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In the August Issue of Cabot Early Opportunities we (mostly) return to our roots, focusing on technology and MedTech growth stocks, while adding a little flavor with a consumer stock we’ve been keeping an eye on.

Enjoy!

Put simply, the market’s snapback from the selloff two weeks ago has been extremely impressive, and while it doesn’t erase all of the yellow flags, it’s certainly a positive sign. Because we didn’t drastically change our stance during the weakness (a little trimming), we’re not doing anything drastic during the rebound — at least not yet. We filled out our position in CrowdStrike last week and are placing Pinterest and Twilio back on Buy.

If all goes well, we could have a new addition or two soon, with our top choices written about in tonight’s issue. But tonight, we’ll stand pat and see how the market acts as earnings season continues.

The market remains very strong, with the trends of the major indexes and the vast majority of stocks pointed up, both of which keeps us mostly bullish. But really, we’re looking at things mainly on a stock-by-stock basis now; some names are extremely extended and vulnerable to air pockets, while others are just a few weeks into what look like new, sustained advance. With that in mind, we’re actually taking partial profits on one stock today, while averaging up in another — all in all, we’ll still be around 18% in cash.

Elsewhere in tonight’s issue, we write about some of our favorite cookie-cutter stories out there at the moment; we own one great one, but we’d like to have another. And we also review all our stocks, present some new ideas and talk a bit how to handle the speculative, super-hot names in the proper fashion.

The bull market remains alive and well, and I continue to recommend that you be heavily invested in a diversified portfolio of stocks.

Last week’s recommendation was well-known Coca-Cola (a true value stock) while this week’s is a fast-growing company that’s never made a profit, but is expected to make bundles, someday. You know its name too!



As for our current portfolio, most trends are good, but we do need to sell one stock, just to keep the portfolio at twenty stocks. That’s a process that ensures we always own the best!

Current Market Outlook


The market has been shaking and baking during the past three weeks on lots of headline (mainly currency-related) news, but while there has been some damage, the major indexes are holding key support and relatively few stocks have fallen apart. Of course the evidence can change at any time, and if the market really breaks down, we’ll turn cautious. But, despite the whippy day-to-day action, we’re sticking to our bullish stance, and believe holding your best performers, and even doing a little buying at opportune times, will prove fruitful.

This week’s list is once again heavy on the medical and retail sectors, though there are a few other tempting ideas out there, too. Our Top Pick is Urban Outfitters (URBN), which has come back to life after a long period out of the limelight.

Stock Name	Price	Buy Range	Loss Limit
WisdomTree (WETF)	0.00	20-21	18-19
Vulcan Materials Company (VMC)	137.10	80-83	75.5-76
United Therapeutics (UTHR)	0.00	164-168	158-160
Urban Outfitters (URBN)	0.00	43.5-45	38-39
SunEdison (SUNE)	0.00	22.5-24	20.5-21
IPG Photonics (IPGP)	0.00	96-99	87-89
Horizon Therapeutics (HZNP)	49.89	21-23	19-19.5
GrubHub (GRUB)	140.03	42-44	39-39.5
Foot Locker (FL)	0.00	59-62	56.5-57
American Eagle (AEO)	0.00	16.5-17.5	15-15.5

What a difference a few weeks make! In late June the market was on its knees as fears of Fed tapering took hold. Today, though, those fears have given way to optimism, with all major indexes and hundreds of stocks surging to new highs. Yes, earnings season is getting underway, which always adds risk to the equation; we’re sure we’ll see a few potholes in the weeks ahead as some firms miss estimates. But the evidence has turned clearly bullish, and the path of least resistance is up. Thus, you should be working to get heavily invested in some of the strongest stocks in the market.

This week’s list has many familiar faces, as well as a broad representation among sectors. Our favorite of the week is Santarus (SNTS), which has enjoyed a huge run in recent months, but sales and earnings growth are huge, and the stock has exploded higher on big volume. Pullbacks are possible, but higher prices are likely over time.

