Search

There’s an old saying that a bull market climbs a wall of worry, and today is a perfect example, with many of our stocks hitting new highs despite the widespread fears of coronavirus. Thus I continue to recommend that you be heavily invested.
However, not all our stocks are strong, and this week three in particular have turned too weak to hold any longer. So out they go.


As for the new recommendation, it’s an insurance company (investment company) that pays a dividend but has great prospects for capital gains. Full details in the issue.

Current Market Outlook


There’s nothing bad to say about the market’s quick rebound two weeks ago and its ability to hold those gains—at the very least, such action from the big-cap indexes and many leading stocks is a good longer-term sign. But it’s also important to look at all of the evidence, and on that front, things are mixed—broader indexes are still hanging around their 50-day lines (acceptable, but not overly powerful) and the number of names hitting new highs has dried up. That doesn’t necessarily portend doom, but it does describe an environment that’s a bit more hit-and-miss, especially with a ton of earnings reports set to be released. Overall, you should remain bullish, but be a bit discerning on the buy side, looking for names that have shown excellent recent strength and volume.

This week’s list has many stocks that meet that criteria, including a few that have popped after earnings. Our Top Pick is Lumentum (LITE), which recently came out of a very long launching pad and, after a four-week rest, has taken off after earnings.

Stock Name	Price	Buy Range	Loss Limit
AAXN (AAXN)	87.11	83-86	74-76
Bilibili (BILI)	28.71	23.5-25.5	20-21
Bill.com Holdings (BILL)	88.76	54-57	47-49
DocuSign (DOCU)	107.98	82-84	73.5-75
GDS Holdings Limited (GDS)	80.15	57.5-59	52-53
Insmed Inc. (INSM)	30.64	30.5-32.5	27-28
Lumentum (LITE)	87.00	86-89.5	76-78
Nuance Communications, Inc. (NUAN)	25.35	21-22	18.5-19.5
Old Dominion Freight Line Inc. (ODFL)	221.91	212-216	195-197
Scotts Miracle-Gro (SMG)	155.72	119-122	110-112

In this Month’s Issue of Cabot Early Opportunities I discuss one simple way to measure how much a given stock will move relative to the market. I also feature five stocks, from quite small to larger than we normally go. All have something different going for them. We are tilted toward software names this month, though I round things out with another solar name and an emerging biotech opportunity.

The long-awaited correction has begun, and it’s been a doozy, driving the major indexes and many stocks dramatically lower; our Cabot Tides turned negative on Monday, and despite coming into the week with 17% in cash, we’ve been paring back quickly, selling all of Inphi and taking partial profits in both Vertex and Sea Ltd, leaving us with 36% in cash. And going forward, we have a few names on tight leashes should the selling continue.

That said, it’s not all doom and gloom; our Cabot Trend Lines are still positive, and many leading stocks, while dented, are hanging in there (including some we own). The odds favor this correction needing more time to finish up, but the odds also favor the overall bull market still being intact.



In tonight’s issue, we dive into all of our stocks, highlight a few we’re watching, and talk about one sector that, despite this week’s maelstrom, seems to be in position to thrive during the market’s next sustained upmove.

Current Market Outlook


The big-cap indexes remain in rarified air, as they continue to levitate and the sellers refuse to put up a fight. Even more encouraging is that many stocks that took the prior few weeks off (generally building tight ranges) have resumed their advances, a good sign. That said, the upmove has become a bit more selective (small- and mid-cap indexes haven’t participated lately) and numerous yellow flags among secondary indicators are still in place. All of that is a longwinded way of saying that not much has really changed—it’s a strong bull market that should go higher down the road, but the risk of near-term potholes is elevated. Thus, you should remain bullish and continue to hold most of your strong performers, but picking your spots on the buy side makes sense as well.

This week’s list includes a bunch of names that have shown excellent strength after resting for a few weeks—or in some cases, months. Our Top Pick is blue chip Salesforce.com (CRM), which has accelerated to new highs after a 15 months of base-building.

Stock Name	Price	Buy Range	Loss Limit
Aecom Technology (ACM)	0.00	45.5-47	42-43
Axsome Therapeutics (AXSM)	0.00	83-88	71-75
Dexcom (DXCM)	421.36	225-235	202-206
Dynatrace (DT)	36.59	27.5-29	24-25
Fortinet Inc. (FTNT)	137.53	112-115	103-105
Guess (GES)	0.00	21-22	19-19.5
JD.com (JD)	39.58	38-39.5	34.5-35.5
Qorvo (QRVO)	129.47	112-116	101-102
Salesforce.com (CRM)	0.00	178-182	164-167
Western Digital Corporation (WDC)	0.00	65-67	59-60

The much-needed market correction is now two weeks old and thus still quite young, but as it evolves, and we adapt to its actions, we will continue to cultivate a portfolio of the best stocks by selling our laggards and holding our leaders.

Last week that meant selling four stocks, but this week it means only a couple of downgrades to hold, along with one upgrade to buy.



As for this week’s recommendation, it’s a big old high-tech company that is currently range bound, but whose valuation and chart are attractive, so long-term investment should work out well. Plus it pays a dividend of 4.3%.



