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Warren Buffett became the world’s most famous investor in part by investing in companies with strong economic “moats.” Today, we add a well-known company that fits that description. We also say goodbye to two stocks to make room for more reliable opportunities as the market teeters.

It was another good week for Explorer recommendations led by ChargePoint (CHPT), up 17%, and Butterfly (BFLY), up another 8%.


Some of you will remember when George Gilder’s Wealth and Poverty hit the market in 1981 like a thunderclap. It was intellectual capital and political firepower for both the Reagan Revolution and a big bull market.



Mr. Gilder has been active ever since and has a new book out that I highly recommend, Life After Capitalism.

With the broad market making new highs in the face of renewed tariff threats, it seems investors are willing to shrug off macro concerns, at least for now.

We’ll heed the bullish action by stepping into three new positions this month, but hedge our bets by making one of them a half-sized position. We also add two new names to our Watch List.

In our August 24 note, we commented that the current stock market felt like the scene in the 2000 movie “The Perfect Storm” in which the fishing boat Andrea Gail, after an intense battle with the storm, finds herself in calmer waters lit by rays of sunshine.

Central banks around the world are boosting interest rates at a pace faster than perhaps any other time in living memory. Since mid-March, only six months ago, the U.S. Fed Funds rate has surged from essentially zero to about 2.35% and will be at 3.0% by the end of this week.

The big news today is that last week’s market weakness turned our intermediate-term market-timing indicator negative. But no one indicator is perfect, and at Cabot, we use another indicator to measure the market’s long-term trend—and that indicator is still positive. Thus it’s a standoff, which means our Market Monitor is positioned at dead neutral. Short-term, we tend to think the market is ripe for more of a pullback, simply because it’s had such a great, long advance. But long-term, we remain optimistic that once the correction is complete, the main uptrend can continue, and this thinking, in part, is because there are so few investment alternatives! In any event, our goal is to continue presenting you with stock that are most prone to short-term strength, and this issue brings a nice mix of old and new. Read them all, choose your favorite story, and work to find a good entry point. Our favorite this week is Twitter (TWTR), which has a huge fundamental story and a decent technical setup.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	125-131	123-124
VeriSign (VRSN)	190.71	58.5-60.5	56-57
Vipshop Holdings (VIPS)	14.25	91-95	80-82
Twitter (TWTR)	40.37	56-62	52-53
Insulet (PODD)	175.69	41-43	39-40
Pandora Media Inc. (P)	0.00	31-33	29-29.5
Medivation (MDVN)	0.00	70-75	69-70
The Hain Celestial Group, Inc. (HAIN)	0.00	91-93	83-85
Gilead Sciences (GILD)	75.10	76-79	73-74
CalAmp (CAMP)	0.00	27-29	24-25

Last week was a good one for the bulls, not because the indexes finished in the green but because after three poor weeks, the broad market finally found some support, with breadth improving and the number of stocks hitting new lows drying up. We wouldn’t say the broad market is completely out of the woods; another few days of positive action would be necessary to conclude that. But, overall, we’re optimistic—the intermediate- and longer-term trends are pointed up, most stocks outside of commodity sectors remain in good shape, and we’re even seeing some rotation into more growth-oriented groups, which is usually a good sign. We’ll keep our Market Monitor at a level 7 right now as we wait to see further confirmation from the broad market.

This week’s list is chock full of strong stocks with solid growth stories from a variety of industries. We’ll keep it simple with our Top Pick this week, going with Adobe Systems (ADBE), a liquid growth leader that just reported a strong quarter.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	0.00	70-73	64-65
Adobe Inc. (ADBE)	315.23	123-127	116-119
Axalta Coating (AXTA)	0.00	31-32.5	28-29
Broadcom Limited (AVGO)	266.26	215-223	200-205
Children’s Place (PLCE)	0.00	114-117	105-107
Glaukos Corp. (GKOS)	67.84	46-48.5	41.5-43
KB Home (KBH)	36.05	18.5-19.5	17-17.5
Micron Technology, Inc. (MU)	43.31	25-26	23-23.5
Olin Corp. (OLN)	0.00	31-33	29-30
Veeva Systems (VEEV)	180.23	47-50	44-46

