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[Note: Due to the Christmas holiday, there will be no Cabot Turnaround Letter weekly update next Friday. The next monthly issue of the newsletter will be published on December 31.]

The Fed has reversed a long-standing balance sheet tightening phase with its recent decision to expand its balance sheet—a move that has largely fallen under the news radar.

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), Janus Henderson Group (JHG), Paramount Global (PARA), Starbucks (SBUX) and Teladoc Health (TDOC).

The overall market remains in an uptrend, as do most leading stocks, and that’s why we remain mostly bullish. But while we’re positive, we’re not pounding the table, partly because of some secondary measures (most broader indexes haven’t hit new highs in a month) but mostly because individual stocks aren’t offering up many great entry points. Tonight, then, we’re again standing pat, happy to ride our winners but monitoring earnings season closely, both for stocks we own and for those we want to buy.

In tonight’s issue, we go over a few new ideas, including a couple of IPOs from last year that were nailed but are now coming back from the dead; they could be morphing into leaders. And as usual we go over all of our current holdings and our updated watch list.

This week’s market recap is a familiar story—the major big-cap market indices are doing great! But the small cap index is still wallowing in the mud.

The market correction continues, and we’re now seeing the selling pressures broaden, with many resilient growth stocks beginning to come under pressure. The longer-term evidence remains positive, so this is still an overall bull market, but our intermediate-term Cabot Tides are clearly negative, so we advise being cautious—cutting back on new buying, holding a chunk of cash and keeping losers and laggards on tight leashes.

This week’s Friday Update includes our comments on earnings from eight companies. Also, Toshiba (TOSYY) reported earnings this morning, along with its plan to split into three companies.

Current Market Outlook


The issue following the huge selloff on June 9 was titled, “What Happens From Here is What Counts,” and so far, we’ve been encouraged by what we’ve seen—the Nasdaq found intraday support three times in the 6,100 to 6,150 area last week, and few growth stocks decisively broke key support levels. And today, we saw the Nasdaq and many leading stocks pop nicely. In the short-term, we can’t say the market is completely out of the woods, so picking your spots makes sense. But our main focus is on the intermediate-term, and the trends there remain up for most major indexes and the vast majority of leading stocks. All in all, we remain mostly bullish, though don’t be surprised to see some more “tests” for the market in the near-term.

This week’s list is also encouraging, as our screens aren’t finding it difficult to find great charts and enticing stories. Our Top Pick is LendingTree (TREE), which just broke out in late-April and has held up well during the recent market wobbles.

Stock Name	Price	Buy Range	Loss Limit
Bluebird Bio (BLUE)	0.00	106-112	96-100
Cooper Companies (COO)	0.00	234-242	220-223
HealthEquity, Inc. (HQY)	70.70	50-52	45-46
IAC/InterActiveCorp (IAC)	0.00	99-103	91-94
Impinj (PI)	0.00	52-56	46-48
Lending Tree (TREE)	411.51	166-174	152-156
PayPal (PYPL)	147.00	51-53	47-48
Summit Materials (SUM)	0.00	27-28.5	25-26
Supernus Pharmaceuticals (SUPN)	52.50	37-39	33-34.5
Zillow (Z)	76.64	44.5-47	40.5-42.5

After rising 25% from its December low to its May high, the S&P 500 index is finally taking a breather. I don’t expect a shocking price drop like we saw in December. Rather, I anticipate the S&P 500 receding to 2,750, which would be down 200 points from the recent high, or even 2,650. Pullbacks aren’t any fun, but they are normal, and they provide opportunities for investors to buy stocks while they’re on sale.

The good news is that it seems that the markets are back on track, although we remain cautious.

Economic statistics continue to be strong, with factory orders and consumer confidence better than analysts expected. Home prices have moderated somewhat, although interest rates and the continuing lack of inventory are not helping that market.

The Financial Times this week reported that Beijing is preparing plans to remove Hong Kong’s chief executive, Carrie Lam, whose term is not up until 2022, as anti-government protests in the city intensified.

Sell Fortrea Holdings (FTRE); Buy Pan American Silver (PAAS)

One year ago, soon after marijuana sales became legal in Canada, investors were throwing money at the sector, anxious to get a piece of the action. Today, the opposite is true—getting money for a cannabis business takes real work!