Details in the issue.

Today’s recommendation is a British outfit that, as its stock symbol suggests, is thriving thanks to offerings that help workplace teams plan, interact, engage, track progress and more, all of which is becoming more difficult as workplaces become more mobile.

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 needed a correction and now we have one, or at least the start of one. And the kickoff has been powerful enough to turn our short-term timing indicator negative, which means it’s time to turn a bit defensive, raising cash and leaning toward lower-risk investments. Thus, we sell two more stocks today and downgrade two to hold.As for the new recommendation, it’s a slow and steady telecom company that not only pays a good dividend but also is poised to benefit from the rollout of 5G technology.Full details in the issue.

Current Market Outlook


Usually when the market is stretched and sentiment is complacent, the market latches onto a reason to retreat, and last week provided it, with the Middle East conflict offering an excuse for sellers to get active and buyers to pull in. The good news is, thus far, the retreat has been reasonable—the major indexes are still even above their 25-day lines, and few stocks have cracked key support or flashed any abnormal action. That said, we’re leaning toward the view that, Iran or not, the short-term is likely to remain tricky, with rotation, potholes and news-driven moves likely to be the norm for a while. Thus, we remain bullish, but continue to advise picking your spots—many stocks have etched nice month-long rest periods, though some others probably need time to consolidate.

This week’s list has a bunch of names that haven’t appeared in Top Ten for a long time (if ever). Our Top Pick is Alibaba (BABA), which has finally kicked back into gear after a long time in the wilderness. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Alibaba (BABA)	254.81	208-216	192-196
Bilibili (BILI)	28.71	20.5-22	18.5-19.5
Coupa Software (COUP)	262.20	157.5-162.5	143-146
Eldorado Resorts (ERI)	0.00	56-58	51-52
Global Blood Therapeutics (GBT)	0.00	76.5-80	66.5-68.5
Lumentum (LITE)	87.00	76-79	69.5-71
SolarEdge Technologies Inc. (SEDG)	124.37	95-97.5	86-87.5
Tenet Healthcare (THC)	0.00	35.5-37	32.5-33.5
WPX Energy (WPX)	0.00	13.2-13.7	11.7-12.0
Scorpio Tankers (STNG)	0.00	37.5-39	33.5-34.5

Download the new report Cabot’s 10 Best Stocks to Buy and Hold for 2020 (subscribers only)


A stock joins the Buy Low Opportunities Portfolio today and another one rejoins the Growth Portfolio. Additionally, we say goodbye toone stock, which continues to have a slightly-improving price chart, but the 2020 earnings growth prospects are too dismal to remain in the Growth Portfolio.

Open today’s issue to read additional features and changes with three more stocks.

Some 100 gigawatts of solar power projects were completed last year, and after some virus-related issues, there’s every reason to expect even faster deployment of solar in the future. That should help today’s recommendation, a provider of residential solar electricity via solar panels and battery storage

Today’s featured companies are benefiting from the current focus on healthcare, online commerce, dining at home and limited travel behaviors.

All of the stocks that I follow with any regularity finished falling in March, and began to rebound. I’m glad for that, and happy to be buying low. However, there’s still a dark cloud on the horizon. The longer the quarantine situation lasts in the U.S. and in foreign lands, the uglier the economic situation will become. That’s because many companies are scrambling for cash to pay their employees, rent, utilities, etc. while they’re not actually selling any products that can replenish the cash flow.



There are various stocks in today’s issue that I indicated would be good for traders. “Good for traders” bears no resemblance to “good for buy-and-hold investors”, okay? Please read my recommendations carefully. When in doubt, send me an email with your questions.



Lastly, take your time investing cash positions. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges. To that end, I’ve listed short-term upside price resistance targets on quite a few of the stocks. When the stocks rise to those targets, you’re going to tell yourself “my stock is going to keep rising!” Instead, odds are very strong that your stock will turn down. This will be a trader’s market for much of 2020. If you’ve ever toyed with the idea of buying and selling within a stock’s trading range, this is the year to do it! Best of luck to you!

Digital payments were already a big trend prior to Covid-19. But the pandemic has pulled forward demand for solutions that help businesses pay and get paid whenever, wherever, and however.

Today we’re profiling a small company that specializes in payment processing solutions. It’s relatively new to the public markets and has a market cap well under $2 billion.



While areas of its busieness have been harmed by the pandemic the big-picture story remains great. And management reported record sales activity in both March and April. And the stock’s looking great.



All the details are inside this month’s Issue. Enjoy!

U.S. markets are trading cautiously with the latest uncertainty surrounding the coronavirus pandemic. Chinese markets have surged over the last week and I’ll outline a trading idea to take advantage of the momentum. Our emerging market (EEM) signal is decisively positive as our portfolio moves ahead, led by our Alibaba (BABA) position, up 18% this week, and Sea Limited (SE) continuing its incredible run. Today, we discuss changes afoot in Hong Kong with a new recommendation that is an undervalued throwback blue chip that is also a high-quality proxy for Asian growth.