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Corporate America is weathering trade uncertainty remarkably well. The S&P 500 index has recovered more than 20% since bottoming out in April but is up only 6% this year.

You may have noticed that the stagflation scenario (inflation and slow growth) is a theme being promoted by the financial media with comparisons to the 1970s. But even if this becomes a reality, stocks are still your best option to protect and grow your wealth. In the 1970s, large-cap value outperformed growth stocks and long-term Treasury bonds. Dividend-paying stocks also outperformed. Our strategy will remain the same regardless of the pundits, value, quality, and momentum.

In the first week of 2019, a better overall stock market, weaker U.S. dollar, bargain hunting, and hopeful signs of a temporary truce in the U.S.-China trade war have all helped push our Emerging Markets Timer back into a bullish mode.

As with our prior signals, we’re not advising you to jump in with both feet since there is still a fair amount of uncertainty out there and the iShares EM Fund (EEM) needs to demonstrate staying power and work through some resistance. Still, we are extending our line a bit with our two new buys in today’s issue.

Discover the value of international diversification and the profit potential of investing in fast-growing countries.

Today’s Cabot Small-Cap Confidential candidate runs an online marketplace for a different type of market where over $120 billion is spent each year. The trend is strong, and it’s still early days. All the details are inside the June Issue of Cabot Small-Cap Confidential.

In the January Issue of Cabot Early Opportunities I highlight five standout growth stocks that should have meaningful upside from current levels. Recognizing that the current risk-off environment has these types of stocks acting erratically (probably an understatement) I’ve focused first and foremost on companies I like rather than getting hung up on their recent share price performance. In terms of buying, we’ll start very, very slow. The three smaller companies I feature go straight to the Watch List as we’ll try to be opportunistic buyers when things feel more secure. Even with the two larger companies we start with half positions.



Enjoy!

The market’s rally has run into trouble, with our Cabot Tides and Two-Second Indicator effectively back on the fence. When it comes to growth stocks, most are acting more resiliently than the broad market, but even there it’s hit and miss, with lots of air pockets though many names that are acting well, too. Because of the divergent action, we’ve had a flurry of moves since the last issue, paring back or selling three names, but putting money to work in two names (including a new addition last week). All told, we’ll still have about 27% in cash and have a few stocks that look great, but are also keeping a close eye on a couple that remain iffy.

In tonight’s issue, we go over all our thoughts on the market and our various moves, as well as write about the solar sector that may be getting going after a long slumber, as well as small caps in general, which could finally get going ... if interest rates behave themselves.

Markets, led by Nasdaq’s leading companies, had an impressive winning streak broken by concerns over an acceleration of coronavirus cases. Our Emerging Markets signal (EEM) stays positive as the virus is being handled well in Asia outside of China but is exploding in Latin America. The Explorer portfolio is well positioned with cash to deploy and stocks holding up well.

Today, we’ll look inside the indexes to see what’s working and also explore what more participation by individual investors in 2020 might mean for markets. Then we move north to Canada for a promising new recommendation that has all the characteristics of a winning gold stock.

I’ve been receiving questions recently that essentially ask, “Why did this stock go up when the company reported bad news?” and “Why did this other stock go down when the company reported good news?”

Here’s how I handle my personal stock portfolio when I’m expecting a market correction. When I sell a stock, I put part of the capital in the money market fund, and I reinvest part of the capital into an attractive stock opportunity.

The market has pulled back after a huge run-up, which is normal action and likely not a product of renewed Fed fears that didn’t exist a week ago. These types of pullbacks in bull markets, like the new one we’ve just entered, are buying opportunities. And so today, we add a high-profile growth stock that is already up more than 80% year to date but may be just scratching the surface of its artificial intelligence potential, which could open up new revenue streams. It’s a new recommendation from Tyler Laundon in Cabot Early Opportunities.

Dohmen Capital Research Institute Inc. was founded in 1977 by Bert Dohmen as an economic and investment research firm. The firm currently offers 10 services, including a long-term advisory service for the mutual fund investor, and fax and e-mail services for short-term traders in stocks, options and short sales. Bert...

With the market becoming less supportive, I’m dialing back the aggression, so this week’s recommendation is a lower-risk company in the pharmaceutical sector that pays a solid dividend.
As for the current portfolio, our three energy stocks remain very strong, and there are no changes.


Details inside.

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.

Current Market Outlook


With Greece on the brink of defaulting on some loans and/or exiting the eurozone, the uncertainly of what’s to come caused sellers to drive the indexes and most stocks down sharply today. The straight-down action of the past few days, which came on the heels of some encouraging gains, is a yellow flag, as are the downmoves of many stocks. As we’ve been writing, you should honor your stops (many stocks tripped their stops today) and be holding at least some cash on the sideline. That said, while we’re knocking our Market Monitor down a notch today, the bigger picture hasn’t changed—the major indexes are still within their multi-month ranges, and the best stocks are pulling back normally, so we don’t advise selling wholesale.


This week’s list has many strong stocks that have held up well during the recent selloff. Our Top Pick is Community Health Systems (CYH), which just exploded out of a base following a big court ruling last week. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
SVB Financial Group (SIVB)	0.00	141-145	135-137
Sealed Air (SEE)	0.00	51-52.5	47.5-48
Lennar (LEN)	61.85	50-52	47-47.5
IACI (IACI)	0.00	77-79	73-74
Facebook, Inc. (FB)	0.00	84.5-87	81.5-82
Community Health Systems (CYH)	0.00	61-63	57-58
Carnival Corporation (CCL)	0.00	48-49.5	46.5-47
Avery Dennison Corp. (AVY)	0.00	60-61.5	57-58
Arista Networks (ANET)	0.00	79-82	74-75
Adobe Inc. (ADBE)	315.23	80-82	76-77

While pulling back a bit from the sharp jump on Monday, November 9th, the market rebounded on additional encouraging Covid vaccine results this week.

Earnings growth is an important metric for stocks.

Markets are hoping for some sort of breakthrough from the Xi-Trump meeting on the sidelines of the G-20 meetings in Japan over the weekend. Most likely there will be some positive face-saving news with most key issues kicked down the road. The Chinese want no new tariffs and Huawei sanctions pulled back. Emerging market signal is still positive and we remain cautiously optimistic.