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I’m changing my recommendations on Dollar Tree (DLTR) to Hold; and on Big Lots (BIG), Kraft Heinz (KHC) and WellCare (WCG) to Buy.

Today I’m highlighting three different types of trading opportunities: buying stocks in the days leading up to earnings reports, buying stocks when they fall a silly amount on neutral or good news, and putting great stocks on watch as we await pullbacks. There are many changes in Buy recommendations today, reflecting both dramatic changes in year-to-date price action and significant earnings revisions as Wall Street contemplates final 2018 numbers and solidifies their 2019 earnings projections. I’m not trying to be fickle! I’m just trying to stay on top of the facts so that you can have a clear idea of where tomorrow’s profitable opportunities can be found.

Explorer stocks, with the exception of Neo Performance (NOPMF), held their own in a difficult week. The market concerns center on the impact of high interest rates and mortgage rates on consumer spending, investment, and economic growth.

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.

U.S. markets are trading cautiously with the latest uncertainty surrounding the coronavirus pandemic. Chinese markets have surged over the last week and I’ll outline a trading idea to take advantage of the momentum. Our emerging market (EEM) signal is decisively positive as our portfolio moves ahead, led by our Alibaba (BABA) position, up 18% this week, and Sea Limited (SE) continuing its incredible run. Today, we discuss changes afoot in Hong Kong with a new recommendation that is an undervalued throwback blue chip that is also a high-quality proxy for Asian growth.

Today’s addition is a profitable small-cap MedTech company specializing in products to treat peripheral nerve injuries.

Management has a number of growth-oriented irons in the fire. And I think the company could be an attractive acquisition target.

While the sock has been relatively stable in this increasingly volatile market, we’ll still start with a half-sized position, just in case.

September selling is already underway. Just remember that it’s almost always temporary. The S&P 500 has been down at least 4% after Labor Day in each of the last four years, with a bottom coming sometime in October. All four times, it has eclipsed pre-Labor Day levels by the third week of November. Thankfully, our portfolio enters September in very good shape, with 12 stocks up double-digit percentages and four others up by at least triple digits. To help weather another potential September storm, today we add a “safer” dividend stock recently recommended by Chief Analyst Tom Hutchinson to his Cabot Dividend Investor audience.

Details inside.

In reviewing the charts of the major U.S. stock market indexes, I noticed that the Dow, the S&P 500 and the NASDAQ each look as if somebody is slogging uphill in deep thick mud. That’s a bit like a “two steps forward one step back” pattern.

The major indexes are having another good day, and this time so are most leading growth titles. As of 2 p.m. ET, the Dow is up 180 points while the Nasdaq is in the green by 179 points.

Credo Tech (CRDO) up 10% on Earnings

Current Market Outlook


The month-long rebound that began in early February clearly cracked last week, with the major indexes falling below key support and with some indexes (like the S&P 500 and NYSE Composite) retesting their February closing lows. There are still many stocks holding up well, including most of the growth-oriented names that exploded higher on big volume in February; however, as we saw last week, good stocks can go down in a hurry when the market hits the skids. Overall, we’re shifting our Market Monitor back down to neutral, and the onus is on the bulls to change that—a few strong days could make all the difference, but this downturn may continue until enough investors have thrown in the towel after the market’s huge run last year. We still advise holding strong, profitable stocks, but new buying should be limited and holding a good-sized chunk of cash on the sideline makes sense.

This week’s list still has a lot of good stories and solid charts, and includes a few newer names. Our Top Pick is ServiceNow (NOW), which remains exceptionally resilient. Just remember to keep new buys small given the market.

Stock Name	Price	Buy Range	Loss Limit
Chegg (CHGG)	74.21	21-22	19-19.5
Continental Resources (CLR)	66.19	56.5-58.5	52-54
Floor & Décor (FND)	68.03	49-51	45.5-47
Fortinet Inc. (FTNT)	137.53	51.5-54	47.5-49
HealthEquity, Inc. (HQY)	70.70	61.5-63.5	55.5-56.5
Netflix, Inc. (NFLX)	423.92	307-322	280-285
PagSeguro Digital (PAGS)	35.09	35-37	31-33
Penumbra Inc. (PEN)	173.25	116-120	106-108
Red Hat (RHT)	0.00	146-153	135-139
ServiceNow (NOW)	341.86	167-172	155-158

Cabot Top Ten Trader Editor Mike Cintolo wrote this about a month ago: “As the general market has heated up, we’ve noticed more and more ‘Bull Market stocks’—brokerage, investment bank and asset management firms, each of which directly benefit from higher stock prices and increased trading activity—pushing to new highs.” The market...

The bull market rolls on, and our portfolio continues to deliver, so I continue to recommend that you be heavily invested in stocks that help achieve your investing goals.

Today’s featured stock is a big Asian consumer company that’s still growing extremely fast; in fact, revenues are accelerating!



As for the current portfolio, to keep it at our maximum level of 20 stocks, we’re parting company with little marijuana company Columbia Care (CCHWF), mainly because it’s our biggest loser.



Details inside.



Lastly, I hope you’ll join me for the 9th Annual Smarter Investing, Greater Profits Online Conference, August 17-19. We have an incredible lineup of experts ready to share their best picks.

The market has been generally very good, although it’s wobbling this week so far.

The bull market that started two years ago has returned more than 60% in the S&P 500. The index is up about 23% year to date. The market rally has also broadened since the summer to include many other stocks and sectors besides technology.

Sprout Social (SPT) reported Q4 results yesterday that surpassed expectations. Revenue was up 32.6% to $37.3 million (beating by $1.4 million) while adjusted EPS of -$0.06 beat by $0.05. Guidance for 2021 looks solid with management calling for 2021 revenue of $172.5 million (up 30%), modestly ahead of estimates for $170 million.

“Smooth seas do not make skillful sailors.” - African Proverb

For the first time this year, this week all three major benchmarks closed at all-time highs during the same session on the hunch that a lousy job market will spur a series of interest rate cuts by the Federal Reserve.

Even though the Dow, S&P 500 and Nasdaq hit all-time highs this week, news flow felt a little more negative, and the small-cap indices all moved slightly lower.

After surging to new highs in late March, today’s recommendation has pulled back quietly but steadily throughout April and my goal is for readers to get on board somewhere near the bottom of the current correction.

The phrase you hear more than ever from market prognosticators these days is that they are “cautiously optimistic” about the state of the stock market. In some ways this is pretty useless advice, but in another it hits the nail on the head. The market clearly wants to continue to rise; the world is awash in liquidity, and the Fed seems determined to keep interest rates low for some time. In addition, momentum tech stocks seem unstoppable.