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The world is about to change in a major way. So much so that you may look back ten years or even five years from now and realize how profoundly different things are since 2019.

The rapidly advancing rollout of 5G will be a technological tipping point that crosses a threshold into the digital age where everything is connected to the internet. Today, only a few things are connected. In a few years, the whole world will be computerized.



5G is such a game changer that many companies and governments can’t afford to be left behind. The current Administration has labeled 5G a national security priority. It seems 5G is the news arms race.



Those are the stakes. And it’s coming fast. In this issue, I identify a company that is at the epicenter of the 5G rollout. It holds vital technology that is light years above the competition and is necessary to connect any device to 5G. Earnings and revenues should skyrocket as the rollout proceeds in haste.

Current Market Outlook


The rapid spread of China’s coronavirus provided the impetus for a selloff that began last Friday and exploded onto the scene today. Where does that leave us? First, the intermediate-term trend of the indexes is still positive but close to the fence; the big-cap indexes look OK, but the broader measures (small and mid caps) are right around their key 50-day lines. Beyond the charts, it’s likely that more time is needed for investors to trim/hedge after four months of straight-up action. As for leading stocks, we’re taking it on a case-by-case basis—some are looking ragged and ripe for a deeper correction, but most are pulling back normally. If you’re heavily invested, our advice is to follow the usual plan: Hold most of your shares in your strong, profitable stocks, while selling or keeping tight leashes on losers and laggards. We’re moving our Market Monitor down to a level 6.

On the buy side, newer names that are holding up well should be near the top of your shopping list. This week features plenty of those, with our Top Pick being Kansas City Southern (KSU), a reliable grower that just reacted well to earnings.

Stock Name	Price	Buy Range	Loss Limit
Agios Pharmaceuticals, Inc. (AGIO)	52.43	50.5-52.5	45.5-47
Bristol-Myers (BMY)	66.24	62-64	59-60.5
Datadog (DDOG)	81.52	39.5-41.5	36.5-38
Kansas City Southern (KSU)	176.54	162-165	150-152
Sea Limited (SE)	132.86	42.5-44.5	38-39
Snap Inc. (SNAP)	16.68	18-19	16-16.5
STMicroelectronics (STM)	30.09	27.5-28.5	25-25.5
Taiwan Semiconductor (TSM)	78.41	57-58.5	53-54
Wix.com (WIX)	302.53	137.5-141	127.5-129
Zillow (Z)	76.64	46-48	42.5-44

Current Market Outlook


Last week’s action was encouraging, with the major indexes snapping back decently from Monday’s selloff and with many individual growth stocks either acting resiliently and/or reacting well to earnings. That said, three up days (Tuesday-Thursday last week) are not enough to reverse the prior meltdown—right now, all major indexes are below their 50-day moving averages and, generally speaking, the overall intermediate-term trend is neutral-to-negative. We’re not advising you to hole up in your bunker, but the onus is on the bulls to prove that the tariff-induced decline was a shakeout; until then, it’s best to remain cautious by holding some cash, keeping new buys small and making sure your losers and laggards don’t slip much further.

Going along with the action in growth stocks, this week’s list is chock-full of recent earnings winners. Our Top Pick is TransDigm (TDG), a solid 20%-ish grower in the aerospace field that gapped on earnings and is set to pay a huge one-time dividend.

Stock Name	Price	Buy Range	Loss Limit
Carvana (CVNA)	82.90	75-78.5	64-66
Insulet (PODD)	175.69	144-147	128-131
Lattice Semi (LSCC)	23.92	17.5-18.5	15.5-16.2
Martin Marietta Materials (MLM)	261.52	243-250	218-222
Medpace (MEDP)	76.28	75.5-78.5	67.5-69.5
Roku, Inc. (ROKU)	150.46	124-130	107-110
Shake Shack (SHAK)	92.08	85-88	75-77
SolarEdge Technologies Inc. (SEDG)	124.37	80-84	70-72
TransDigm (TDG)	599.41	525-545	475-485
Wingstop (WING)	121.52	95-98	88-90

The rollout of the new 5G technology is an evolution that is thrusting the world into a digital age that will change the world. This new technology will have a huge effect on the market in 2020 and beyond.

Companies that benefit from 5G have a powerful catalyst for growth that will push stock prices to a new level. But finding stocks in the area that are still cheap and defensive in a pricey and uncertain market is a challenge.



In this issue I identify a company that is defensive and high dividend-paying. But, unlike most stocks in that area, it is still reasonably priced. At the same time, the company has massive exposure to 5G and a huge catalyst for growth. With this company you can play offense and defense at the same time.

The market continues its good news/bad news behavior, with emerging market stocks as a whole not doing well but Chinese stocks performing strongly. So, while we don’t have a formal Buy signal, we’re taking advantage of Chinese strength to inch a little deeper into the market. Today’s featured stock is another old friend that we’ve made money on before that has broken out of a nice consolidation pattern.

The market rolled over this week, but it’s too early to say if it’s the start of another correction or just some turbulence. Either way, we’re well prepared, with exposure to a broad range of sectors, including some benefiting from the uncertainty.

The recent bounce in emerging market stocks has raised hopes that the end might be near for the powerful correction that has hit EM stocks so hard. That may be the case, although the only sure way to tell is to watch the market’s action tomorrow and through the rest of earnings season and beyond. We’re certainly not going to do any predicting, just telling you what to do based on the action we see. The next few weeks will see quarterly reports from four of our stocks, and will also give us a sense of what the future leadership among emerging-market stocks will look like. In today’s issue, we have a South African company that’s becoming a global player in a software niche.

The market’s downturn continues, with the trends of the major indexes and most growth stocks clearly down. Our longer-term Cabot Trend Lines even turned negative last Friday, reinforcing the view that the sellers are in control.

The action of the last couple of days has been a smack in the face for all investors, U.S. and emerging markets alike. As always, the Cabot growth disciplines tell us not to panic, but also not just to sit there and let the market take away your money. While we don’t have any changes to the portfolio tonight, this issue of Cabot Emerging Markets Investor shows a distinctly defensive tone, with a very heavy cash position and just two stocks rated Buy. We also have a new stock this week that’s perfectly suited to conditions. It’s a commodity play with a generous dividend, attractive valuation and a simple story. Read on for all the details.

Today I wrote about a company that announced a new CEO! I then went back and added to the story. My conclusion remains unchanged: I expect the stock to perform poorly through year-end and possibly quite a ways into 2019.

The shift from Wednesday’s pullback to today’s nice market bounce is just par for the course as investors scramble to figure out the fallout from alarming headlines and conflicting predictions. It’s not an easy market to navigate, and the portfolio is dealing with it by holding a heavy (50%) cash position and cutting back on most buying. But we’re still finding attractive stocks for our watch list, and will be ready when we finally get a green light from the Cabot Emerging Markets Timer.

Last week’s “surprise” failure by Facebook to meet growth expectations has kicked off a correction in growth stocks that will likely run for a while, while allowing other types of stocks to come to the fore. This is natural. Our job is to follow the leaders, and to discard stocks that are no longer doing what we hired them to do.

One of the minor predictable patterns that the stock market has developed over the years involves the days before and after holidays (like the Fourth of July). Basically, stocks do a little bit better on those days, but the pattern is neither big enough nor dependable enough to make money on. Still it’s worth keeping in mind as you watch the action of stocks this week.