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In tonight’s letter, we share a couple of ideas for those of you that don’t like to hold all your stocks though earnings; we review a couple of new names that are on our watch list (ESTC is one we’re very intrigued by) and go over all our current Model Portfolio stocks as many are set to report earnings during the next two weeks.

Current Market Outlook


The market bounced back nicely last week, though the major indexes are still in no-man’s land, sitting in the middle of their two-month ranges, and with many stocks still hovering just south of new highs as earnings season gets underway. We have seen a couple of rays of light (growth stocks are showing a hint of outperformance this month, which is a good thing), but overall, the environment remains on the edge—decisive upmoves by the indexes and breakouts from leading stocks would be bullish, while a move below support and a bunch of downside earnings gaps would be bearish. For now, we’re keeping our Market Monitor neutral, but we’ll let you know if we see a sustained trend getting underway.

This week’s list contains a couple of recent earnings winners, as well as a couple of others that shot to new highs on big volume last week. Because of the market environment, our Top Pick will be a slower, but surer, play—Starbucks (SBUX) isn’t going to double, but it’s just the type of mega-cap name that institutions can pile into following a great quarterly report.

Stock Name	Price	Buy Range	Loss Limit
Zebra Technologies (ZBRA)	154.94	81-84	75-76
WisdomTree (WETF)	0.00	17-18	15.5-16.5
Ulta Beauty (ULTA)	331.95	132-137	122-124
United Continental Holdings (UAL)	96.76	68-71.5	61-62
Starbucks (SBUX)	64.49	85-88	77-78
Royal Gold, Inc. (RGLD)	129.66	72-74	65-67
Janus Capital (JNS)	0.00	17-18	14.5-15
Dexcom (DXCM)	421.36	58-61	54-55
Dollar Tree (DLTR)	0.00	68.5-70.5	64-65
Agrium (AGU)	0.00	101-105	94-95

Current Market Outlook


Pure and simple, last week was a bad one for the market—not only did the major indexes take hits, but many resilient stocks came under severe selling pressure. The fact that strong, Top Ten-type stocks took hits (leaving fewer stocks in good shape) has us lowering our Market Monitor by a notch, and it’s vital that the repeated waves of intense selling seen last week don’t continue. For now, though, the bigger picture hasn’t changed: The trading range environment and the vicious rotation from sector to sector remains the order of the day. Thus, the general game plan is the same: being selective on the buy side and holding some cash on the sideline—as we wait for the major indexes to show their hand.

This week’s list actually has quite a few solid growth stories, though there’s definitely a bigger-cap tilt to the list. Our Top Pick is one of them—Lockheed Martin (LMT) has just hit new highs and is under strong accumulation as business is set to pick up.

Stock Name	Price	Buy Range	Loss Limit
Ultimate Software (ULTI)	0.00	178-185	168-170
Tesoro (TSO)	0.00	103-106	92-94
Royal Caribbean Cruises (RCL)	0.00	88-92	83-84
Martin Marietta Materials (MLM)	261.52	166-174	155-156
Lockheed Martin (LMT)	0.00	205-211	193-195
Lennox International (LII)	270.56	117-120	108-110
Facebook, Inc. (FB)	0.00	91-95	85-86
BofI Holding (BOFI)	42.93	125-129	114-115
Activision Blizzard, Inc. (ATVI)	0.00	28-29	25.5-26
Arista Networks (ANET)	0.00	80-82	75-76

Current Market Outlook


After nine straight down days and some signs of investor panic, the market enjoyed a much-needed rebound today (right off key support) ahead of tomorrow’s election. Ideally, the past two weeks were the final leg of the market’s two-plus-month correction and stocks kite higher into year-end; such a scenario is certainly possible. However, the fact is that all we’ve seen is one strong up day—all the major indexes remain below their intermediate-term moving averages, as do most stocks. Thus, on the sell side, you can consider letting go of any broken stocks you’ve been holding on to, and on the buy side, you should continue to keep new positions small until the market confirms a new, sustained uptrend. We’re keeping our Market Monitor at level 4 until that happens.
This week’s list has a bunch of resilient stocks, including another batch that’s recently reacted well to earnings. Our Top Pick is Gigamon (GIMO), which, after a quick shakeout, snapped right back on earnings and lifted to new highs today.