Stock Name	Price	Buy Range	Loss Limit
YY Inc. (YY)	0.00	33-35	28-29
Yelp (YELP)	41.30	36-38	32-33
The ExOne Company (XONE)	0.00	60-62	53-54
Tesla, Inc. (TSLA)	818.87	120-130	100-108
Santarus (SNTS)	0.00	24-25	20-21
Nexstar Media Group (NXST)	105.68	37-39	30-31
Krispy Kreme Doughnuts (KKD)	0.00	19-20	16-17
Delphi Automotive (DLPH)	0.00	52-54	50-51
Conn’s Inc. (CONN)	0.00	55-57.5	49-50
Bloomin’ Brands (BLMN)	0.00	24.5-25.5	22.5-23

Last week’s action was encouraging, from both the major indexes (most of which have pushed back above their 50-day lines) and growth stocks, which are definitely leading the way higher. With rising interest rates still a worry and earnings season coming up, it’s likely that volatility will remain elevated; you shouldn’t throw money at the market willy-nilly. But we’re very encouraged by the straight-up, smoke-up-a-chimney type of action by the market and many stocks since the panic low in late-June. Our Market Monitor remains in the bullish camp.

This week’s list is a bit more diverse than we’ve seen of late, with many quality prospects to consider. Our favorite of the week is Pandora (P), which is a very jumpy stock we were knocked out of a few weeks ago, but its recent, powerful action is intriguing. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Thor Industries (THO)	104.76	48-50	41-42
Qihoo 360 (QIHU)	0.00	47-49	41-42
Pandora Media Inc. (P)	0.00	19-20	16-16.5
InvenSense (INVN)	0.00	14.5-15.5	13-14
Guidewire (GWRE)	90.60	42-44	37-38
Chart Industries (GTLS)	72.05	96-98	90-91
Ford Motor Co. (F)	0.00	15.5-16.5	13-14
Electronic Arts (EA)	0.00	22.5-24	21-21.5
DreamWorks (DWA)	0.00	24-25.5	21-22.5
Cree, Inc. (CREE)	67.96	65-68	60-61

We wrote last week about how the unusually persistent rebound in the market bodes well going forward. And the good vibes have continued since then, with gaggles of growth stocks rising nearly every day and a vacuum of selling pressure. Also impressive is how stocks have reacted to their quarterly reports—earnings season is nearly over, but we can’t remember a time when so many stocks have gapped up on their results. Of course, the market isn’t a one-way street, and forgotten are many of the worries of a month ago; some shakeouts are sure to occur. But such power on the upside usually doesn’t just disappear. We remain optimistic.

This week’s list reveals a broad swath of strong stocks from many industries. Our Top Pick is AerCap Holdings (AER), a firm that buys and leases airplanes. Business is strong, earnings estimates are huge and a recent acquisition is a game changer.

Stock Name	Price	Buy Range	Loss Limit
Domtar (UFS)	0.00	104-110	96-97
Trinity Industries (TRN)	0.00	65-67	59-60
RetailMeNot (SALE)	0.00	41-43	36.5-37.5
O’Reilly Automotive (ORLY)	0.00	150-155	142-143
Nabors Industries (NBR)	0.00	21-22.5	19-19.5
Harman International Industries, Inc. (HAR)	0.00	102-105	93-95
Freescale Semiconductor (FSL)	0.00	21-22	18-19
FireEye (FEYE)	0.00	73-75	63-65
HomeAway, Inc. (AWAY)	0.00	45-48	41-41.5
AerCap (AER)	0.00	41-43	35-36

Large-cap indexes like the S&P 500 continue to hang in there, but under the market’s hood, the selling in leading stocks that began three weeks ago has intensified, with many now showing abnormal action. Most fast-moving stocks are in a correction, and that’s enough for us to switch our Market Monitor to neutral, meaning you should limit new buying and raise some cash. That said, we’re not making any bold predictions; we’ve seen these rotations out of growth stocks before, and they often reverse themselves quickly. But right now, it’s best to pull in your horns and wait for leading stocks to find support.

Despite the carnage in certain sectors, we’re encouraged by this week’s list—there are many solid stories here, not just defensive or mega-cap names. Our Top Pick is Nabors Industries (NBR), one of a few energy stocks that are acting well.

