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Tom Hutchinson, Chief Analyst of Cabot Dividend Investor, talked about dividend stocks and the current market. PLUS Tom shared a couple of his favorite high-growth, high-yield stocks.

In the November Issue of Cabot Early Opportunities, we take our first step into the crypto economy, delve deeper into international e-commerce markets, bring in another security specialist, attempt to fix the world’s supply chains and jump back into a high-end consigner that’s finally past the pandemic’s ill effects.

Your Spring issue of Cabot’s 10 Best Marijuana Stocks is ready, with updates on the 10 stocks we’ve been following and two new stocks I’ve added to the mix.

And it’s a great time to take a fresh look at all of them, as the market’s recent correction has brought most of them down to what look like good buying areas. Yes, the correction is deep, but it was overdue, and long term, I remain very optimistic about the sector.

First off, a quick note: Due to our regular schedule (50 weeks a year), there won’t be a Movers & Shakers update this shortened week, or a Top Ten issue next Monday—but we will send out a Movers & Shakers update next Monday and will be around all next week if you have any questions. Have a fantastic Thanksgiving!

Nothing much changed with the market last week: The major indexes were down, but not severely, and the intermediate-term trend continues to point up. That said, under the surface, it remains a very mixed bag—some areas look great, but there are as many (or more) wobbly names out there compared to names in solid uptrends. We’ll keep our Market Monitor at a level 5 this week, though we’d like to individual stocks act better soon.

This week’s list is heavy on old world companies, though there are a few great-looking growth names, too. Our Top Pick is in that space and has shown great power before and after its recent earnings report.

After a heady run, further short-term wobbles are possible, even likely, as the market and many stocks digest their May/June gains and as fear levels rise with interest rates. That said, to this point the consolidation in the major indexes and leading stocks has been completely acceptable, with very little abnormal action. If we start to see some names crack meaningful support, we’ll knock our Market Monitor down a notch or two, but today we’ll keep it at a level 8, as the odds continue to favor this being a normal rest period that will give way to higher prices.

This week’s list has a handful of names that have recently got going despite the market’s shenanigans. Our Top Pick this week is from a beaten-down group that’s come to life, possibly signaling the start of a group move.

Overall, the market’s action remains as close to pristine as you could hope for. Under the hood, there has been a touch of rotation, with some growth stocks chopping around while cyclical, construction and materials names perk up. All in all, we wouldn’t be surprised if growth continued to catch its breath, as the recent pullback was very brief, but that’s short-term nitpicking: While dips and potholes will come, the bottom line is that the vast majority of evidence is bullish, so you should be, too. We’ll bump our Market Monitor up to a level 8, and think adding exposure (ideally on dips) makes sense.

This week’s list reflects the broadening we’re seeing out there, with a few tech names but many others from other corners of the market. Our Top Pick is a long-term winner in the aerospace and defense field whose stock just broke out.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the October 2022 issue.

As stock prices tumble under the twin pressures of rising interest rates and the likely arrival of an economic downturn, just about every new stock pick is destined to be a disappointment. How does one select stocks in such an environment? While most fresh ideas will be near-term duds, there is an important purpose to picking new ideas. And, one doesn’t need to buy full positions right away. We screen for low P/E stocks on depressed 2023 earnings, with estimates for those earnings that are increasing. These make good stocks in which to take starter positions.

We also sorted through stocks with high dividend yields and highlight two picks and two pans (with enticing yields yet have serious dividend risks).

Our feature recommendation this month is Dow (DOW). Its shares have been sold by fearful investors, but the company’s low valuation doesn’t recognize the improvements in its financial strength and cost structure since the dark days of early 2020, nor the attractive yet sustainable dividend yield.

