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Stocks rebounded nicely last week, giving hope that the 2023 stock market may be far more resilient than the 2022 market – which could eventually get us out of this bear market malaise. That makes it a good time to buy one of the blue-chip tech stocks that were infamously beaten into submission by last year’s indiscriminate selloff in all things technology. Fortunately, Tyler Laundon is recommending just such a stock – a name this is familiar to all, and yet is embarking on some exciting new ventures that the general public might not be fully aware of. Today, we add this mega-cap technology giant to the Stock of the Week portfolio.

The action in the second half of August was encouraging, but as has been the story of 2021, a lot of that move has been erased so far in September—and that goes for just about everything.

Microsoft was a top pick for 2011 in both of the Dick Davis Digests.

CEO Special Bulletin: Position Updates

The market took a hit today, which wasn’t totally unexpected; overall, the damage was contained, with the Cabot Tides remaining positive and most growth stocks still in good shape

All in all, not a bad month. The stock markets had a nice bounce. The unemployment rate held steady at 4.2%; productivity increased (by 2.4%), higher than economists expected; and while home prices continued to rise in certain areas of the country (Northeast and Midwest), nationwide, they fell by 4.9%, to $401,800, on average.

And best of all, the turmoil regarding tariffs doesn’t seem to be affecting earnings much.

FactSet reported that, so far, 90% of S&P 500 companies have announced second-quarter earnings, and 81% have reported a positive EPS surprise and a positive revenue surprise.

That gives us an 11.8% earnings growth year over year—not bad!

Inflation stays high, infrastructure week arrives, and Rivian stock surges while markets sold off a bit yesterday. The weakness yesterday halted some good rallies among Explorer stocks. We continue to explore new ideas and for this week’s recommendation, we go into the Cloud for a familiar name.

With the market on track to post a very nice gain in November, it’s been a good time to just sit back and let most stocks do their thing. Much of this move has been driven by lower yields and peak Fed chatter, with inflation and economic data largely supporting the disinflation and soft-landing scenario.

Whether or not the Fed will ultimately begin to cut rates next spring/early summer remains to be seen, but that’s what the market is currently expecting. We’ll now look to the December 12/13 FOMC meeting (last of the year) for Jerome Powell to repeat his “not thinking about thinking about cuts” shtick.

The Federal Reserve yesterday maintained its benchmark interest rate while leaving the door open for further action as officials work to bring inflation back to the central bank’s 2% target. This makes sense, though markets are still a bit on edge as further increases are a possibility.

But today, we take a big swing with an aggressive stock that combines biotech with artificial intelligence - and is trading well off its highs.

Despite fears to the contrary (or perhaps because of them), 2010 has so far been a pretty good year for investors—especially the last few months. Stocks in a lot of sectors—retail, automobiles, banks—recovered from their recessionary lows, creating plenty of profits for smart investors. But there were also new stocks...

The major indexes are up to new highs, though they again have become very dependent on the Magnificent Seven in the last month after stocks of virtually all sizes and sectors rallied in November and December. Outside the Mag Seven, most stocks have been stagnant so far in 2024. Not so in the Stock of the Week portfolio, where we have multiple stocks hitting new highs, none of which belong to the Mag Seven, and TWO stocks that have doubled in the last year! We try and keep the hot streak going by adding a familiar, big-name growth stock that was beaten to a pulp during the bear market of 2022 and 2023 but has demonstrated some real momentum in the last three months. It’s a recent recommendation from Cabot Explorer Chief Analyst Carl Delfeld.

The S&P 500 has now gained 90% since its closing low in March 2020. This alone has made investors a bit cautious but all indications are that we are still in a bull market. Explorer recommendations did well this past week and today we go back to China for a new idea that many of you will know.

WHAT TO DO NOW: The market’s rebound has been very encouraging, especially when looking at individual growth names—we’re seeing more constructive action now than we were during the narrow advance of June and July, including among all of our holdings. That said, the intermediate-term trend for most everything is still neutral at best (negative for lots of stuff), so the possibility of a partial or full retest still exists. Given our large cash position, we’re going to add half-sized positions tonight in Palantir (PLTR) and Axon Enterprises (AXON), two strong potential leading titles, but we’ll also still hold a 50%-ish cash position as we watch to see how things play out from here. Details below.

Today’s addition is a small-cap networking company on the cusp of a potential multi-year growth cycle.

The big-picture growth catalyst? Emerging AI and cloud computing technologies that place new strategic importance on network infrastructure and security for data centers, hyperscalers and global enterprises.

All the details are inside this month’s Issue.

Enjoy!

Stocks keep hitting new highs, riding a stronger-than-expected earnings season and multiple red-hot trends (artificial intelligence, semiconductors, weight-loss drugs), all of which we have heavy exposure to in the Stock of the Week portfolio. It’s possible stocks in those sectors are due for a pullback, but tech as a whole is clearly thriving at the moment, so today we split the difference by adding a dividend-paying technology stock that’s been a long-time favorite of Cabot Dividend Investor Chief Analyst Tom Hutchinson.

It’s become a full-blown market correction. When will the selling stop? No one knows. But as always, when it does, there will be ample opportunities to make huge profits on the other end of it. In the meantime, we prune a few of our hardest-hit positions today and add a new position designed to capture growth in the fastest-rising economic power in the world, India. It’s a brand-new recommendation from Carl Delfeld in his Cabot Explorer advisory.

Details inside.

There are only a few companies out there that provide the software that companies can use to implement IT cost-accounting. Today’s Cabot Small-Cap Confidential candidate is pioneering the entire movement.

Current Market Outlook


The top-down view of the market remains just so-so, with the intermediate-term trend effectively on the fence—most indexes are hanging around their 50-day lines and have recouped about half of the recent corrections. Thus, some caution is still in order, especially as further news-driven moves are likely in the days and weeks ahead. However, the leaders (and potential leaders) of the market are very impressive, with more and more flashing constructive action, including some that are rallying on outsized volume, both of which are a sign that big investors are getting comfortable putting money to work. It’s not a wild bull market obviously, with relatively few stocks hitting new highs, but it’s safe to say the evidence has improved, causing us to nudge up our Market Monitor today.

This week’s list has a bunch of good-looking stocks that have seen good-volume buying of late. Our Top Pick is Datadog (DDOG), which has returned to form after a big-volume breakout last week. Start small and add if the stock and market improve from here.

Stock Name	Price	Buy Range	Loss Limit
Alibaba (BABA)	288	280-288	260-265
Datadog (DDOG)	107	103-107	92-94
Purple Innovation (PRPL)	25	23-24.5	20-21
Seres Therapeutics (MCRB)	30	27.5-29.5	23-24
SolarEdge Technologies Inc. (SEDG)	273	243-257	218-224
STMicroelectronics (STM)	33	32-33.5	29-30
Teck Resources Limited (TECK)	14	13-14.2	11.5-11.9
Twilio (TWLO)	283	277-287	250-255
Twitter (TWTR)	47	44-46	40-41
Zendesk (ZEN)	105	101-105	92-94