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In this week’s video, Tyler Laundon discusses the move in the 10-year Treasury and possible impacts on the market.

Knowing what to look for when investing in stocks will help you focus your attention and lead you to better investment decisions.

Lawmakers’ return from holiday recess could put SAFE banking back in the news and set up a trading opportunity in cannabis stocks.

Current Market Outlook


The first week of the year was extremely volatile, but all in all the action ended up positive, with major indexes kissing fresh all-time highs and many leading stocks ending up nicely on the week. Overall, then, not much has changed—the primary evidence remains positive, so we’re content to ride things higher, but there’s little doubt the environment is hot and heavy (basically the opposite of what we saw 10 months ago), so you should continue to keep your feet on the ground (trail stops, take partial profits when available) and be discerning with your buys (aiming to enter after a bit of rest or some sharp shakeouts to support areas).

Because of this, most of our buy ranges are a bit below current prices (looking for pullbacks), though we still see some solid setups. One is Snap (SNAP), which is a clear leader in the internet space and has just returned to its highs after its first test of the 10-week line since its October blastoff.

Stock Name	Price	Buy Range	Loss Limit
8x8, Inc. (EGHT)	35.5	32.5-34.5	27.5-29
LPL Financial Holdings (LPLA)	116.8	108-112	97-99
The Mosaic Company (MOS)	26.8	25-27	21.5-22.5
Palo Alto Networks (PANW)	364.6	345-360	310-320
Progyny (PGNY)	44.9	40.5-43	36.5-38
Snap Inc. (SNAP)	54.4	53-55	47-48.5
Spotify (SPOT)	344.2	335-347	297-304
Sunrun (RUN)	95.8	87-91	74-77
Vale S.A. (VALE)	18.6	17.4-18.2	15.8-16.2
Zillow (Z)	143.2	134-140	119-122

Current Market Outlook


Earnings season. The upcoming U.S. elections. Spiking COVID positives and accompanying Europe lockdowns. All told, what was a cleaner situation a couple of weeks ago has turned into one with a lot of crosscurrents, and that has caused a buyers’ strike of sorts, with the major indexes and many leaders pulling back of late. It’s not a disaster, but today’s action has put the intermediate term back on the fence; basically, it looks like the market is still in a consolidation phase after the big March-through-August rally. It’s a similar deal with leading stocks, as many have taken on water, though few have cracked. (In fact, we see a lot of good setups out there should buyers step up soon.) All in all, we’re not making any huge moves, but we’ll knock our Market Monitor down a notch and keep a close eye on things.

This week’s list is an interesting mix of growth and turnaround situations, including a couple that have their hands in both cookie jars. Our Top Pick is Align Technology (ALGN), which just galloped out of a two-year base after earnings. Aim to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Align Technology (ALGN)	448.51	420-440	375-390
AAXN (AAXN)	101.69	99.5-102.5	90-92
Exact Sciences (EXAS)	107.06	103-107	91-93
The Gap, Inc. (GPS)	17.75	19.5-20.5	17-17.5
General Motors Company (GM)	36.83	34-36	31-32
GrowGeneration (GRWG)	17.75	16.5-18	14-15
MercadoLibre, Inc. (MELI)	1270.86	1180-1240	1070-1110
NIO Limited (NIO)	25.86	23.5-25	20.5-21.5
Shift4 Payments (FOUR)	55.98	51.5-54	46-47.5
Square, Inc. (SQ)	176.77	164-171	148-152

The market’s rebound has been very impressive, though there are a couple of flies in the ointment (we’re not huge fans of defensive sectors rallying strongly) and this week looks like a good test for a couple of reasons: First, there are some key quarterly reports coming out in key technology areas, and trend-wise, many growth-oriented measures are closing in on five-week highs, which could turn the intermediate-term trend up … if all goes well. For now, nothing has officially changed: If we see more breakouts and further upside, it would obviously be bullish, but while some retrenchment from here wouldn’t necessarily be bearish, it would be a sign the market likely needs more time to set up. We’ll leave our Market Monitor at level 6 this week.

