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Current Market Outlook


If you haven’t stuck with a proven system in 2015, chances are you’ve been chopped to pieces by the market’s never-ending ups and downs. Today was another headline-driven selloff (Chinese stocks are seeing renewed weakness), but it doesn’t change the market’s condition—the intermediate-term trend is still sideways, with some stocks acting fine and others looking like it’s 2008. The plan remains the same—be selective on the buy side, honor all stops and hold some cash, but also give your most resilient stocks a chance to hold up and resume their advances. If leading stocks decisively break down, then we’ll change our tune, but so far focusing on the strongest stocks has been fruitful.

This week’s list features a few recent earnings winners, as well as a few that are set up well heading into their earnings reports. Our Top Pick is Valeant Pharmaceuticals (VRX), a big-cap growth stock that remains in a firm uptrend following a better-than-expected report.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	248-256	230-232
Netflix, Inc. (NFLX)	423.92	101-106	93-94.5
Infinera (INFN)	0.00	22.5-23.5	20-21
IACI (IACI)	0.00	78.5-81	75-76
GoPro, Inc. (GPRO)	0.00	59-62	54-55
Criteo (CRTO)	0.00	51-53	48-49
Chipotle Mexican Grill (CMG)	773.32	705-720	660-665
Cempra (CEMP)	0.00	42-44	37-38
China Biologic Products (CBPO)	0.00	112-117	105-106
Amazon.com (AMZN)	2.00	515-530	470-475

According to Gallup, having enough money for retirement is the most common financial concern in the U.S. In the 2014 survey, Gallup found that 59% of Americans are worried about not having enough money for retirement. That’s actually down from a few years ago, when over 66% of Americans were concerned about funding their retirements.

If you invest in the stock market through mutual funds, you know the year-end distributions can be taxable. Here’s how to minimize that.

Today’s recommendation is a small company, and there are no analysts following the stock. But it has big clients for which its products are absolutely critical. The stock has been on a wild ride this week. I have a hunch I know why, and we’re going to step in and to try and grab shares at a discount, starting with half a position.

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2 Under-the-Radar Japanese Stocks to Buy

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What Does this Massively Bullish Option Trade Mean?

The market put in a solid show last week, with the indexes finally getting off their knees. However, as you can see from our new market monitor above, the field is still tilted toward the bears – eight days of rallying doesn’t undo the 15% to 20% decline seen from mid-December to mid-January. If a new bull market is starting, there will be plenty of time and opportunities, but for now, you should stay defensive, holding cash, and buying only small amounts of certain stocks. OptiMo’s pickings remain somewhat slim, as much of the market’s recent strength has come from the most beaten-down sectors (financials, homebuilders, transports), which aren’t high-odds setups. But we believe there are some emerging leaders in today’s Top Ten, led byInteractive Brokers (IBKR), a newly-public market maker and brokerage firm for professional investors. Its business depends on the market’s action; if a new bull market unfolds, it should drive earnings and the stock much higher.

Stock Name	Price	Buy Range	Loss Limit
ACI (ACI)	0.00	44-48	-
ACOR (ACOR)	0.00	22-26	-
CALM (CALM)	0.00	28-32	-
IBKR (IBKR)	0.00	33-35	-
NITE (NITE)	0.00	14-16	-
OI (OI)	0.00	46-52	-
RATE (RATE)	0.00	50-54	-
SID (SID)	0.00	88-95	-
TNE (TNE)	0.00	56-62	-
WMS (WMS)	0.00	35 1/2 - 39	-

The market continues to look good as stocks are grinding higher with a few normal-looking down days mixed in (like yesterday) to keep investors honest. Average in, spread out your buys across different stocks, and take note of the current trading range and where support, and overhead resistance, appear to be. Action is starting to pick up in our portfolio, with a few companies having reported this week and a number on tap for next week too.

