Search

Today’s selection is one of the big, fast-growing Chinese companies (you might call it the Google of China), which has just pulled back to offer us a lower-risk entry point.

Emerging market stocks in general strengthened this week, keeping our Cabot Emerging Markets Timer firmly on the positive side. Our new stock is an express delivery company with a China-wide network that covers 96% of China cities and towns. We have ratings changes on two of our stocks.

Current Market Outlook


After a modest rise last week, the market’s story remains the same—the intermediate- and longer-term trends continue to point up, and leading stocks remain in favor, with a ton gapping up on earnings during the past three weeks. It’s not all good news, of course—the broad market has again turned iffy by a few measures, and the environment is a bit giddy right now as investors count their profits. Thus, we won’t rule out a healthy pullback in the major indexes or some rotation among various stocks and sectors. But at day’s end, we always go with the market’s primary evidence (trend, price/volume, etc.), and today that evidence is solidly bullish, so we are, too.

This week’s list is heavy on small- and mid-sized companies, though a variety of sectors are represented. Our Top Pick is Universal Display (OLED), a leading glamour stock that just soared on earnings after about five months of no progress. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Axcelis Technologies (ACLS)	0.00	31.5-33.5	28.5-30
Conn’s Inc. (CONN)	0.00	29.5-31	26.5-27.5
EPAM Systems (EPAM)	188.24	96-98.5	90-92
Insulet (PODD)	175.69	66-69	60.5-62.5
Neurocrine Biosciences (NBIX)	123.40	70-73	63.5-65.5
Old Dominion Freight Line Inc. (ODFL)	221.91	115-119	106-108
PBF Energy (PBF)	38.93	30-31	27-28
Trex Company (TREX)	117.56	100-105	92-95
TRI Pointe Group Inc. (TPH)	0.00	16.5-17.2	15-15.4
Universal Display (OLED)	187.54	154-160	137-140

The market hit a pothole today, which isn’t totally unexpected given the recent run-up; in fact, in the short-term, we don’t see much of an edge either way, as earnings season is underway and growth stocks have generally been lagging.

However, longer-term, the evidence remains piled up on the bullish side of the ledger, both via our trend-following indicators and with a growing number of bullish studies. Thus, we remain heavily invested, though we remain choosy on the buy side given the market’s short-term uncertainties.

In choosing today’s stock, I leaned conservative, and found a dividend-paying stock with strong growth prospects. When I selected it yesterday, the stock was at the bottom of its recent range, but today it shot up to near the top of that range. It’s still a good story, but I’d like it better where it was yesterday.

There are a few yellow flags out there, from short-term sentiment measures to a weakening broad market (our Two-Second Indicator is again unhealthy), but the trend of the major indexes is firmly up, and the action of growth stocks has been terrific, including a bunch that have surged on earnings in recent weeks.

Current Market Outlook


There’s still another couple of weeks to go, but so far, earnings season has been good for the market, not only driving the major indexes to new highs last week but reinvigorating many growth stocks and launching a few fresh breakouts and new leadership. In the short-term, we expect continued volatility among the indexes and various sectors based on earnings reports and news flow (both financial and otherwise), with dips possible after last Friday’s moonshot advance. But the evidence remains bullish in the intermediate- and longer-term. Thus, we’re sticking with a bullish stance, and advise you to hold your strong performers and look to latch onto new leaders as they lift off, while getting out of any holdings that crack.

This week’s list has many earnings winners from last week in a variety of industries, as well as a few names set up well ahead of their reports. Our Top Pick is First Solar (FSLR), which looks like a powerful turnaround after blasting ahead following a blowout earnings report. Try to grab shares on dips.

Stock Name	Price	Buy Range	Loss Limit
Avis Budget Group (CAR)	0.00	40-42	36.5-38
Dana Holding (DAN)	0.00	28.5-30	26-27
First Solar (FSLR)	83.74	57-60	51-53
Flir Systems (FLIR)	0.00	44.5-46.5	40.5-41.5
GrubHub (GRUB)	140.03	57.5-60	53-54.5
Polaris Industries (PII)	0.00	113-119	104-107
PulteGroup (PHM)	45.93	28.5-30	26.5-27.5
STMicroelectronics (STM)	30.09	22-23.5	19.5-20.5
SVB Financial Group (SIVB)	0.00	212-220	197-203
Terex (TEX)	0.00	45-47	41.5-42.5

Note: To accommodate our Thanksgiving week schedule, there will be no issue of Cabot Stock of the Week published next week. The next issue will be published November 28.

As for today, the broad market’s long-term trend remains up, and today my recommendation is an undervalued stock recommended by Azmath Rahiman, chief analyst of Cabot Benjamin Graham Value Investor.

We’re adding a new 5.3% yielding stock to the High Yield Tier. Most of our other positions are rated Buy as well, and the market is strong, so if you’re underinvested, it’s time to put some money to work.

Current Market Outlook


The market rebounded very nicely from last Monday’s big decline, with all of the major indexes shooting ahead and most notching new all-time highs. Thus, from a top-down perspective, the picture remains bright, with the intermediate- and longer-term trend of the market (and most stocks) pointed up. That said, it’s tricky out there—below the surface, the rotation is still vicious on a day-to-day basis, and many leading growth stocks remain stagnant. We’re still mostly bullish (we’re nudging the Monitor back up to 8 this week) and advise you to hold your strong stocks and look for new buys as they come. With the crosscurrents and earnings season (which is set to begin in a couple of weeks), it’s best to be selective and keep your feet on the ground.

This week’s list has a ton of very strong charts, with many showing persistent advances during the past few weeks. Our Top Pick is AbbVie (ABBV), which has come under extreme accumulation and looks like a new big-cap leader in the medical space.

Stock Name	Price	Buy Range	Loss Limit
AbbVie Inc. (ABBV)	93.53	85-89.5	77-79
Carpenter Technology (CRS)	53.25	46.5-49	42-43.5
E*Trade Financial (ETFC)	0.00	42-44	39.5-41
Eagle Materials Inc. (EXP)	0.00	103.5-106.5	97-99
Loxo Oncology (LOXO)	186.59	87-91	78-80
MKS Instruments (MKSI)	109.43	90-94	83.5-85
Meritor (MTOR)	21.46	24-26	21.5-22.5
Valero Energy (VLO)	97.40	74-77	69.5-71.5
Winnebago (WGO)	48.56	42.5-45	38.5-39.5
YY Inc. (YY)	0.00	86-89	78-80

The market remains in a strong uptrend, and thus I continue to recommend that you be heavily invested in stocks that will help you meet your investment goals. At the same time, however, you need to manage risk, and it’s worth noting that the higher the market climbs, the greater the potential for loss once the uptrend ends.

Today’s recommendation is a classic steelmaker that has great growth prospects as the U.S. economy speeds along and protectionist measures improve our country’s competitive position. Also, the stock is cheap, so downside risk is limited.

With today’s recommendation, I swing back to the aggressive side, with a technology company that is revolutionizing (well, maybe that’s too strong a word) the marketing industry. In any case, it’s growing very fast and it’s expected to turn profitable this year.