Search

Apple and Facebook are huge, global brands, Apple with a market cap of $533 billion and annual sales of $235 billion and Facebook with a market cap of $250 billion and annual sales of just $18 billion. Institutional investors love both stocks. But let’s look at the reality principle. Here are a couple of charts that show how AAPL and FB have performed over the last three months. I think the difference will be clear.

All of our market timing indicators remain bullish, and the major indexes and many stocks are attempting to resume their post-election uptrends. In the Model Portfolio, we have three changes tonight.

The big picture this week is much the same as last week. In fact, the S&P 600 Small Cap Index closed today just a fraction off where it closed last Thursday. The same applies to the Nasdaq, while the S&P 500 is up modestly.

Many banks in are experiencing rapid growth in developing economies.

First, a housekeeping note: With Santa coming in a few days, there will be no issue next Monday, but we will send a “full” update next Monday (in place of the issue) to keep in touch, and we’ll be around if you have any questions. Merry Christmas and Happy Holidays!

As for the market, the post-Fed action was clearly a downer and is threatening to reverse the intermediate-term uptrend, which was the lone positive piece of top-down evidence. To this point, we will say many individual stocks have bent but haven’t broken, but the onus is once again on the bulls to step up and offer support. We’ll move our Market Monitor down to a level 4, and it could sink further should the bears keep at it.

The good news is we’re still finding many solid-looking charts, though they’re from all nooks and crannies of the market. Our Top Pick today is in the surprisingly resilient housing group.

This week, markets took slower economic growth numbers to mean no more interest rate hikes and higher stocks. That’s the logic of Wall Street today.

Laszlo Birinyi (pronounced BUH-ree-nee), an investor who “listened” to the market rather than corporate or financial news, passed away this week. He was someone who thought differently. His theory about the flow of money that made him one of the nation’s foremost stock pickers in the 1990s will endure.

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.

The S&P 600 Small Cap Index has drifted a little lower this week but made a nice move over the last month as interest rates declined. The S&P 600 iShares ETF (IJR) is up 7% over the last five weeks.

The chart inside shows how clear the inverse relationship between the IJR (green line) and the 10-year yield (blue line) is.

This week, we comment on earnings from Elanco Animal Health (ELAN), Gannett (GCI), Kaman Corporation (KAMN) and Warner Bros Discovery (WBD).

We also include the Catalyst Report and a summary of the March edition of the Cabot Turnaround Letter, which was published on Wednesday.

RxSight (RXST) Still a Buy

While the coronavirus concerns are still high, stocks have recovered their footing, as China has taken steps to stimulate its economy and markets.

The Cabot Global Stocks Explorer portfolio is holding up well, though Luckin Coffee (LK) sold off hard and then sharply rebounded this week. Our emerging markets timer (EEM) is marginally positive, and in an uptrend in the last month.



Today’s recommendation is a leader in fintech with a great growth story, strong numbers and an attractive entry point.

Stocks are showing signs of strength as we dive head-first into third-quarter earnings season. Will the latest round of company reports give markets the nudge they need to enter their first substantive rally since mid-summer? Or will they douse the rally with cold water before it really even begins? We’ll have our answer soon. In the meantime, in case it’s the latter, today we add a reliable dividend payer that’s been gaining traction thanks to the restored global supply chain. It’s a brand-new recommendation from Cabot Dividend Investor’s Tom Hutchinson.

Details inside.

Remain bullish. The market has been consolidating its recent gains, which is a good sign, and all of our market timing indicators remain clearly bullish. Short term, today’s drop could lead to further weakness, especially with Fed Chief Janet Yellen speaking on Friday morning. But our market timing indicators are bullish, so the odds still favor higher prices in the weeks and months ahead. In the Model Portfolio, we’ll stand pat tonight with nine stocks and a cash position of 8%.

This is one of those periods where it’s impossible to know what’s going to happen next given all the variables. So it’s better to look at the big picture trends and not try to get too cute in the short-term. For us, that means sticking with what we have been doing, since nothing is fundamentally or technically broken.

One of the things I want you to remember, as the market falls lower and lower and bad news about politics and the economy multiplies, is this: Market tops occur when the news is best, and market bottoms occur when the news is worst. Thus, somewhere ahead is an absolutely terrible news day that will mark the market bottom—but I don’t know where.

What I do know is that it will come, and that the bull market that follows it will be very rewarding, particularly for investors who are prepared for the bull—and I hope that’s you.

The past month has been the best of the year for our marijuana stocks, and while there’s a chance the sector could top out now (there’s so much good news out there), I learned long ago that it doesn’t pay to fight the trend.

The fact is, this sector strength could easily run to the end of the year as investors rush into this high-growth sector. So, we’ll now become fully invested, adding one new stock at the same time.



Full details in the issue.

The S&P 500 rose 15% year-to-date through October 20, and the Dow Jones Industrial Average rose 18% year-to-date. Those achievements are not remotely unusual when stocks are having a good year. However, it would be normal to expect price corrections along the way—corrections which have been curiously absent this year.

A banner November for the stock market rolls on, and an encouraging start to the holiday shopping season could act as a catalyst for another strong month in December. The Stock of the Week portfolio is thriving with the pickup in the market, with nine of our stocks hitting either 52-week or all-time highs. So today, we take another big swing by adding a mid-cap software stock recently recommended by Tyler Laundon in his Cabot Early Opportunities advisory.

Details inside.

Another interest rate hike and negative second-quarter earnings growth have done little to slow the bull market rally or investor confidence, so this week we add a “Bull Market Stock” to take advantage of the strength. It’s a term coined by our Mike Cintolo, so naturally, today we add Mike’s favorite Bull Market Stock, one he recently recommended to his Cabot Top Ten Trader audience, a company that benefits directly anytime there’s a bull market and the big institutions are buying stocks hand over fist.

Happy New Year to everyone - I wish you and your families a healthy and prosperous New Year. As we turn the page to 2022, let’s review some trends before getting to a company with a new device to shake up and lower costs in healthcare at home and around the world.