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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.

Our portfolio stocks achieved another successful quarter of results, generally pleasing Wall Street with upside surprises as opposed to earnings disappointments or news of corporate difficulties. Nevertheless, 2018 has been a difficult year for stock investors, with the S&P 500 index delivering two 10% corrections. The best of companies can easily have their share prices languish for months on end, as we’ve seen all year.

U.S. stocks delivered great performance in January and are now taking a breather. As such, I expect the S&P 500 index to trade between 2625 and 2825 for a while. The trading range might end up being a little higher or a little lower, but for now, a repetition of the trading range that took place between late October through early December seems most likely to occur. I anticipate that the market indexes will continue advancing later this year.

Like many consumer goods producers, companies that make apparel and related products have experienced sharply lower sales and profits with the stay-at-home restrictions during the pandemic. But, for companies that make everyday apparel, particularly those with enduring brands or an outdoor/active lifestyle focus, demand should eventually return to healthy levels.

In this issue, we list seven companies that we believe offer interesting recovery potential.

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Dollar Tree (DLTR), GE Aerospace (GE), Goodyear Tire & Rubber (GT), Intel (INTC), Paramount Global (PARA), SLB Ltd. (SLB) and UiPath (PATH).

Agnico Eagle (AEM) is poised to benefit from a major change in the balance of global reserve assets.

Current Market Outlook


We’ve pointed out the numerous yellow and red flags seen in the market during the past few months, and during the past two or three weeks, those chickens have come home to roost—the massive weakness in the broad market is now infecting the major indexes and most formerly resilient stocks. It’s not 2008 out there (the worst of the selling is still in the commodity and economically-sensitive areas) and there are signs of short-term panic (820 combined new lows on Friday). But the trend of the market and the vast majority of stocks is now down, so you should be in a defensive stance until the bulls prove they have the strength to get things going on the upside. We’re knocking our Market Monitor down to reflect this.

This week’s list isn’t defensive, per se, but most of the stocks here have defensive characteristics (businesses that aren’t too economically sensitive) or have enjoyed a recent bullish catalyst. Our Top Pick is American Eagle (AEO), a turnaround that pays a nice dividend.

Stock Name	Price	Buy Range	Loss Limit
United Therapeutics (UTHR)	0.00	120-124	112-113
Mylan (MYL)	0.00	50-51	47-48
MercadoLibre, Inc. (MELI)	980.83	108-112	105-106
The Hain Celestial Group, Inc. (HAIN)	0.00	96.5-98	92-93
GoPro, Inc. (GPRO)	0.00	65-70	62-63
Gilead Sciences (GILD)	75.10	100-103	93-94
Foot Locker (FL)	0.00	54.5-56	52-53
AMAG Pharm. (AMAG)	0.00	27.5-29.5	24-24.5
American Eagle (AEO)	0.00	13.7-14.5	13.2-13.3
Apple (AAPL)	248.94	99-102	96-97

During the past three-plus months, the market has put in a firm foundation, with numerous tests of long-term support, positive divergences among various breadth measures and three legs down to the correction. And now we’re starting to see buyers take control—today our Cabot Tides flashed a green light, telling us to begin putting money to work.

Are you tired of turning on your television first thing in the morning and getting heartburn over the market’s gyrations?

Yeah, me, too. So, I’m swearing it off. I’m only going to peek at it a couple of times a day, since it doesn’t seem to be finishing the day as it starts, and I just don’t need the angst.



Instead, I’m going to keep looking at the macro-economic figures and try to do my very best to find the right investments for you to weather these ups and downs.

Things look good for 2024. Inflation is down, interest rates have likely peaked, and there is no sign of recession. But you never know. It’s a tough game to predict the future of the market. However, certain trends are likely to persist.

It’s a good bet that interest rates have peaked. Sure, they could edge higher from here. But they are unlikely to soar to new highs past 5% for the 10-year Treasury. The situation would have to completely reverse for that to happen. Meanwhile, stocks that have been dragged lower by rising interest rates have come alive again.

These stocks, which have strong track records of market outperformance, are at historically cheap valuations, have established upward momentum, and are positioned ahead of a likely slowing economy.

