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Cloudflare (NET) reported Q4 results yesterday that surpassed expectations. Revenue was up 54% to $193.6 million while adjusted EPS came in at $0.01. As compared to some other software stocks that have beat expectations, Cloudflare reinvested the surplus cash in growth initiatives, so it didn’t flow to the bottom line.

This stock reported first-quarter earnings that beat expectations last night. However, the stock declined in after-hours trading.

Two of our stocks reported earnings and opened lower this morning. I’m keeping one on Hold and moving the other, which was rated Buy, to Hold as well.

The primary evidence remains bullish, so we’re still thinking mostly positive, especially when looking at the big picture. But there’s no question things are getting more and more divergent: The broad market and even most big-cap stocks are flat to down so far this year, and more recently, as interest rates have backed up and financial stocks get hit, we’re seeing selling pressures start to spread. That doesn’t necessarily portend doom, but coming on the heels of a multi-month advance, this kind of action does raise the risk of a change in character; we’re going to pull our Market Monitor down a notch to level 7—still bullish, but holding a little cash, booking some partial profits on the way up and being more discerning on the buy side makes sense.

This week’s list has its share of hot stocks, and we’re impressed that we’re still seeing some strong earnings winners that are moving on very, very strong volume. For our Top Pick, we’ll go outside the tech space with a name that just lifted out of a multi-month base on earnings and could be leading a new group move. Try to buy on dips.

Last week, we outlined four ingredients of a market bubble that were usefully outlined in a recently published book1”and briefly described how it clearly appears that our stock market is in a bubble. These ingredients include easy trading of assets, cheap and easy money, rising speculative fervor and an appealing narrative.

This week, we review earnings reports from Advance Auto Parts (AAP), Berkshire Hathaway (BRK/B), Dril-Quip (DRQ), Elanco Animal Health (ELAN), Fidelity National Information Services (FIS), Gannett (GCI), Macys (M), Six Flags Entertainment (SIX), Viatris (VTRS) and Warner Bros Discovery (WBD).

In recent weeks, we’ve seen outstanding moves among growth stocks (and, increasingly, the broad market), which coincided with increasing giddiness among many investors. That’s a yellow flag, and today, we saw the first signs of abnormal selling among the leaders—big-volume distribution was evident among many stocks, no matter what the sector. To be fair, few names truly broke down, so we’ll keep our Market Monitor where it’s been. But today was a shot across the bow; the next few days should tell us whether this is a shakeout (we’ve seen a few this year), or whether a deeper (and well-deserved) retreat is likely during October.

This week’s list has many names that are more recent winners, and those types of names held up far better than most extended stocks today. Our favorite of the week is Las Vegas Sands (LVS), a leader from 2009-2010 that has re-emerged after a two-year rest. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Whirlpool (WHR)	0.00	144-147.5	138-139
Workday (WDAY)	194.88	75-78	68-70
Ulta Beauty (ULTA)	331.95	111-116	100-102
Safeway (SWY)	0.00	29-31	26-27
NQ Mobile (NQ)	0.00	21-23	18-19
Las Vegas Sands Corp. (LVS)	0.00	62-65	58-59
Incyte Corporation (INCY)	76.98	33.5-35	29-30
Finisar (FNSR)	0.00	22-24	20.5-21
Salesforce.com (CRM)	0.00	50-52	46-47
Boeing (BA)	432.22	114-117	107-107.5

Current Market Outlook


It’s been a tricky few weeks, but by our measures, the intermediate-term trend of the major indexes has turned up, which is a sign to increase your exposure to the market’s leading stocks (preferably on pullbacks). And there are a lot of leaders to choose from! In particular, the growth stocks that bounced nicely off the market’s early-February low continue to perform excellently, displaying powerful and persistent action, which usually indicates more upside is in store (albeit with normal pullbacks and shakeouts along the way). We’re not viewing this as a blastoff, but more of a resumption of the market’s longer-term uptrend. Our Market Monitor moves up a couple of notches into bullish territory.

This week’s list is another one that’s filled with enticing growth stories and strong charts. There are a ton of good stocks to choose from, but we’re going with TD Ameritrade (AMTD) as our Top Pick, as it’s one of the strongest Bull Market stocks out there today.

Stock Name	Price	Buy Range	Loss Limit
Ligand Pharmaceuticals (LGND)	267.14	173-178	158-162
Micron Technology, Inc. (MU)	43.31	56-60	51-53
Palo Alto Networks (PANW)	236.92	181-187	166-170
Qualys (QLYS)	0.00	74-77	68-70
Sarepta Therapeutics (SRPT)	120.93	73-77	64.5-67.5
TD Ameritrade (AMTD)	0.00	60-63	55-57
Teladoc, Inc. (TDOC)	127.95	37-38.5	36.5-38
Twitter (TWTR)	40.37	32.5-34.5	29-30
Western Digital Corporation (WDC)	0.00	96-100	89-91
Zillow (Z)	76.64	53-55.5	48.5-50

We’ve seen mixed action since the year began, which isn’t totally surprising given January’s normal wiggles. The major indexes are churning a bit up near their highs, something that can lead to short-term selling; at the very least, it’s telling you that buying pressures have eased as the calendar has flipped. On the other hand, we’re encouraged to see some growth stocks that had been sitting out the dance since early October begin to reassert themselves—so far this year, we’ve seen a handful of breakouts from legitimate bases, the first collection of breakouts since November, and most held well even in today’s selloff. All told, we continue to lean bullish, though we’re watching things closely.

