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Happy Thanksgiving! The market is relatively quiet at the moment, and will likely continue to be ahead of the Thursday holiday. And as we head into the final month of the year, our portfolio is in good shape, with most of our stocks acting well. But it can never hurt to add a bit of safety, especially in a bear market, which is why this week we’re adding a reliable real estate investment trust (REIT) that tends to outperform coming off of down periods for the market. The company comes highly recommended by Cabot Dividend Investor Chief Analyst Tom Hutchinson.

Details inside.

Nobody has missed their chance to buy low and catch a long overdue run-up in some great stocks. There are lots of great opportunities listed in this week’s update.

There’s been plenty of drama over the last week, but small caps don’t seem to care. Both the S&P 600 and the Russell 2000 are making new all-time highs.

FactSet reported this morning that the Russell 2000 has outperformed the S&P 500 Index every session this year. That’s impressive. Let’s look more closely at the S&P 600 Index because I have sector data for it. Impressively, through mid-day Thursday, every small-cap sector is outperforming its large-cap counterpart YTD. The strongest small-cap sectors are materials (+14.4%), energy (+13.4%), industrials (+12.3%), and tech (+11.7%). The weakest, utilities, financials and healthcare, are all up in the 4.4% to 5.3% range.

As a whole, the S&P 600 is up 9.2% while the S&P 500 is up just 1.2% YTD.

The market has been terrific. And it will probably finish the year higher than it is now. But there is reason for caution.

Because of sticky inflation, interest rates remain near the highest levels in 20 years and may continue to stay high or go higher, until they drive the economy down. A hugely contentious presidential election is about to take place. And there are two significant global wars going on.

Steep selloffs are common even in markets that rise over time. The S&P 500 doubled over the last five years. But it crashed 30% in record time at the onset of the pandemic in 2020. There was also a bear market in 2022 during which the S&P fell over 20% and the Nasdaq plunged well over 30%. Of course, most stocks were down a lot more than the indexes. If you targeted some of the very best stocks at fire sale prices you could have gotten amazing returns.

In this issue, I highlight a way to target the purchase of the very best stocks at fire sale prices amid market turmoil that may occur from the potentially market-roiling issues this year or next. Most investors don’t buy when the market is crashing because it’s natural not to want to try and catch a falling knife. But there’s a way to take emotion out of the equation and calmly plot a way to fantastic returns.

Current Market Outlook


For the first time in a few weeks, we’re seeing some signs of spring when it comes to the Nasdaq and growth stocks, as many found support near or above their early-March lows and have begun to perk up, including some that have rallied back above their 50-day lines. (The Nasdaq itself has done this, too, which is obviously encouraging.) Moreover, we’re seeing many more six- to 10-week structures out there, which are far more palatable than the jagged three-week bases seen a while back. That said, we’re not out of the woods—the major indexes remain divergent (not the healthiest situation) and very few growth names are hitting new highs. For the first time in a while, we do think the market has a chance to kick into gear, but we have to see it to believe it; we’re nudging our Market Monitor up to a level 6, but still think the general game plan (small positions, buying cyclical names on weakness) makes sense for now.

This week’s list is a nice mix of growth and cyclicals, many of which look like either potential breakouts or early-stage pullbacks. Our Top Pick is Amkor Technology (AMKR), which might need a little more seasoning but has held up great during the correction and is now pushing ahead.

Stock Name	Price	Buy Range	Loss Limit
10X Genomics (TXG)	191	182-187	164-168
Align Technology (ALGN)	548	538-560	490-500
Amkor Technology (AMKR)	26	24.5-26.5	21-22
Cleveland-Cliffs (CLF)	19	17.5-19	16-16.5
The Gap, Inc. (GPS)	30	28.5-30.5	25.5-26.5
Lam Research (LRCX)	661	620-645	565-580
Lennar (LEN)	105	98.5-102.5	90-92
Micron Technology, Inc. (MU)	94	91.5-94.5	83-85
Scotts Miracle-Gro (SMG)	253	237-247	220-226
ShockWave Medical, Inc. (SWAV)	133	125-130	110-114

When I’m trying to discern what big investors are doing I dive into my options scanner, and right now, it’s telling me that the market rally is just getting started.

With domestic equities trading at high valuations, buying international stocks is an opportunity to get ahead of the crowd, hedge risk and diversify your portfolio.

If you are able to get prequalified for a mortgage, then you will have an easier time making a bid on the property of your dreams.

This beaten-down global logistics company was instrumental in redefining trade for a new era. So, with trade dominating the headlines, is the stock a buy?

Tracking bullish option activity is part of how I’ve built a successful career trading options—it’s my bread and butter. Here’s how I do it.

The financial press is full of chatter about what to do in the current market downturn. Common themes include timing the bottom (which usually includes the opposing suggestions to not time the markets followed by suggestions on how to do it), buying on the dips (highlighting the appeal vs. the danger that this is a secular bear market), and buying stocks that have been beaten down by 50% or more year-to-date. There are other themes, but these are the ones I see most often.

FedEx (FDX) reports earnings later today and all will be watching as its shares tumbled last week after it issued a sales warning. The Federal Reserve issued its fifth interest rate hike of 2022, and it certainly won’t be the last one, warned dove-turned-hawk Fed Chairman Jerome Powell. This brisk run-up in rates, which should have been earlier and faster, is hitting growth stocks hard since those are mostly high revenue growth companies that are not yet profitable. The market is punishing this group to levels that tempt longer-term investors.

For the first time in seemingly months, the market has a bit more negative tone. So should you book some gains on some of your winners?

We have two new additions to the portfolios in today’s issue, one of our stocks has changed its name, and one stock is now rated Sell.

The Cabot Emerging Markets Timer is flashing a warning signal, and even good earnings results are no guarantee of big advances. We are trimming the portfolio by selling Sibanye Gold and dropping YY Inc.

The Emerging Markets Timer is in relatively good shape, as the iShares EM Fund is staying in contact with its 25-day moving average. Many of our stocks are acting great. We sold three laggards in last week’s issue and our only action today will be to move one stock back to a Buy rating.

The market is looking a lot better than it did a couple of weeks ago even though the Russia-Ukraine conflict continues and the Fed has become more vocal about the need to hike interest rates in order to battle inflation.

Here are some ways you can use options to hedge or create additional yield in your portfolio. In addition to covered calls, which generate additional income on stocks you already own, I also share hedging strategies using puts and spreads.