be published November 28.

As for today, the broad market’s long-term trend remains up, and today my recommendation is an undervalued stock recommended by Azmath Rahiman, chief analyst of Cabot Benjamin Graham Value Investor.

Since the effective federal hemp-derived THC ban was approved in the latest budget deal, cannabis investors have taken the change as a sign the Trump administration is no longer serious about rescheduling.

This is probably wrong. Cannabis sector CEOs closer to the rescheduling process than most investors think the sector-changing reform is still on track.

Your finances touch almost every aspect of your life in some way or another, and that can make tackling them feel overwhelming. This month, we’ll lay out a monthly “to-do” list that can help you save money on taxes, set aside more money, and plan for the future. Plus, the monthly breakdown will help make sure you won’t miss financial deadlines that you never saw coming.

Volatility is back, with the VIX spiking above 20 for the first time since early August and above 21 for the first time since June.

Tariffs are the reason. Specifically, escalating tariff rhetoric between the U.S. and China, which spooked the market into its worst one-day selloff since April last Friday, and has prompted wild intraday swings every trading session since. So far, the damage to the major indexes has been fairly limited (the S&P 500 is less than 2% off its highs, as of this writing), but under the surface, a few yellow flags have emerged, including the number of 52-week lows among NYSE-listed stocks topping the magic number of 40 (it’s up to 63) that typically precludes a more pronounced market pullback. We’ll see how much the just-underway third-quarter earnings season can act as a yin to tariffs’ yang and hopefully provide a relatively high floor for stocks in the coming weeks. As I wrote in this space last week, that may depend on whether companies can cross the relatively high bar of 8% earnings estimates.

Though the current market rally is just two weeks old, we’re already beginning to see some big-volume upmoves in the most fundamentally and technically attractive stocks in the market … a sure sign that institutional investors are getting active on the buy side. While this week’s Fed meeting will almost certainly have a big say in the market’s near-term direction, the evidence right now tells us the bulls are re-taking control. And that means you should be putting some money to work! The last couple of Top Ten Reports have highlighted many leaders, and this week’s batch has plenty of interesting stories, big and small, new world and old world. Our favorite of the week is Gafisa (GFA), a Brazilian homebuilder that came public just a few months ago. It’s just now lifting from its first basing structure on good volume, but be aware the shares are somewhat thinly traded, so the stock can be choppy.

Stock Name	Price	Buy Range	Loss Limit
BIDU (BIDU)	0.00	350-390	-
BUCY (BUCY)	0.00	88-92	-
CCC (CCC)	0.00	14-16	-
DE (DE)	0.00	84-87	-
EDU (EDU)	0.00	77-85	-
FCSX (FCSX)	0.00	40-45	-
GFA (GFA)	0.00	37-40	-
MLNM (MLNM)	0.00	14-16	-
RTP (RTP)	0.00	440-475	-
WDC (WDC)	0.00	29-32	-

This past Wednesday we published the December edition of the Cabot Turnaround Letter. Our first article, “Year-end Selling: Turning Other’s Losses into Gains,” describes three reasons why many investors, including highly experienced professional managers, tend to sell weak stocks toward year end without regard to price or value – and how this can produce quick profits for nimble investors. We include six stocks that look well-positioned to bounce.

The market has entered a rough patch, especially for tech and stocks that have not been demonstrating relative strength. Explorer stocks are all over the map, with Coupa (COUP) and Cloudflare (NET) showing some weakness, many positions holding steady, and Novonix (NVNXF) up 25% in the last week.

The sooner you identify and eliminate the greatest risk factors in your investing, the sooner you’ll be on the path to increased profits.

Current Market Outlook


Last week’s issue was titled “Next Few Days Should be Key,” and we think they were—in a bullish way. The market’s strong snapback to new highs (in the indexes and many leaders) made the prior dip look like a shakeout, which generally bodes well. That said, the action didn’t erase all the yellow flags out there, either, as sentiment is bubbly, many stocks are extended in time and price and, most important, tons of names are set to report earnings in the days ahead, which will be key for the intermediate term. Don’t get us wrong, we’re encouraged, but we still think it’s best to pick your spots on the buy side and trail your stops (and book some partial profits here and there) as opportunities arise. We’ll move our Market Monitor back up a notch and see how things go from here.

This week’s list is brimming with strong names, including more than a few that reacted well to earnings last week. For our Top Pick, we’ll go with Dynatrace (DT), which has just gotten going from a multi-month structure and looks ready for a sustained advance.

Stock Name	Price	Buy Range	Loss Limit
Align Technology (ALGN)	602	585-605	525-540
Bill.com Holdings (BILL)	179	170-177	150-154
Canada Goose Holdings (GOOS)	42	40-42.5	35.5-37
Dynatrace (DT)	56	53-56	47.5-49
PayPal (PYPL)	282	267-277	240-246
Pinduoduo (PDD)	188	178-186	160-164
SM Energy (SM)	12	10-11	8-8.8
Snap Inc. (SNAP)	64	60.5-63.5	53-54.5
Tapestry, Inc. (TPR)	39	35-37	31.5-33
Zendesk (ZEN)	156	150-155	138-141

It’s been said that the four most dangerous words in investing are “this time, it’s different.” The stock market’s behavior is clearly pointing to things being different this time.

Over the past month or so, it seemed like stocks would continue their frenetic surge. This week, however, the market appears relatively lackluster with a lot less excitement. Some investors may yearn for more fireworks, but as a value investor, I find this calm to be more sane.

The Cabot Undervalued Stocks Advisor has an investment horizon that is generally one to two years. As long as our companies are making fundamental progress, we’re comfortable with waiting for periods that easily extend past December 31st. However, the market doesn’t necessarily share that perspective. For many reasons, including professional investor bonus calculations, tax-related trading, window-dressing and simple year-end portfolio house-cleaning, the market’s horizon shrinks geometrically as the calendar winds down.

This note includes our review of earnings from Adient (ADNT), Conduent (CNDT), Gannett (GCI), Goodyear Tire & Rubber (GT), Ironwood Pharmaceuticals (IRWD), Kaman Corporation (KAMN), Molson Coors (TAP), Organon & Co. (OGN), Vodafone (VOD), Western Digital (WDC) and Western Union (WU). Next week the deluge tapers with six companies reporting.

There were no ratings or price target changes this week.