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We started to see the market shake and bake a bit last week, which isn’t unusual considering the heady run the indexes and dozens of growth stocks have had since the late-June low. Exactly what happens next is anyone’s guess; our feeling is simply that the next month will probably be more difficult than the last month, so you should expect a few potholes or sudden selloffs. But with the main trend still pointed up, we think higher prices are likely in the weeks and months ahead. Thus, while plunging into a bunch of stocks right now probably isn’t the best idea, we do think you should work to remain (or work toward becoming) heavily invested.

This week’s list has some old friends and a couple of new faces. There’s lots of strength to choose from, but our favorite is Michael Kors (KORS) a fashion house with ambitious growth plans.

Stock Name	Price	Buy Range	Loss Limit
Under Armour (UA)	0.00	69.5-71.5	64-65
Ocwen Financial (OCN)	0.00	49.5-52	45.5-46.5
LKQ Corp. (LKQ)	0.00	28.5-30.5	25-27
Michael Kors Holdings Limited (KORS)	73.22	69-72	63.5-64.5
Jazz Pharmaceuticals (JAZZ)	0.00	77-80	74-75
Harman International Industries, Inc. (HAR)	0.00	66-69	59-60
Facebook, Inc. (FB)	0.00	37.5-39.5	32-33
Cubist Pharmaceuticals (CBST)	0.00	59-62	52-54
Baidu (BIDU)	0.00	130-136	118-120
Activision Blizzard, Inc. (ATVI)	0.00	17-18	15.5-16

Ever since the market suffered a wave of nasty distribution two weeks ago, it’s been tough to make much money; strength has attracted sellers, interest rate-sensitive groups have been crushed, the broad market has weakened and, today, growth stocks were battered. Now, the long-term trend is still up, and many stocks remain in uptrends, but the market has changed character. Thus, we’re moving our Market Monitor into neutral territory—maybe this retreat will find support soon, and if it does, we’ll be happy to quickly switch back to an aggressive stance. But for now, we believe it’s best to play things a little cautiously and hold some cash.

This week’s list does have a good crop of candidates if you want to nibble on weakness, including a few bigger-cap issues that have great stories. Our favorite is one of those bigger names—Boeing (BA), which, despite its image as a slow-moving behemoth, has a history of sustained moves when the aerospace industry turns up, as it has today.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	86-89	78-80
SunPower (SPWR)	12.26	17-19	14.5-15
Sohu.com (SOHU)	0.00	61-64	52-54
SodaStream (SODA)	142.91	65-67	55-57
Ocwen Financial (OCN)	0.00	41-43.5	36-37
Jazz Pharmaceuticals (JAZZ)	0.00	65-67.5	59-60
Illumina Inc. (ILMN)	289.74	68-71	63-64
Chart Industries (GTLS)	72.05	94-97	84-95
General Motors Company (GM)	0.00	33-34	31-32
Boeing (BA)	432.22	97-100	90-91

The overall market remains mixed, with most of the market doing just OK but growth stocks acting very well, especially this week, which has brought with it a ton of powerful gaps. Divergent environments lend themselves to rotation and potholes, so we don’t think it’s a time to floor the accelerator, but we are adding one more name to the Model Portfolio tonight, leaving us with around 36% in cash.

Elsewhere in tonight’s letter, we write about the importance of being patient soon after you buy a stock, as well as some very encouraging action from our old Two-Second Indicator. We also review some enticing names and give a full view of all our stocks.

It’s not a blastoff-type of environment, but the evidence has steadily improved during the past three weeks, first due to the action of leading growth stocks, and now, our Cabot Tides have returned to bullish territory. Thus, we continue to follow the evidence, slowly putting money to work and rotating into stronger situations. Last week, we averaged up in two of our recent buys, and tonight, we’re adding a full position in a fresh leader.

Elsewhere in tonight’s issue, we write about the ups and downs of recent IPOs, as well as one sector that is beginning to reemerge and has many stocks that fit our stock picking criteria.

In January’s Issue of Cabot Early Opportunities we take a trip down memory lane to January 2020, and try to take some of our own advice that seems even more timely now.

We also dig into five stocks that cover a wide variety of end market exposures. We unpack a small stock that represents a play on infrastructure and clean energy, two rising stars in MedTech, a consumer name that just won’t quit and even a beaten down growth stock that should recover as people get back out there later in 2021.



As always, there should be something for everyone!

Investors remain in a buying mood, as last week’s lower-than-expected Consumer Price Index (CPI) number added fuel to the recent rally. With inflation still high and a recession likely upon us, another correction may be in the offing. But for now, it’s time to buy. This week, we add a dirt-cheap mid-cap stock from new Stock of the Week contributor Clif Droke, Chief Analyst of our Cabot SX Gold & Metals Advisor. It’s from an industry that never goes out of fashion and is gaining steam from the shifting automotive landscape.

