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The bull market remains alive and well, with most stocks and sectors in good shape, so we\'re generally letting our winners run and staying heavily invested. That said, January is often a tricky month, so with the potential for potholes and volatility, tonight\'s Cabot Stock of the Week is a mega-cap growth stock that, by some measures, is undervalued.

Today’s recommendation is a familiar name, not because I’ve recommended the stock before (I haven’t) but because the company’s creations are enjoyed by millions of Americans and a major new acquisition will only increase the company’s reach.

Current Market Outlook


It’s been a great start to the year, with most areas and indexes shooting ahead on solid volume in recent days. We’re still seeing some wild moves (up and down), which is par for the course for early January and you can expect volatility among individual names to remain elevated in the near-term. Our focus is always on the intermediate- to longer-term, so while there remain some near-term yellow flags (with many stocks extended to the upside and with sentiment bubbly, you should pick your spots on the buy side), the positive price and volume action keeps us bullish.

This week’s list is about evenly split between growth stocks and industrial/commodity stocks, which tells you how broad the advance has been. Our Top Pick is Commercial Metals (CMC), a mid-sized steel-related outfit that just catapulted out of a huge base on earnings. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Alcoa (AA)	0.00	51-53	47-49
Autohome (ATHM)	98.65	70-73	65-67
Commercial Metals (CMC)	0.00	23.5-25	21-22
Dycom Industries (DY)	0.00	109-113	99-101
Lear Corp. (LEA)	0.00	184-188	173-176
Lennar (LEN)	61.85	64-66.5	60-62
Netflix, Inc. (NFLX)	423.92	204-210	191-194
Splunk (SPLK)	207.67	85-88	79-80.5
Steel Dynamics (STLD)	0.00	44-46	40.5-41.5
Twitter (TWTR)	40.37	23-24.5	21-22

Current Market Outlook


The major indexes boomed again today, with three of the five we track (S&P 500, Nasdaq and NYSE Composite) all notching all-time highs. We would point out that today’s move came on obvious news (likelihood of corporate tax cuts), and that sentiment is getting hot and heavy, which increases the risk of a market pullback or a generally trickier environment (rotation, choppy trading, etc.). Thus, you want to keep your feet on the ground and be sure you’re looking for decent entry points and honoring your stops. But there’s no question the majority of evidence remains solidly positive, and until that changes, you should remain in a bullish frame of mind.

Not surprisingly, this week’s list has many strong charts in a bunch of different industries. Our Top Pick is Urban Outfitters (URBN), a solid turnaround situation in a newly leading sector. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Canada Goose Holdings (GOOS)	46.21	26-27.5	23.5-24.5
CF Industries (CF)	45.23	39-40.5	36-37
Cree, Inc. (CREE)	67.96	38-40	34.5-36
KB Home (KBH)	36.05	30-31.5	27.5-28.5
Lululemon Athletica (LULU)	304.69	72.5-75	66.5-68.5
MercadoLibre, Inc. (MELI)	980.83	312-322	285-290
PRA Health Sciences Inc. (PRAH)	96.08	87.5-90	82-84
Sage Therapeutics (SAGE)	0.00	155-165	125-132
SVB Financial Group (SIVB)	0.00	228-235	208-213
Urban Outfitters (URBN)	0.00	32-34	28-29

There are many changes in today’s issue: we’re adding four new stocks and selling seven stocks.

As the year winds to a close, we find ourselves in the grip of a mild but long bull market in emerging markets stocks, and the big question on all investors’ minds is whether the trend will continue into the new year. No one knows, of course, but the Cabot system says there’s no reason to fight the trend!

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.

The year is poised to end on a high note, as the major indexes continue to hit new highs, with the Dow hitting a record number of new all-time highs this calendar year.

The Cabot Emerging Markets Timer is sitting firmly on the fence and some of our stocks are taking breathers. It’s not anything like a time to over-react, but we’re pulling in our horns in an appropriate way. We also have a new stock that does a brilliant job of balancing a national presence with thorough local focus.

Current Market Outlook


Growth stocks have stabilized and the market has quieted down following the sharp Nasdaq-led selloff, allowing some stocks to bounce back nicely and other new leaders to flex their muscle. Short-term, we wouldn’t be surprised to see some follow-on selling in some of the damaged areas (we still think chip stocks, for instance, look iffy), and some year-end uncertainties (tax reform, government shutdown) could always cause some wobbles. But you know us—we go with the evidence in front of us, and with the major trends of the major indexes and most leading stocks pointed up, we remain mostly bullish. As always, you want to sell stocks that are breaking down and focus new buying on fresher leadership stocks that have shown excellent volume clues.

There are many such examples in this week’s list, which has a wide variety of good-looking charts and stories to choose from. Our Top Pick is Etsy (ETSY), a niche online retailer that’s just turning profitable and has powerfully broken out during the past week.

Stock Name	Price	Buy Range	Loss Limit
Ally Financial (ALLY)	30.44	27.5-29	24.5-26
Boise Cascade (BCC)	0.00	38-40	35-36
Charles Schwab (SCHW)	0.00	49-51.5	46-47.5
D. R. Horton (DHI)	66.55	48-50	44-45.5
Etsy (ETSY)	112.97	18.5-20	16.5-17
First Solar (FSLR)	83.74	64-68	56-59
G-III Apparel (GIII)	45.25	32-34.5	28-30
Global Blood Therapeutics (GBT)	0.00	41-44	36-38
NetApp (NTAP)	0.00	56-58	51-52.5
Roku, Inc. (ROKU)	150.46	43-47	35-37.5

There are only a few companies out there that provide the software that companies can use to implement IT cost-accounting. Today’s Cabot Small-Cap Confidential candidate is pioneering the entire movement.

The market weakness that I mentioned last week has vanished, and with it my cautious stance. Thus, this week’s stock is what we call a zinger—a stock that has been hot, and will likely remain hot for a substantially longer period of time as investors learn about its great growth story.

Today’s recommendation is a medical device company whose one product—an insulin delivery system for diabetics—is growing market share rapidly.