Stock Name	Price	Buy Range	Loss Limit
Archer Daniels (ADM)	0.00	45-47	42-43
AveXis (AVXS)	0.00	58-62	51-53
Clayton Williams Energy (CWEI)	0.00	94-98	85-87
Eagle Pharmaceuticals Inc. (EGRX)	0.00	72-74	66-67
Gigamon (GIMO)	0.00	54-57	48-50
Las Vegas Sands Corp. (LVS)	0.00	57-59	53-54
Martin Marietta Materials (MLM)	261.52	190-195	180-183
Melco Crown (MPEL)	0.00	16.5-17.5	15-16
Spirit AeroSystems (SPR)	92.54	51.5-53	48-49
Take-Two Interactive (TTWO)	123.32	47-49	44-45

Current Market Outlook


Major indexes, including the S&P 500, Dow Industrials and Nasdaq Composite remain range bound, chopping sideways in very tight ranges during the past five to seven weeks. But the broad market is looking better and better—most small- and mid-cap indexes hit new highs last week, and we’ve seen some improved action among growth stocks. All told, we remain positive on the market and believe the path of least resistance remains up. Individual stocks have been a bit trickier, but many are acting well. We think it’s best to remain heavily invested.


This week’s list includes many smaller, rapidly growing companies, reinforcing the view that money is flowing toward growth ideas. Our Top Pick is Shopify (SHOP), which has enormous potential as e-commerce expands. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Wix.com (WIX)	302.53	39.5-41.5	35-36
Ubiquiti Networks (UBNT)	170.11	50-52	47-48
Shopify (SHOP)	585.00	40.5-42.5	36-37
Ingevity Corp. (NGVT)	99.98	42-44.5	39-40
Microsemi (MSCC)	0.00	38.5-40	36-37
LGI Homes (LGIH)	86.04	37.5-38.5	33-34
Green Plains Energy (GPRE)	0.00	23.5-24.5	21.5-22
Finisar (FNSR)	0.00	21.5-22.5	19.5-20
Exact Sciences (EXAS)	116.91	18-19	15.5-16
Autodesk (ADSK)	229.00	66-68	60-61

Current Market Outlook


October is an infamous month in market history, with many huge dips and crashes taking place at this time of year. This time around, the major evidence is much more positive than when the market experienced those prior wipeouts—the longer-term trend is up and we remain impressed with the resilience of the broad market and growth stocks. Of course, the intermediate-term trend remains neutral, and with so many uncertainties out there (U.S. election, Deutsche Bank, etc.), we can’t rule out a leg down in the near-term to scare out many investors. As always, we advise going with the flow—today, that means leaning bullish, but not flooring the accelerator until the bulls decisively retake control.

This week’s list has more of a mix of stocks and sectors than previous weeks, but that’s fine with us. Our Top Pick is Inphi (IPHI), a fast-growing networker that looks ready to get going after a few weeks of rest.

Stock Name	Price	Buy Range	Loss Limit
Apache (APA)	0.00	64-61.5	55.5-54
Autodesk (ADSK)	229.00	72-70	65-64
Carrizo Oil & Gas (CRZO)	24.03	41-39	36-35
Inphi (IPHI)	120.16	43-41.5	39.5-38.5
Line Corporation (LN)	0.00	48-46	43-42
Micron Technology, Inc. (MU)	43.31	18.5-17	16-15.5
Quanta Services (PWR)	91.45	28-26.5	25-24
Symantec Corporation (SYMC)	0.00	25-24	23-22.5
Thor Industries (THO)	104.76	85-83	77-76
XPO Logistics (XPO)	0.00	37.5-35.5	34-33

Current Market Outlook


The market’s not out of the woods yet, as many indexes are still hovering below their 50-day moving averages. But the way stocks have handled themselves in recent days is encouraging—there’s been little follow-on selling following the initial dump on September 9, and growth-oriented stocks and indexes have perked up nicely, with some reaching new highs late last week. Throw in a still-healthy broad market (there are very few stocks hitting new lows, which is a good sign), and we remain optimistic, though we’ll keep our Market Monitor in its current place (7 out of 10) and will continue to advise you to keep newer positions smaller than normal until the indexes clearly kick into gear on the upside.


Encouragingly, this week’s list contains a ton of growth stock ideas, including a few newer names to consider. Our Top Pick is Arista Networks (ANET), a fast-growing networker that’s benefiting from the big shift to cloud computing and offers a unique software option for developers. Today’s dip looks buyable.

Stock Name	Price	Buy Range	Loss Limit
gdxi (gdxi)	0.00	102-106	94-96
Tata Motors Limited (TTM)	0.00	40-42	37-38
Seattle Genetics (SGEN)	150.85	50-53	48-49
Gigamon (GIMO)	0.00	50-52	46-47
Glaukos Corp. (GKOS)	67.84	34.5-36.5	31-32
Clayton Williams Energy (CWEI)	0.00	69-73	56-58
Cirrus Logic Inc. (CRUS)	0.00	52.5-54.5	47-48
Arista Networks (ANET)	0.00	80-83	74-76
Aerie Pharmaceuticals (AERI)	0.00	31-34	26-27.5
Abiomed (ABMD)	0.00	123-126	113-115

Current Market Outlook


We think last week’s action could prove to be a turning point for the market, not just in the short-term (recovering from a four-plus week retreat) but longer-term, too (as some indexes attack key resistance levels). There are still flies in the ointment (we’d like to see more stocks hitting new highs), so we’re not fully bullish, but the combination of a healthy broad market, the intermediate- and longer-term trends of the market pointing sideways-to-up, and pervasive negative sentiment (nobody believes the market will rise significantly going forward), all bode well going forward. After a trip into neutral territory, we’re bullish again, though we’re still holding some cash in reserve as we wait for more individual stocks to kick into gear.

