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Despite the recent dicey market, there are two great opportunities created by a weird interest rate move that is likely to correct itself in the months ahead.

The yield curve, defined as the difference between short- and long-term interest rates, has flattened as the benchmark 10-year Treasury rate has fallen. The rate has fallen from 1.75% in February to the current 1.31%, despite the stronger economy and persistent inflation.



I believe rates have moved far too low. Interest rates are still well below what has been defined as normal for the last decade. The 10-year rate is still well below the pre-pandemic level. Plus, the benchmark rate averaged between 2% and 3% during both the Obama and Trump Administrations.



Interest rates have fallen too far and are likely to trend higher in the months ahead. Two portfolio stocks benefit from the difference between short and long rates and have been held back by the falling rates. These stocks are likely to move higher as the situation reverses

In tonight’s Cabot Growth Investor, we review all our stocks and highlight some names we’re watching, including one that’s set up very well ahead of earnings. We also dive into some details about how we run our ship—we’ve gotten a few questions about this lately, and we think this will clear up any questions you may have.

The market’s evidence remains mostly bullish, so we do, too, but it’s a selective advance—most indexes are doing just OK, but growth-oriented stocks and sectors have put on a great show. In the near-term, there are signs of exuberance, and while that doesn’t mean you should sell your strong stocks, it is a sign to keep your feet on the ground.

In the Model Portfolio, most of our stocks are performing well, but we’re standing pat for the moment, holding about 20% in cash as we look for solid entry points in fresh leading stocks.

In tonight’s issue, we review the market, all of our stocks and even write about one growth sector that’s showing extreme power of late—we already own two of the leaders in the group, but many look great. We also touch on the sentiment backdrop, while highlighting a few potential new buys if things settle down a bit.

Current Market Outlook


After a vacuum of selling pressures helped the S&P 500 and Nasdaq soar to new highs, last week’s generally tight, calm action was just what you want to see—despite the run, investors aren’t booking profits and the bears aren’t coming out of the woodwork. That’s not to say there won’t be pullbacks (possibly brief, sharp dips) or that every investor is rowing in the same direction—some groups are lagging and many major indexes are still shy of their September peaks. Thus, you shouldn’t buy with both fists, but there’s clearly enough evidence to be bullish and look to latch onto new leading stocks as they emerge.

This week’s list is chock-full of stocks with big stories and powerful charts. There are many we like, but for our Top Pick we’ll go with Medivation (MDVN), a well-traded (but little-known) biotech firm that has a blockbuster treatment for prostate cancer on its hands.

Stock Name	Price	Buy Range	Loss Limit
Wabtec (WAB)	0.00	86-89	81-82
Ulta Beauty (ULTA)	331.95	119-123	110-111
Textron (TXT)	0.00	40.5-41.5	37.5-38.5
Spirit Airlines (SAVE)	57.03	73.5-77	68-69
Receptos (RCPT)	0.00	103-108	88-90
MercadoLibre, Inc. (MELI)	980.83	128-135	122-124
Medivation (MDVN)	0.00	106-111	96-98
Marriott International, Inc. (MAR)	0.00	73-75	68-70
Alibaba (BABA)	254.81	112-116	102-105
Allison Transmission (ALSN)	51.79	31.5-33.5	29.5-30

Current Market Outlook


It looks as if the first “test” of the nascent uptrend has arrived; the major indexes have barely been dented, but under the market’s hood, we’re seeing something of a rolling correction, with a couple of sectors getting hit every day, and with a few stocks breaking down. The next few days will probably be where this rally’s rubber will meet the road—to this point, the selling has been normal (even expected) given the month-long rally from the mid-October lows. Thus, we remain bullish, but we’re also keeping a close eye on the action, both to judge the market’s health and to identify stocks that are setting up new entry points.

This week’s list has a nice array of stocks of varying sizes and from different sectors. We like many of them, but we’re going to go with Sierra Wireless (SWIR) as our Top Pick—it’s a bit speculative, but has a powerful chart and huge numbers, and any shakeout could create a nice buying opportunity.

Stock Name	Price	Buy Range	Loss Limit
Taser (TASR)	0.00	19-20	16-17
Sierra Wireless (SWIR)	0.00	34.5-36.5	29.5-30.5
NetSuite, Inc. (N)	0.00	105-108	96-98
Leggett & Platt, Incorporated (LEG)	49.79	39-41	35-37
Health Net (HNT)	0.00	48-50	44-46
Electronic Arts (EA)	0.00	40-42	37-38
Dexcom (DXCM)	421.36	50-53	45-46
CyberArk (CYBR)	111.74	39-43	33-34
Ambarella (AMBA)	52.79	47.5-48	43-44
Apple (AAPL)	248.94	108-114	100-103

Current Market Outlook


After a quiet-but-good holiday week (except for the energy stocks, which have crashed), the sellers came out of the woodwork today, pulling down many stocks that have enjoyed good runs. Big picture though, while there remain a few yellow flags and divergences (including the small caps, which are again acting poorly), the major trend remains up for the indexes and the vast majority of stocks. Thus, our advice is to remain bullish, and to remain focused on what’s working—for many stocks, this pullback could go further, but the odds favor weakness leading to higher prices in the weeks ahead.

