Cabot Weekly Review (Video)
In this week’s video, Tyler Laundon runs through the big economic and earnings related news of the week and frames the market’s recent performance as generally positive given the end-of-2023 rally and some second guessing on 2024 rate cuts. Tyler gives a short preview of what’s ahead for the Fed and inflation watchers out there then wraps things up with a handpicked selection of chip, retail, defense and tech stocks that look enticing.
Stocks Discussed: SMH, TSM, MRVL, AMD, AVGO, RMBS, DECK, ANF, URBN, BIRK, KAMN, TDG, CW, DRS, TATT, MPTI, GOOG, GTLB, ESTC, NTNX, SMCI
Cabot Street Check (Podcast)
This week on Street Check, Chris and Brad discuss the possibility of underperformance in January after a strong end to 2023, the old adage that “markets climb a wall of worry” and what those “worries” could be, and whether recent Fed comments change the outlook for rate cuts in 2024. Then, they welcome on Nancy Zambell, Chief Analyst of Cabot Money Club, for a real estate deep dive and a conversation about mortgage rate expectations, investor sentiment, and Cabot’s top picks for the year ahead.
2024 Stock Market Outlook: Secrets to Success in a New Bull Market
Quarterly Cabot Analyst Meeting
The recording of the Cabot Prime Members Meeting with the Analysts from October 18, 2023 is now available for you to listen to at your convenience—click here for access. This private call with our analysts is one of your exclusive Cabot Prime Core member benefits.
RECENT BUY AND SELL ACTIVITY
This table lists stocks bought or sold in the most recent Issues or Updates.
PORTFOLIO UPDATES THIS WEEK
Cabot Growth Investor
Bi-weekly Issue January 12: It’s turning out to be a typical volatile January, with last week’s harsh selling among leading stocks leading to this week’s strong snapback that’s seen many leaders (including a few names we own) roar back to new high ground. That’s not to say the wobbles are over--in fact, we’d half-expect some more wiggles given earnings season is just getting started. But overall, things are volatile, but still bullish, so while we’re not flooring the accelerator, we are staying positive.
Last week, we sold half of one stock and placed another on Hold, but tonight, we’re going to start a new half-sized position in an old (from last year) favorite that we think got derailed mostly by the market environment last summer and fall--and now looks poised to do well if the market holds together.
Bi-weekly Update January 18: WHAT TO DO NOW: Remain bullish, but keep your feet on the ground. January has lived up to its billing, with plenty of volatility—right now, we’re seeing lots of weakness in the broad market and even among some glamour funds, while our primary indicators and leading growth stocks are still acting well. At this point we’re taking things on a stock-by-stock basis, trimming here and there but holding most or all of our winners. Today, we’re going to book partial profits in Nutanix (NTNX), selling one-third and holding the rest, which will leave us with around 29% in cash.
Cabot Top Ten Trader
Weekly Issue January 16: After a sour first week of the year, leading stocks snapped back very nicely last week, and when you add in the other encouraging intermediate-term vibes (trends of the indexes and most sectors are up), we remain bullish overall. That said, we’re also keeping our feet on the ground: The current advance is now about two and a half months old, earnings season is here and the broad market was a notable laggard last week, all of which means further volatility and crosscurrents are possible, even likely. We’ll leave our Market Monitor at a level 7.
This week’s list is another where’s there’s something for everyone. Our Top Pick is one of many medical-related stocks that’s showing strength thanks to a new product, great Q4 guidance and expectations of accelerating growth this year.
Movers & Shakers January 19: Net-net, it’s been a quiet week for the major indexes, with most up or down less than 1%. That said, there are some interesting things happening under the market’s surface.
Cabot Value Investor
Monthly Issue January 2: Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the January 2024 issue.
We review the stock market’s remarkable performance in 2023 and highlight our recommendations that produced notable gains along with our clunkers. Our view on the 2024 market is that stocks will have an average year, with the Magnificent Seven producing flat/modest returns at best. Readers should keep in mind quotes from Yogi Berra and Warren Buffett when considering market forecasts. Onward to 2024.
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.
Weekly Update January 16: Earnings season has arrived, and with it could be a recalibration of investor expectations for stocks broadly.
The S&P 500 Index seems reasonably priced at 19.5x estimated 2024 earnings. But nearly 30% of the index’s weight is comprised of Magnificent Seven stocks, whose average multiple is 33x. Estimated earnings growth rates for these Mag Seven stocks, which average 19% for each of the next five years, set a high bar. When high expectations meet less-high reality… well, investors know what can happen to stock prices. And, any wobbling in the largest stocks can send the market broadly lower. As Dennis Gartman, the legendary and now-retired writer of The Gartman Letter, frequently said, “when the generals leave the field, the rest of the army follows.”
