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The American economy is in a period of great transition, but just like the frog in the pot of water that’s being slowly heated, many people don’t appreciate the magnitude of the coming changes yet. There are tremendous investment opportunities out there for investors who are willing to embrace the future. This week, General Motors (NYSE: GM) stock hit a 25-year low. In the same week, Clean Harbors (Nasdaq: CLHB), hit an all-time high.

I hope you had a great holiday season thus far, and I hope you have an even better New Year.

I hope you had an enjoyable and relaxing summer. Wall Street is back to work this week, and Apple (AAPL) is launching a new product or two next week, so get ready for stocks to start moving again.

This month we are dialing up the risk a little with a small software company that has a potentially disruptive platform that streamlines back-office processes for small and mid-sized businesses.

There are risks. The economy isn’t super strong, and this is a competitive market. But this company has a truly innovative set of solutions, is in one of the market’s most beat-up sectors and has new products and a low-cost customer acquisition strategy.

It’s also profitable and generates positive free cash flow, two attributes that make it an attractive acquisition target.

Enjoy!

All three major U.S. indexes were up around 2% yesterday as the Bank of England stepped in to stabilize the pound, but the recovery looks fragile as sentiment remains mixed at best in the short term. Explorer stocks drifted lower this past week and we remain defensive looking for asymmetric plays where the upside potential exceeds downside risk.

Nio (NIO) was up 22% this week though markets face headwinds of inflation and increasingly loose talk of recession by many including Fed Chairman Jerome Powell. With regret, we let go of Sea (SE) but add another favorite selling at a sharp discount to its high—and in the middle of the unstoppable trend of cybersecurity.

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).

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.

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

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

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

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).

Corporate America is weathering trade uncertainty remarkably well. The S&P 500 index has recovered more than 20% since bottoming out in April but is up only 6% this year.

You may have noticed that the stagflation scenario (inflation and slow growth) is a theme being promoted by the financial media with comparisons to the 1970s. But even if this becomes a reality, stocks are still your best option to protect and grow your wealth. In the 1970s, large-cap value outperformed growth stocks and long-term Treasury bonds. Dividend-paying stocks also outperformed. Our strategy will remain the same regardless of the pundits, value, quality, and momentum.

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?

The bull market remains alive and well, with most stocks and sectors in good shape, so we\'re generally letting our winners run and staying heavily invested. That said, January is often a tricky month, so with the potential for potholes and volatility, tonight\'s Cabot Stock of the Week is a mega-cap growth stock that, by some measures, is undervalued.

After six consecutive weeks down, the market has generally given up all its gains for the year; taking profits when they were there was definitely wise. But this week the market is up—so far—and I’m watching carefully to see which of our stocks bounce like tennis balls—and which bounce like eggs. The best tennis balls can still be your road to profits.

Overall, though, the climate is definitely unsupportive, and thus a defensive stance, including plenty of cash, is warranted.

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.

After spending most of the summer making a series of new highs, it’s been more of the same so far this fall.

The drawback is that the market is high-priced. Technology stocks, driven by the AI catalyst, have driven stocks higher. But certain sectors have not had a great year. Despite the impressive performance of the overall market over the last few years, there are still bargains to be found.

The real estate sector struggled during inflation and rising interest rates and has been the worst-performing sector over the last five years. Healthcare has floundered all year because of uncertainty regarding tariffs and new pricing policies from Washington. It has been the second-worst-performing market sector over the last year.

But things are turning around in both beleaguered sectors. The Fed started cutting the fed funds rate again in September and two more cuts are expected this year. The long-anticipated issues in the healthcare industry have revealed themselves. And it doesn’t seem nearly as bad as feared. As a result, healthcare stocks had the strongest weekly rally in more than 20 years.

In this issue, I highlight a REIT that specializes in healthcare properties. It has a stellar track record of performance and has among the fastest earnings growth among REITs. It also pays a strong dividend yield and will likely benefit in the months ahead from a rally in either sector.

With a big Fed meeting on tap for this afternoon, we’re continuing to maintain a steady pace of adding new positions, selling off some weaker ones, and adding fresh names to our Watch List.

Details on all of the above are included in this September’s Issue. Enjoy!