This week’s list has a slightly larger-cap tint to it, but all of the stocks have enjoyed huge-volume buying sometime during the past month. Our Top Pick is D.R. Horton (DHI), the nation’s largest homebuilder that’s participating in a powerful upmove for that group.

Stock Name	Price	Buy Range	Loss Limit
Whirlpool (WHR)	0.00	178-184	162-164
Whole Foods (WFM)	0.00	46-48	43-44.5
SolarWinds (SWI)	0.00	49-51	46-47
NetEase, Inc. (NTES)	0.00	100-103	93-95
KLA Corp. (KLAC)	158.80	66-68	62-63
Incyte Corporation (INCY)	76.98	72-74	65-67
Gentex Corp. (GNTX)	0.00	34-35	31-32
D. R. Horton (DHI)	66.55	24.5-26	22.5-23
Tableau Software (DATA)	126.42	81-85	73-74
Bloomin’ Brands (BLMN)	0.00	21-22	19-20

Current Market Outlook


After a relatively quiet week, the major indexes and most stocks remain in uptrends, and that’s why we’re keeping our Market Monitor in bullish territory. But there remain a growing list of yellow flags, and the fact is that the broad market is very split, with lots of crosscurrents pushing and pulling various stocks and sectors. So far, the gyrations are normal and, possibly, bullish, helping to shake the tree, as we wrote last week. But many stocks are now approaching support—the next few days will be telling, as buyers should arrive on the scene if the intermediate-term uptrend is intact. All told, we remain bullish, but we’re keeping a watchful eye on things.

This week’s list includes everything from big, old-world companies to high-flying new-age firms. Our Top Pick is AMAG Pharmaceuticals (AMAG). The firm has transformed itself thanks to a recent acquisition, and the stock has been acting great for the past few weeks.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	140-144	133-135
Packaging Corp (PKG)	0.00	76-77.5	70-72
Palo Alto Networks (PANW)	236.92	113-118	104-106
Old Dominion Freight Line Inc. (ODFL)	221.91	77-79	72-73
Infinera (INFN)	0.00	13.5-14.5	12.5-13
Celgene (CELG)	0.00	112-116	104-105
Brunswick Corporation (BC)	0.00	48-50	46-46.5
Applied Materials (AMAT)	0.00	23-24.5	22-22.5
AMAG Pharm. (AMAG)	0.00	39-41	35-36
Alliance Data Systems (ADS)	0.00	273-284	265-268

We got a great response to Wednesday’s Cabot Wealth Advisory about Peak Oil, and many of the responses are reproduced in today’s issue.

This week’s note includes our comments on earnings from 10 of our companies. The deluge continues next week.

The note also includes the monthly Catalyst Report and a summary of the November edition of the Cabot Turnaround Letter, which was published on Wednesday. We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.

The big-picture outlook with the market hasn’t changed, with all of our key market timing indicators bullish, many studies pointing to higher prices down the road and leaders--even those that have taken hits--showing little abnormal action. That said, near-term, the odds are growing we may see more choppy trading, if not a pullback of some sort, so we’re not pushing the envelope here and are ditching names that crack. Earlier this week, that meant selling one position, and today, we’re selling another, leaving us with 28% in cash.

To be clear, the odds still favor the next big move being up, so we’re aiming to put some money to work in new leadership that emerges on earnings, or current leadership that pulls in to support. For now, though, we’ll hold the cash and see how earnings season progresses.

Elsewhere in tonight’s issue, we go over a few new ideas, with the biggest write-up being what could be the #1 AI platform play (not picks and shovels, but actual platform) out there. It’s on our watch list.

Stocks are at all-time highs, yet again, defying the myriad potential macro tailwinds (expanding war in the Middle East, looming presidential election, another damaging hurricane, Q3 earnings season underway, etc.) that have been threatening to derail the market. One of them still could, but for now, we’ll stick with what’s in front of us, and that’s a market with plenty of momentum. Today, we lean into that momentum by adding a mid-cap tech stock recently recommended by Tyler Laundon to his Cabot Early Opportunities audience.

