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The most dangerous way to sell short is to pick a hot little stock that’s “way overvalued” and bet that it will come down. Such a case in recent weeks has been American Superconductor (AMSC), a company that recently found new life by entering the market for wind energy. For the past five months, AMSC’s chart, in climbing from 16 to 45, has rewarded investors who were long on the stock, and it has punished short-sellers ... despite the broad market being unsupportive.

The marijuana sector peaked in February, corrected strong for a couple of months, and since then has been sinking slowly lower, shaking out weak hands as it prepares for its next upmove.

Fundamentals in the industry remain terrific, as I am confident third-quarter results will soon reveal, and while the trend toward legalization in the U.S. continues, it’s taken a back seat at the federal level for now, so all the action remains at the state level.



In the portfolio today, we continue to hold patiently, with the portfolio more than one-third in cash, waiting for a new uptrend—but if you’re eager to buy now (while things look cheap) I do have some suggestions.



Full details in the issue.

While today brings an unexpected new political reality, markets around the world are already adjusting to the new order.

Before we dive into this morning’s Weekly Review, I wanted to bring to your attention to the schedule for this holiday week. I will be working/trading as normal Monday through Wednesday, and then will be off Thursday through Monday morning, which means we won’t be sending a Daily Watchlist or the Week in Review on Monday, November 27. Have a great Thanksgiving!

In tonight’s issue, we write about what we’re seeing in the market’s recent rotation as well as another batch of studies that portend higher prices for the market down the road. We also dive into all our recommendations and present some of our favorite ideas for the next market upleg.

The market’s divergent behavior continues, with small growth stocks in particular suffering, but there are still attractive investments, and for investors looking for something in the electric vehicle sector, today’s recommendation is one of them.

As for the current portfolio, I have two sell recommendations, both small, lightly traded stocks that are losing support.



Details inside.

Today I’m going to give you my two cents on Dow 10,000. No doubt the nightly news programs had a field day with that milestone and a lot of individual investors in the U.S. likely took it as a sign that it was OK to start wading back into the market. Wrong.

Last chance to enter our essay contest: How I Lost Money in the Bear Market and What I Would do if I had Another Chance. Here are the rules: maximum 1,000 words; one entry per email address; send entries via email to essaycontest@cabot.net; the winner will receive a one-year free subscription to your choice of these Cabot newsletters: Cabot Market Letter, Cabot Top Ten Report, Cabot China & Emerging Markets Report, Cabot Green Investor, Cabot Benjamin Graham Value Letter or Cabot Stock of the Month Report. The contest deadline is June 30, 2009 and winners will be announced on July 12, 2009. The top three essays will be selected by a panel of Cabot editors, and readers will vote on the winner. We may choose to reprint any entries in Cabot Wealth Advisory.

This month I’m featuring an innovative software company with an AI angle.

While AI is all the rage, bordering on hype, this company’s learning platform has been harnessing the technology for a few years. The latest iterations of AI are likely to help make its product better and open new monetization opportunities.

It’s a neat story and the company has terrific products that are loved by users. Because of the recent run in tech stocks, we’ll start with a half-sized position. Enjoy!

The two best small-cap medical device stocks are BioTelemetry (BEAT) and iRhythm (IRTC). Which one is better? You might not have to choose.

The U.S. has one of the best freight railroad systems and one of the worst passenger railroad systems.

I’ve been traveling between New York and Boston frequently for over three years. The transportation options between the two have definitely improved since I moved here; now I can choose the Bolt Bus or the Megabus, both of which have WiFi and electrical outlets. But I’ve also taken the Fung...

One conversation reminded me of a column I’d written a few years ago describing factors that hampered progress in this country.

I have interest in stocks that held up well during the brief selling and are now perched at or near new highs.

In my mind, the future is likely to bring something new to America, and for lack of a better term, I’m going to call it the Great Shrinkage. In this Great Shrinkage, as I ventured before, credit will shrink and equity will increase. In this Great Shrinkage, the number of colleges will shrink, as fewer parents choose to borrow the big bucks required. States and municipalities will cut non-essential services. Savings rates will climb ... but with demand so high, returns from savings will stay extremely low.

With the market bouncing around in the first two weeks of the year on more speculation about Fed rate cut magnitude/cadence (economists are now thinking slower and fewer of them) and mounting geopolitical risks, small caps as an asset class have begun to trail the broader market.

That said, on a stock-specific basis there’s been a lot of positive motion in small caps in the MedTech and software space, which is where we concentrate.