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It’s a new year, and a new attitude. Investors tend to sober up after weeks of holiday slacking and refocus on the market. What are they saying?

It’s a new year, and a new attitude. Investors tend to sober up after weeks of holiday slacking and refocus on the market. What are they saying?

After a mixed performance last week, the market opened significantly lower yesterday, and the Dow and S&P 500 both hit their lowest level since the start of October. One of Cabot’s long-term market timing indicators just turned negative, which tells us it’s time to get more defensive. As a result, we are doing some selling today and moving two position to Hold.

Understanding taxes can be a struggle, so let’s break down recent changes to the tax code and some penalties to avoid.

Current Market Outlook


The market has been thrashing around during the past few trading days, with big gaps up and down, dramatic reversals and news-driven moves. But overall, nothing has really changed from our point of view—most growth leaders are still under pressure after suffering abnormal selling the prior couple of weeks, which, coming after a prolonged upmove, raises the odds that further potholes are ahead. Of course, it’s not all bad—today was a stick save for the major indexes (most bounced nicely off their 50-day lines), and while the broad market has pulled back, many areas are doing so normally. All told, we remain flexible, and are open to the possibility that the recent dip was more of a shakeout than the start of a rough patch, but the burden of proof is on the bulls to step up. Until then, we prefer being cautious.

The good news is that our stock screens continue to pick up on some potential fresh leaders should the market find its footing. Our Top Pick this week is Novocure (NVCR), an innovative player in the cancer market that’s come to life after a year-long rest. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
10X Genomics (TXG)	121	116-120	103-105
DouYu (DOYU)	16	15.2-16.2	13-13.7
The Gap, Inc. (GPS)	17	16.5-17.5	14.5-15.2
Guardant Health (GH)	103	98-102.5	88-90
The Mosaic Company (MOS)	18	17.2-18.2	15.4-16
MyoKardia (MYOK)	124	116-121	103-106
Novocure (NVCR)	98	93-98	81-84
Snap Inc. (SNAP)	24	22.5-24	20-21
Taiwan Semiconductor (TSM)	80	78-81	71-73
Target (TGT)	148	145-149	132-134

Current Market Outlook


Growth stocks suffered another shot across the bow last Monday, and for the next three days, most didn’t bounce much. But last Friday and today’s action was far more encouraging, with leading stocks rebounding nicely and the broad market doing decently, too. Of course, we never put too much emphasis on just a day or two; the market wasn’t hanging by a thread before the latest bounce (the trends of the indexes and leading stocks were up), and today’s action doesn’t necessarily mean it’s up and away from here, either. In fact, with earnings season coming up, we still think focusing on the right stocks and looking for relatively lower-risk entries is your best bet. But until proven otherwise, most of the rubber-meets-the-road evidence remains bullish, so you should, too.

This week’s list has a broad mix of cyclical and growth issues to choose from. For our Top Pick, we’re going a bit speculative—Plug Power (PLUG) is low priced, but very liquid, and the recent pattern (huge-volume rally, controlled pullback) looks very tempting.

Stock Name	Price	Buy Range	Loss Limit
ANGI Homeservices Inc. (ANGI)	14.81	14.5-16	12-12.7
Arconic (ARNC)	17.00	15-16.5	13-13.5
Bloom Energy (BE)	16.22	15-16.5	12.5-13.5
Carrier Global Corporation (CARR)	26.23	24.5-25.5	22-22.5
D. R. Horton (DHI)	66.55	61.5-64	55.5-57
GDS Holdings Limited (GDS)	80.15	78-82	71-73
Plug Power (PLUG)	8.35	8.0-8.7	6.6-7.0
Saia Inc. (SAIA)	129.19	120-125	109-112
Spotify (SPOT)	272.82	278-290	244-249
Vapotherm (VAPO)	48.53	44-47	38-40

Today, I’d like to share an excerpt from the Complete Retirement Income Guide which profiles many different kinds of income investments.

Just wanted to start with a quick word of optimism about the future of the stock market, and the potential for making money in the months and years to come. I was pleased to attend the Contrary Opinion Forum in Vermont last weekend with Timothy Lutts--Tim’s been going for 22 years straight, while this is my fourth or fifth visit since I came to Cabot back in 1999--and it’s always a treat.

Yesterday afternoon, my wife and I returned from a two-week trip to India. The experience was absolutely marvelous, rich in warmth and beauty, yet at the same time colored by the substantial economic challenges that face the country of 1.1 billion people. While I was gone, the Dow dropped another 10%, the S&P 500 lost 14% and the Nasdaq plunged 16%. Happily, all our Cabot growth-oriented letters have been recommending a heavy cash orientation for many months so this continued erosion has brought little pain.

Today, I’m writing on a MacBook Pro. This morning I did my morning crossword puzzle on my iPad. All day long, my iPhone is by my side. My home Wi-Fi comes from Apple AirPorts. And some nights, I stream entertainment through my Apple TV. In short, I love Apple products, and I expect to continue using them for many more years. But one of the most important market truisms is this: “The company is not the stock.”

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