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Tom Hutchinson, Chief Analyst of Cabot Dividend Investor, talked about dividend stocks and the current market. PLUS Tom shared a couple of his favorite high-growth, high-yield stocks.

It’s too soon to buy new stocks aggressively. But there is a safer place in the meantime to generate a high yield without much downside in the near term.
In this issue, I highlight a stock from the energy sector, the only market sector having a good year. Yet, the stock is not overvalued or overpriced. It provides a high yield without much downside if the market decline continues. And the price is likely to trend higher over the rest of the year.

2022 was a hard year for stocks. Fortunately, Cabot Options Trader had a better year. These are the best (and worst) options trades I shared with subscribers.

After a negative start to the week last Monday, the market surged higher on Wednesday, following what many traders view as a “less hawkish” speech by Federal Reserve Chairman Jerome Powell.

After a negative start to the week last Monday, the market surged higher on Wednesday, following what many traders view as a “less hawkish” speech by Federal Reserve Chairman Jerome Powell.

Well, the market got exactly what it expected yesterday when the Fed hiked by 75bps (the odds were over 80% that’s what they’d do). Fed Chair Jerome Powell’s messaging was consistent with what he said back in August in Jackson Hole.

Overall, nothing has changed yet with the major evidence out there, but we continue to think a bottom-building process is playing out in decent fashion so far: Last week, the major indexes sank below their January lows on news of the Russian invasion, but then rallied hugely to close the week all while showing small positive divergences in the broad market (fewer stocks hitting new lows on the Nasdaq, fewer below their 200-day lines, etc.). Moreover, there’s little doubt that sentiment is getting pretty bearish, and believe it or not the intermediate-term trend of growth funds actually isn’t far from a green light. Thus, there are some positives as it attempts to etch a low area to this three-plus-month downturn, so we’re nudging up our Market Monitor, but we need to see the market build on these baby steps before thinking the downtrend may be over.



This week’s list is very heavy on the commodity complex, as that’s clearly where the big money has been flowing. Our Top Pick is a natural gas-heavy play with as good a cash flow story as there is.

Current Market Outlook


From a top-down perspective, nothing has really changed with the key evidence; there remain a couple of divergences (number of new highs, lagging small-cap indexes), but the intermediate-term trends of the major indexes and most leading stocks (and even non-leading stocks) are pointed up. Under the surface, though, we’re seeing some ping pong action—the major indexes have been alternating up and down days for the past couple of weeks, while many sectors are whipping in and out of favor on a weekly basis. (Growth stocks have been alternating good and bad weeks for a month.) What does it mean? It’s fair to say the broad buying pressures have eased up, though to this point, the sellers haven’t done much damage at all. We’re going along with the back-and-forth action, nudging our Market Monitor down a notch—we remain overall bullish, but the current earnings season will have a lot to say about the intermediate-term outlook for the market and leading stocks.

In the meantime, we’re still seeing a good number of setups from a wide variety of stocks and sectors. We have a couple of favorites this week, but for our Top Pick we’ll go with Qualcomm (QCOM), which has shown extreme power after a game-changing deal with Apple last week. We’re OK buying here or (preferably) on dips.

Stock Name	Price	Buy Range	Loss Limit
Ctrip.com International Ltd. (CTRP)	34.94	42.5-44.5	39-40.5
D. R. Horton (DHI)	66.55	43-45.5	39.5-41.5
Fastenal (FAST)	37.08	67.5-69.5	62.5-64
First Solar (FSLR)	83.74	57-59	52.5-54
Five Below (FIVE)	134.58	136-142	124-127
Kansas City Southern (KSU)	176.54	121-124	112-113.5
ManpowerGroup (MAN)	90.84	93.5-95.5	84.5-86
Microchip Technology (MCHP)	79.12	95-97	88-89
QUALCOMM Incorporated (QCOM)	106.36	78-82	69-71
Redfin (RDFN)	40.40	21-22	19-19.5

Current Market Outlook


All eyes are on Janet Yellen this week, who is set to speak Friday morning, and whether she’ll offer hints to the Fed’s next move. As always, we’ll let others slice and dice the comments; we’ll stick with the market’s action itself. And on that front, things look solid—the market’s consolidation of the past few days has been normal thus far, and while a short-term shakeout of some sort wouldn’t surprise us, the odds continue to point toward higher prices down the road. We continue to advise you to remain heavily invested, though be sure to honor your stops for any stocks that break support.

This week’s list includes a nice array of stocks and sectors, including a few recent earnings winners. Our Top Pick is Gigamon (GIMO), a hot stock that’s recently taken a few weeks to catch its breath. Further dips are possible but buying here with a tight stop makes for a good risk-reward opportunity.

