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Current Market Outlook


The market continues to gyrate wildly, gapping up or down based on the news of the day. In the short-term, the indexes (and most stocks) have etched out a little trading range, and that could continue for a while longer. But the main trend remains down, so you should be using these bounces as a chance to unload any broken stocks and raise cash if you’ve yet to do so. On the buy side, we are starting to see the wheat separate from the chaff, but it remains too early to put any big money to work; a couple of small positions is fine, but we suggest focusing mostly on preserving capital for the next sustained run—that’s when the big money will be made.

This week’s list includes with some recently strong themes (medical, construction and retail), including a couple of recent IPOs. Our Top Pick is one of those newly-public firms—Planet Fitness (PLNT) has a good story and the stock has shown solid relative strength since coming public.

Stock Name	Price	Buy Range	Loss Limit
Signet Jewelers (SIG)	0.00	135-140	125-127
Post Holdings (POST)	0.00	63-65	59-60
Planet Fitness (PLNT)	0.00	17-19	15-16
PDC Energy (PDCE)	0.00	53-56	48-49
Medicines Company (MDCO)	56.98	38-41	34.5-36
Lululemon Athletica (LULU)	304.69	64-66	60-62
JetBlue Airways Corporation (JBLU)	0.00	23-24	21-21.5
TopBuild (BLD)	111.00	32-34	29.5-30
Anacor Pharmaceuticals (ANAC)	0.00	125-132	118-120
AMN Healthcare (AHS)	0.00	33-35	31.5-32

Current Market Outlook


In the short-term, there’s no question the market is “overbought” and there are some signs of complacency, so we’re not ruling out a market-wide shakeout, some kind of below-the-surface correction or simply a tricky earnings season. But the real money is in the intermediate- and longer-term moves, and on that front, the vast majority of evidence remains in the bull camp, as the trends of the indexes are pointed up, leading stocks are acting well and some new leadership is starting to emerge on earnings. Thus, our game plan remains the same—you should generally be holding your strong stocks (though booking a few partial profit is fine) and looking to do some buying either on pullbacks (for stocks that ran up strongly in September) or on powerful breakouts (likely on earnings).

This week’s list contains another varied batch of strong stocks, including a couple that have shown superb power in recent days. Our Top Pick is Skechers (SKX), which exploded higher last week after a blowout quarter—we advise starting small and adding shares if the stock continues higher.

Stock Name	Price	Buy Range	Loss Limit
Beacon Roofing (BECN)	0.00	53-55	49-50
Cree, Inc. (CREE)	67.96	32.5-34.5	29-30.5
Essent Group (ESNT)	0.00	42-44	39-40.5
HollyFrontier Corporation (HFC)	0.00	35-36	32-32.5
Michael Kors Holdings Limited (KORS)	73.22	47.5-49	45-46
Navistar International (NAV)	0.00	41.5-43.5	37.5-39
Proofpoint (PFPT)	113.79	91-94	87-89
Skechers (SKX)	0.00	32-34	28-29.5
Sohu.com (SOHU)	0.00	64-67	59-61.5
Zogenix (ZGNX)	46.50	36.5-38.5	33-35

There remain some yellow flags in the market, but when you look at the big picture, there remains far more good than bad. It’s vital to remain flexible of course, as in 2020, things have changed on a dime a couple of times, but with most of the evidence still positive, we remain mostly bullish.

Fourth quarter 2019 earnings season began yesterday with a few large banks reporting very strong results.

Another interest rate hike and negative second-quarter earnings growth have done little to slow the bull market rally or investor confidence, so this week we add a “Bull Market Stock” to take advantage of the strength. It’s a term coined by our Mike Cintolo, so naturally, today we add Mike’s favorite Bull Market Stock, one he recently recommended to his Cabot Top Ten Trader audience, a company that benefits directly anytime there’s a bull market and the big institutions are buying stocks hand over fist.

In this month’s issue of Cabot Turnaround Letter, I recommend a company I’ve been fond of all the way back to 7th grade. It’s a household name, but one that’s perhaps been forgotten on Wall Street in recent years. But now, it looks primed for a turnaround.

Details inside.

The market has gotten a lot bumpier in November, though the major indexes haven’t given up much ground. That’s because even as the air comes out of the (perhaps overinflated) artificial intelligence balloon of late, investors are instead rotating into the many under-loved names in other sectors. Today, we add a stock in one of those underappreciated sectors. It’s an educational company that Carl Delfeld recommended to his Cabot Explorer audience last month. And the stock is having a solid year.

Details inside.

FTAI Aviation (FTAI) Reports

Following yesterday’s after-hours preliminary Q4 earnings results, we are selling Beta Bionics (BBNX) today.

What do you do when a stock changes character? Specifically, how do you handle it when a stock you’ve known as a growth stock may have turned into an income stock?

One of the best ways to put money into great growth stocks is by keeping a list of leading stocks.