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Current Market Outlook


We like to go with the evidence that’s in front of us at any given time, and if you do that today, you’ll see that most of the key evidence continues to look solid—the intermediate-term trend of the major indexes is tilted higher (though there’s still some resistance at the early-September highs to chew through), while more and more leading stocks are acting constructively; most have pulled back reasonably (so far) after heady runs during the prior three-plus weeks. Of course, we’re not leaving our brains at the door either, as earnings season (which ramps up this week in a big way) and the upcoming U.S. elections certainly have the potential to carve out a few potholes, while sentiment has picked back up after the August/September dip. Thus, we remain flexible and think picking buy points is vital, but overall, we remain mostly bullish.

This week’s list has a ton of potential pullback buys, though you have to be aware of earnings dates. Our Top Pick is Beyond Meat (BYND), which is enjoying a normal breather and looks to be approaching a good risk-reward entry point.

Stock Name	Price	Buy Range	Loss Limit
Avalara (AVLR)	153.44	147-152	132-135
Beyond Meat (BYND)	183.98	178-185	153-156
Bill.com Holdings (BILL)	116.15	110-114	97-100
Carvana (CVNA)	213.52	207-220	180-187
Deckers Outdoor Corp. (DECK)	253.08	238-246	218-222
Invitae (NVTA)	48.38	47-49.5	41-42.5
Monolithic Power (MPWR)	312.85	300-310	270-275
Paycom Software (PAYC)	383.11	360-375	320-327
Plug Power (PLUG)	16.39	15.6-16.8	13.5-14.0
SunPower (SPWR)	17.62	16.5-17.5	13.5-14.5

We had written lately that the market had been extremely quiet in recent weeks ... possibly a bit too quiet, as the market has a way of hitting a pothole after a period of calm. Sure enough, we saw some growth stocks ease early last week, and then the Middle East attacks and counterattacks caused selling on Friday. Even so, it’s been a normal wobble so far, and while things are likely to be tricky and news-driven in the near term based on the happenings in the Middle East, just about all of the intermediate-term evidence remains bullish. We’ll leave our Market Monitor at a level 7 today.

This week’s list is surprisingly growth-y, with many names from different sectors at or threatening new high ground. Our Top Pick looks to be near a decent entry after a humongous rally from early April to late May.

Complacency is creeping back into the market, but we remain vigilant as the earnings season cranks up into full gear. That said, the broad backdrop is still in good shape as evidenced by some of our favorite indicators. We’ve also done some pruning recently (mostly among laggards) as the market’s multi-month run is becoming a bit extended. But we still see opportunities, especially in areas investors have overlooked. All told, near-term wobbles are possible, but we remain bullish as the odds favor the new uptrend bringing us higher over time. We’ll keep our Market Monitor at a level 7, but we’ll stay nimble as earnings come in.

This week’s list contains some formerly out-of-favor stocks that are now in much better shape as industry trends improve. Our Top Pick is an engineering firm that shows all the classic signs of being under strong institutional accumulation. We’re OK using dips to enter.

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.

We can’t say much bad about the market’s rebound from its pre-Thanksgiving low area, but we wouldn’t say the rally has been decisive at this point. That’s not bearish, but simply a fact that the recovery needs to continue to progress—a bad two or three days from here could get iffy, though continued strength would likely bring a spate of breakouts. As always, we’ll just take it as it comes—right here, we’re encouraged and are extending our line, but are going slow until we see more stocks confirm on the upside. Our Market Monitor stands at a level 6.

This week’s list reflects some of the broadening out we see in the market, with names from many different nooks and crannies. Our Top Pick is a chipmaker that sat out the dance during the past year and a half but has recently emerged on big volume after earnings as growth accelerates. Try to buy on weakness.