Current Market Outlook


We’ve begun to see a few worrisome developments when it comes to the market. Small-cap indexes have lagged badly and haven’t made any progress in three months. A few sectors (especially commodity-related) have broken down. And breadth in general has weakened, with the number of stocks hitting 52-week lows expanding in recent days. However, we see a lot of good news, too—the intermediate-term trend is still pointed up, lots of strong stocks have consolidated normally in recent days and we’ve even seen a few new leaders begin to emerge on big volume. Altogether, it’s fair to say that the evidence has weakened so we’re knocking down our Market Monitor back to a level 7 and will be watching events closely. But until the uptrend is cracked, you should remain mostly bullish, holding your strong performers and looking for new buys as opportunities arise.

This week’s list has a wide variety of stocks and sectors, including a few names we haven’t seen in a long time. Our Top Pick is Builders Firstsource (BLDR), a good-sized supplier of building products that just gapped up strongly on earnings after trashing earnings estimates.

Stock Name	Price	Buy Range	Loss Limit
Autohome (ATHM)	98.65	34-36	31-32
Builders FirstSource (BLDR)	44.12	14.5-15.5	13.5-14
Exelixis (EXEL)	27.35	20.5-22	19-19.5
Leucadia (LUK)	0.00	26-27	24-25
ON Semiconductor (ON)	24.07	14.5-15.5	13.5-14
PulteGroup (PHM)	45.93	22.5-23.5	21-21.5
Shopify (SHOP)	585.00	60-64	53-55
SVB Financial Group (SIVB)	0.00	190-195	175-178
Synopsys (SNPS)	137.53	69-72	64-66
Take-Two Interactive (TTWO)	123.32	56-59	53-54

Current Market Outlook


Just a few days ago, the intermediate-term trend was looking iffy, but the past few days have shown very encouraging action—every major index has tagged new high ground, and we’re seeing more and more stocks react well to earnings and follow through to the upside afterwards. There are still a couple of yellow lights from some secondary measures (short-term sentiment is a bit complacent; small caps continue to lag), so near-term pullbacks wouldn’t be surprising. But there’s no question the trend of the market and most stocks is up, with many areas resuming their post-election advances. We’ll nudge up our Market Monitor to a level 8 (out of 10) to reflect the improved evidence.

This week’s list has a bunch of stocks that are showing excellent power in recent weeks; many have just gotten going after long sideways phases. Our Top Pick is Lumentum (LITE), a mid-sized player in the optical networking field that’s exploded out of a four-month base. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Box Inc. (BOX)	0.00	16.7-17.7	15-15.7
CDW Corporation (CDW)	0.00	55.5-58	51-52.5
Cleveland-Cliffs (CLF)	0.00	11-12	9.7-10.3
Lam Research (LRCX)	268.47	112-116	106-108
Louisiana-Pacific (LPX)	0.00	21.5-22.5	20-20.5
Lumentum (LITE)	87.00	45-48	41-43
Medicines Company (MDCO)	56.98	46-49	42-43.5
Morgan Stanley (MS)	0.00	44-46	41.5-42.5
Sanmina (SANM)	0.00	38-40	35-36
Weibo (WB)	98.16	51-54	48-49

Current Market Outlook


Last week brought the long-awaited breakout by the major indexes, but after a couple of days at new high ground, most sank back into their prior five-plus-week ranges today; small-cap indexes even broke their 50-day lines. With that said, most indexes remain in good shape, and the same can be said about the vast majority of stocks (a bunch of which have gapped up on earnings) and sectors—in other words, the evidence remains far more positive than not. Because of that, it’s fine to take a swing at some strong stocks on pullbacks, especially those that have recently shown great accumulation. However, we’re going to leave our Market Monitor at level 7 today given the lack of progress in the indexes, and we’ll keep our eyes open should today’s selling persist.

The good news is that this week’s list is chock-full of earnings winners that should find support on weakness. Many look enticing, but our Top Pick is Skyworks (SWKS), which is one of many super-strong chip stocks that just enjoyed a big earnings gap as investors anticipate better results ahead.