Stock Name	Price	Buy Range	Loss Limit
Yelp (YELP)	41.30	35-37	32-33
US Silica Holdings, Inc. (SLCA)	0.00	38.5-40.5	35.5-36.5
Royal Gold, Inc. (RGLD)	129.66	80-83	74-75
Pioneer Natural Resources (PXD)	0.00	177-183	164-166
Insulet (PODD)	175.69	40.5-42.5	37-38
MercadoLibre, Inc. (MELI)	980.83	160-165	149-150
Line Corporation (LN)	0.00	44-46	39.5-40.5
Gigamon (GIMO)	0.00	43.5-46	40-41
Dicks’s Sporting Goods (DKS)	0.00	56-58	50-51
Acuity Brands (AYI)	0.00	273-280	253-256

There remain a few warts on the market’s current rally, including some meaningful divergences (the Nasdaq and Russell 2000 have yet to reach new highs like some of the broader big-cap indexes) and a lack of decisive breakouts from big-cap leaders (most are still working on launching pads). But the evidence is rarely going to line up perfectly; the fact is that during the past few weeks, more and more stocks have been acting well as selling pressures ease. Now’s a time to grow gradually more optimistic as the stocks you own and follow improve.

This week’s list includes one of those classic, big-cap breakouts that we alluded to above. Top Pick Applied Materials (AMAT) is in the process of completing a major acquisition that should boost its market dominance in a big way, and the stock has exploded out of a nice consolidation on very big volume.

Stock Name	Price	Buy Range	Loss Limit
Zebra Technologies (ZBRA)	154.94	72-76	69-70
Skyworks Solutions (SWKS)	0.00	45-47	41-42
MeadWestvaco (MWV)	0.00	42-44	39-40
Lannett Company (LCI)	0.00	45-46	42-43
Illumina Inc. (ILMN)	289.74	160-170	154-155
Carrizo Oil & Gas (CRZO)	24.03	59-61	55-56
Consol Energy Inc. (CNX)	0.00	45-48	43-43.5
Bonanza Creek Energy (BCEI)	0.00	52-55	48-49
Arris Group (ARRS)	0.00	32-34	28.5-29.5
Applied Materials (AMAT)	0.00	20-22	18-19

Current Market Outlook


In the market, it’s the unexpected that you should pay closest attention to. Two weeks ago, the broad market was heading south and the major indexes broke down after a month of distributive action. But since then, the market has zoomed ahead like a rocket, with all the major indexes back above their 50-day lines and many stocks either hitting new highs or racing toward the top of multi-week launching pads. There are still some things to worry about, and we’ll probably get a truer read on things once the big boys come back from vacation next week. But overall, we’re leaning bullish, encouraged by what we’ve seen during the past two weeks.

This week’s list shows a bunch of stocks that have shown big-volume buying of late, a sure sign institutions are sniffing around. Our Top Pick this week isn’t a stock we think is going to double, but rather, one we feel strongly will head higher. It’s Home Depot (HD), the granddaddy of housing stocks, which just busted free from a 15-month base.

Stock Name	Price	Buy Range	Loss Limit
WPX Energy (WPX)	0.00	23-25	20-21
Sensata Technology (ST)	0.00	47-49	44-45
Regeneron Pharmaceuticals (REGN)	512.96	340-350	319-320
Royal Caribbean Cruises (RCL)	0.00	61-63	57-58
Home Depot (HD)	0.00	88-91	83-84
Keurig Green Mountain (GMCR)	0.00	129-135	119-121
F5 Networks, Inc. (FFIV)	0.00	120-122	113-114
Community Health Systems (CYH)	0.00	50-52	46-47
Canadian Solar (CSIQ)	0.00	34.5-35.5	31-32
Akorn (AKRX)	0.00	37-38.5	34-35

Current Market Outlook


The market remains all over the place, with nearly every day bringing another 1%-plus move in the major indexes; such wide-and-loose action isn’t usually a good thing after a big market advance. That said, our outlook isn’t negative here (we’re still more bullish than bearish), and we continue to see more and more stocks set-up to get going … if the bulls can create a real, sustained uptrend. For now, though, it’s best to hold your top performers, do a little buying (preferably on weakness) and hold some cash as we wait for the market to show its true colors.