This week’s list has many great looking charts combined with solid growth stories. Our Top Pick is more aggressive than we’ve had in recent weeks—Veeva Systems (VEEV) has a great growth story and it catapulted higher on earnings, marking what could be a coming out party for the stock. Keep new positions small to start.

Stock Name	Price	Buy Range	Loss Limit
Veeva Systems (VEEV)	180.23	31.5-33	28-29
ONEOK (OKS)	0.00	37.5-38.5	33.5-34
Universal Display (OLED)	187.54	64-66	57-59
Masimo (MASI)	159.56	48-49.5	44-45
Jack in the Box (JACK)	0.00	81-84	74-76
Dycom Industries (DY)	0.00	80-83	71-73
Dollar Tree (DLTR)	0.00	86-88.5	80-81
Copart (CPRT)	74.80	46-48	42-43
Boston Scientific (BSX)	0.00	21.5-22.5	20-20.5
Abiomed (ABMD)	0.00	98-101	91-93

Stocks are coming off a rare down week, though the “damage” was mostly limited to last Thursday after a couple rogue Fed members came out with some hawkish quotes (though, in fairness, this happens just about every month). Still, the bull market is very much intact, and it’s a great time to go looking for growth stocks at value prices. As the new Chief Analyst of Cabot Value Investor, I just added such a stock to that portfolio, so today’s new Stock of the Week recommendation comes from yours truly. It’s a giant in the auto industry that is benefitting greatly from Americans’ burgeoning appetite for hybrid cars.

The market is melting down with no end in sight. The question is, does this more closely resemble the July/August carry trade/weak jobs report selling of last year, when the major indexes fell an almost identical amount to what they have in the past three weeks? Or are we hurtling toward the end of the 28-month bull market? We may know the answer soon, as the all-important February inflation prints are released later this week.

In the meantime, we’re playing plenty of defense in today’s issue, selling out of six of our positions that have completely broken down, and adding shares of a low-risk gold miner that’s been a favorite of Cabot Explorer Chief Analyst Carl Delfeld for some time.

Details inside.

It’s become a full-blown market correction. When will the selling stop? No one knows. But as always, when it does, there will be ample opportunities to make huge profits on the other end of it. In the meantime, we prune a few of our hardest-hit positions today and add a new position designed to capture growth in the fastest-rising economic power in the world, India. It’s a brand-new recommendation from Carl Delfeld in his Cabot Explorer advisory.

Details inside.

The market has been resilient in the face of some bad headline news during the past two weeks, but just about every major index and most stocks and sectors are essentially neutral--the evidence is as mixed as it can be. That’s not a bearish thing, per se, and we’re actually making one small new buy today in a peppy growth stock. But until we see more decisive action among growth titles (possibly as earnings season continues to ramp up), we recommend holding a good amount of cash (45% after our move tonight).

As has been the case for the past decade, the fate of cannabis stocks lies largely in the hands of politicians.

Cannabis companies have been getting solid support from state-level politicians. Forty states now allow sales of medical cannabis.

Sure, they are permitting too many stores, and that is putting downward pressure on pricing. At some point, the market sorts that out. Prices will fall to a point where it is no longer that enticing to bring on new supply, yet companies will have gotten lean enough to produce profits. We are not there yet. But we will get there.

Politicians in Washington, D.C. let cannabis investors down once again.

Commentary from lobbyists and Senators had suggested the Senate banking committee might make progress on cannabis sector banking reform (allowing banks to work with companies) in late July.

That turned out not to be the case. I cautioned at the time that a risk here is that the actions of politicians are hard to predict. But it was worth having exposure, in case there actually was progress on so-called SAFE banking, which seemed possible at the time.

The market has steadily improved its standing since its low three weeks ago, so much so that our Cabot Tides and Two-Second Indicator have returned to bullish territory; that had us start putting money to work last week and we’re doing a bit more buying tonight. Granted, this isn’t the same environment as, say, last November, as buying pressures are still sporadic and growth stocks are good (not exceptional), so we’re moving in steps and want to be “pulled” into a heavily invested position via more strength.

In tonight’s issue, we review all of our stocks, especially our recent buys, and write about one growth area where it appears investor perception has changed for the better in a big, big way.

