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The market has finally begun to consolidate after a heady eight-week run in the major indexes and leading stocks. It’s never fun to see things retrench, and we do think the next couple of weeks (very roughly speaking) could see more choppy, tedious trading. But our focus remains on the intermediate- and longer-term picture, and on that front, the evidence remains bullish, so we remain heavily invested.



The Model Portfolio has been steadily putting money to work, including filling out two positions last week. We now have eight stocks and a cash position of around 14%.



In tonight’s issue, we give our latest thoughts on all our positions and write about yet another unique, longer-term bullish occurrence that bodes well going forward.

The long-awaited market correction has finally begun, and while you may be tempted to tie the correction to fundamental events, I don’t find any value in that—because all that news is public information so it has no real value to us. Instead, I prefer to watch the action of the stocks carefully, to judge where the money is flowing. And the result of my observations today is that we will sell four stocks and downgrade another to hold—and then continue watching.

As for this week’s recommendation, it’s a high-potential little medical stock that most investors haven’t heard of. It’s not for everyone, but it does provide diversity to our portfolio and it may be perfect for yours.



Details in the issue.

Last year, there were at least 7.9 billion records—including credit card numbers, home addresses, phone numbers and other highly sensitive information—that were compromised by computer hacks, mainly through invasions of business networks.

As we head into 2020, emerging markets are at the top of the Cabot Global Stocks Explorer menu after developing a nice uptrend in the fourth quarter of 2019. In addition, they are cheap - trading at a substantial discount to U.S. markets on a valuation basis. Today’s new idea is at the sweet spot of several powerful trends in China and has delivered steady and substantial profits to shareholders over the past five years.

Spot charter rates have begun to boom and most expect the good times to continue for many quarters if not longer—while Q3 results were still sour, this company’s stock moves on perception of the future, and it’s pretty much established now that 2020 will be a banner year (analysts see earnings of $3.61 per share!).

The broad market remains strong, and all Cabot’s market timing indicators are currently positive, so I remain optimistic that we’ll see higher prices in the month ahead.

This week’s recommendation is a growth-oriented medical stock with great potential; it was originally recommended by Mike Cintolo last November and it’s currently hitting new highs.



And as for the current portfolio, most of our stocks look fine, but because I limit the portfolio to 20 stocks, one has to go—and it’s the weakest.



Details in the issue.

The latest issue of Cabot Marijuana Investor is now available, with my current advice on the fourteen stocks in the portfolio.

The cannabis sector remains in a correction, but the new year brings the promise of a great rebound, and I want you to be in the stocks that will benefit most, so, while there hasn’t been much news over the past week, I do include full updates on each stock in the portfolio so you can best decide which stocks fit your own portfolio.

Also, the portfolio remains 25% in cash, waiting for the sector’s main trend to turn up.

Full details in the issue.

This stock has always had a great story—the company looks like one of the best cookie-cutter stories in construction-related retail, operating large (75,000 square feet on average) warehouse-style locations that specialize in hard flooring (tile, wood, stone, laminate and the like).

Precious metal stocks (and their underlying commodities) have become a mixed bag, especially with some global uncertainties seemingly cleared up, but this stock is pushing ahead nonetheless thanks to some company-specific catalysts in addition to higher gold and silver prices.

The cannabis sector remains in a correction, with Canadian stocks in particular still struggling—even as Cannabis 2.0 promises new retail opportunities. But the fundamentals of the industry remain bright, and investors are now beginning to discriminate between the winners and the losers—with the best stocks showing substantial increases in buying volume recently.

The portfolio remains more than a third in cash, waiting for the sector’s main trend to turn up, and there are just two small adjustments today. The portfolio will sell half its position in Cresco Labs (CRLBF) and double its position in Innovative Industrial Properties (IIPR).



Full details in the issue.

Current Market Outlook


The market finally hesitated a bit last week, and going through our weekend research, we did spot more leading names that had pulled back during the past five to 10 trading days. But as has been the case since the early-October lows, that weakness was tame (most dips were calm and controlled), with today’s burst of buying pushing many back up. (Encouragingly, even the lagging small-cap indexes are now trying to break out of multi-month ranges.) There’s still some shorter-term yellow flags, so we wouldn’t throw caution to the wind here (don’t forget to take some partial profits!), especially if you’ve put a bunch of money to work in recent weeks. But the fact that most stocks and indexes haven’t been able to retreat much despite those yellow flags is yet another stone in the bullish wall. We remain bullish.

This week’s list includes a broad mix of names, from old winners coming back to life to new names perking up to recently strong performers that have eased to good entry points. Our Top Pick is Axon Enterprise (AAXN), which has come back to life after a year-long rest. Start small and go from there.

Stock Name	Price	Buy Range	Loss Limit
Alnylam Pharmaceuticals (ALNY)	143.58	107-113	97-99.5
AAXN (AAXN)	87.11	72-75	66-64
Kansas City Southern (KSU)	176.54	149-153	138-141
Leggett & Platt, Incorporated (LEG)	49.79	51.5-53	47-48
Lithia Motors Inc. (LAD)	146.30	160-165	145-148
Luckin Coffee (LK)	0.00	28-30	24.5-25.5
Novocure (NVCR)	0.00	88-91	80-82
Palo Alto Networks (PANW)	236.92	241-246	225-228
Synnex Corp. (SNX)	129.70	119-123	110-112
Target (TGT)	124.77	122-125	112-114

This week’s pick has one of our favorite growth stories in the market.