This week’s list has a bunch of promising names, including a few with terrific growth stories. Our favorite of the week is Arris Group (ARRS), which, thanks to a huge acquisition last year, is a leading provider of next-generation set-top boxes. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Yelp (YELP)	41.30	74-78	69-70
United Therapeutics (UTHR)	0.00	105-110	95-97
United Continental Holdings (UAL)	96.76	43-45	39-40
Splunk (SPLK)	207.67	72-74	64-65
Pandora Media Inc. (P)	0.00	31.5-33.5	29-29.5
Medivation (MDVN)	0.00	68-70	63-64
JinkoSolar Holding (JKS)	0.00	31-34	28-29
FireEye (FEYE)	0.00	53-57	47-48
Broadcom Limited (AVGO)	266.26	50-52	47-48
Arris Group (ARRS)	0.00	23-24.5	20-21

Repligen (RGEN) reported Q2 results before the bell today that surpassed expectations and has the stock up nicely (6% at mid-day) and bucking the broader market weakness. Revenue was up 86% to $163 million, beating by nearly $19 million, while adjusted EPS of $0.79 rose by 88% and beat by $0.27. Management raised full-year guidance to a range of $625 million to $645 million (up 71% to 76%), well above consensus estimates of $586 million. Adjusted EPS guidance goes to $2.71 - $2.78, way above consensus of $1.71. Gross margins are up a lot, from 57.9% in the year ago quarter to 62% in Q2.

I’m changing my recommendations on Dollar Tree (DLTR) to Hold; and on Big Lots (BIG), Kraft Heinz (KHC) and WellCare (WCG) to Buy.

Third-quarter earnings season gets underway next week, and expectations are high. Economists are expecting 8% earnings growth among S&P 500 companies, according to data compiled by FactSet. It would be the eighth consecutive quarter of at least 8% profit growth among U.S. companies – perhaps the biggest reason stocks have been on a tear the last two years.

We spend the vast majority of our time focused on U.S. stocks, and rightly so.

After all, although America has just 4% of the world’s population and generates 23% of the global GDP, 72% of worldwide investment capital is spent on U.S. stocks. That’s a stat our global investing expert, Carl Delfeld, relayed to me and my colleague Brad Simmerman on our latest Street Check podcast (click here to listen to the entire conversation). I knew the global investment axis tilted toward the U.S. – just maybe not that much.

The good news is that four weeks of upside action has brought a new buy signal from Cabot’s intermediate-term market timing indicator. But this doesn’t mean you can jump in with both feet yet; there’s still reason for caution.

One way Cabot Stock of the Week exercises caution is by diversifying widely, not only among industries but also among investment strategies. Today’s recommendation, a big undervalued robotics company in Japan, is an excellent example.



As for the rest of the portfolio, it’s acting well and thus the only change today is a downgrade of one stock—which has got a bit high—from buy to hold.



Full details in the issue.

Note: To accommodate our Thanksgiving week schedule, there will be no issue of Cabot Stock of the Week published next week. The next issue will be published November 28.

As for today, the broad market’s long-term trend remains up, and today my recommendation is an undervalued stock recommended by Azmath Rahiman, chief analyst of Cabot Benjamin Graham Value Investor.

Financial fraud has been around for as long as financial systems themselves, but the proliferation of the internet has drastically increased the opportunities for scammers to separate you from your hard-earned money. This month, we’ll take a hard look at the most common scams and schemes that you face today, who they affect, and practical steps you can take right now to protect yourself.

Current Market Outlook


The issue following the huge selloff on June 9 was titled, “What Happens From Here is What Counts,” and so far, we’ve been encouraged by what we’ve seen—the Nasdaq found intraday support three times in the 6,100 to 6,150 area last week, and few growth stocks decisively broke key support levels. And today, we saw the Nasdaq and many leading stocks pop nicely. In the short-term, we can’t say the market is completely out of the woods, so picking your spots makes sense. But our main focus is on the intermediate-term, and the trends there remain up for most major indexes and the vast majority of leading stocks. All in all, we remain mostly bullish, though don’t be surprised to see some more “tests” for the market in the near-term.

This week’s list is also encouraging, as our screens aren’t finding it difficult to find great charts and enticing stories. Our Top Pick is LendingTree (TREE), which just broke out in late-April and has held up well during the recent market wobbles.

Stock Name	Price	Buy Range	Loss Limit
Bluebird Bio (BLUE)	0.00	106-112	96-100
Cooper Companies (COO)	0.00	234-242	220-223
HealthEquity, Inc. (HQY)	70.70	50-52	45-46
IAC/InterActiveCorp (IAC)	0.00	99-103	91-94
Impinj (PI)	0.00	52-56	46-48
Lending Tree (TREE)	411.51	166-174	152-156
PayPal (PYPL)	147.00	51-53	47-48
Summit Materials (SUM)	0.00	27-28.5	25-26
Supernus Pharmaceuticals (SUPN)	52.50	37-39	33-34.5
Zillow (Z)	76.64	44.5-47	40.5-42.5

I previously gave you a heads up that new low-sulfur diesel regulations (IMO 2020) and a serious hog disease in China (African Swine Fever) are quite likely to increase inflation numbers in 2020 and beyond. Are you ready for the next sweeping industrywide change that will be hitting the credit markets?

Bitcoin is sometimes referred to as “digital gold,” but investors should also have some of the real stuff. As J.P. Morgan put it, “Gold is money. Everything else is credit.” So today, with gold prices on the rise, we add exposure to the yellow metal in the form of a low-risk streaming and royalty company.

In today’s note, we discuss pertinent developments for several of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Alcoa (AA), Atlassian (TEAM), GE Aerospace (GE), Paramount Global (PARA), SLB Ltd. (SLB) and Starbucks (SBUX).


Gold and silver continue to benefit from safe-haven buying, boosting our holding of Agnico Eagle Mines (AEM).