After an amazing run higher, growth stocks hit an air pocket this week, with many highfliers coming down and some abnormal action being seen. We haven’t exactly floored the accelerator during the past few weeks, and we took our cues from individual stocks, paring back this week and leaving us with a good-sized cash position. That said, we’re not making any major market call--the trends remain up, and many growth stocks are acting OK--so while we want to see how growth reacts from here, we’re flexible and could put some money back to work soon if key names stabilize.

It’s been a great year in the market with the S&P up 27%. And there is good reason for optimism about 2025.

We are in a bull market that began in October of 2022. Bull markets don’t usually run out of gas after just two years, especially recent ones. The Fed has begun a rate-cutting cycle that is likely to last for the next two years. Plus, the economy is solid and expected to get stronger. Rate cuts in a strong economy are unusual, but the combination should be great for stocks.

One sector may have a better 2025 prognosis than the overall market: Financial stocks have been on a tear since the summer. The Financial Select Sector SPDR Fund (XLF) is up 33% YTD and 22% since early August. Despite the recent spike, many financial stocks are still cheap after a decade and a half of underperformance.

Financial stocks are dependent on yield spreads, economic growth, and relaxed regulations. All those areas are improving or expected to improve as a result of the election.

In this issue, I highlight one of the highest-growth companies in an industry that is on the rise. It is the leading all-digital bank in the country. Unlike many other industry-leading stocks, it is still well below the high because of a recent temporary stumble which has likely only delayed its price spike.

One down, one to go.

Cannabis stocks soared today (August 30) on news that Health and Human Services (HHS) recommends cannabis get downgraded to Schedule III under the Controlled Substances Act, from Schedule I.

I predicted this a few days ago on the Cabot website, and in my last Cabot Cannabis Investor update on August 9.

Current Market Outlook


As we steamroll toward the end of the decade, the overall market remains in good shape—the intermediate-term trend is firmly up, the number of stocks hitting new highs is expanding and many longer-term studies tell us that 2020 is likely to be another solid year. That said it’s not all peaches and cream out there—short-term, huge number of new highs often leads to some retrenchment, and we’re also seeing a bit more divergent action among individual stocks, with some growth titles hitting potholes while investors rotate elsewhere. None of that is “bad,” per se, but it is a reminder to honor and update your stops as time goes by, and to take a couple of partial profits if you score a decent profit.

This week’s list has a wide variety of newer names, from construction to precious metals to biotech to chips. Our Top Pick is Synaptics (SYNA), which has the makings of an intriguing turnaround as it’s riding a few powerful growth trends.

Stock Name	Price	Buy Range	Loss Limit
Aecom Technology (ACM)	0.00	42-43.5	39-40
GDS Holdings Limited (GDS)	80.15	47-48.5	43-44
Inphi (IPHI)	120.16	71.5-73.5	65-66
Pan American Silver (PAAS)	27.28	20-21	18-18.5
Planet Fitness (PLNT)	0.00	71.5-74	64.5-66
PTC Therapeutics (PTCT)	0.00	47-49	42.5-43.5
Reata Pharmaceuticals (RETA)	0.00	197-210	178-183
Shopify (SHOP)	585.00	368-383	335-345
Skyworks Solutions (SWKS)	0.00	107-111	96-98
Synaptics (SYNA)	0.00	63-66	55-56.5

Current Market Outlook


When we did our research over the weekend, we really liked what we saw: Not only are the intermediate- and longer-term trends up for all the major indexes, the big-cap measures are in new high ground and, perhaps more importantly, we see a ton of recent breakouts acting well across a variety of industries. Combined with prior positive studies, we think the bull move has farther to run. That said, there are some minor worries to keep in mind—short-term sentiment measures are very complacent, and many leaders are also extended for the time being, meaning a rest/shakeout is a growing possibility. We think any pullback will offer up a bunch of solid entries, but in the meantime, it’s best to be a bit choosy on the buy side.

This week’s list has a nice collection of names that have either recently shown rare strength or have run for a few weeks and could make for solid pullback buys. Our Top Pick is Jabil (JBL), which is beginning to retreat after a major long-term breakout and advance.

Stock Name	Price	Buy Range	Loss Limit
Advanced Micro Devices (AMD)	82.24	37-39	33.5-35
Arconic (ARNC)	17.00	29.5-30.5	27-28
Boot Barn (BOOT)	43.24	41-43	37-38
Fortinet Inc. (FTNT)	137.53	98-102	89-91
Jabil Inc. (JBL)	41.50	37-38.5	34.5-35
KBR Inc. (KBR)	30.53	29-30	26.5-27
Neurocrine Biosciences (NBIX)	123.40	110-113	100-102
Oshkosh (OSK)	95.04	88-90.5	80.5-81.5
Peloton (PTON)	53.03	27.5-30	23.5-25
Sea Limited (SE)	132.86	35-37	31.5-32.5