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A letter from the desk of President & Publisher Ed Coburn covering the current economic data and what it means for investors.

The big-cap indexes have been leading for a while now, but more recently, we’ve seen an even greater dichotomy out there, with the broad market actually coming under pressure and with most (non-big-cap) indexes testing or breaking intermediate-term support. On the flip side, the number of growth-y stocks in good shape has actually increased. As we wrote last Friday, these sorts of divergences tell us the risk of some unpleasantness has increased, though that doesn’t guarantee it will happen and, if it does, when. Thus, it’s best to go with the flow right here—aiming to buy strong, fresh leaders at decent entry points, but also being willing to book partial profits on the way up and raise stops when needed. We’ll again leave our Market Monitor at a level 7.

This week’s list has a major growth tilt, which goes along with the emergence of many growth stocks from multi-week (or, sometimes, multi-month) consolidations. Our Top Pick is getting going from a two-and-a-half-month rest following another great quarterly report.

Happy Halloween! October has lived up to its billing as a volatile, tricky month, and this week might be the most unusual of all. On one hand, we have the big-cap indexes notching another decent gain, some hot stocks remaining hot and, encouragingly, we’ve seen a few fresh breakouts among growth names, too.

The Russell 2000 and S&P 600 SmallCap Index have pulled back from recent highs, but the data suggests they’ll go higher in the weeks ahead.

Bank of America’s seasonality analysis shows November tends to be a strong month for the market. The Russell 2000 is up 70% of the time, with an average gain of 2.64%. Small-cap industrials tend to be particularly strong, up by 6.1% on average, and rising 79% of the time.

The major indexes continue to hover near all-time highs, even as more issues beneath the surface crop up. Another strong earnings season, dwindling U.S.-China trade tensions, and another interest rate cut are helping prop stocks up, even as volatility begins to creep higher again. So today, to account for a possible pullback, we opt for a stock that’s a household name but one that has become so undervalued that Clif Droke just added it to his Cabot Turnaround Letter portfolio.

Details inside.

The market’s momentum continued last week as a benign inflation print and another round of solid earnings backed up bullish sentiment—with virtually all of the major indexes moving higher. For the week the S&P 500 rose 0.7%, the Dow Jones Industrial Average advanced 0.8%, the Nasdaq Composite jumped 2.2%, but the Russell 2000 slipped 1.4%.

Embattled healthcare company Kenvue (KVUE) just received a buyout offer from Kimberly-Clark (KMB); does that make shares of the company behind Tylenol a buy, hold or sell?

We’re seeing lots of crosscurrents in the market right now, especially when it comes to the evidence -- the big-cap indexes are in good shape and we’ve seen a few more breakouts from growth stocks ... but the broad market is very iffy and most other indexes are stuck in the mud. We think it’s best to go with the flow--ditching stocks that break down but selectively adding stronger, fresher names, all while holding some cash for future buying power (if more breakouts come during earnings season) and for cushion (if the market weakens again). We’ve had a few changes in the past two weeks (including some in our special bulletin today), and we go over all the details in tonight’s issue.

FTAI Infrastructure (FIP) Reports

Chemical stocks are hovering near mult-year lows, which makes it an intriguing area to watch for turnaround investors. These are the three names on my watchlist now.

It’s not always that the market outperforms in October, but this year’s “jinx month” came and went on a positive note (albeit with a minor setback earlier in the month).


Granted, there was some volatility on the political front, but as far as the equity market was concerned, it wasn’t too bad. The S&P 500 index stood at a record high as recently as Wednesday, and Wall Street’s favorite stocks and ETFs are mainly trending higher as we exit the month.

This railroad stock has a strong moat, great insider buying, and is exactly the kind of company Warren Buffett would love.

Maintaining exposure to multinational stocks should be an important element of any investing strategy, and this ETF is an easy way to do it.

Health care stocks are ideally suited for a market like this — perched near the highs while uncertainty rises — and these are my two favorites right now.

WHAT TO DO NOW: The indexes continue to act fine, but individual growth stocks remain hit or miss based on the news of the day. Today we’re going to sell our position in MP Materials (MP), taking a tiny gain and holding the cash (which will now be around 35%). Details below.

Dividend reinvestment plans, a.k.a. DRIPs, are a great way to earn steady income. Here are three of the better stocks that offer them, according to Sure Dividend.

Before we dive into this week’s covered call idea, we need to clean up a couple positions from the October expiration cycle.

Explorer stocks were mixed this week as Asian stocks struggled amidst increased U.S.-China economic tensions and concern over Chinese economic growth.

Commodities are back but something to keep in mind was mentioned to me by a friend in the energy business: “America is running out of shale oil.” This has big implications for world oil markets and America’s energy mix since if we are running out of the shale oil that can be extracted at about $60/barrel, higher oil and energy prices are around the corner.