Stock Name	Price	Buy Range	Loss Limit
Zulily (ZU)	0.00	52-56	45-48
Zillow (Z)	76.64	92-95	85-86
WhiteWave Foods (WWAV)	0.00	27-28.5	25-26
SanDisk Corp. (SNDK)	0.00	78-80	73-74
Nabors Industries (NBR)	0.00	22.5-23.5	20-20.5
Kate Spade & Company (KATE)	0.00	37-39	33-34
First Solar (FSLR)	83.74	68-72	60-62
Finisar (FNSR)	0.00	26-27.5	23.5-24
E-Commerce China Dangdang (DANG)	0.00	14-15.5	12-12.5
Activision Blizzard, Inc. (ATVI)	0.00	20-21	18-18.5

The market continues to chop around, with forays into new-high ground inviting plenty of sellers and sharp dips quickly attracting bargain-hunting buyers. We are seeing more set-ups out there, which is a good sign—if the market does kick into gear, there should be some solid leadership. However, until then, this is about as neutral and choppy an environment as we can remember. That doesn’t mean you shouldn’t take any action (this isn’t 2008!), but it’s best to wait for the market to show some bullish action before getting heavily invested. Patience and cash are your allies today.

This week’s list is the first in a while that has a growth tilt to it; there are still some cheap, stable-type stocks, but also some real potential leaders of the next advance. Our favorite is Arris Group (ARRS), which has excellent growth prospects, a huge backlog and a nice-looking launching pad.

Stock Name	Price	Buy Range	Loss Limit
WhiteWave Foods (WWAV)	0.00	29.5-31	26.5-27
Vipshop Holdings (VIPS)	14.25	150-160	138-140
Trinity Industries (TRN)	0.00	78-82	73-74
Rice Energy (RICE)	0.00	29.5-31	27.5-28
Pacira Biosiences (PCRX)	54.85	72.5-75.5	67-68
InterMune (ITMN)	0.00	36-38	33-34
Gilead Sciences (GILD)	75.10	79-83	75.5-76.5
CBRE Group (CBG)	0.00	28-29	26-26.5
Arris Group (ARRS)	0.00	29-31	26.5-27.5
Apple (AAPL)	248.94	580-600	530-540

Last week was a quiet one for the major indexes, but many individual stocks had big moves ... mostly on the upside. We don’t have much to add from our last few commentaries—our Market Monitor remains bullish, and most stocks and sectors are in good shape, so you should be thinking positively and sticking to the bullish game plan. That said, be sure to keep your feet on the ground and be prepared for a pickup in volatility; we’re not predicting anything, but it’s been three months since the market low and seven weeks of nearly straight-up action, so it only makes sense to be prepared for some hiccups sooner or later.

One very hopeful event of the past two weeks is that many growth stocks, which had been lagging the market, are beginning to perk up. Our favorite this week is NXP Semiconductors (NXPI), a good-sized chip stock with a few irons in the fire and a stock that recently lifted off from a huge base. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Qihoo 360 (QIHU)	0.00	31-32.5	-
Oasis Petroleum (OAS)	12.57	36-38	-
NXP Semiconductors (NXPI)	0.00	30.5-32	-
Nationstar Mortgage (NSM)	0.00	38-40.5	-
Medicines Company (MDCO)	56.98	29-30.5	-
Masco (MAS)	0.00	18.5-19.5	-
Lazard (LAZ)	0.00	35-38	-
Michael Kors Holdings Limited (KORS)	73.22	61-64	-
Hertz Global Holdings, Inc. (HTZ)	0.00	18-19.5	-
First Solar (FSLR)	83.74	32-34	-

Last week’s market break was decisive, as it took down just about every stock and sector. It also came on the heels of a few weeks of funky action, with small- and mid-cap indexes diverging (small-cap indexes are down a few percent on the year!), few growth stocks sustaining their upmoves and lots of choppy action. Could the market come storming back and resume its uptrend? Sure, anything is possible. But the evidence has clearly turned sour, and the odds are that the next bounce or two will be sellable. Thus, it’s best to turn defensive by selling some stocks, holding plenty of cash and limiting new buying to small positions.

That said, you should keep your shopping list ready—this week’s list has many recent earnings winners that continue to hold up well in the face of a weak market. Our Top Pick is U.S. Steel (X). The stock broke out from a solid base last week and exploded higher on enormous volume—and we think it can do well in this challenging environment.