Stock Name	Price	Buy Range	Loss Limit
Allegheny Technologies (ATI)	27.78	20-22	17.5-18.5
Broadcom Limited (AVGO)	266.26	196-202	182-185
Cheniere Energy (LNG)	63.82	46-48	42.5-43.5
Citizens Financial Group (CFG)	0.00	35-37	32-33
Eagle Materials Inc. (EXP)	0.00	103-106	96-98
International Paper Company (IP)	0.00	55-57	51.5-52.5
Micron Technology, Inc. (MU)	43.31	22.5-24	20.5-21
Royal Caribbean Cruises (RCL)	0.00	92-96	85-87
Seagate Technology (STX)	0.00	42.5-45	38-40
Skyworks Solutions (SWKS)	0.00	88-92.5	82-84

Current Market Outlook


Early January is almost always a tricky time as big investors rotate and reposition their portfolios, leading to lots of crosscurrents and volatility. We saw some of that today and won’t be surprised to see more gyrations in the days ahead. Thus, we’re focusing mostly on the bigger picture, and on that front, the trend remains up, and we’re seeing a lot of pullback resumption set-ups (mostly from cyclical and financial stocks) and base-breakout set-ups (among some growth-oriented stocks). Now’s not the time to chase a stock’s every tick higher or lower, but you should remain bullish, and have a list of set-ups ready should the buying pressures resume after the modest late-December market retreat. We’re leaving our Market Monitor at a level 8 out of 10.

This week’s list has many stocks that have formed the aforementioned set-ups—should they resume their uptrends, many could have nice runs. For our Top Pick, we’re going with Micron Technology (MU), which gapped up strongly on earnings two weeks ago before pulling back. Dips look buyable to us.

Stock Name	Price	Buy Range	Loss Limit
Arista Networks (ANET)	0.00	95-98	90-92
Dave & Buster’s (PLAY)	57.01	54-56.5	51-52
HD Supply Holdings, Inc. (HDS)	0.00	41-43	37.5-38.5
Micron Technology, Inc. (MU)	43.31	21.5-23	19.5-20
Nabors Industries (NBR)	0.00	16-17	14.5-15
Oasis Petroleum (OAS)	12.57	14.5-16	13-13.5
Quanta Services (PWR)	91.45	34-36	31.5-32.5
Texas Capital Bancshares (TCBI)	0.00	76-78	71-72
United States Steel Corporation (X)	0.00	31.5-33	29.5-30.5
WellCare Health Plans, Inc. (WCG)	271.83	135-138	127-129

Current Market Outlook


There’s little question the overall market environment remains bullish—the intermediate- and longer-term trends are up, most stocks and sectors are in the same boat and we’re spotting more set-ups (either pullbacks or longer bases) out there. Short-term, though, nothing would surprise us—most major indexes haven’t made any progress since mid-December, we’re entering the thick of earnings season and some sentiment measures have gotten extended, indicating investor complacency. We’re not advising any drastic change in stance; our Market Monitor remains in bullish territory at a level 8 out of 10, and we’re looking to latch on to any new leadership that lifts off. But just be sure to have your plan in place, both on the buy side and sell side, as earnings season revs up.

This week’s list is a mixed bag and includes a few stocks that are reporting earnings within a couple of weeks. Our Top Pick is Coherent (COHR), a little-known laser company that’s benefiting from an uptick in OLED demand and from a major acquisition that’s just closed. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Alaska Air Group (ALK)	0.00	90.5-93.5	84-85.5
Charles Schwab (SCHW)	0.00	39.5-41	36.5-37.5
Coherent, Inc. (COHR)	0.00	138-145	128-130
Glaukos Corp. (GKOS)	67.84	37.5-39.5	35-36
HealthEquity, Inc. (HQY)	70.70	45-48	40-42
Incyte Corporation (INCY)	76.98	112.5-118	102-104
MSC Industrial (MSM)	0.00	95-98	91-89
Rio Tinto plc (RIO)	57.05	40-42	37-38
Tesaro (TSRO)	0.00	148-153	134-137
Univar (UNVR)	0.00	27-28.5	25-26

Current Market Outlook


Stocks notched another solid week, with most major indexes rising 1.5% or so and a bunch of stocks going along for the ride. We saw the S&P 500, S&P 400 Midcap, Nasdaq, NYSE Composites and the NYSE Advance-Decline line all hit new highs. That’s bullish! We’re also encouraged by the increasing number of powerful earnings reactions we’re seeing, with many stocks surging on their heaviest volume in over a year. Short-term, pullbacks and shakeouts are always possible, but looking at the big picture, we saw the market blast out of an 18-month trading range in November, consolidate tightly for two months through January, and now resume its uptrend, with more stocks and sectors participating. All told, we’ll bump our Market Monitor up another notch to level 9 (out of 10).