This week’s note includes our comments on Goodyear Tire (GT), Warner Bros Discovery (WBD) and Berkshire Hathaway (BRK/B), which reported late last week. It also includes comments on the 12 companies that reported earnings this week: Bayer AG (BAYRY), Brookfield Reinsurance Ltd (BNRE), Dril-Quip (DRQ), Elanco Animal Health (ELAN), Goodyear Tire & Rubber Company (GT), TreeHouse Foods (THS), Six Flags Entertainment (SIX), Viatris (VTRS), Toshiba (TOSYY), Volkswagen AG (VWAGY), Warner Bros Discovery (WBD) and Western Digital (WDC).

SThe story of the broad market is much the same as it has been in recent weeks. To wit, rotation continues across several industry groups while the major averages remain stuck in a lateral range. Things should start to heat up as we head further into the earnings season, though we’re not advising any major change in stance just yet.

This week’s list includes a nice mix of key industries that are benefiting from major fundamental and economic trends. Our Top Pick is a stock that should get a boost from accelerating interest in online foreign language learning.

After living through 2022, we’re certainly not going to whistle past any market graveyards, so our antennae are up when it comes to the market’s recent wobble—but instead of guessing what may come, it’s best to just go with the evidence in front of you, and so far, everything looks normal. That doesn’t necessarily mean we’d be piling in here, but we continue to lean bullish. We’ll leave our Market Monitor at a level 7 today.

This week’s list is very mixed, but with the chip sector looking peppy, our Top Pick is comes from that space and also quacks like a new growth leader. The stock is extended here, but dips of a couple of points would be enticing.

Last week brought some true extremes when looking at sentiment and oversold conditions, telling us some type of bounce was likely. That’s what we saw starting Thursday afternoon, and we’re optimistic we may have hit a workable low—“workable” in this case meaning the market can work higher for more than just a couple of days. That said, we’ll just see how it goes: While there are a few stocks acting well and set up decently, the vast majority of evidence remains negative, so we still favor defense and patience as the market tries to etch a bottom.
Encouragingly, though, this week’s list does have a few names that have shown outsized support during the past couple of weeks, often after earnings, and our Top Pick is one of them as it attempts to round out its launching pad.

Today I am fulfilling your dreams and profiling a company that specializes in tax collection. Three cheers for taxes!
Seriously, nobody likes taxes. With the exception of state treasurers. Taxes are just one of those parts of life that you’d prefer to ignore. But if you’re a retailer you can’t do that. In fact, retailers across the U.S. - and the world for that matter – have to devote more and more attention to sales tax compliance.
That’s the big picture trend powering one company’s growth. All the details are inside this month’s Issue. And I promise, it’s going to be more interesting than you think!

Today’s candidate provides digital health solutions to people with chronic health issues. Its biggest market is people with heart conditions, but it is branching out to the diabetes market as well. For a short window of time, I believe we can establish a position while shares are “on sale.”

Last week brought some renewed chop and crosscurrents, with broader indexes finding some sellers and a few stocks hitting potholes before or after earnings. Moreover, we’re seeing indications that complacency has made a quick comeback, and with many good-looking stocks set to report earnings over the next two weeks, some near-term selling wouldn’t surprise us. Even so, all of this looks normal in the context of where the market has come from: The prior three weeks were excellent, the intermediate-term trend is pointed up and the vast majority of stocks are acting well. Could we see another change in character, with the market falling back into its spin-cycle ways of 2021? It’s always possible, but we go with the weight of the evidence, which today remains mostly positive. We’ll leave our Market Monitor at a level 7 today.

This week’s list is another well-rounded one, with some recent earnings winners and stocks from a variety of industries. Our Top Pick is Enphase Energy (ENPH), which appears to be getting going from a deep base after earnings. We prefer entering on a bit of weakness if possible.