There’s not much to say when it comes to the market—the downturn that started in late August continues, with the major indexes back down to their May/June lows, keeping the intermediate- and longer-term trends pointed down. Moreover, after last week’s Fed meeting, the sellers finally came around for many resilient names, causing a bunch to crack support. Today, we’re staying cautious and continuing to hold plenty of cash, but we’re keeping an open mind as we see how this retest phase plays out. Our Market Monitor is down to a level 3.



This week’s list is mostly names that have taken on water (like everything else) but are still acting “normally.” Our Top Pick is a name that’s acting very unusually good, and it has a good story and excellent growth, too.

Note: Due to the celebration of Independence Day next week, the next issue will be delivered Tuesday, July 5.



After two brutal weeks for the indexes, the market staged a very nice snapback last week, and this comes after some decent resilience in many growth names during the June mini-crash. But the real question is can the market build on it: We’ve seen a handful of nice baby steps for the market this year, but each time the sellers reappear quickly and smack everything lower. Overall it’s best to remain mostly defensive until the buyers show they’ve conclusively taken control from the bears, which will take more time.



On a positive note, this week’s list has many names either showing some outsized accumulation of late or are forming solid bottoming areas. Our Top Pick is one that’s had a couple of false starts this year but looks ready to run if the market can get going.

We can’t say the market is out of the woods, as some major indexes still have work to do (small caps were very weak today) and a couple of bad days could be damaging. But just going with what we see, it’s hard not to be encouraged about last week’s action—after a month of pulling back, no primary indicator flipped to negative, and among individual stocks, the vast majority retreated grudgingly before many took off on the upside in recent days. We’re not going to overreact to a day or two of action, but the fact that our screens are turning up many more high-potential names has us nudging our Market Monitor back up to a level 7—though, as always, we’ll see how it goes during this week’s gauntlet of economic reports.

This week’s list is chock-full of solid growth ideas, with a smattering of cyclical exposure as well. Our Top Pick is a growth name that just broke out from a two-year base after earnings.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the August 2022 issue.

Ernest Hemingway’s quote about “… gradually then suddenly…” could apply to the escalating geopolitical tensions.



It has been a quiet month for new recommendations and ratings changes as we patiently wait for attractive opportunities in a difficult investing climate.



Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.



I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.



Thanks!

Current Market Outlook


The market had been a bit wobbly, but last week brought a bunch of good-looking earnings reactions (not just the mega-cap names on Friday), which has put the sellers back on their heels—the Nasdaq actually kissed new high ground today! Of course, earnings season isn’t over, so it’s possible we see some air pockets emerge, and some of the blemishes we’ve been writing about still exist (the number of new highs continue to dry up a bit even as the Nasdaq pushes ahead). Because of all that, we still think picking your stocks and buy points is important; try to avoid chasing any old thing just because it’s going up. But there’s no question most of the evidence remains bullish, so we advise you to stick with a heavily invested position and buy fresh leaders either on initial pullbacks or powerful earnings moves.

This week’s list has a growth-ier feel as we highlight many of the recent earnings winners. Our Top Pick is Qualcomm (QCOM), which won’t be the fastest horse but just emerged from a huge consolidation and has giant earnings estimates thanks to a huge deal and the 5G boom.

Stock Name	Price	Buy Range	Loss Limit
Advanced Micro Devices (AMD)	82.24	72.5-75.5	63-65
Fortune Brands Home & Security (FBHS)	81.02	74-77	66-68
GenMark Diagnostics (GNMK)	15.47	17-18.5	14.5-15.5
Kirkland Lake Gold (KL)	51.30	49-52	43.5-45.5
Pinduoduo (PDD)	87.53	91-96	78-81
Penn National Gaming (PENN)	45.38	34-36.5	29.5-30.5
Pinterest (PINS)	35.86	33.5-37	28.5-30
QUALCOMM Incorporated (QCOM)	106.36	106-110	94-96
Qorvo (QRVO)	129.47	127-131	114-116
Scotts Miracle-Gro (SMG)	155.72	154-159	139-142

Current Market Outlook


After an impressive four-month rebound, many investors are nervously expecting the return of volatility during earnings season. But despite some recent choppiness among the leading stocks, the market remains largely unperturbed. Growth stocks are holding up well, while the major indices remain above their key trend lines. And while there are signs lately of increased demand in defensive areas of the market (like consumer staples and precious metals mining), the more aggressive segments remain strong. Finally, a healthy number of stocks are still making new 52-week highs on both major exchanges (especially the NYSE), while new lows have been remarkably sparse. All of this tells us that the intermediate-term trend still favors the bulls. While volatility may yet rear its head, we’ll continue to follow the weight of evidence.