Details inside.

Asset allocation, instead of asset concentration, can help diversify your portfolio and ensure that you’re always invested in the best funds.

The longer you hold an investment, the better your chances of making money.

The retail and financial sectors have been up and down this year, but I have one retail stock and one financial stock that are set up well for big runs.

On November 11, Chinese consumers spent an astounding $14.3 billion on Singles Day, a number that dwarfs the Black Friday to Cyber Monday shopping binge in the U.S. The founders of the Day thought that the date 11/11 looked like trees with no branches and Singles Day began as an ironic way for unmarried and unattached people to give themselves a present (because there was nobody else to give them one).

Investors are on pins and needles about the presidential election. But history shows that elections don’t change the direction of the stock market.

The market took a good-sized hit today, and we see the action as a shot across the bow and are remaining flexible. But as always, we’re going to go with what’s in front of us: Right here, many stocks remain in good shape, though clearly things are mixed, while some yellow flags have arisen. It’s imperative to stick with what’s working, aim for decent entry points and actively manage your portfolio (partial profits on the way up, raising stops, etc.). We’ll again stick with a level 7 on the Market Monitor, though the next few days should be telling.

This week’s list has a bigger growth mix, though as has been the case, there’s something for everyone here. Our Top Pick has shown outstanding power and ties into both AI and the recently strong defense and space trades. Try to buy on further weakness.

It’s fair to say the overall evidence took a step back last week, with the Nasdaq coming under pressure, though many cyclical stocks act well (in fact, there are a few in this week’s issue that have shown great recent power) and, ironically, we’re actually seeing some solid strength in many AI-related stocks, a bunch of which have lifted off from three-plus-month consolidations even as other growth areas have flailed. As has been the case for weeks, then, the market outlook really depends on where you’re looking. We’ll move our Market Monitor to a level 6 here, but we’re still game for taking a swing at some of the many strong names (ideally on dips) out there.

This week’s list is chock-full of strong names, mostly from the cyclical side of the aisle, with many lifting out of very long-term consolidations after earnings, showing great power. Our Top Pick is helping to lead the broader transport group, which is also breaking out to new highs.

The Middle East uncertainties came to the forefront just over a week ago, and that uncertainty flared up further this weekend with the U.S. joining the fray on Saturday night. Even so, stocks have remained resilient, with all of the indexes remaining in intermediate-term uptrends and not far from their recent highs, and there’s been very little abnormal action among individual stocks even after their big runs in May. That’s all to the good—but, at the same time, nothing has changed for the better, as very few stocks are reaching new high ground and there hasn’t been much net progress for the past month, even in many leaders. We’ll leave our Market Monitor at a level 7.

This week’s list has names from every nook and cranny in the market, which is a good sign. Our Top Pick is a real leader but has rested a bit during the past couple of weeks as the 25-day line has caught up. We’re OK entering here or (preferably) on dips.

Two of the past three weeks have had odd mid-week holidays, which combined with the time of year, has led to some pretty slow trading since the tail end of June. We’re now seeing more tightness and legitimate setups out there, so if the buying pressures spread we think there could be a surprising number of names that provide solid entry points. While there are some signs that could be starting, earnings season is set to ramp, and as always, that will likely tell the intermediate-term story. For now, given that the market’s decent-but-tricky evidence hasn’t changed much, our advice isn’t changing, either. Our Market Monitor remains at a level 7.

This week’s list has another batch of intriguing setups that could go if the market cooperates. Our Top Pick has always had a good story and great numbers, and now the stock seems to be ready to move as its sector comes back to life.

It was a quiet week, with no companies reporting earnings (no earnings reports scheduled for the rest of the year, in fact) and no changes in ratings. We had three price target increases, for Trinity Industries (TRN), Adient (ADNT) and DuPont (DD), noted below.

Shares of Pinterest (PINS) are selling off today after Q4 earnings came in slightly below expectations (food and beverage weakness a culprit), though the big-picture story remains one of a company that’s made a number of operational adjustments and launched a series of growth initiatives that should drive higher revenue and EPS growth in 2024. I think the recovery story is intact and the stock’s worth owning. Keeping at buy half.

The markets have continued to flirt with new highs—pulling back and then moving forward—for the past month.

The Fed’s 50-basis-point rate cut inspired investors, home buyers, and those folks wanting to refinance their homes. The Mortgage Bankers Association reported that refinancing applications rose 20% right after the rate cut!

The Canadian government announced tha trusts will lose their tax-favored status in January.