This week’s list is a bit more diversified than the past two weeks, and for our Top Pick, we’re going with a name that’s very strong following quarterly results, has triple-digit growth and a great story—if you enter, be sure to keep it small and use a loose stop.

This month’s selection is a small company in the health care space given the strength in this group of stocks. The company has a very specific focus on products to treat peripheral nerve injuries, and it’s growing revenue north of 50% annually.

Remember the 3D printing stocks that were hot back in 2012 and 2013? 3D Systems (DDD) soared from 9 to 97, while Stratasys (SSYS) zoomed from 18 to 130. Some of the advance was certainly justified. Both companies had demonstrated their ability to grow earnings year after year, and in 2012 and 2013, both companies enjoyed many quarters when revenues boomed more than 50%. But look at the stocks today.

Two weeks ago I wrote here about the massive buildup of both government and individual debt in last 70 years. I noted that this bubble of debt appeared to have popped in the past year. And I speculated that a very long (decades-long) period of debt shrinkage and balance sheet improvement might be in the cards. Then I asked for your opinions.

The market remains healthy, with all major indexes in uptrends and no major signs of divergence, and thus I continue to recommend heavy investment in stocks that meet your portfolio’s goals.

This week’s recommendation is an American apparel company whose stock is cheap and thus has great capital gains potential. Plus it pays a 5.8% dividend!

As for the current portfolio, most of our stocks are performing fine; a few are hitting record highs; and one or two stocks have become worrisome, but not enough to cause me to take action.

The market’s main trends remain up, and thus I remain bullish, while continuing to remind you that a balanced portfolio with attention to risk management is always smart.

As we march toward spring it appears real-world risks are decreasing (more vaccines, lower case count, etc.) while the market risk for growth stocks has gone up (higher yields, volatility, etc.), at least in the short term.

As I scanned through dozens of charts and evaluated stories for this month’s addition my focus was repeatedly drawn to one stock. The chart is compelling, the story is enticing, and the recent Q4 report and forward guidance illustrate sound fundamentals, supported by long-term demand growth.



The stock appropriately balances the potential risks and rewards in the current market.



Enjoy!

The market’s main trend remains up, with many major indexes hitting new highs in recent days—and many of our stocks doing the same. Those are the stocks you should hang onto tightly—because there’s no telling how far they’ll run.

Our portfolio stocks achieved another successful quarter of results, generally pleasing Wall Street with upside surprises as opposed to earnings disappointments or news of corporate difficulties. Nevertheless, 2018 has been a difficult year for stock investors, with the S&P 500 index delivering two 10% corrections. The best of companies can easily have their share prices languish for months on end, as we’ve seen all year.

The good news is that four weeks of upside action has brought a new buy signal from Cabot’s intermediate-term market timing indicator. But this doesn’t mean you can jump in with both feet yet; there’s still reason for caution.

One way Cabot Stock of the Week exercises caution is by diversifying widely, not only among industries but also among investment strategies. Today’s recommendation, a big undervalued robotics company in Japan, is an excellent example.



As for the rest of the portfolio, it’s acting well and thus the only change today is a downgrade of one stock—which has got a bit high—from buy to hold.



Full details in the issue.

Today we’re breaking into a familiar market by going back to the insurance industry.

But today’s addition is very different from our other rapid growth insurance companies in a major way (as you’ll soon see!).



The stock is acting strong and the fundamentals remain great, despite COVID-19.



All the details are inside this month’s Issue. Enjoy!

After a brief shakeout last Monday, supposedly on fears that Italy would leave the EU, the market reversed course and has been pushing higher and higher since, supposedly cheering on the continued strong performance of the U.S. economy.

I’m enjoying the ride, and I assume you are, too. But I must remind you that good news is prevalent at market tops, while bad news is what you wallow in at market bottoms. So keep your eyes on the exits—while continuing to hold the best stocks as long as the market supports them.