This week’s list contains a nice mix of some of today’s leading themes: healthcare, internet, real estate/home improvement and education. Our Top Pick is Owens & Minor (OMI), which has a solid story and has broken out of an extended base on more than 10 times normal volume.

Stock Name	Price	Buy Range	Loss Limit
Farfetch (FTCH)	26.23	21-22.75	19.5-20
Floor & Décor (FND)	68.03	69-72	62.5-63
GSX Techedu (GSX)	97.59	85-88	74-75
Invitae (NVTA)	32.06	30-32.5	27-27.5
Meritage Homes (MTH)	102.20	92-98	84-85
Owens & Minor (OMI)	17.01	15-16	13-13.5
SailPoint Technologies (SAIL)	31.60	30-32	28.5-29
Sea Limited (SE)	132.86	110-116	99.5-100
Watsco (WSO)	237.50	220-230	210-212
Wix.com (WIX)	302.53	262-275	248-250

Current Market Outlook


The selling in growth stocks spread to the rest of the market last week, with most major indexes finishing lower, led again by growth-y indexes and funds. The good news is that, for now, the worst-case scenario has been avoided—many growth stocks tested key support in recent days (50-day lines, etc.) and almost all held up, with Friday and today seeing some solid bounces. Cyclical stocks have done a similar dance, with many pulling in, but few really cracking, and now the bounce is underway. Ideally, this rebound will develop some power—strong bounces off support often provide low-risk entry points—but, while we won’t wait weeks to see how it plays out, it’s too soon to conclude the recent selling wave is over. We remain more optimistic than not, and the past couple of days are certainly encouraging, but let’s see if some new and potential leaders lift off in classic fashion.

This week’s list is a mix of various different stocks, including a number of names we haven’t written up before. Our Top Pick is Chart Industries (GTLS), an under-the-radar name that’s set to see earnings soar as demand for its various energy infrastructure items (including many that play into the clean energy space) takes off.

Stock Name	Price	Buy Range	Loss Limit
Axon Enterprise, Inc. (AXON)	187	183-188	168-171
Builders FirstSource (BLDR)	50	49-51	44-45.5
Chart Industries (GTLS)	178	173-178	154-157
Elastic (ESTC)	157	153-158	135-138
PKI (PKI)	182	178-183	161-164
Rapid7 (RPD)	113	109-113	99-102
Regeneron Pharmaceuticals (REGN)	667	630-650	575-585
UPST (UPST)	203	185-195	157-162
WK (WK)	137	130-134	117-119
Zscaler (ZS)	251	240-247	220-225

Current Market Outlook


After a couple of horrid weeks for growth stocks, we’ve seen a ray of light lately, as many found solid support with some volume beginning to show up in some stocks as they rally, an early sign that big investors are engaged. Thus, we’ll chalk it up as a nice first step, and definitely a change from the recent carnage, but we still need to see more—many indexes are now doing more chopping than rising (the overall intermediate-term trend is basically neutral at this point), and most of the action in recent days has been among stocks that took the biggest hits (and thus still have a ton of overhead to chew through). Don’t get us wrong, we’re intrigued by what we see—it could prove to be the early stages of a change in character for growth stocks after three months in the outhouse—but the bulls still have more to prove before we meaningfully increase our exposure.

This week’s list remains mixed, with lots of turnaround and cyclical situations, but with a few growth-y issues too. Our Top Pick is Analog Devices (ADI), which has come back to life after a three-month rest thanks to great earnings, huge cash flow and a pending acquisition.