Stock Name	Price	Buy Range	Loss Limit
United States Steel Corporation (X)	0.00	30.5-32.5	27.5-28.5
Western Digital Corporation (WDC)	0.00	98-100	93-94
Skechers (SKX)	0.00	50-52	45-46
Pacira Biosiences (PCRX)	54.85	93-95	84-85
Lam Research (LRCX)	268.47	67.5-69.5	64-65
Facebook, Inc. (FB)	0.00	70-73	66-67
Deckers Outdoor Corp. (DECK)	141.68	87-89	81-82
Chipotle Mexican Grill (CMG)	773.32	640-670	595-602
Celgene (CELG)	0.00	85-87	79-80
Baidu (BIDU)	0.00	200-210	192-194

During the July-through-September period, we often saw the major indexes lag (the S&P 500 went nowhere from mid-May through mid-October) while growth leaders surged. Now, though, we’re starting to see the opposite—the broad market’s health has improved, and many groups have come to life, but just about any stock that’s had a huge run in recent months is under pressure. We don’t advise panicking out of all your winners, but set your stops and consider booking partial profits. On the flip side, there are many less well-known names that are acting great, including a bunch that have recently broken out on earnings, and that’s where any new buying should be focused.

This week’s list has a nice collection of those type of names. Our favorite is United Rentals (URI), a company we’ve long liked, and now the stock is getting going after an eight-month rest.

Stock Name	Price	Buy Range	Loss Limit
Whiting Petroleum (WLL)	0.00	65-68	58-59
United Rentals, Inc. (URI)	0.00	63-65	59-60
Nu Skin Enterprises Inc. (NUS)	46.07	110-115	98-100
ServiceNow (NOW)	341.86	54-56	48-50
Northrop Grumman (NOC)	0.00	104-107	96-97
Noble Energy (NBL)	0.00	74-75	69-70
Illumina Inc. (ILMN)	289.74	90-92	84-85
Gentex Corp. (GNTX)	0.00	27.5-29.5	24-26
Five Below (FIVE)	134.58	46.5-49	43-44
Align Technology (ALGN)	316.20	54-56	46-48

Our fearless leaders in Washington are at it again, and the uncertainty surrounding a potential government shutdown has cast a pall over the market during the past two days. Still, it’s as important as ever to make sure you keep your eye on the ball—news and rumors are sure to come fast and furiously in the days ahead, but what counts is the action of the market itself and leading stocks. And right now both look fine! If the evidence changes then we’ll change our advice, but tonight we’re keeping our Market Monitor where it’s been and our advice remains unchanged.

This week’s list has a nice mix of repeat recommendations, as well as stocks that are showing up for the first time in many months or years. Our favorite of the week is Oasis Petroleum (OAS), a stock that just leapt out of a three-year consolidation following a major acquisition.

Stock Name	Price	Buy Range	Loss Limit
Wynn Resorts (WYNN)	121.08	152-157	138-140
Vipshop Holdings (VIPS)	14.25	53-57	44-46
Trina Solar (TSL)	0.00	14-15	11-12
Taser (TASR)	0.00	13.5-14.5	11.5-12
Pinnacle Entertainment (PNK)	0.00	24-25	22-23
Oasis Petroleum (OAS)	12.57	47-49	42-43
Nexstar Media Group (NXST)	105.68	42-43	39-40
Chart Industries (GTLS)	72.05	120-125	113-115
Ciena (CIEN)	44.25	24-25	22-23
Baidu (BIDU)	0.00	144-150	133-135

From a top-down perspective, the intermediate-term trend is up and most dips are met quickly with buying (Friday was a good example of that). But looking at individual stocks, we are seeing more and more iffy action; more groups are acting sloppily after big runs, strength is being sold into, and volatility is on the rise. None of this means you should be running into the storm cellar or that a big drop is a sure thing, but there’s enough worrisome evidence to hold some cash, to keep losers and laggards on tight leashes, and to be discerning in terms of what (and at what price) you buy. We’re knocking our Market Monitor down a peg.

What we like about this week’s list is that it’s mostly stocks that are out of the public’s eye—they haven’t been hot in recent weeks. Our favorite of the week is Canadian Pacific Railway (CP), which just broke free from a multi-month base and is part of the still-strong transportation group.

