Search

The markets traded sideways through most of April. But since then, the choppiness has returned—along with worries about the uncertainty regarding the debt ceiling, the expiration of the immigration-limiting legislation, and ongoing debate about the possibility of a recession.

Yet, economically speaking, the trends are still healthy. Manufacturing has held up, employment continues to rise, and job openings are still underutilized (as you can tell if you’ve been in a restaurant lately!).

Many major indexes have hit new highs in recent days, and all Cabot’s market timing indicators are currently positive. Conclusion: it’s a bull market and you need to be heavily invested.

But, as always, you need to manage your portfolio. In our own portfolio, eight of our stocks have hit new highs in the past week, which is great. But two of the others are being downgraded to hold because their prospects are less secure.

As for today’s new recommendation, it’s a young, fast-growing company in a high-risk/high-potential market sector. It’s certainly not for everyone, but for aggressive investors, it could be fun.

The Model Portfolio is more than 90% invested and off to a good start this year. In tonight’s issue, we write about our newest addition and the excellent relative strength it’s shown in recent months; we think it’s a liquid leader of the new energy rally. We also write about some recent IPOs, other stocks we’re watching and, of course, dive into all of our recommended names.

Mattel (MAT) reported revenue of $1.08 billion, down 0.7% from last year, and missing the consensus estimate of $1.09 billion by 1%. Earnings per share, however, exceeded the consensus estimate of $0.16 by 18.75%, coming in at $0.19. Key metrics showed mixed performance: Barbie sales fell 5.9% to $266.10 million, Fisher-Price dropped 17.5% to $135.90 million, while Hot Wheels rose 3.9% to $327.40 million, and other brands reached $471.90 million, beating estimates.

This month we’re adding a high-growth biotech name that has just begun to commercialize a unique compound for fighting aggressive cancers and other diseases including, potentially, COVID-19.

The company just began booking revenue from its first cancer treatment. That launch significantly de-risks the stock and raises the potential for future approval of the same compound for other indications.



The stock has retreated lately because prescription sales were curbed during the COVID-19 outbreak. This should be a temporary dip as there are many potential stock-moving catalysts coming this year. We’re hoping to sneak in and buy the dip on this high-potential name.



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

As we head into December, there are several major factors at work on the market, and most of them are negative: interest rates are rising, global trade is at risk of slowing, and the major trend of the market is now down. But not all factors are bleak. On the positive side, the deep correction has made stocks cheaper, and as stocks have fallen, investors have become more fearful, which eventually becomes a good thing.

So while caution is clearly warranted, it’s important not to stick your head in the sand.

Expensify (EXFY) reported underwhelming Q1 2023 results after the bell yesterday. Our goal here was to get into what seems like a promising long-term opportunity with a small specialist (expense management and other financial tools for small and very small businesses) before the trends turned more positive.

The fact that the major indexes and, especially, a ton of growth stocks bounced sharply late last week is a bullish sign; it at least tells you buyers are still interested, especially when it comes to some fast-growing names that recently reported outstanding results. That said, we can’t conclude the market is off to the races again—all the major indexes (save the Nasdaq) are still below their 50-day lines, the number of stocks hitting new highs is still tiny, and much of the broad market has taken on lots of water. Some new buying is fine, as is holding your top performers, but be sure to hold some cash until the market confirms a new uptrend.

This week’s list has a bunch of stocks that are acting bullishly, including a few that recently gapped up on earnings. Our Top Pick is Michael Kors (KORS), a well-sponsored name that reported a blowout quarter last week. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Yelp (YELP)	41.30	86-92	75-76
Valeant Pharmaceuticals (VRX)	0.00	133-138	124-125
USG Corp. (USG)	0.00	31-33	29.5-30
Salix Pharmaceuticals (SLXP)	0.00	95-99	89-90
ServiceNow (NOW)	341.86	63-65	57-58
Michael Kors Holdings Limited (KORS)	73.22	91-96	83-84
Incyte Corporation (INCY)	76.98	62.5-65	54-55
Keurig Green Mountain (GMCR)	0.00	102-107	89-90
Tableau Software (DATA)	126.42	84-88	78-80
Canadian Solar (CSIQ)	0.00	36.5-38.5	32-33

The market rolled over this week, but it’s too early to say if it’s the start of another correction or just some turbulence. Either way, we’re well prepared, with exposure to a broad range of sectors, including some benefiting from the uncertainty.

Thursday’s massive rally in Intel (INTC), a Cabot Turnaround Letter portfolio holding, did more than just underline the just-announced $5 billion stake that Nvidia (NVDA) initiated in the company. It also highlighted the degree to which growing federal involvement in tech- and defense-related companies—particularly those used to enable AI and other “mission critical” applications—has been driving the seemingly endless rallies of many leading tech sector stocks.

We’ve been able to enjoy a break in the earnings action this week (finally), and without a lot of company-specific updates, we’ll keep things short and sweet today.

The main message is that the broad market continues to rise on the back of rate cut expectations and a falling 10-year yield (down to 4.35% from over 4.7% a couple weeks ago).

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

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).

[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.

Although the red-hot housing market has cooled down, rent prices and mortgage rates are up. So what’s the better option, buying or renting?

The market’s weakness didn’t last long; the indexes snapped quickly back, though breadth is not quite as good as previously. Still, the market strength restores my confidence that we’ll see higher highs in the months ahead, and I recommend that you invest accordingly.
For today’s recommendation we swing back to the aggressive side. Remember those promises of DNA-based personalized medical treatments from a decade ago? We’re getting closer and today’s recommendation is a leading force in the field.

The Dow is in a tailspin.

After Wednesday’s Fed-ignited selloff, the 118-year-old index has now fallen for 10 consecutive days – its longest string of down days since 1974. Prior to yesterday, the index hadn’t fallen much during the first nine days of this losing streak, down just 3.47%; but yesterday’s 2.58% decline stretched those losses to an even 6%. So what once was a modest pullback is now hurtling toward a correction.

Regardless of your politics, “calm” is not a word you would likely use to describe the stock market under President Trump, at least through the first three months of his second term. But given the extreme tariff-fueled volatility that pervaded this time a week ago, that’s exactly how the last week has felt for investors: calm.

Vita Nelson’s The Moneypaper specializes in direct investing through dividend-reinvestment plans, or DRIPs. However, this month Nelson also provided subscribers with some helpful advice for investing in fixed-income instruments in today’s low-yield environment, and explained the pros and cons of various types of bond funds. “Federal Reserve Chairman Bernanke has promised...

The market has handled itself well during the past couple of weeks, consolidating normally, with our intermediate-term indicators still positive, which is all to the good. Still, leadership remains somewhat lacking and, while coming close, our Cabot Trend Lines are still negative, so we’re content to take things step by step while waiting for more institutional-quality names to get going. Tonight, we are extending our line a bit more, but will hold onto a 36% cash position and want to see added upside confirmation before we put too much more money to work.