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WHAT TO DO NOW: From a top-down perspective, there’s plenty of good news from the secondary evidence and our Cabot Tides is very likely to turn positive tomorrow, which is another good sign. That said, individual stocks remain very tricky, with lots of selling on strength and poor earnings reactions among names we own or have been watching—that’s not a reason to be bearish, but we advise going slow until we see more real breakouts. In the Model Portfolio tonight, we’re jettisoning our small stake in Argenx (ARGX), which has fallen apart this week pre- and post-earnings, but we’ll add two new half-sized positions: Halozyme (HALO) and GE Aerospace (GE). That will leave us with around 70% in cash—we’d like to put more cash to work but will wait for names to emerge instead of forcing the issue.

WHAT TO DO NOW: Continue to lean bullish, but pick your spots. Our intermediate-term indicators remain bullish, and the market’s consolidation so far has been tight and quiet, which is a plus. Leadership remains good-not-great, with many names acting well but also plenty of wobbles and some selling on strength, too. All told, we’re content to follow the playbook we’ve been using, adding as names emerge and averaging up if they start well. Tonight, we’ll fill out our position in Snowflake (SNOW), adding another half-sized stake, but we’ll hold 31% or so in cash and see how things go from here.

Weight Watchers (WTW) looks good both fundamentally and technically.

Growth stocks remain mostly hit or miss, but the evidence has improved somewhat during the past couple of weeks. We’re not flooring the accelerator, but we are doing a little new buying tonight, though still keeping about one-quarter of the Model Portfolio in cash.

Elsewhere in tonight’s issue, we talk about the thinning out of the advance and dive into all our stocks (a couple of which have earnings coming up), as well as talk about our new recommendations and game plan going forward.

The coronavirus is sending the market into a tailspin. It took a thriving bull market from all-time highs to the cusp of a bear market in a matter of weeks.
It is likely that this market will not significantly recover until there is more clarity on the extent of the economic disruptions it is causing and how long they will last. That seems unlikely for several weeks at least. In the meantime, the market is vulnerable to constant headline risks.


It is likely that the market has not found a bottom.


That said, this too shall pass. The coronavirus is a black swan event that is singularly responsible for the market crash. When the panic and emergency subsides, and it will, the market will likely recover and make up for lost time.
In this issue I discuss the ramifications and measures to protect your investments. As well, I identify rare securities that are timely opportunities while the market is down. These stocks have limited downside if the market continues to fall and huge upside leverage when it recovers.

Current Market Outlook


Since the March 23 low, the market has pretty much followed the plan, with a good initial rally, a little upside follow through and lots of up/down, news-driven moves since. To be fair, that is more descriptive than predictive—a few big moves in one direction or the other could change the outlook, and today’s action was encouraging for the bulls. Right now, though, the overall evidence remains unchanged: The trend of the major indexes and most stocks is still pointed down, and while many names are doing a good job of hanging in there, few stocks are in true uptrends. Looking ahead, the first sign of light would be a batch of growth-oriented stocks bursting to new highs, followed by the intermediate-term trend of the major indexes turning up (likely to take another week even if all goes well). Given the unprecedented situation, we’re open to anything, but until the buyers show more muscle, we advise sticking with a mostly defensive stance.

The good news is that we continue to see quite a few stocks that institutions have been accumulating in recent weeks. This week’s list has a few, with our Top Pick being Livongo (LVGO), a newer, fast-growing name that’s popped up of late.

Stock Name	Price	Buy Range	Loss Limit
Five9 (FIVN)	78.35	74.5-78	66-68
Livongo Health Inc. (LVGO)	33.34	27.5-30	23-24.5
Newmont Mining (NEM)	57.31	48-51	42.5-44.5
Novavax, Inc. (NVAX)	65.95	13-14.5	10.5-11.5
Peloton (PTON)	53.03	27-29	23-24.5
Pinduoduo (PDD)	87.53	36.5-38.5	33-34
Regeneron Pharmaceuticals (REGN)	512.96	470-490	415-425
RingCentral (RNG)	238.73	213-225	187-192
Sprouts Farmers Market (SFM)	19.00	18.5-19.5	16-16.5
Zscaler (ZS)	126.22	61-64	54-55.5

In the August Issue of Cabot Early Opportunities we (mostly) return to our roots, focusing on technology and MedTech growth stocks, while adding a little flavor with a consumer stock we’ve been keeping an eye on.

Enjoy!

In the October Issue of Cabot Early Opportunities we continue to snap up shares of high-growth software stocks, while adding a couple of consistent growers in the landscaping and waste management arenas to round out our market exposure.

Enjoy!

