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Even as worries fade over the recent Middle East flare-up, new tariff-related headlines have lately crept back into the news. However, stocks have taken it in stride by ignoring what would normally be “bad” news. In view of this, we’re pleased with the market’s resilience—and it’s also welcome that it hasn’t become overheated with too much enthusiasm yet. We’re still seeing a few flies here and there, with some stocks having trouble breaking above resistance, but a growing number of stocks are joining the parade, with a nice mixture of growthy and cyclical names getting into sync with the general march forward. All told, we like what we’re seeing, and in view of the continued strength, we’re raising our Market Monitor to a level 8.

This week’s list features names across multiple industries, which we view as a sign that categorical strength is building. Our Top Pick is a sporting goods giant that has multiple growth tailwinds and is tightening up as the 25-day line has caught up. We’re fine entering here or (preferably) on a dip.

Today I’m removing Delta Air Lines (DAL) from the Growth Portfolio. The company’s earnings outlook has deteriorated to an expectation of EPS declining 1% in 2016, and the price chart has not improved since I put the stock on Hold two months ago.

The market succumbed today to some bad news from Europe, although some buyers did support shares after the early-morning dip. Net-net, today and last Friday were bad, but the major indexes remain range-bound; amazingly, the Nasdaq is now in the midst of its sixth 4% swing up or down since early June, and yet, has made basically no progress during that time. It’s choppy out there! Thus, we see no reason to change our Market Monitor from its neutral position. As for individual stocks, it, too, is a mixed bag—some big leaders broke down last week, but many are still base-building and a couple actually poked into new-high ground after solid quarterly reports. All in all, a little buying is fine, but do your buying on weakness, keep positions smaller than normal and adhere to your stops.

This week’s list is a hodgepodge of stocks from different industries; most are strong for individual reasons (earnings, etc.). Our top pick is PPG Industries (PPG), which isn’t an exciting company, but it delivered a solid earnings report and announced a merger that kicked the stock higher. We think it could do well if bought on pullbacks.

Stock Name	Price	Buy Range	Loss Limit
A.O. SMITH (AOS)	0.00	49-50.5	-
ASML Holding (ASML)	350.01	52.5-54.5	-
DVA (DVA)	0.00	94-97	-
eBay Inc. (EBAY)	0.00	43-45	-
Medivation (MDVN)	0.00	90-94	-
Mellanox Technologies (MLNX)	92.00	84-90	-
PPG Industries (PPG)	0.00	109-112	-
Skyworks Solutions (SWKS)	0.00	27-28	-
USG Corp. (USG)	0.00	18.5-20	-
WOR (WOR)	0.00	21-22	-

The market began correcting in late March, and since then it has tried to get going twice (in late April, and in early June), with both rallies failing. Late last week, though, another rally attempt got underway, and while it’s early, it looks more promising—the upmove last Friday was powerful, and there appears to be less uncertainty surrounding Europe. Plus, potential leading stocks have now had two to three months to rebuild bases, so there are more potential buyable patterns out there. That said, the market remains fragile, and earnings season is dead ahead; our guess is that earnings, not Europe, will likely decide the market’s next big move. We’ll keep our Market Monitor in neutral territory for now, but color us encouraged by the market’s action.

This week’s list has a few good ideas; sector-wise, it’s clear that the housing stocks are performing best. Thus, we’ll keep it simple and name Lennar (LEN), the leading homebuilder in the market, as our Editor’s Choice; the company just came out with a great earnings report, propelling shares to new highs. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
3D Systems (DDD)	0.00	30-32	-
CPHD (CPHD)	0.00	42-44	-
Cirrus Logic Inc. (CRUS)	0.00	27-28.5	-
Eagle Materials Inc. (EXP)	0.00	35.5-37.5	-
Expedia Group (EXPE)	0.00	46-48	-
Lennar (LEN)	61.85	28.5-30.5	-
Ocwen Financial (OCN)	0.00	17.5-18.5	-
Skechers (SKX)	0.00	19-20.5	-
Ultimate Software (ULTI)	0.00	85-88	-
Western Refining (WNR)	0.00	21-22.5	-

It’s been a bumpy ride these last few months, but analysts are expecting big things from small-cap stocks in 2019.

The downdrafts that ended 2018 have created some small-cap bargains, making it a great time to buy.

On February 13, small-cap expert Tyler Laundon will discuss the rewards of having small caps in your portfolio. He’ll talk about what went right, and not-so-right, in 2018 and give you a preview of what to expect in 2019.

And he’ll conclude with secret stock picks from his new report (which you’ll receive FREE) that you won’t want to miss.

Cree Inc. (CREE) is a leader in the production of light emitting diodes.

