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It’s that time of the year when economists and market mavens spill an abundance of ink making year-ahead stock forecasts and boom/bust warnings. As there seems to be an abnormal amount of recession predictions for the year ahead—including a few from some reputable sources—I think we should examine the question: Will the U.S. witness a major economic shock in 2026?

In December’s Issue of Cabot Early Opportunities we look back at one of the strangest years in decades and discuss the seemingly counterintuitive strategy that drove huge portfolio gains.

Then we look at a fresh batch of names that seem ripe for the picking now and which could serve us well in the beginning of 2021. Our new stocks span clean energy, PC gaming, biotech, industrial supplies, and payment processing. As always, there should be something for everyone!

In February’s Issue of Cabot Early Opportunities we dig into the red hot IPO market.

We take a closer look at five recent IPOs that have been on my shopping list. It is not an Issue for the faint of heart. Several of these stocks have made significant moves in their short history as public companies.



There are strategies to mitigate the risks, however. And as we scan the universe of attractive stories today it is not hard to envision several of these stocks trading significantly higher a year from now.



Sit back and enjoy.

This retailer presented at the January 13 ICR Conference 2020 and moves from Buy to Strong Buy.

All in all, the good-not-amazing environment remains in place, with intermediate-term uptrends intact for the major indexes and a solid amount of good-looking leadership out there. That said, there also remain a fair number of potholes out there, and most broader indexes tested their 50-day lines late last week. All told, there are plenty of stocks in a variety of sectors that are working, so we’re bullish, but picking strong names, targeting decent entry points and booking a few partial profits on the way up are advised. We’ll leave our Market Monitor at a level 8.

This week’s list has something for everyone, and we like how many of them have shown excellent power of late. Our Top Pick looks like an institutional way to play the energy transition trend. Aim to enter on dips.

The broad market remains (ahem) challenging, but there are still broad pockets of strength, and if you care to mine them (we have mining on our minds, for obvious reasons), and you watch your stocks carefully, you can still make money in this market. Coal, oil and fertilizer remain strong, but we’re now seeing more action in stocks of supporting industries, like the companies that help the drillers, or the companies that sell and service the tractors that roam the fields. This extension of strength into supporting industries is normal; we well remember when layers of technology stocks went through the process in the 80s and 90s. So don’t fear it and don’t fight it; embrace it and prosper. Our Editor’s Choice in this issue is one of these stocks, Titan Machinery. Making its first appearance in Cabot Top Ten Report, and hopefully not its last, it boasts good management, a great industry rolling in cash, and excellent expansion opportunities. Plus, it’s a young stock, and the buyers are in total control.

Stock Name	Price	Buy Range	Loss Limit
AGU (AGU)	0.00	96-102	-
AUXL (AUXL)	0.00	33-36	-
BUCY (BUCY)	0.00	69-73	-
CPX (CPX)	0.00	29-31	-
CRM (CRM)	0.00	69-74	-
GDP (GDP)	0.00	52-57	-
MOS (MOS)	0.00	143-150	-
ROST (ROST)	0.00	31-36	-
STLD (STLD)	0.00	36-40	-
TITN (TITN)	0.00	30-32	-

Market trends remain quite positive, and I continue to recommend that you work to get more invested. According to our market timing indicators, the odds are still very good that months from now, the market will be higher.
Today’s recommendation is a well-known medical stock that’s temporarily a bargain, chosen for both diversification and the fact that the broad market, which has surged higher since Christmas, is due for a real correction.

The market continues to be messy, but we’re going to take a partial swing at a profitable software company playing in a big, growth market – cloud services.

This company is like a smaller version of Amazon Web Services and Microsoft Azure. But without all the other parts of those much, much larger companies.



We may be a bit early. But we’ll manage that risk by taking a half position in a company that’s likely to grow above 30% for years and is very profitable.


Enjoy!

The market and growth stocks have had a couple of wobbles so far in September, and given the heady run from leading stocks in August, some further shakeouts are possible. If the selling pressure intensifies enough to turn our Cabot Tides negative, we’ll trim our sails, but right now, the trends of the major indexes and the vast majority of leading stocks are pointed up, so we remain positive.

The market isn’t totally out of the woods at this point—the intermediate-term trend of most indexes and growth measures is essentially neutral here, there’s plenty of overhead to chew through. That said, there’s no doubt the rebound has been impressive, with some indexes recouping 60% to 80% of their corrections, and individual stocks are acting much peppier of late. What happens from here will be key: Some backing off would be normal, but if any retreat is tame and individual stocks continue to flex their muscles, it would be a good sign—though obviously a huge drop would be iffy. For now, we continue to slowly rebuild exposure but are remaining flexible. We’ll nudge our Market Monitor up to a level 6 but are taking things on a day-to-day basis.