This week’s list is encouraging, as we’re not having any trouble spotting stocks that have consolidated tightly or recently popped to new highs on good volume. Our Top Pick is the first big-cap growth stock to surge above resistance this week—Chipotle Mexican Grill (CMG), which remains a great cookie-cutter story.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	149-154	137-139
Rackspace (RAX)	0.00	45-48	42-43
Rackspace (RAX)	0.00	45-48	42-43
Lululemon Athletica (LULU)	304.69	60-62	54-55
Leggett & Platt, Incorporated (LEG)	49.79	42-44	39-40
D. R. Horton (DHI)	66.55	25.5-26.5	23.5-24
Chipotle Mexican Grill (CMG)	773.32	695-720	650-655
CF Industries (CF)	45.23	285-295	265-268
Brunswick Corporation (BC)	0.00	51-53	47-48
Alkermes (ALKS)	0.00	63-67	56-57
Align Technology Inc. (ALGN)	316.20	60-62	56-57

With most major indexes still within 2% or 3% or their recent peaks, we can’t say the market is a horror show. But the evidence pointing toward a fatigued market continues to pile up, with last week’s waves of distribution (on Monday, Wednesday and Thursday) telling us sellers are gaining strength. We’re not predicting anything, but right now, making lots of money is very difficult; even the strong defensive sectors are choppy, and if you buy a stock at the wrong time, forget about it. Thus, we’re leaving our Market Monitor in neutral territory, and advise you to play things cautiously—keep positions small, keep your laggards on tight leashes and hold some cash.

Just as important, though, you should also keep your eyes open for a resumption of the uptrend. This week’s list has a few potential shooting stars, though there’s also a flavor of safety to some of the names. Our favorite of the week is First Solar (FSLR), which is dancing to its own drummer after a bullish near- and long-term earnings forecast a couple of weeks ago.

Stock Name	Price	Buy Range	Loss Limit
Santarus (SNTS)	0.00	17.5-18.5	15-16
Shutterfly (SFLY)	94.71	42.5-44.5	39-40
ONYX Pharmaceuticals (ONXX)	0.00	95-99	87-88
ServiceNow (NOW)	341.86	36-39	33-34
NetSuite, Inc. (N)	0.00	77-79	73-74
Medicines Company (MDCO)	56.98	33-34	29-30
Cheniere Energy (LNG)	63.82	25-26	22-23
Home Depot (HD)	0.00	73-74.5	70-71
First Solar (FSLR)	83.74	36-37.5	32-34
Actavis (ACT)	0.00	95-97	90-91

The market didn’t do all that much during the holiday-shortened week, so our overall stance is unchanged—we’re still leaning bullish but are also holding some cash and are more focused on being patient and buying stocks at lower-risk entries. That said, we have seen a (very) subtle shift during the past couple of weeks; some of the defensive-type names have stagnated, with growth and speculative stocks acting a bit better. It’s too early to conclude that a big shift has occurred, but it’s something to watch closely—a movement back into growth stocks would be very encouraging.

In the meantime, we’re looking for newer names that have shown excellent power of late. This week’s list is chock-full of them, and our Top Pick is Biogen Idec (BIIB), a big biotech firm with big earnings growth coming. The stock just gapped out of a multi-month zone on favorable news.

Stock Name	Price	Buy Range	Loss Limit
Workday (WDAY)	194.88	78.5-81.5	75-75.5
Johnson Controls International plc (JCI)	0.00	48-50	43-44
Gogo Inflight (GOGO)	0.00	27-30	22-23
First Solar (FSLR)	83.74	59-61	49-51
Fifth & Pacific (FNP)	0.00	30.5-32	27.5-28
New Oriental Education (EDU)	113.97	28.5-30	26-26.5
Dexcom (DXCM)	421.36	33-35	29-30
Canadian Solar (CSIQ)	0.00	29-30.5	23-24
Bitauto Holdings (BITA)	0.00	29.5-31	25-26
Biogen (BIIB)	0.00	285-295	267-268

From a top-down perspective, the intermediate-term trend is up and most dips are met quickly with buying (Friday was a good example of that). But looking at individual stocks, we are seeing more and more iffy action; more groups are acting sloppily after big runs, strength is being sold into, and volatility is on the rise. None of this means you should be running into the storm cellar or that a big drop is a sure thing, but there’s enough worrisome evidence to hold some cash, to keep losers and laggards on tight leashes, and to be discerning in terms of what (and at what price) you buy. We’re knocking our Market Monitor down a peg.

What we like about this week’s list is that it’s mostly stocks that are out of the public’s eye—they haven’t been hot in recent weeks. Our favorite of the week is Canadian Pacific Railway (CP), which just broke free from a multi-month base and is part of the still-strong transportation group.

