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The market’s rebound has been very impressive, though there are a couple of flies in the ointment (we’re not huge fans of defensive sectors rallying strongly) and this week looks like a good test for a couple of reasons: First, there are some key quarterly reports coming out in key technology areas, and trend-wise, many growth-oriented measures are closing in on five-week highs, which could turn the intermediate-term trend up … if all goes well. For now, nothing has officially changed: If we see more breakouts and further upside, it would obviously be bullish, but while some retrenchment from here wouldn’t necessarily be bearish, it would be a sign the market likely needs more time to set up. We’ll leave our Market Monitor at level 6 this week.

This week’s list is a bit more diversified than the past two weeks, and for our Top Pick, we’re going with a name that’s very strong following quarterly results, has triple-digit growth and a great story—if you enter, be sure to keep it small and use a loose stop.

U.S.-China turbulence led to a rollercoaster week for global stocks with some recovery during the past couple of days. Our Emerging Market Timer has turned negative, as EEM has fallen below both its 25-day and 50-day moving averages.

Several of our portfolio companies posted strong earnings this week and the portfolio is already in a conservative stance. We have a new recommendation today that will diversify the portfolio and give us exposure to a country with a youthful population and a robust economy.

While President Donald Trump hangs fire on rescheduling cannabis, we continue to get signs that support what I call the inexorable march towards greater acceptance of cannabis use and legal reform that will help public companies in the space.

We see momentum for cannabis acceptance and reform in: Ongoing federal-level evidence that Trump may actually follow through on his campaign promise to reschedule cannabis; ongoing robust state-level sales growth; opinion polls; and scientific evidence that cannabis has medical benefits.

The broad market began to show strength in late December, and last week we saw further progress, with new lows continuing to shrink to very bullish levels while a granddaddy blastoff measure (the 2-to-1 Blastoff Indicator) turned green. It’s all very encouraging, but now we need to see more “primary” evidence turn positive, including the trends of the major indexes and many more “real” breakouts from high relative strength stocks. We’re optimistic, but are in a trust-but-verify mode; for now we’ll move our Market Monitor to a level 5.

This week’s list is heavy on many themes that are working, including solar, metals, infrastructure, China and travel. Our Top Pick is from the latter area and has turned the corner in a decisive manner.

I’m adding a 31-year dividend payer to the Safe Income Tier, and cover all our stocks that have reported earnings so far. You’ll also find some important information on REITs at the end of the issue which you should find valuable if you bought last month’s High Yield Tier addition.

It’s time to look beyond the pandemic. It may seem like it will drag on forever. And it may still be a while yet before it’s behind us. But it will pass. In the grand scheme of things, it is a very temporary situation.

The overwhelming majority of your investing career from here will be in the post pandemic environment. And the virus has created opportunities. While the market indexes are at all time highs, many of the more cyclical and real economy stocks are still historically very cheap. But these stocks will be lifted by the inevitable recovery ahead.



In this issue, I identify two industry leaders with stock prices that are temporarily depressed in the current environment. Yet, they present fantastic opportunities if we look beyond the haze.

With a powerful moat, insider buying, and activist investor support, this undervalued railroad stock may be poised for long-term growth.

The technology-oriented Nasdaq Composite closed yesterday 10.7% below its all-time closing high, set in November. Some technology- related stocks are facing headwinds for multiple reasons. Many trade at high valuations. Most do not offer dividends to buffer the impact of higher interest rates. Some companies are showing great revenue growth but no profits. We are adjusting by selling two positions and adding an international story with enormous promise.

We’ve moved into the second half of the year, but the overall picture is still the same for the stock market—there are some positives out there, but we’re still stuck in a downtrend—all indexes and growth funds are below key intermediate- and longer-term moving averages, and the fact that we’re seeing lots of stocks still hitting 52-week lows every day (even on big up days) tells us the broad market remains on the outs. All in all, it’s important to keep your eyes open and to stay flexible; the market can turn up at any time given that it’s looking months into the future, but as we’ve been writing for months, we have to see strength develop first, so defense remains the name of the game.



This week’s list is a hodgepodge of ideas, from big, steady-Eddies to smaller up-and-comers that want to get moving if the market can stabilize. Our Top Pick is an off-the-bottom name whose RP line has turned strong and whose growth is rapid and should accelerate.

We’re going to continue with our strategy of locking in modest, but relatively quick, profits on some positions while they’re available.