Stock Name	Price	Buy Range	Loss Limit
Albemarle Corporation (ALB)	256	247-257	220-225
Bonanza Creek Energy (BCEI)	56	52-55	46-48
Coinbase (COIN)	331	305-320	267-277
Dexcom (DXCM)	627	605-630	535-545
Enphase Energy (ENPH)	240	220-232	190-196
J.B. Hunt (JBHT)	196	191-197	178-181
Medpace (MEDP)	226	212-222	192-196
Marvell Technology Group (MRVL)	69	66-68.5	60-61.5
SLAB (SLAB)	193	182-192	160-165
WOLF (WOLF)	131	123-129	101-105

Current Market Outlook


The news-driven environment featuring incessant rotation and crosscurrents remains in effect; throw in the fact that breadth is narrow (about half of stocks are still below their 50-day lines despite the S&P 500 and Nasdaq being near new high ground; broad market indexes are chopping sideways) and earnings season is approaching and we think it’s best to continue going slow and aim to buy on weakness. That said, there are a growing number of good-looking growth stocks out there—not a ton are kiting higher, but there are lots of setups and, while there have been bumps in the road, the sellers really haven’t been able to sink their teeth into them despite some recent strength. All in all, we’re more optimistic than not, but stock selection and solid entry points are key.

This week’s list has a variety of sectors represented, including a few that have avoided the market’s volatility. Our Top Pick is Arista Networks (ANET), whose stock is in a smooth uptrend as growth picks up steam.

Stock Name	Price	Buy Range	Loss Limit
Antero Resources (AR)	15	13.8-14.3	12.3-12.7
Ares Management (ARES)	65	62-64	57-58
Arista Networks (ANET)	371	363-370	340-345
Bentley Systems (BSY)	64	62-64.5	57-58.5
FIGS, Inc. (FIGS)	44	42.5-45	36-37
L Brands (LB)	77	73-75.5	65.5-67.5
NVIDIA Corporation (NVDA)	821	775-795	700-710
PayPal (PYPL)	303	288-297	268-273
Rapid7 (RPD)	103	97-101	87-89
Synaptics (SYNA)	158	154-158	136-138

Current Market Outlook


We traded in our crystal ball years ago, especially when it comes to short-term predictions, but our screens over the weekend told a clear tale: While it’s not 1999 out there, many growth stocks and indexes have enjoyed good moves of late, and when you combine that with some signs of complacency, a retrenchment looks possible. (Today, in fact, might be the start of that, as many growth stocks were hit.) Still, this isn’t some grand market call—overall, the environment remains the same, with some divergent and rotational action, but also more and more names acting well—but our point is more to make sure you’re still sticking with great-looking stocks at decent entry points, as opposed to chasing things higher. We’ll leave our Market Monitor unchanged this week.

This week’s list has a bunch of strong names thanks to recent earnings reports and other news items. Our Top Pick is Ambarella (AMBA), which staged a massive blastoff on earnings—we’re OK starting small here or on dips.

Stock Name	Price	Buy Range	Loss Limit
Academy Sports and Outdoors (ASO)	45	43-46	38-39
Ambarella (AMBA)	136	132-138	112-115
Asana Inc. (ASAN)	95	88-92.5	75-78
Avalara (AVLR)	188	180-185	164-167
Chipotle Mexican Grill (CMG)	1895	1850-1900	1700-1760
Floor & Décor (FND)	125	122-126	110-112
Macy’s, Inc. (M)	22	21-22	18.5-19
Nutanix (NTNX)	44	41.5-44	36.5-37.5
Quanta Services (PWR)	115	109-113	97.5-99.5
TX (TX)	54	51.5-53.5	46.5-47.5

Current Market Outlook


Growth stocks are still in mostly good shape, which is the good news. And while we see reasons for continued optimism, it’s also hard to be a raging bull right now. There’s quite a bit of rotation underway, and sentiment is still elevated. On top of that, the number of Nasdaq stocks making new lows is more than we’d like to see, which means cross-currents could become a factor in the near term. Still, the weight of evidence prevents us from being overly cautious; plus there are a fair number of nice-looking setups in individual stocks across several industries. With this in mind, we’re leaving our Market Monitor at level 6 for now.