Cabot Dividend Investor
Monthly Issue January 10: 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.
Weekly Update January 17: It’s earnings season again! And this one should be more important than most.
Earnings are, of course, a big deal for the individual company. But in addition to company-specific fundamentals, Wall Street will be carefully watching what company earnings indicate about the macro environment.
Cabot Early Opportunities
Monthly Issue January 17: In the January issue of Cabot Early Opportunities, we take a look at updates within our portfolio then dive into five stocks from markets ranging from defense to cybersecurity to the blooming IT infrastructure market.
As always, there’s something for everybody!
Cabot Income Advisor
Monthly Issue December 19: The market has had seven consecutive higher weeks. And the positive momentum should continue into the new year.
The S&P 500 is up 12.5% in the last seven weeks and 23% for 2023. But those returns are deceiving. Until the market rally broadened out recently, only seven large technology company stocks accounted for nearly all the gains.
Many stocks are still in a bear market. In fact, certain more interest rate-sensitive stocks recently fell to the lowest level since the trough of the pandemic market more than three years ago, although they have rebounded with falling interest rates recently.
Buying stocks in the throes of a bear market has proven to be a winning strategy over time. Buying stocks after they have already started to climb out of the lows has proven to be a winning strategy sooner.
The timing may be perfect for a rare opportunity to generate much higher returns than can normally be expected from stocks of defensive companies. In this issue, I highlight a defensive stock that had been a stellar performer before inflation and rising interest rates took hold. It is priced near the lowest valuations in its history and has recently been generating upward momentum.
Weekly Update January 16: The market surge has leveled off. The expectation debate about peak interest rates, inflation, and recession continues. And now, it’s another earnings season.
The S&P 500 pulled back during the first trading week of the year after a two-month, 15% spike. In the second week, the index gained back everything it lost the first week. He we are again on the cusp of the all-time high set about two years ago.
Cabot Turnaround Letter
Monthly Issue December 27: In this issue, we discuss our Top Five Stocks for 2024. We also dissect and review what happened in the capital markets in 2023 and offer our outlook for the coming year.
This month’s Buy recommendation, Mohawk Industries (MHK), is a major global flooring manufacturer whose shares are deeply out of favor. We discuss three key questions when considering an investment in a cyclical company and describe how Mohawk passes all three with flying colors.
Weekly Update January 19: Other than the buyout of Kaman (KAMN), it’s been a relatively quiet week for company-specific news.
Regarding Kaman, the company announced that it will be taken private for $1.8 billion, or $46/share, a huge 100%-plus premium over the prior day’s closing price. The market has had little confidence in Kaman’s turnaround, despite what we saw as evidence that impressive changes are underway, led by its capable new CEO. The huge premium is at a discount to our $57 price target, but we’re fine with the deal as it produces a reasonable return, in cash, today, compared to a slog for a year or more while the turnaround plays out.
Cabot Money Club
Monthly Magazine January: Most of us never take practical economics classes that dive into everyday finances, how to save, how to invest, or how to plan for the future. If you’ve taken an economics class at all, you probably learned more about supply and demand than you did about setting aside an emergency fund. That means that most of what we “know” about money we learned from our parents or just sort of picked up as we went along. So this month, let’s put to rest some of the most pernicious money myths and unfounded beliefs that keep us from achieving our long-term financial goals.
Stock of the Month January 11: Welcome to our TOP PICKS issue! For this issue, I asked the Cabot analysts to give me a couple of their top picks for 2024. And I hope you will be pleased with the diversity—market-cap and sector-wise—that the analysts have offered.
But first, let’s talk about the market.
ASK THE EXPERTS
Prime Question for Mike: Hi Mike. I was surprised that you put in a sale for 1/3 of our shares of Nutanix (NTNX) today. Typically, you let a stock run and sell when it runs out of steam and heads the opposite direction. Can you share your thoughts on this move?
Mike: Well, I wouldn’t say that’s exactly true – while not a super-common thing, I have taken profits on the way up more than a few times over time. As for NTNX, it was really that it was extended to the upside price-wise, has been running for many weeks of course, and there was lots of good news of late (M&A, many upgrades, etc.).
Booking partial profits to us (I talked about this briefly on my webinar yesterday) isn’t about picking a top – if we though NTNX was in trouble we’d just get out – but about ringing the register with some shares, then holding the rest for hopefully a bigger move. Basically, selling some now will ease the burden should the stock start to shake out, which we do think is increasingly a possibility.
If you want to hold on, there’s nothing wrong with that, but after riding many things up and back down the past couple of years, we’re OK booking a little profit on the way up—but not too much, letting the rest run.