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The majority of the evidence when it comes to the overall market remains positive, but the environment for individual growth stocks remains very challenging—many are still holding up well, but no real money is being made as waves of selling pressures show up every couple of days. We’re still holding our resilient names and aren’t opposed to new buying here or there, but it’s important to hold some cash and keep new buys small until the bulls step up to the plate for more than a few hours at a time.

In tonight’s letter, we share a couple of ideas for those of you that don’t like to hold all your stocks though earnings; we review a couple of new names that are on our watch list (ESTC is one we’re very intrigued by) and go over all our current Model Portfolio stocks as many are set to report earnings during the next two weeks.

From an intermediate-term perspective, the pieces continue to fall into place for the bulls--recently, our Two-Second Indicator has joined our trend-following indicator on the bullish side of the fence, while things like our Aggression Index and the trend in interest rates remain encouraging. Short-term, we are finally seeing some signs of churning in extended leaders, so we’re continuing to move gradually, picking our stocks and spots carefully. Last week, we did a little more buying in DUOL and started a position in ANET, and today we’re starting one more half-sized stake that will diversify the portfolio a bit.

I moved Zeta (ZETA) to buy this morning given the rather extreme selloff after earnings. Not long after that alert went out, a short seller by the name of Culper Research issued a short report on Zeta. | By far the most questions I’m getting right now are about Zeta (ZETA). You read my update yesterday, and it was bullish. Analysts increased price targets from the mid-30s into the low 40s, with some going up to 50.

Today we’re breaking into a familiar market by going back to the insurance industry.

But today’s addition is very different from our other rapid growth insurance companies in a major way (as you’ll soon see!).



The stock is acting strong and the fundamentals remain great, despite COVID-19.



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

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?

Today’s Cabot Small-Cap Confidential candidate runs an online marketplace for a different type of market where over $120 billion is spent each year. The trend is strong, and it’s still early days. All the details are inside the June Issue of Cabot Small-Cap Confidential.

Most companies that were hit hard by Covid have recovered and then some. Many are faring better than ever. But because of investors’ narrow focus on the Magnificent 7 and a handful of artificial intelligence stocks the last two and a half years, share prices across various sectors have not kept pace with revenue and earnings growth. In recent months, we’ve capitalized on that discrepancy by pouncing on United Airlines (UAL), The Cheesecake Factory (CAKE) and, just last month, Carnival Corp. (CCL), with great success.

This month, we hope to mine another quick double-digit winner from the industrials sector. It’s a company that’s thriving like never before, but there’s been a significant lag between the fundamentals and the share price. We hope our timing in adding it to the portfolio now can produce UAL- or CCL-like rapid returns.

Details inside.

The Senate Judiciary Committee recently approved the nomination of Terrance Cole to lead the Drug Enforcement Administration (DEA).

The full Senate may vote on Cole’s confirmation as soon as early June.

This could be the start of a significant turning point for cannabis stocks. That’s because Cole will address a Biden-era proposal to move cannabis to Schedule III from Schedule I under the Controlled Substances Act (CSA). The change would significantly enhance cannabis company cash flow by neutralizing an IRS rule that bars operating expense deductions against revenue from the sale of Schedule I substances.

Are promises made really promises kept, for President Donald Trump?

No one really knows, so cannabis equity investors remain depressed.

They can’t get any bullish signals from the administration on rescheduling, which Trump promised.

But there is a way to deal with this uncertainty as a cannabis investor. Shift your focus to getting paid to wait. I’ll explain why, and how, below.

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.

Cabot Benjamin Graham Value Letter, launched in 2003, uses the teachings of Benjamin Graham, the father of value investing, in a system that safely builds long-lasting wealth. Unlike Cabot’s growth publications, the letter doesn’t use market timing, instead relying on a 76-year-old system, followed by investors such as billionaire Warren Buffett, to pick undervalued stocks and hold them as they reach a specified valuation.

The market and many leaders bolted ahead last week, which is just what we wanted to see as the big investors came back from the beach; it’s clear the buyers are in control. That said, despite some heady gains, we wouldn’t call this a runaway bull market—we’re seeing some under-the-surface rotation every few days, with money cycling out of some stocks and sectors and into others. That is totally orderly and, over time, healthy, but it does mean you get some periodic weakness in favored names. Thus, keep your feet on the ground, and look to use pullbacks as buying opportunities in the best stocks. As for winners, you should generally hold on to your best performers, though taking partial profits here and there (hopefully on the way up) is a good idea.