There remain a few hundred leading stocks that are in great shape – they’ve reacted well to earnings, are in powerful sectors and find buying support just a couple of weeks after beginning normal corrections. However, there are also plenty of stocks that are languishing, or have been taken out and shot during earnings season, leaving investors scratching their heads. The bottom line is that stock selection is very important in this environment, as the leaders are putting on outstanding displays … but there are still plenty of potholes. Thus, holding a little cash as earnings season continues isn’t a bad idea; this week’s Top Ten, for instance, contains a couple of big earnings winners that look ripe for buying. Our favorite of the week is Nasdaq Stock Market (NDAQ), a pure “Bull Market stock” that’s going to benefit from both the strong equity markets and consolidation in the industry. Look to buy on a pullback of a couple of points.

Stock Name	Price	Buy Range	Loss Limit
CNX (CNX)	0.00	54-58	-
CYBS (CYBS)	0.00	15 1/4 - 16	-
DECK (DECK)	0.00	125-135	-
DV (DV)	0.00	50-55	-
IBN (IBN)	0.00	60-64	-
NDAQ (NDAQ)	0.00	40-45	-
NUVA (NUVA)	0.00	37-42	-
SGR (SGR)	0.00	70-74	-
STLD (STLD)	0.00	49-53	-
STP (STP)	0.00	52-56	-

[Note: Due to the Christmas holiday, there will be no Cabot Turnaround Letter weekly update next Friday. The next monthly issue of the newsletter will be published on December 31.]

The Fed has reversed a long-standing balance sheet tightening phase with its recent decision to expand its balance sheet—a move that has largely fallen under the news radar.

While our focus is on long-term business fundamentals and underlying valuations, even we can be tempted to briefly set this aside for shorter-term bargains. And this time of year these bargains can appear, driven by artificial selling pressure.

In this issue, we look at six stocks that are promising candidates for a bounce.

A Fed rate cut was offset by Mideast uncertainty but our portfolio soldiered on having another positive week. The Emerging Market Signal is just short of turning positive due to the lack of a clear uptrend but we have a new recommendation at the heart of “The Internet of Things”.

With the market on edge we’re going with a slightly larger company than normal with this month’s Cabot Small-Cap Confidential selection. But we’re not being overly conservative. Shares of this software stock have been climbing steadily after a breakout move in May. The reasons? Growth is reaccelerating, profit margins are climbing, and the proportion of recurring revenue is going up.

A few weeks ago, I wrote here about investing in master limited partnerships, or MLPs, and invited you to send in your questions about owning MLPs. (You can read the original article here if you missed it.) The tax issues surrounding these high-yield investments can get pretty complicated,...

Editor’s Note: Due to the Fourth of July holiday next Thursday, your July issue of Cabot Value Investor will come out next Friday, July 5. Happy 4^th!

Leveraging cyclicality is a good way to squeeze more profits out of value stocks.

That was an idea put forth by Matt Warder, the newest addition to the Cabot analyst team and the successor to Bruce Kaser in Cabot Value Investor’s “sister” value investing advisory, Cabot Turnaround Letter, on the latest edition of the Street Check podcast I host with my colleague Brad Simmerman.

Cisco Systems (CSCO) announced a huge $28 billion deal for security software specialist Splunk (SPLK). Regardless of concerns over the economy, rising interest rates, the incipient tech-driven Cold War II, rising government focus on anti-trust and other macro issues, there will always be blockbuster deals. We dig into the deal in our comments below on Cisco.

In the December Issue of Cabot Early Opportunities we look at five companies growing nicely and with share prices that have held up reasonably well in recent months.

Our top pick this month is a small-cap biopharma stock that just made a timely acquisition this week. I also feature a potential biotech superstar, an emerging MedTech name, a solar energy specialist and an online retailer that we’ve seen before.

As always, there should be something for everyone in this month’s Issue!

Today, for a change, I’ll cover the news first, and the investing advice second. In Illinois, marijuana taxes exceeded alcohol taxes in the first three months of 2021. Marijuana tax revenue amounted to $86,537,000 while alcohol taxes brought in $72,281,000. I expect the gap to widen from here and there’s no question other states have taken note.