This week’s list is another that’s loaded up with powerful charts, all of which have recently surged on earnings reports. Our Top Pick has been extremely tedious for the past 16 months but is flashing some overwhelming buying power as the sector improves.

You should have an advisory that will get you out of the market and into cash when the tides turn against you.

AVPT, AORT and DCBO Still Buys After Reporting

Walgreens Boots Alliance (WBA) acknowledged disappointing quarterly results on Thursday, cutting its full-year financial guidance to a range of $2.80 a share to $2.95 a share, down from previous expectations of $3.20 a share to $3.35, and well off analyst estimates of $3.21. CEO Tim Wentworth discussed plans that could lead to the closure of thousands of its U.S. pharmacies as the company’s retail business continues to struggle. “We are at a point where the current pharmacy model is not sustainable, and the challenges in our operating environment require we approach the market differently,” Wentworth said, also noting that a quarter of the stores are not contributing to operating income. While there were positives – a well-performing international business and a growing U.S. healthcare segment for instance – future performance will heavily rely on the company’s shift toward greater efficiency.

Wells Fargo (WFC) kicked off the Cabot Turnaround Letter earnings season today, showing EPS of $1.26/share, which exceeded estimates by 17 cents. WFC also beat top-line revenue estimates by $710M, coming in at $20.86B. Despite the comfortable beats, WFC shares are essentially flat for the day.

Last week had a few potential potholes for the market’s nascent rally, including some influential big-cap earnings releases and an inflation report before the long weekend—but despite some selling that popped up here and there, the market and fresh leaders handled themselves well. Stepping back, we’re definitely encouraged by the market’s snapback and the numerous upside moves in individual, growth-oriented stocks during the past month; we think the odds favor the next major, sustained move is up. That said, a lot of stocks have set up (but not broken out), old leaders (chip names in particular) look suspect and it’s a fact that defensive areas continue to ramp higher, which is a sign that big investors are hunting for some safety. Again, we’re encouraged overall, but continue to think going slow makes sense, especially now that some selling pressures are beginning to emerge, stickign with mostly small positions and keeping some cash on the sideline. We’ll keep our Market Monitor at a level 6 today.

This week’s list is a bit of a hodgepodge, with some recent earnings winners, some fresh names and a few stodgier types. Our Top Pick is Rocket Cos. (RKT), which is basically a cyclical (mortgage lending) company that should be lean and mean after the multi-year dry period—meaning its earnings power should be big as rates head lower.

Outside of a few mega-cap names, the market remains stuck in neutral, with the vast majority of stocks (including growth stocks), sectors and indexes meandering sideways, resulting in plenty of trendless, tedious action. Of course, many areas are within shouting distance of new high ground, so we’re not negative--but while we’d love to put some money to work (a couple of names on our watch list are fairly enticing), we think less is essentially more, at least until the market shows its hand. We’re again standing pat tonight, though remaining flexible for what may come.

Long-term, the market’s picture remains bright, with our most reliable indicator (Cabot Trend Lines) firmly positive, which we write more about in today’s issue, as well as one name that’s probably at the very top of our watch list. All in all, we’re ready to make some moves, but right now, patience is the best course.

As has been the case for the past decade, the fate of cannabis stocks lies largely in the hands of politicians.

Cannabis companies have been getting solid support from state-level politicians. Forty states now allow sales of medical cannabis.

Sure, they are permitting too many stores, and that is putting downward pressure on pricing. At some point, the market sorts that out. Prices will fall to a point where it is no longer that enticing to bring on new supply, yet companies will have gotten lean enough to produce profits. We are not there yet. But we will get there.

The market remains very strong, with the trends of the major indexes and the vast majority of stocks pointed up, both of which keeps us mostly bullish. But really, we’re looking at things mainly on a stock-by-stock basis now; some names are extremely extended and vulnerable to air pockets, while others are just a few weeks into what look like new, sustained advance. With that in mind, we’re actually taking partial profits on one stock today, while averaging up in another — all in all, we’ll still be around 18% in cash.

Elsewhere in tonight’s issue, we write about some of our favorite cookie-cutter stories out there at the moment; we own one great one, but we’d like to have another. And we also review all our stocks, present some new ideas and talk a bit how to handle the speculative, super-hot names in the proper fashion.

We previously asked how many stocks you own, how much time you spend on your investing, and how you feel about those numbers. Here are the results.

What we may see developing in markets is a rather broad trading range – say from 21,000 to 25,000 in the Dow. This could be our reality until we work our way through the real but uncertain impact of the shutdown on the economy.