Stock Name	Price	Buy Range	Loss Limit
Ubiquiti Networks (UBNT)	170.11	39-41.5	35.5-36
Spirit AeroSystems (SPR)	92.54	27-29	25-26
SM Energy (SM)	0.00	85-87	80-81
The Priceline Group Inc. (PCLN)	0.00	1,040-1,070	990-1000
Harman International Industries, Inc. (HAR)	0.00	75-78	68-69.5
Halliburton (HAL)	0.00	52-55	49-50
First Solar (FSLR)	83.74	58-60	49-50
Canadian Pacific Railway (CP)	0.00	140-146	130-131
Chicago Bridge & Iron (CBI)	0.00	75-76.5	69-70
Bitauto Holdings (BITA)	0.00	24-25.5	20-21

Current Market Outlook


The market began 2016 on a bearish note, with the major indexes plunging and even the market’s most resilient stocks getting hit very hard. The “reason” for the decline was supposedly a meltdown in China’s stock market overnight, but there’s no question the U.S. market’s underpinnings had been weak for a while (hence our cautious approach in recent weeks). From here, anything is possible—January is a notoriously volatile month full of crosscurrents, so yet another snapback is possible. But we’re moving our Market Monitor down a notch into bearish territory given the evidence; now’s the time to think more about capital preservation and work mostly on building a watch list, keeping new buys to very small positions.

This week’s list has many great ideas, stocks that should do well if the market does find strong support. Our Top Pick is SolarEdge (SEDG), which is aiming to be the Intel of the solar sector; the company and the sector as a whole are turning around after a big decline last year.

Stock Name	Price	Buy Range	Loss Limit
SolarEdge Technologies Inc. (SEDG)	124.37	25.5-27	22-22.5
Royal Caribbean Cruises (RCL)	0.00	96-99	91.5-92
Pacira Biosiences (PCRX)	54.85	72-75	66-67
Ophthotech (OPHT)	0.00	70-74	64-65
Universal Display (OLED)	187.54	51.5-54	47.5-48
Nevro Corp. (NVRO)	0.00	64-67	57-58
Neurocrine Biosciences (NBIX)	123.40	50-53	45-46
Dollar Tree (DLTR)	0.00	74.5-78	71.5-72
China Biologic Products (CBPO)	0.00	135-140	123-125
Acorda Therapeutics (ACOR)	0.00	39.5-41	37-38

Current Market Outlook


The market put together another constructive week, with the major indexes recovering following some early weakness and more stocks setting up in constructive launching pads. That said, the rubber will likely meet the road during the next three weeks as earnings season revs up—a bunch of powerful breakouts would dramatically raise the odds that the market is beginning a sustained rally, but if the sellers feast on stocks following their reports, it’ll be best to take things slowly. For now, we remain neutral—buying a stock here or there is fine, but booking some partial profits on the way up and holding a chunk of cash on the sideline also makes sense.

This week’s list contains a mix of stocks already out to new highs, many that are setting up, and a few that are recovering well from huge declines. Our Top Pick is Restoration Hardware (RH), which is near the top of its launching pad and doesn’t report earnings until December.

Stock Name	Price	Buy Range	Loss Limit
TripAdvisor (TRIP)	55.14	80-84	72-73
Synaptics (SYNA)	0.00	84-86	76-77
RH Inc. (RH)	252.93	99-103	91-92
PDC Energy (PDCE)	0.00	56-59	52-52.5
ServiceNow (NOW)	341.86	74-76	67-68
Newfield Exploration (NFX)	0.00	38-40	35-36
The Goodyear Tire & Rubber Company (GT)	0.00	30.5-32	27.5-28
Franco-Nevada (FNV)	125.51	49-52	46-47
Fiat Chrysler (FCAU)	0.00	15.5-16.5	13.5-14
Amazon.com (AMZN)	2.00	555-575	495-500

Current Market Outlook


It’s been four weeks since the August 24 panic low and the market has done a decent job hanging in there—all of the major indexes probed higher into last week before selling off on Friday. Currently, the major trends of the market remain down, so we’re staying defensive. However, the next few days will be telling—if the indexes can advance from here, we could receive an intermediate-term buy signal late this week, which will have us loosening the wallet a bit. But if the sellers show up again, all bets are off. For now, it’s best not to anticipate anything; you should continue to hold plenty of cash and keep new buys small. We’ll let you know on Friday if the outlook has changed.

In the meantime, we are encouraged by the action of many individual growth stocks, which are showing lots of relative strength even as the market struggles. Our Top Pick this week is Activision Blizzard (ATVI), which is pushing higher on the back of some very good product news. Consider nibbling on dips.

Stock Name	Price	Buy Range	Loss Limit
Tyler Technologies (TYL)	0.00	145-151	132-134
T-Mobile US (TMUS)	0.00	41-42.5	38-39
Sucampo Pharmaceuticals (SCMP)	0.00	26-28	23.5-24
Pandora Media Inc. (P)	0.00	19-21	17.5-18
Masco (MAS)	0.00	26-27	24.5-25
Expedia Group (EXPE)	0.00	120-125	110-112
Dexcom (DXCM)	421.36	98-100	88-90
Activision Blizzard, Inc. (ATVI)	0.00	29-31	26.5-27
Athenahealth (ATHN)	0.00	138-140	130-132
Adaptive Biotechnologies Corporation (ADPT)	39.41	110-114	98-99