This week’s list has another crop of very strong stocks, most of which have either gapped up on earnings or are just emerging from consolidations. Our Top Pick is ON Semiconductor (ON), a chip firm that just blew away estimates and is expecting huge bottom-line growth thanks in part to its acquisition of Fairchild.

Stock Name	Price	Buy Range	Loss Limit
Arista Networks (ANET)	0.00	115-120	102-105
NetEase, Inc. (NTES)	0.00	285-295	260-265
ON Semiconductor (ON)	24.07	14.5-15.5	13.5-14
Paycom Software (PAYC)	0.00	51-53	47-48.5
Portola Pharmaceuticals (PTLA)	0.00	29.5-31.5	26-27
Shopify (SHOP)	585.00	56.5-61.5	50-53
TIM Participacoes (TSU)	0.00	15-15.5	13.8-14.2
TTM Technologies (TTMI)	0.00	15.8-16.8	14.5-15
United States Steel Corporation (X)	0.00	37.5-39.5	35-36
Wix.com (WIX)	302.53	58-62	52-55

Two weeks ago we saw a tremendous number of stocks hit new highs, which usually indicates some short-term euphoria. Sure enough, the major indexes have generally hesitated in recent days, and under the market’s hood, some previously strong sectors (especially metals and transportation stocks) have come under pressure while a few growth stocks perk up. You should always watch your stops, especially if you have losses, but to this point, we’ve seen little in the way of abnormal action—a few stocks look ugly, but most are still holding key support, and many pullbacks are likely setting up solid entry points. Bottom line, while the short-term is likely to bring some bumps in the road, the odds continue to favor higher prices ahead for the market, so we’re OK putting some money to work in strong stocks during the current retreat.

This week’s list is heavy on the old world stocks that have been leading the rally, though there are a few growth names here, too. Our Top Pick is Berry Plastics (BERY)—it doesn’t have the most thrilling story, but the numbers are excellent and shares are in a solid uptrend.

Stock Name	Price	Buy Range	Loss Limit
Berry Global (BERY)	64.22	49.5-51.5	45.5-47
Chemours Company (CC)	0.00	23-24.5	21-22
Incyte Corporation (INCY)	76.98	98-103	91-93
KLX Inc. (KLXI)	0.00	43-45	38.5-40
MasTec, Inc. (MTZ)	66.65	36.5-38.5	33.5-34.5
MRC Global (MRC)	0.00	19.5-20.5	17.5-18
Netflix, Inc. (NFLX)	423.92	122-126	114-116
Square, Inc. (SQ)	91.04	13.5-14.5	12-13
Thor Industries (THO)	104.76	99-104	90-92.5
Zions Bancorporation (ZION)	0.00	40-42	37-38

Current Market Outlook


Beneath the market’s surface, there’s been lots of rotation and volatility, with buyers focusing on the laggards of late last year (especially the big-cap growth stocks), while the strong materials and transportation sectors continue to consolidate. (Even as the major indexes probe new high ground, the number of stocks hitting new highs is way down versus a few weeks ago.) That’s something to keep an eye on, but the trends of the major indexes and most stocks are still up, sellers have been unable to put much of a dent in the market despite the huge post-election run and few stocks have broken down. Until that changes, we’re keeping our Market Monitor in bullish territory, though it’s probably best to be a bit more discerning on the buy side, looking for tight setups and big volume breakouts.

Tonight’s list remains heavy on turnaround stocks, especially those in cyclical industries; the odds continue to favor higher prices as these stocks consolidate their strong post-election gains. Our Top Pick is AK Steel (AKS)—you can buy a little here and look to add shares on a powerful move to new highs.