GE Vernova (GEV) Powers Higher

Current Market Outlook


It’s been a tricky few weeks, but by our measures, the intermediate-term trend of the major indexes has turned up, which is a sign to increase your exposure to the market’s leading stocks (preferably on pullbacks). And there are a lot of leaders to choose from! In particular, the growth stocks that bounced nicely off the market’s early-February low continue to perform excellently, displaying powerful and persistent action, which usually indicates more upside is in store (albeit with normal pullbacks and shakeouts along the way). We’re not viewing this as a blastoff, but more of a resumption of the market’s longer-term uptrend. Our Market Monitor moves up a couple of notches into bullish territory.

This week’s list is another one that’s filled with enticing growth stories and strong charts. There are a ton of good stocks to choose from, but we’re going with TD Ameritrade (AMTD) as our Top Pick, as it’s one of the strongest Bull Market stocks out there today.

Stock Name	Price	Buy Range	Loss Limit
Ligand Pharmaceuticals (LGND)	267.14	173-178	158-162
Micron Technology, Inc. (MU)	43.31	56-60	51-53
Palo Alto Networks (PANW)	236.92	181-187	166-170
Qualys (QLYS)	0.00	74-77	68-70
Sarepta Therapeutics (SRPT)	120.93	73-77	64.5-67.5
TD Ameritrade (AMTD)	0.00	60-63	55-57
Teladoc, Inc. (TDOC)	127.95	37-38.5	36.5-38
Twitter (TWTR)	40.37	32.5-34.5	29-30
Western Digital Corporation (WDC)	0.00	96-100	89-91
Zillow (Z)	76.64	53-55.5	48.5-50

With rates rising and bonds losing value, dividends are all the rage these days. And these little-known dividend payers are offering some attractive yields.

Growth as a whole has been stagnant for three months, and this week, we started to see the selling spread out a bit, with our Two-Second Indicator waiving a yellow flag and with more names coming under pressure (and with many growth stocks really caving in). To be fair, the top-down evidence isn’t much changed, so we’re flexible--if this is the final shakeout to the past three months of rest, there could be many things to sink our teeth into soon.

But as growth investors, we’re focused on the growth evidence, which tells us to remain in a cautious stance until the buyers step up.

Small caps have bounced around this week, taking a break from the rally that began on September 11 and continued through the 19^th.

Behind the scenes, analysts have been increasing their earnings expectations for the asset class. This is largely because rates are falling, but also because the economy is holding up.

In the investment world, I’d caution any beginning investor that a story from someone who has made a fortune may not be a reliable roadmap for replicating their success.

The title of this note might be, “What to expect when you’re expecting … earnings.” As companies in the Cabot Undervalued Stocks Advisor portfolio start reporting earnings this week, let’s look into what is behind the results and estimates.

Current Market Outlook


Leading stocks stabilized somewhat during the second half of last week, but we’re still seeing plenty of potholes (mostly on earnings reports) and a bunch of rotation out of fast-growing names and into more cyclical, defensive areas. That’s not to say all growth stocks look terrible—we’re still seeing a good number of positive earnings gaps, including a few in today’s issue—but there remain a bunch of crosscurrents on a day-to-day basis, making it difficult to latch onto top performers. As for the overall market, it’s in solid shape, with the intermediate-term trend tilted up. All in all, we don’t advise hiding in the closet, but it’s important to hold some cash and honor your stops, and on the buy side, to pick your entry points and focus on names that have shown recent, powerful buying.

This week’s Top Ten has a diverse mix of stocks, and happily, it includes a good number of stocks with solid growth stories. Our Top Pick is Paycom Software (PAYC), which staged a fantastic earnings gap (and follow-through) last week.

Stock Name	Price	Buy Range	Loss Limit
BJs Wholesale (BJ)	36.69	24.5-26	22-22.5
CarGurus (CARG)	41.58	42-45	38-40
Chart Industries (GTLS)	72.05	73.5-77	66-68
Greenbrier (GBX)	57.73	56.5-58.5	52-53
Illumina Inc. (ILMN)	289.74	320-330	295-302
Ingevity Corp. (NGVT)	99.98	96-100	87-90
Neurocrine Biosciences (NBIX)	123.40	110-114	100-102
Paycom Software (PAYC)	0.00	127-133	114-117
SodaStream (SODA)	142.91	111-116	98-101
Zendesk (ZEN)	82.19	59-62	53.5-55.5