Stocks are rolling again, and the panic that engulfed the market just two weeks ago has vanished, replaced by the longest market winning streak all year. Nearly all our Stock of the Week stocks are up in the past week, several of them by double digits, led by AST SpaceMobile (ASTS) – up more than 80% (!) since we last wrote. So, let’s strike while the iron is hot and add another upstart growth stock to the portfolio in the form of a mid-cap just recommended by Carl Delfeld in his Cabot Explorer advisory.

Details inside.

The market’s rebound from the August 5 mini-panic has been unusual—in a good way, with a straight-up advance that’s recouped most of its prior decline, given up very little of its gains along the way, and has been led by a gaggle of growth stocks that have powered ahead on earnings. Now, we’re not totally free and clear here, and some short-term wobbles could easily come; by our measures, the intermediate-term trend is sideways and defensive stocks are percolating, so there’s more work to do. All in all, we’re putting a little more money to work tonight but will still be holding just shy of 40% in cash as we see if the market can further confirm a new uptrend.

This was a good week for the Explorer portfolio as all our positions advanced, led by NovoCure (NVCR), Sea Limited (SE) and Virgin Galactic (SPCE), which jumped 25% this past week. We now head into the fourth quarter, which may bring some turbulence as the election approaches. We will take what the market gives us but will be on guard. Our emerging markets timer (EEM) is still positive.

Today, we have a new recommendation in emerging markets that we hope will benefit from the biggest shopping day in the world.

Fears and evidence of rising inflation hammered Wall Street this week so today we are selling two lagging positions and adding a blue-chip inflation hedge. The Fed may begin pulling back on monetary stimulus and increasing interest rates. It is possible that all of this is being overdone and that inflation will be only transitory, in which case market bulls will swoop in to buy stocks at some point. We need to stay in the middle. Avoid panic selling and buy conservative quality.

Last week, I wrote about the problems facing the newspaper industry and some possible solutions. I asked for your feedback and I got a huge (and insightful) response. So today I’m going to feature many of the best letters submitted via email and on our blog, The Iconoclast Investor. If you haven’t shared your view on this yet, either send me an email or post it on the blog, where it’ll get shared with your fellow readers as well. Thanks for writing in!

Current Market Outlook


Last week’s issue was titled “Next Few Days Should be Key,” and we think they were—in a bullish way. The market’s strong snapback to new highs (in the indexes and many leaders) made the prior dip look like a shakeout, which generally bodes well. That said, the action didn’t erase all the yellow flags out there, either, as sentiment is bubbly, many stocks are extended in time and price and, most important, tons of names are set to report earnings in the days ahead, which will be key for the intermediate term. Don’t get us wrong, we’re encouraged, but we still think it’s best to pick your spots on the buy side and trail your stops (and book some partial profits here and there) as opportunities arise. We’ll move our Market Monitor back up a notch and see how things go from here.

This week’s list is brimming with strong names, including more than a few that reacted well to earnings last week. For our Top Pick, we’ll go with Dynatrace (DT), which has just gotten going from a multi-month structure and looks ready for a sustained advance.

Stock Name	Price	Buy Range	Loss Limit
Align Technology (ALGN)	602	585-605	525-540
Bill.com Holdings (BILL)	179	170-177	150-154
Canada Goose Holdings (GOOS)	42	40-42.5	35.5-37
Dynatrace (DT)	56	53-56	47.5-49
PayPal (PYPL)	282	267-277	240-246
Pinduoduo (PDD)	188	178-186	160-164
SM Energy (SM)	12	10-11	8-8.8
Snap Inc. (SNAP)	64	60.5-63.5	53-54.5
Tapestry, Inc. (TPR)	39	35-37	31.5-33
Zendesk (ZEN)	156	150-155	138-141

Within the Growth & Income portfolio, you’ll find a discussion of retail woes. The Buy Low Opportunities Portfolio features a comparison between two of the rare retailers that emerged from first-quarter earnings season unscathed. I was simply focused on retail stores throughout May. Lots of investors own these stocks, and I figured some of you might find the assessment interesting.

A large number of our portfolio stocks are experiencing bullish price action right now. Unless something ugly hits news headlines in the next few days, we’re probably going to enjoy a strong stock market in the first half of July. I hope you’re not sitting on the sidelines!

There’s little doubt the news has gotten worse, with the U.S. debt downgrade, renewed U.S-China trade tensions, another hike in steel tariffs announced last week and a big pickup in war uncertainty over the weekend … but so far, the market has handled itself decently, with some wobbles (mostly among the broad market) but overall a quiet-ish consolidation compared to the recent run-up. To be fair, that can always change, but given everything, we’re pleased with the action thus far. We’ll again leave our Market Monitor at a level 7 as we wait to see which way the market breaks from this tight range.

This week’s list has a ton of overall strong charts with recent tightness, just like the market. Our Top Pick is a steadily growing emerging blue chip in the software space that just left behind an endless consolidation with a powerful earnings gap.