Stock Name	Price	Buy Range	Loss Limit
AK Steel Holding (AKS)	0.00	9.9-10.4	9.0-9.3
Atwood Oceanics (ATW)	0.00	12.5-13.5	11-11.5
CF Industries (CF)	45.23	32-33	29-30
Clovis Oncology (CLVS)	0.00	45-48	41-43
Grand Canyon Education (LOPE)	121.03	57-59	54-55
Greenbrier (GBX)	57.73	44.5-47	40.5-42
Lions Gate Entertainment (LGF-A)	0.00	25-27	23-24
Oil States International (OIS)	0.00	39-41	36-37
Shopify (SHOP)	585.00	45-47	42-43
SVB Financial Group (SIVB)	0.00	170-175	157-160

Current Market Outlook


The market has made a little upside push during the past week or two, but net-net, most indexes are up just a smidgen during the past seven weeks. That sideways trading has contained most stocks and sectors, too, as they chop around with a slight upward bias. Even so, the intermediate- and longer-term trends are up, so the odds continue to favor the next major move being up. And we’re encouraged by both the number of positive earnings reactions we’ve seen, as well as the action of those stocks after they gap up—most have traded constructively post-earnings with no selling pressures coming in even after they ramp. All told, we’re still mostly positive, but we’ll keep our Market Monitor at a level 7 (out of 10) until we see more than just the Nasdaq decisively push out of their recent trading ranges.

This week’s list has another batch of strong stocks, including many that have recently reacted well to earnings. Our Top Pick is a tough call, but we’ll go with Ally Financial (ALLY), which just exploded higher on earnings after years in the market’s doghouse. It looks to be just starting its run.

Stock Name	Price	Buy Range	Loss Limit
Ally Financial (ALLY)	30.44	21.5-23	20-21
Century Aluminum Co. (CENX)	17.24	14-15	12.5-13
Essent Group (ESNT)	0.00	34-36	31.5-32.5
Exelixis (EXEL)	27.35	18.5-19.5	17-17.5
Olin Corp. (OLN)	0.00	28.5-30	26-27
Symantec Corporation (SYMC)	0.00	26.5-28	25-25.5
Teradyne (TER)	82.83	27-28.5	25-26
Tesla, Inc. (TSLA)	818.87	247-256	225-229
Texas Capital Bancshares (TCBI)	0.00	82-86	76-78
Yandex (YNDX)	0.00	22-23	20-21

Current Market Outlook


During the past three weeks, we’ve seen the market’s breadth begin to sag (small- and mid-cap indexes haven’t made much progress in three months), then we saw some key sectors falter (financials have decisively broken down) and now the market’s own intermediate-term trend is on the fence. That’s enough yellow flags for us to advise trimming your sails a bit; we’re nudging our Market Monitor down to a level 6, as the onus is on the bulls to pull us out of this near-term funk. However, longer-term, we’re much more optimistic—today’s show of support was encouraging, of course, and there remains a ton of strong stocks (especially growth-oriented stocks) out there, so you should continue to hold on tightly to your top performers.

This week’s list is chock-full of stocks that have ignored the market’s recent dip. There are many good names to choose from, our Top Pick is Teladoc (TDOC), a newer issue that’s emerging from a long post-IPO droop and consolidation. It has a great story.

Stock Name	Price	Buy Range	Loss Limit
Criteo (CRTO)	0.00	49.5-51.5	46-47
Grand Canyon Education (LOPE)	121.03	66-69	60-62
Lumentum (LITE)	87.00	50-54	43-45
MercadoLibre, Inc. (MELI)	980.83	205-210	196-200
Momo Inc. (MOMO)	44.65	31.5-33.5	29-30
RingCentral (RNG)	238.73	25.5-27	24-25
SiteOne Landscape Supply (SITE)	98.49	44-46	40.5-41.5
Skyworks Solutions (SWKS)	0.00	94-97	87-88
Teladoc, Inc. (TDOC)	127.95	23.5-25	20.5-21.5
Wynn Resorts (WYNN)	121.08	107-111	98-101

Current Market Outlook


Once again, nothing has changed in the market’s bigger picture health—the intermediate- and longer-term trends of all the major indexes are still up (though small-cap indexes are now testing their 50-day lines) and the broad market is healthy, with few stocks breaking down and even fewer hitting new lows. That said, we’re now entering the sixth week of no progress in most indexes, so it’s clear that the short-term trend is neutral, which has capped most stocks, too. We’re still overall optimistic, but we are going to nudge down our Market Monitor by one notch (to level 7 out of 10), so be sure to honor your stops, and be selective on the buy side or take smaller than normal positions until the bulls return. On the flip side, you should continue to give your strong stocks a chance to resume their rally.