Stock Name	Price	Buy Range	Loss Limit
Ubiquiti Networks (UBNT)	170.11	39-41.5	35.5-36
Spirit AeroSystems (SPR)	92.54	27-29	25-26
SM Energy (SM)	0.00	85-87	80-81
The Priceline Group Inc. (PCLN)	0.00	1,040-1,070	990-1000
Harman International Industries, Inc. (HAR)	0.00	75-78	68-69.5
Halliburton (HAL)	0.00	52-55	49-50
First Solar (FSLR)	83.74	58-60	49-50
Canadian Pacific Railway (CP)	0.00	140-146	130-131
Chicago Bridge & Iron (CBI)	0.00	75-76.5	69-70
Bitauto Holdings (BITA)	0.00	24-25.5	20-21

The major indexes remain in uptrends, there’s no doubt about that. And, despite some still-soggy action among many growth stocks, most of the broad market is trending higher, too. But not all uptrends are equal, and right now, we don’t see much power out there. That’s not a bad thing, per se, but it’s more of a two-steps-forward, one-step-back kind of advance, with lots of rotation still going on week to week. By all means, continue to do some buying in names you like, but we also advise holding some cash and picking your spots.

This week’s list has a slightly steadier feel to it than prior weeks, as money flows toward companies with dependable growth. There are also a few stocks that have popped on earnings and tightened up of late, including SanDisk (SNDK), which is our top pick. Shares are at a good risk-reward point here.

Stock Name	Price	Buy Range	Loss Limit
Waddell & Reed (WDR)	0.00	63-65	56-57
SanDisk Corp. (SNDK)	0.00	67-70	64-65
Salix Pharmaceuticals (SLXP)	0.00	86-88	74-75
US Silica Holdings, Inc. (SLCA)	0.00	31-33	29.5-30
Mohawk Industries (MHK)	0.00	138-143	129-130
Southwest Airlines (LUV)	0.00	17.5-18.5	15-16
Baker Hughes (BHI)	0.00	56.5-58.5	53-53.5
HomeAway, Inc. (AWAY)	0.00	35-37	31-32
Actavis (ACT)	0.00	160-163	156-157
ACI Worldwide (ACIW)	0.00	60-61	58-59

We’ve seen mixed action since the year began, which isn’t totally surprising given January’s normal wiggles. The major indexes are churning a bit up near their highs, something that can lead to short-term selling; at the very least, it’s telling you that buying pressures have eased as the calendar has flipped. On the other hand, we’re encouraged to see some growth stocks that had been sitting out the dance since early October begin to reassert themselves—so far this year, we’ve seen a handful of breakouts from legitimate bases, the first collection of breakouts since November, and most held well even in today’s selloff. All told, we continue to lean bullish, though we’re watching things closely.

This week’s list has a bunch of promising names, including a few with terrific growth stories. Our favorite of the week is Arris Group (ARRS), which, thanks to a huge acquisition last year, is a leading provider of next-generation set-top boxes. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Yelp (YELP)	41.30	74-78	69-70
United Therapeutics (UTHR)	0.00	105-110	95-97
United Continental Holdings (UAL)	96.76	43-45	39-40
Splunk (SPLK)	207.67	72-74	64-65
Pandora Media Inc. (P)	0.00	31.5-33.5	29-29.5
Medivation (MDVN)	0.00	68-70	63-64
JinkoSolar Holding (JKS)	0.00	31-34	28-29
FireEye (FEYE)	0.00	53-57	47-48
Broadcom Limited (AVGO)	266.26	50-52	47-48
Arris Group (ARRS)	0.00	23-24.5	20-21

Current Market Outlook


The strength that began around July 4 continued last week as big investors returned to their desks, pushing most major indexes to marginal new recovery highs. There’s still plenty of news-driven action (volume was light even through last week), and earnings season, which is beginning to get underway in earnest, is sure to have an impact. But the intermediate-term trend (which was iffy in late June) has rejoined the longer-term trend on the upside, and many leading stocks have either snapped back to new highs or are building sound launching pads. We’re always on the lookout for renewed selling pressure, but the evidence has improved, so we’re moving our Market Monitor back to a level 8.