Details inside.

The market’s big-picture outlook remains excellent, and we’re keeping most of our focus on that. However, there’s no doubt that we’re starting to see some growth stock wobbles, as today was the 3rd day of distribution in the group while money rotates into the broader market. That’s no reason to be defensive, but we are selling one name tonight that flashed abnormal action and holding a bit more than 30% cash on the sideline for now. Our goal is to ditch any laggards or names that crack and eventually replace them with big leaders, some of which are in a rest phase that should result in higher-odds entries.

Current Market Outlook


For the past three months, the market has been on the cusp of breaking out a few times, only to fail as selling pressures grew. The past couple of weeks, however, have brought a change of character—many stocks surged on earnings, and then held and even built on those gains. And of course, the major indexes have kissed new high ground. That doesn’t guarantee higher prices—you’ll often see major indexes “fake out” above obvious resistance before pulling back—but we’re putting more emphasis on the increasingly positive action of individual stocks. Our Market Monitor is back into bullish territory, and we’re looking to put money to work as opportunities arise.

This week’s list has a broad array of stocks and sectors, a sign the buying pressures have broadened. Our Top Pick is LinkedIn (LNKD), which gapped out of a huge base on earnings two weeks ago—it looks like a liquid leader and should do very well if the market can continue higher.

Stock Name	Price	Buy Range	Loss Limit
Twitter (TWTR)	40.37	45.5-48	41.5-42.5
Skechers (SKX)	0.00	64-67	58-59
Sealed Air (SEE)	0.00	44-45	40-41
Ryland (RYL)	0.00	43-45	39-40
Pharmacyclics (PCYC)	0.00	157-165	147-150
Martin Marietta Materials (MLM)	261.52	138-145	128-130
LinkedIn Corporation (LNKD)	0.00	260-272	236-239
CyberArk (CYBR)	111.74	48-51.5	42-43
Charter Communications (CHTR)	0.00	172-177	164-168
Apple (AAPL)	248.94	120-125	112-114

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

Current Market Outlook


After many weeks of choppy action, the sellers sunk their teeth into many indexes and stocks last week. Friday’s rebound was encouraging, but by our measures, the intermediate-term trend is sideways-to-down, the broad market is weak and few stocks are making any sustained upside moves—i.e., there’s still no money being made out there. On the positive side, many stocks remain near the top of multi-month ranges, and if earnings season goes well, plenty of new leadership could emerge. But right now, the onus is on the bulls to prove that they can create a sustained uptrend in the market and individual stocks. We’re knocking our Market Monitor to neutral and will be watching the action closely.

This week’s list has many resilient stocks that could be part of that new leadership if the bulls step up their game. Our Top Pick is Mohawk Industries (MHK), which is one of a few very strong housing supply stocks and has a recent catalyst to boot.

Stock Name	Price	Buy Range	Loss Limit
United Therapeutics (UTHR)	0.00	137-139	130-132
Taser (TASR)	0.00	24-25	22-23
Royal Caribbean Cruises (RCL)	0.00	80-82	75-76
Pharmacyclics (PCYC)	0.00	140-145	130-133
Outerwall Inc, (OUTR)	0.00	73-75	68-69
NetEase, Inc. (NTES)	0.00	104-108	96-98
Mohawk Industries (MHK)	0.00	160-165	150-153
HDFC Bank Limited (HDB)	0.00	54-56	50-52
Celgene (CELG)	0.00	117-122	108-111
Acuity Brands (AYI)	0.00	145-150	135-136

Current Market Outlook


Officially, the major indexes are still in no-man’s land, gyrating within their two-month ranges. But the action is definitely feeling heavier. While a few stocks have emerged during earnings season (including a few in today’s issue), every market rally of a day or two has led to quick selling pressure; the broad market can’t get its act together and most stocks that poke into new high ground quickly retreat. We’re still not willing to make any bold predictions here—the environment remains more choppy than bearish—but the bottom line is that no money is being made. Thus we are knocking our Market Monitor down a notch (though it’s still in neutral territory) due to the recent deterioration.