The good news is that there are still many strong charts despite the market’s pause. Our Top Pick this week is Netflix (NFLX), which reacted well to earnings last week and looks like a big-cap leader if the market gets going from here.

Stock Name	Price	Buy Range	Loss Limit
ASML Holding (ASML)	350.01	117-121	109-111
Adient (ADNT)	0.00	60-63	55-56
Alcoa (AA)	0.00	34-36	31-32
Charter Communications (CHTR)	0.00	295-305	278-283
Hancock Holding (HBHC)	0.00	43.5-46	40-41.5
Netflix, Inc. (NFLX)	423.92	133.5-138	122-125
Southern Copper (SCCO)	0.00	34.5-36	32-33
T-Mobile US (TMUS)	0.00	57-59	53-54
TD Ameritrade (AMTD)	0.00	44.5-46	41-42.5
United Rentals, Inc. (URI)	0.00	107-110	100-102

Current Market Outlook


With the market beginning a long-overdue correction that has the potential to bring high-flying stocks down to earth, one very human temptation is to defer new buying until risk seems to be past. But if you always think that way, you’ll never invest. Instead, we recommend keeping it simple. Recognize that the market’s main trend today is clearly up, and focus on identifying strong stocks with logical entry points. The candidates for today’s Top Ten included many semiconductor stocks, medical technology stocks, basic chemical stocks, financial services stocks and REITs, and you’ll find the best of those, along with other attractive stocks.

Our Top Pick is NetEase (NTES), which gapped up to new highs on its earnings report in mid-February and has since pulled back to support at the low end of its recent range. (Note: Don’t let the high share price dissuade you; simply buy fewer shares.)

Stock Name	Price	Buy Range	Loss Limit
Bluebird Bio (BLUE)	0.00	80-85	73-74.5
Century Aluminum Co. (CENX)	17.24	13.5-15	12-12.5
Conduent (CNDT)	0.00	15-16	13.5-14
Copa Holdings (CPA)	0.00	101-105	96-97
NetEase, Inc. (NTES)	0.00	280-290	260-265
Pacira Biosiences (PCRX)	54.85	48-51	44-45
STMicroelectronics (STM)	30.09	13.5-14.5	12.5-13
Symantec Corporation (SYMC)	0.00	27-29	25-26
TAL Education (TAL)	50.49	85-91	80-81
United Rentals, Inc. (URI)	0.00	125-130	114-115

Current Market Outlook


The overall market continues to act just fine, the trends are pointed up for most indexes and stocks, and the broad market remains in great shape. That said, it’s not all peaches and cream—the last three days have seen some selling pressure in a few highflyers and money flows into defensive groups (like utilities and consumer staples). Moreover, this action comes after a few short-term signs of enthusiasm, including a huge number of new highs on Nasdaq last Wednesday. Don’t get us wrong: We’re still bullish, and you should hold your strong stocks and be heavily invested. But we’ll knock our Market Monitor back down a notch (to a level 8), and think being selective on the buy side and ditching losers and laggards makes sense.

This week’s list has a broader array of stocks than in recent weeks as money flows shift. Our Top Pick is Square (SQ), which looks like a new leading growth stock after galloping ahead on earnings last week. Keep positions small and try to get in on dips.

Stock Name	Price	Buy Range	Loss Limit
Applied Optoelectronics (AAOI)	0.00	43.5-47	38-40
Autohome (ATHM)	98.65	32-34	30.5-29.5
HubSpot (HUBS)	582.89	57.5-60.5	55-53
Marriott Vacations (VAC)	0.00	93.5-97.5	87-89
Sage Therapeutics (SAGE)	0.00	62-66	56-59
Sinclair Broadcasting (SBGI)	54.14	38-40	35-36
Southwest Airlines (LUV)	0.00	55-57	51-52.5
Square, Inc. (SQ)	91.04	17-18	15.2-15.6
Univar (UNVR)	0.00	30.5-32	28-29
Universal Display (OLED)	187.54	82-85	74-76