This week’s list is another potpourri of stocks and sectors, most of which have unique catalysts for higher prices. Our favorite of the group is Urban Outfitters (URBN), part of the very strong retail group. The stock is following through beautifully from a huge earnings gap a couple of weeks ago. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Affiliated Managers Group, Inc. (AMG)	0.00	118-122	-
eBay Inc. (EBAY)	0.00	47-48.5	-
Fortune Brands Home & Security (FBHS)	81.02	25.5-26.5	-
GHL (GHL)	0.00	46-48	-
IPG Photonics (IPGP)	0.00	59-62	-
Men’s Wearhouse (MW)	0.00	36-37	-
ServiceNow (NOW)	341.86	33-35	-
Tesoro (TSO)	0.00	38-41	-
Urban Outfitters (URBN)	0.00	37-38.5	-
Valero Energy (VLO)	97.40	30-31.5	-

With the Juneteenth Holiday this week and our last update just three business days ago (and right after the FOMC meeting), there is very little to talk about today. So, I’ll keep things short and sweet and we’ll jump right into company-specific updates, of which there are hardly any.

In other words, enjoy a break in the action! They rarely last long.

It remains pretty much the same story out there as we’ve seen for at least three weeks, if not longer. First, when it comes to the top-down evidence, it’s solid, with the intermediate-term trend of most everything pointed up; second, looking at things from a bottoms-up perspective, the evidence is encouraging, as many fresher breakouts have emerged in the past month or so; and third is more of a heads up, as near-term sentiment is very elevated and earnings season for most leading titles is ramping up, so some tricky trading (volatility, especially among extended stocks) is possible. Thus, we’re staying flexible, but given the overall positive vibes, are leaving our Market Monitor at a level 8.

This week’s list actually has many big-cap titles but there’s plenty for everyone. Our Top Pick appears to have finally left behind a multi-year consolidation after its Q3 report. Ideally you can get in on modest weakness if the market dips.

Today we’re jumping into a small-cap recovery story that appears to be in its early innings. It’s a familiar name, and we’re not the first to jump on it. Bank of America just put out a very bullish note after the company posted a big earnings beat.

But this stock isn’t a consensus buy, far from it. There’s a lot of work to be done before Wall Street jumps on board. That spells opportunity.

I don’t think it’ll be a small-cap stock for long. Because of the crazy week with the election and FOMC meeting we will start with a half-sized position with today’s stock.

In the January issue of Cabot Early Opportunities, we take heed of the improving market breadth and dig into five companies from different industries that look compelling now.

Our top pick this month is a small-cap oil and gas equipment company that’s a leader in the offshore market. I also feature an online retailer specializing in the luxury market, an emerging MedTech name, a customer experience specialist and an online learning marketplace that’s poised to recover nicely.

As always, there should be something for everyone in this month’s issue!

Current Market Outlook


October is an infamous month in market history, with many huge dips and crashes taking place at this time of year. This time around, the major evidence is much more positive than when the market experienced those prior wipeouts—the longer-term trend is up and we remain impressed with the resilience of the broad market and growth stocks. Of course, the intermediate-term trend remains neutral, and with so many uncertainties out there (U.S. election, Deutsche Bank, etc.), we can’t rule out a leg down in the near-term to scare out many investors. As always, we advise going with the flow—today, that means leaning bullish, but not flooring the accelerator until the bulls decisively retake control.

This week’s list has more of a mix of stocks and sectors than previous weeks, but that’s fine with us. Our Top Pick is Inphi (IPHI), a fast-growing networker that looks ready to get going after a few weeks of rest.

Stock Name	Price	Buy Range	Loss Limit
Apache (APA)	0.00	64-61.5	55.5-54
Autodesk (ADSK)	229.00	72-70	65-64
Carrizo Oil & Gas (CRZO)	24.03	41-39	36-35
Inphi (IPHI)	120.16	43-41.5	39.5-38.5
Line Corporation (LN)	0.00	48-46	43-42
Micron Technology, Inc. (MU)	43.31	18.5-17	16-15.5
Quanta Services (PWR)	91.45	28-26.5	25-24
Symantec Corporation (SYMC)	0.00	25-24	23-22.5
Thor Industries (THO)	104.76	85-83	77-76
XPO Logistics (XPO)	0.00	37.5-35.5	34-33