WHAT TO DO NOW: The evidence has improved of late, though we haven’t seen many decisive green lights from our indicators. Still, with so much cash, we’ll dip a couple of toes in tonight and then follow up … if the good vibes continue. Tonight, we’ll add half-sized positions (5% of the account) in Eli Lilly (LLY) and JFrog (FROG), leaving us with a still-big 55% cash hoard. Details below.

In a tough week for markets, Explorer stocks held their own. Banco Santander (SAN) shares are up 50% so far in 2025, significantly outperforming bank and European indexes. Luckin Coffee (LKNCY) was up 10% this week and Sea Limited (SE) shares have risen 25% rise so far this year. All our dominating stocks held firm this week.

It was interesting to be in Tokyo and meeting for lunch today with a former Japan Ministry of Finance official as new tariffs of 24% on Japan were announced.

The S&P 500 and Nasdaq reached new records on Wednesday, reversing Tuesday’s declines. President Trump’s tax-and-spending bill squeaked through the Senate and is now at the heart of a battle in the House. This is hopefully settled today, and a setback would have an impact on the stock market.

Luckin Coffee’s (LKNCY) revenue in China has already surpassed Starbucks in China. This week, it brought the battle to America as its first two U.S. locations opened in New York. This may be just a public relations gambit.

Interest rates are still rising, as the Federal Reserve boosted short-term rates by 75 basis points last month, to try to stem the growth of inflation. There are some signs that it may be working. The 30-year mortgage rate actually saw a couple of decreases early last week, but nudged a bit higher on Friday, to a 5.94% average national rate. And gas prices have declined nationwide to $4.66 per gallon, from $4.68 this time last week. I know that’s not much, but, hey, we’ll take what we can get!

Today’s and next week’s issues of Cabot Undervalued Stocks Advisor are going to look a bit different. I won’t be reviewing all of our portfolio stocks today. Many Wall Street analysts are on vacation, so there will be very little in the way of changes in earnings estimates or new research reports for several weeks.

What a difference a week makes. Last Friday, it seemed the market was in a death spiral and it was hard to make sense out of the volatility. This week has been downright placid, and all the major indexes are up nicely. Since last week’s update, the S&P 600 Small Cap Index is up by 5%.

There’s a lot more to “buying low” than just identifying falling prices.

The market is getting stronger and higher-growth names are leading the charge.

This month we dig into an overlooked company with a global payments platform that’s helping solve digital payment challenges in complex industries.



Growth is expected to be over 30% for a number of years, and the stock is acting well.



Enjoy!

This week the Fed left interests rates again unchanged and Super Micro Computer (SMCI) became part of the S&P 500 index. An announcement of a two million convertible shares offering by Super Micro led to a pullback in the stock though long term, it’s smart to raise capital after the sharp rise in the share price.

Elsewhere, Washington is fixated on the potential push to force a change in the ownership of TikTok while China, as strongly expected, objects. This is a bit ironic since X, Instagram, Facebook, and Google aren’t available to Chinese citizens.

In our final Explorer issue of 2023, we add a new artificial intelligence play whose revenues are on track to expand by nearly 50% this year, and whose share price has more than tripled YTD - and yet trades well below its July highs. Back on the upswing, it’s worth buying now.

Enjoy, and happy holidays!

As markets weigh tariff and trade risks, we will continue our efforts to protect assets through portfolio rebalancing while remaining alert to trading opportunities. Our diversified and global Explorer stocks are doing well.

International investors will be important at the margin since they account for 18% of U.S. stock ownership.

The retreat of the U.S. dollar, down 10% in the last six months, and the emerging premium for U.S. bond markets is leading to higher yields (interest rates).

I recently noticed a few popular stocks such as MicroStrategy (MSTR) offering exposure to leveraged Bitcoin which to me seems like excessive risk and a sign of potential trouble.

This is like pouring gasoline on a roaring fire. It reminds me of a quote from Edward Chancellor’s book The Price of Time, which offered this gem:

“……as a rule, panics do not destroy capital; they merely reveal the extent to which it has previously been destroyed by [the taking on of excessive leverage in good times].”

Welcome to the inaugural issue of Cabot Income Advisor. It is my pleasure to share investment ideas that can provide you with a high income in today’s low interest rate world.
In this issue I highlight three stocks that are great buying opportunities right now for income investors. The stocks are chosen for their high yields, ability to generate attractive call premiums and the likelihood of capital appreciation over time.


While the market indexes have rebounded strongly from the March lows, many individual industries and stocks are still dirt cheap and high yielding, In fact, this is the best market in over a decade in which to find high yields in quality stocks.


Of course, the market is still dangerous and many high yielding stocks are in a precarious financial condition. Many will have to cut the dividend and the price will likely fall. While quality high yields are out there, stocks must be chosen wisely.


These three stocks are a great way to lock in high income and start to build your high income portfolio. Now is the time to embark on your journey to higher income and a more rewarding financial future. I look forward to being your trusted partner.