Also, artificial intelligence is here to stay. Businesses must spend on it not only for competitive advantage, but as a matter of survival. The new technology will continue to be a strong growth catalyst for technology stocks. And the trend will continue regardless of what the Fed does, or the state of the economy, or who is elected president.

In this issue, I highlight a fantastic dividend stock whose long record of strong performance has been interrupted these last two years. It’s also a company that focuses on technology and will surely benefit from the proliferation of AI in the years ahead. The timing for this stock should be outstanding.

Stocks cooled off this past week, though they mostly held their gains, which is not a bad way to close out an unusually productive September. Investors can likely thank the Fed for that. But many potential landmines (presidential election, escalating tensions in the Middle East, another jobs report this week) loom, so we’ll see how things go as we enter an uncertain October.

Given all the uncertainty, today we add a large-cap value stock that I recently recommended in my Cabot Value Investor portfolio. It’s one of the largest banks in America, and it’s potentially on the cusp of getting much bigger. Last year, it caught the attention of Warren Buffett. And so far, his bet on it appears to be paying off – with more upside ahead.

Details inside.

Nuclear energy is a $2 trillion industry waiting to explode. And while some of the bigger-name providers of it have seen their share prices rise manyfold over the last year, other companies that provide nuclear power have remained under the radar – and undervalued.

That includes this month’s new addition. It’s a California utility company that’s one of the largest electricity providers in the country – and it has a nuclear plant that’s starting to get into the (you guessed it) artificial intelligence game.

Details inside.

In the wake of a rare down December, stocks have come roaring back to kickstart 2025, up more than 2% through the first three trading days. It’s early yet, but perhaps the bulls are taking control again after a sluggish end to an otherwise very productive 2024.

Still, there were enough yellow flags under the surface to close out the year that it’s worth taking a cautious approach for now. So today, we add a mega-cap, high-yield dividend stock that’s been a staple of Tom Hutchinson’s Cabot Dividend Investor portfolio for some time.

Details inside.

Cannabis stocks are set to close out the year with a punishing 14% decline. Cannabis investors need help from anywhere they can get it.

It looks like it could come from an unusual place in 2025. The future of the cannabis industry is now in the hands of President-elect Donald Trump.

If anyone told me a few years ago this would be the case, I might have asked them what they are smoking.

However, the reality is that during his presidential campaign, Trump endorsed all three of the main reforms that would legitimize the industry and boost cannabis share prices: Rescheduling, bank reform known as SAFER banking, and legalization of recreational use. Trump endorsed the first two outright. He implicitly endorsed legal rec-use because he supported the Florida referendum which would have made this change. At the very least, he has openly endorsed decriminalization.

NanoString (NSTG), Aerohive (HIVE) and Q2 Holdings (QTWO) reported earnings.

A difficult stretch causes us to sell two underperformers this week but we move forward today with a high-quality Japanese company at the heart of an unstoppable trend and a high-quality stock on sale.

Back on October 13, I penned a CWA titled “Finding Your System” where I wrote about finding a system that fits you. It’s a topic that’s frequently on my mind - money management-type topics are always worth some thought - and I was reminded of it just a few days ago when I was re-reading parts of Reminiscences of a Stock Operator, the fictional biography of Jesse Livermore, and one of the best investment books ever written.

Tesla doesn’t look sick to me. Last night it reported Q4 net income of $3.69 billion and revenue of $24.3 billion, up 59% and 37%, respectively, from a year earlier. Tesla sold 405,278 vehicles, up 31% from a year earlier and stated it knows it needs to produce cheaper EVs to become a bigger automaker. With EVs on the brain, this week we go to Sweden for an under-the-radar electric vehicle maker that is gaining momentum based on performance and styling.

I think the 0.25% raise by the Fed yesterday will be followed by a pause. Won’t it be nice when stocks fluctuate primarily around company performance rather than actions by the Fed? Elsewhere, Xi and Putin meet in Moscow in a sign of solidarity and challenge to the U.S. and the West. Novo Nordisk (NVO) is up 10 points this week while today we have a new emerging market recommendation from a country with one of the strongest currencies of 2023.