This week’s list includes a mix of growth and cyclical themes, most of which have a solid story.
Our Top Pick is Nvidia (NVDA), an established semiconductor name with a growing presence in the soaring high-performance computing (HPC) market, and which has just broken out to new highs on strong volume.

Stock Name	Price	Buy Range	Loss Limit
ArcelorMittal (MT)	30	29-30	25.5-26
Brooks Automation, Inc. (BRKS)	98	92-97	80-82
Jabil Inc. (JBL)	54	52.5-55	46-47.5
JetBlue Airways Corporation (JBLU)	20	19-20.5	17.5-18
KBR Inc. (KBR)	40	38.5-39.5	33-34
Levi Strauss & Co. (LEVI)	28	27-28	23.5-24
NVIDIA Corporation (NVDA)	614	595-615	550-555
Snap-On Inc. (SNA)	236	230-235	208-210
Square, Inc. (SQ)	245	240-243	210-212
Vale S.A. (VALE)	19	18.5-19.5	17-17.5

Current Market Outlook


News of travel restrictions due to a new strain of the virus over in Europe hit the major indexes early today, but when it comes to our analysis, the reason for the initial selloff is secondary—the setup for an air pocket has been around for a couple of weeks as sentiment was elevated and most stocks and indexes were extended to the upside. Thus, today’s hiccups weren’t totally unexpected, but the damage was limited; at day’s end, the major indexes held up well and remain in intermediate-term uptrends, as do most stocks. Near term, further reverberations are likely, so we still think it best to pick your spots and stocks carefully, but with the major evidence still positive, we are too.

This week’s list has a nice mix of stocks benefiting from different trends (growth, reopening, cyclical, etc.). Our Top Pick is Elastic (ESTC), which has finally, decisively gotten going from a long 20-month IPO base.

Stock Name	Price	Buy Range	Loss Limit
Alcoa (AA)	22.12	21-22.5	18-18.7
Cardlytics (CDLX)	146.04	135-141	116-119
Coeur Mining (CDE)	9.88	9.5-10.0	8.2-8.5
Elastic (ESTC)	155.91	147-153	129-133
Floor & Décor (FND)	99.10	95-98	85-87
Kodiak Sciences (KOD)	149.51	136-142	117-120
PayPal (PYPL)	237.79	232-238	209-213
Redfin (RDFN)	78.54	72-75.5	60-63
Smartsheet (SMAR)	72.00	70-73	61-63
WESCO International (WCC)	75.16	72-75.5	62-64

After a tough start following the long weekend, the market did find some support by week’s end, but overall, the situation remains the same: The evidence is more positive than not, but when looking at individual stocks, there are many areas that are struggling, while on a day-to-day basis, money continues to thrash around. To be clear, that action doesn’t predict doom—this is a bull market after all—but it does mean that making and holding onto money in this environment remains a challenge. We’ll stick with a Level 7 on the Market Monitor.

Interestingly, this week’s list does have a bit more of a growth flavor, though it’s not all AI, as other areas are seeing a bit of leadership emerge. Our Top Pick has been a clear mid-cap leader of the advance and is now exhaling to its 10-week line.

The market is still in fine overall shape, but under the hood, it’s becoming more and more of a mixed situation. To be clear, there remains a lot more good than bad when examining the evidence, but for the here and now, we advise simply taking things on a stock-by-stock basis—holding your strong performers (albeit also raising stops and potentially booking a partial profit here or there), while cutting bait with those that lag or crack support and keeping some powder dry. We’ll again leave our Market Monitor at a level 7—we’ve had good success finding winners but don’t advise flooring the accelerator at this point.

This week’s list is growth-ier despite some potholes seen last week, which is a plus. For our Top Pick, we’re going with a blue chip in the AI theme, with its recent post-earnings pullback setting up an opportunity.