This week’s list is again heavy on growth stocks, though there are a couple of special situations presented as well. Our Top Pick is ZTO Express (ZTO), a young, volatile Chinese stocks with huge growth and a very strong chart. Start small, ideally on dips.

Stock Name	Price	Buy Range	Loss Limit
Energen (EGN)	77.04	72-75	65-67
Etsy (ETSY)	112.97	40.5-43	35.5-37
GDS Holdings Limited (GDS)	80.15	41.5-43.5	37-38
Grand Canyon Education (LOPE)	121.03	114-117	106-108
Madrigal Pharmaceuticals (MDGL)	234.07	270-290	230-240
Palo Alto Networks (PANW)	236.92	212-217	198-201
Roku, Inc. (ROKU)	150.46	45.5-47.5	40.5-42
Sonic Corp. (SONC)	35.22	34-36	31.5-32.5
Workday (WDAY)	194.88	130-134	121-124
ZTO Express (ZTO)	28.84	21-22	18.5-19

Current Market Outlook


Stocks had another punishing week, with all the major indexes off at least 3% and many individual stocks doing much worse than that. Yes, the market remains stretched to the downside, with numerous oversold-type readings and some measures of sentiment that are showing greater caution. But at this point, any bounces have lasted just hours, and the intermediate-term trend remains firmly down (the major indexes are also below all longer-term moving averages), so we advise waiting patiently for the bulls to offer support; our Market Monitor drops to a level 3 in today’s issue. The ray of light is that, as earnings season has progressed, we’re beginning to see some solid reactions, often from names that didn’t do much in the last uptrend. These are names to keep an eye on for potential leadership down the road.

This week’s Top Ten has the first batch of earnings winners and other resilient stocks showing some big-volume accumulation. Our Top Pick is Tractor Supply (TSCO), a steady company that’s found excellent earnings-induced support, even hitting a new high today. If you want in, aim to nibble on weakness.

Stock Name	Price	Buy Range	Loss Limit
ACADIA Pharmaceuticals (ACAD)	47.84	20-21.5	18.3-19.2
Burlington Stores (BURL)	193.95	164-168	151-153
Cadence Design (CDNS)	42.95	43-45	40-41
Jacobs Engineering Group (JEC)	89.83	71-73	67.5-69.5
Mellanox Technologies (MLNX)	92.00	79-81	74-75
MongoDB (MDB)	156.56	72-75	64-67
PayPal (PYPL)	147.00	79-82	74-75
Tesla, Inc. (TSLA)	818.87	325-340	290-298
Tractor Supply Company (TSCO)	122.24	90-93	82-84
Xilinx (XLNX)	134.50	76-79	70-72

Current Market Outlook


Not surprisingly, we saw some selling come into the market last week, as many stocks and indexes were stretched to the upside and some near-term sentiment measures (put-call ratios, etc.) showed complacency. In the short-term, such wobbles could easily continue, as we’re seeing some bigger names get hit on decent volume. Intermediate-term, though, we’ve seen very little abnormal action among individual stocks and the trends of the major indexes are pointed up. It’s still a good idea to go slow and look for solid entry points, and don’t forget to book some partial profits on the way up. But with the evidence still bullish, we’re remaining heavily invested.

This week’s list is centered on growth ideas, including a few that have emerged after nice rest periods. Our Top Pick is Okta (OKTA), an early-stage leader that just busted loose from a three-month zone on huge volume.

Stock Name	Price	Buy Range	Loss Limit
BJs Wholesale (BJ)	36.69	29-31	27-28
Glaukos Corp. (GKOS)	67.84	59-64	51-53.5
HubSpot (HUBS)	582.89	146-152	134-137
Match (MTCH)	0.00	50-52	45-46.5
NuVasive (NUVA)	66.00	67-69.5	61.5-63
Okta, Inc. (OKTA)	148.41	68-72	58-60
Palo Alto Networks (PANW)	236.92	229-236	210-214
Ulta Beauty (ULTA)	331.95	272-283	249-254
United Continental Holdings (UAL)	96.76	84-86	78-79
Yext Inc. (YEXT)	21.32	24.5-26	21.5-22.5