The S&P 600 Small Cap Index bounced off rock-solid support at the 820 level late last week, and over the last few sessions has migrated back to its 50-day moving average line at around 837.

In the August Issue of Cabot Early Opportunities we (mostly) return to our roots, focusing on technology and MedTech growth stocks, while adding a little flavor with a consumer stock we’ve been keeping an eye on.

Enjoy!

Current Market Outlook


After a very strong rally from the late-January lows, the major indexes are again in the midst of a pullback—during the past week and a half we’ve seen a few days of churning and distribution as worries over inflation (and a less-loose Federal Reserve) cause some profit taking, and today saw a big rotation out of growth stocks. Could this be the start of a “real” correction? It could be, as the intermediate-term advance is long in the tooth and sentiment remains giddy. That said, we never anticipate, and so far, we really haven’t seen much abnormal action yet—while a few stocks have fallen apart after earnings, most leaders are intact and even the weakest major index (Nasdaq) is near its 25-day line, which is acceptable. Given some of the yellow flags out there, our antennae are up, but with most of the evidence still positive, we’re keeping our Market Monitor at a level 7.

This week’s list has many recent earnings winners, including a few that are busting loose from good-sized bases (regular or post-IPO). Our Top Pick is Wix.com (WIX), which has a great story, accelerating growth and just staged a very powerful breakout.

Stock Name	Price	Buy Range	Loss Limit
The AZEK Company (AZEK)	47	45-47.5	40.5-41.5
Deere & Company (DE)	338	318-328	288-294
DraftKings Inc. (DKNG)	60	59.5-62.5	52-53.5
Magna International Inc. (MGA)	87	81-85	73-75
Mohawk Industries (MHK)	174	162-168	146-149
MongoDB (MDB)	392	395-407	355-365
SelectQuote (SLQT)	30	27-29	24-25
Sonos (SONO)	38	34.5-36.5	29.5-30.5
Teck Resources Limited (TECK)	23	21-22	18.7-19.5
Wix.com (WIX)	335	333-346	295-305

U.S. conglomerates, all the rage in the 1970s and into the 1980s, are still alive and kicking though investors prefer a more sector and global approach.

Yesterday, General Electric (GE) completed the spinoff of its healthcare business, GE HealthCare Technologies (GEHC). GE HealthCare, which makes MRI machines and other medical equipment, now trades on Nasdaq under the ticker symbol GEHC.

Lots of moving parts in this week’s update. We add one stock (as always), sell another, and have several ratings changes – a reflection of a mixed second-quarter earnings season, and on the cusp of the latest inflation data, to be released this Wednesday. Most of our stocks are acting well, however. And the market continues to inch forward, especially growth stocks, which is why our latest addition is a mid-cap (Internet of Things) IoT company courtesy of Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

With weeks of churning action and complacent sentiment, the market was flirting with trouble for a while, and now it’s hit the intermediate-term tripwire. Thus, we mostly advise defense here—after a big run-up and the aforementioned churning, the odds favor more short-term downside testing and/or pain ahead. That said, the odds also favor a resumption of the longer-term uptrend down the road, so it’s best not to get too holed up in your bunker, either. Tonight, we’ll leave our Market Monitor at a level 6, and the main message is to hold a good chunk of cash, honor stops and be very selective on the buy side.

This week’s list is another broad mix of stocks, with something for everyone in terms of stories, sectors and setups. Our Top Pick is a reliable grower in the infrastructure area that’s pulling back toward support. Given the market, keep new buys on the small side.

Good news. The U.S. economy is delivering Goldilocks-like growth—strong but not too strong—and the stock market is back in a good mood. Inflation rose 0.2% in February, meeting expectations but down a notch from last month’s 0.5% rate. And Friday’s jobs report showed that job creation remains robust, but wages are still increasing slowly (up 0.1% in February). The report pushed the yield on the 10-year treasury to within 0.06 percentage points of 3%, but it stopped just shy of breaking through.

In tonight’s Cabot Growth Investor, we review all our stocks and highlight some names we’re watching, including one that’s set up very well ahead of earnings. We also dive into some details about how we run our ship—we’ve gotten a few questions about this lately, and we think this will clear up any questions you may have.