The silver lining is that our screens are still picking up on a good number of resilient stocks, including more than a few earnings winners. Our Top Pick this week is Harman International (HAR), which has come to life after a yearlong rest. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Pacira Biosiences (PCRX)	54.85	103-107	95-97
ServiceNow (NOW)	341.86	70-73	65-66
Netflix, Inc. (NFLX)	423.92	420-440	385-390
Lowe’s Companies (LOW)	98.15	66-68	60-62
Harman International Industries, Inc. (HAR)	0.00	126-131	115-116
Freescale Semiconductor (FSL)	0.00	30-32	26.5-27
Blackstone Group (BX)	49.12	35.5-36.5	32-33
Burlington Stores (BURL)	193.95	45-50	44.5-45
Biogen (BIIB)	0.00	378-385	348-352
Boeing (BA)	432.22	141.5-146.5	130-132

Current Market Outlook


The market has had plenty of gyrations this year, even since it pushed out to new highs in February. But at no time since then has the intermediate-term trend turned down, and at no time have a bunch of Top Ten stocks showed abnormal action. Thus, we remained bullish, and that patience began paying off last week as the market’s uptrend resumed. There will surely be pullbacks and potholes among various sectors and indexes from time to time, but with the odds favoring higher prices in the weeks ahead, you should be holding your top performers and looking to add new leaders at good buy points.

This week’s list has a diverse mix of stocks, including a few new names. Our Top Pick is Ulta Beauty (ULTA), which is one of the market’s top retail stocks and cookie-cutter stories. A buy on dips is your best bet.

Stock Name	Price	Buy Range	Loss Limit
Western Refining (WNR)	0.00	47-49.5	43-44
Vipshop Holdings (VIPS)	14.25	26-28	23-24.5
Ulta Beauty (ULTA)	331.95	145-152	137-139
Ryland (RYL)	0.00	45-47.5	41.5-42.5
Regeneron Pharmaceuticals (REGN)	512.96	460-475	430-440
Universal Display (OLED)	187.54	42-45	38-39
Juno Therapeutics (JUNO)	0.00	55-60	51-52
JD.com (JD)	39.58	27-28.5	25-26
JetBlue Airways Corporation (JBLU)	0.00	18-19	16.5-17
Fortinet Inc. (FTNT)	137.53	33.5-35	31.5-32

Current Market Outlook


The market definitely showed some improvement last week—the major indexes bounced back decently, and importantly, many recent earnings winners not only held their gains but stretched higher, something we haven’t seen much of for a few months. Because of that, we’re pushing the Market Monitor up a bit, but we remain relatively neutral for one simple reason: the market (and most stocks) are still range-bound, and until that changes, it’s going to be hard for any stock to make persistent progress. We’re OK doing some new buying, especially in some recent earnings winners (preferably on dips), but holding cash and keeping risk in check is necessary in this environment.

The good news is that we continue to see a broadening array of stocks firming up. Our Top Pick for the week is Tesoro (TSO)—while most energy stocks are still struggling, refiners are surging, and TSO looks like the leader. Buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Vulcan Materials Company (VMC)	137.10	71.5-73.5	66-67
Tesoro (TSO)	0.00	82-85	75-76
Sprouts Farmers Market (SFM)	19.00	34-36	31-32.5
Lear Corp. (LEA)	0.00	105-108	96-98
Integrated Device Technology (IDTI)	0.00	19-20	17-17.5
GrubHub (GRUB)	140.03	38.5-40.5	35-35.5
E*Trade Financial (ETFC)	0.00	24-25	22-22.5
Tableau Software (DATA)	126.42	91-95	85-86
Ashland Inc. (ASH)	0.00	122-125	114-115
Amazon.com (AMZN)	2.00	362-372	335-338

Current Market Outlook


After a straight-up move in February, the market has hit some rough waters, with the major indexes and lots of growth stocks taking hits. There’s always the chance that the market is beginning a major correction after a strong but relatively brief (in this case, four weeks) advance, but we like to go with the evidence. So far, all of the indexes are holding above their 50-day lines, and very few stocks have shown any abnormal selling. Thus, while we’re not fully invested, we are sticking with a bullish outlook and believe holding your best performers, and even buying a little on this dip, makes sense.

This week’s list is again heavy on the chip and medical (mainly biotech) sectors, with a smattering of retail. Our Top Pick is Biogen (BIIB), a blue-chip leader of the biotech group. The stock lifted out of a 10-month base in January and has acted well since, and it’s now approaching a solid entry point after pulling back.

Stock Name	Price	Buy Range	Loss Limit
WhiteWave Foods (WWAV)	0.00	39.5-41	37-38
Tesoro (TSO)	0.00	86-89	80-81
Skyworks Solutions (SWKS)	0.00	90-92	80-82
NXP Semiconductors (NXPI)	0.00	95-100	87-89
Mallinckrodt (MNK)	0.00	117-121	108-110
Jack in the Box (JACK)	0.00	92-95	87-88
HDFC Bank Limited (HDB)	0.00	59-61	56-57
Centene (CNC)	0.00	61-62.5	57-58
Burlington Stores (BURL)	193.95	54-56	50-51
Biogen (BIIB)	0.00	405-415	370-380