Stock Name	Price	Buy Range	Loss Limit
Acuity Brands (AYI)	180	176-181	162-165
Analog Devices (ADI)	163	159-164	145-148
Avery Dennison Corp. (AVY)	219	215-220	197-200
Blackstone Group (BX)	91	86-89	79-81
Children’s Place (PLCE)	95	90-93	80-82
EOG Resources, Inc. (EOG)	80	78-81	70-72
EPAM Systems (EPAM)	485	465-475	425-430
Owens Corning (OC)	105	101-104	92-94
Progyny (PGNY)	59	54.5-57.5	48-50
Roblox Corporation (RBLX)	89	85.5-89.5	73.5-76.5

Current Market Outlook


If you had told us three weeks ago that growth stocks would bounce decently, a collection of names would show some big-volume upmoves and other names would start to tighten up, we’d have taken it in a heartbeat. As we’ve written in recent days, the action is encouraging, though not decisive yet, and the next week or two will be key—many prior winners have pushed into resistance, while in recent months most good-looking names have quickly found sellers, so if the buying pressures can continue it would be a sign that the market’s character has changed. As it stands now, the evidence has improved, so you can start putting more money to work if you’ve been relatively defensive. But we think going slow and building as you develop profits is the way to go.

This week’s list has many interesting names, including a few more growth-y titles than we’ve seen recently. For our Top Pick, we’ll take another swing at Nvidia (NVDA)—it’s had two failed breakouts this year, but we think the 3rd time could be the charm.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	53	51-53	45.5-47
Bentley Systems (BSY)	58	54.5-56.5	49.5-50.5
BioCryst Pharmaceuticals (BCRX)	16	14-15.2	12-12.7
CrowdStrike (CRWD)	222	215-224	190-195
Dicks’s Sporting Goods (DKS)	97	93.5-96.5	85-86.5
Ford Motor Co. (F)	15	13.6-14.3	12.2-12.6
NVIDIA Corporation (NVDA)	650	630-655	575-590
Range Resources (RRC)	15	13.7-14.5	12-12.5
Sea Limited (SE)	257	248-260	220-225
Toll Brothers Inc. (TOL)	65	63.5-66	58.5-59.5

First, a scheduling note: With Christmas coming quick, next Monday (December 27) is the second of our two regular weeks off for Top Ten. We’ll be in later that week, but if we don’t talk to you have a great holiday season!

After an encouraging bounce, the sellers immediately came back to the well last week. While we don’t think this is going to morph into 2008, it’s clear that most of the evidence remains negative: The intermediate-term trend of most indexes and stocks is pointed down and the vast majority of former leaders are in shambles. We’ll let others predict (guess) what happens from here, but with most things acting poorly, it’s best to remain cautious, holding plenty of cash, building your watch list and keeping any new buys on the small side.



This week’s list has a variety of names that are resisting the market’s weakness, so if you want to nibble on something, you’ll find it here. Our Top Pick is a unique IoT-related firm whose stock is acting just fine.

Markets have continued to improve, and so have economic statistics. Housing price increases—while slowing somewhat—are still on the rise, with the Case-Shiller Index posting a 7.3% increase in prices for the month.

ADP employment rose to 192,000, higher than the 183,000 expected. Job openings declined just a bit, to 8.5 million from 8.8 million last month. And the unemployment rate edged up from 3.8% to 3.9% in April.

The latest issue of Cabot Marijuana Investor is now available, with my current advice on the fifteen stocks in the portfolio.

While coronavirus fears infect the broad market, the good news is that marijuana stocks seem to have an immunity, mainly because they already had their correction last year. Many stocks in the sector are looking better, and I’m now recommending averaging up in three stocks already in the portfolio.



These changes will reduce the portfolio’s cash level to roughly 12%, so we will be well positioned to benefit from the sector’s resumption of its big uptrend.



Full details in the issue.