In the March Issue of Cabot Early Opportunities we talk honestly about the current state of the market and what to do now.
I also cover five opportunities that continue to pique my interest. I have a familiar software stock that’s been resilient lately, an alternative energy supplier that could help reduce Europe’s reliance on Russian energy, a pharma company set to make big moves over the coming years, an early-stage electric vehicle play, and an innovative MedTech company that’s growing like a fertilized weed in early spring.


Enjoy!

Global fossil fuel uncertainty is shining the spotlight back on renewables as the best way for most economies to be energy independent. This issue we feature one of America’s largest renewable generation portfolios, which offers an exceptional 4%-plus dividend yield. We also look at a young renewables-focused business finding its legs in wind, solar and infrastructure.

As always, we also highlight three technically strong ESG stocks to consider and give updates on our Greentech Timer and Real Money and Excelsior portfolios. Read on!

Today, I’m adding the world’s largest publicly traded uranium company Cameco (CCJ), which has held up spectacularly throughout this market meltdown. Though of note, this stock is volatile and we are going to play it super defensively, with an in-the-money call.

The situation remains the same as it has for the past week or so. When it comes to selling pressures, we’re seeing some signs that they’re starting to ease, but, on the buying side, there isn’t much evidence to suggest the bulls are flexing their muscles, as most indexes, sectors and growth funds are still in downtrends while rallies into resistance (whether for an index or stock) almost always attracts quick selling. Yes, there are still many old world stocks that are acting well (though we’ll see how today’s commodity-related selloff goes), so we’re not opposed to nibbling on these sorts of pullbacks. But overall, we think watchful waiting is the right course.



This week’s list is intriguing as there are a good number of fresh breakouts here, some from very long ranges. Our Top Pick is one of those, with the company’s massive step-up in earnings last year expected to persist for at least the next couple of years.

With the market still in a downtrend, defense continues to be important.
Cash is the simplest defensive asset, but low-risk stocks, undervalued stocks, dividend-paying stocks and stocks in sectors bucking the downtrend are all worth considering.



My recommendation this week is a well-known automaker with great prospects in the electric vehicle space whose stock is trading 38% off its recent high.



Details inside.

The market has spent the past six weeks etching a volatile, tedious bottom, with numerous secondary measures offering encouragement, the biggest of which is an ongoing positive divergence in the number of stocks hitting new lows, which tells us fewer stocks are participating in the downside. That’s good to see, but what we really need to see now is real, sustained buying pressure--so far, that hasn’t been the case, so we’re remaining generally defensive.

Value is back.
After nearly a decade of extreme underperformance versus growth stocks, overdue value stocks are flipping the script.


The dominance of growth stocks over the last eight years has been about as lopsided as the relative performance has been over the last 100 years.


But things are changing. Inflation is back. And rising interest rates are sure to follow. This economic recovery is shaping up to a lot different that the last one. This recovery is shaping up to be much better for value stocks. In fact, the role reversal is already underway. Value stocks are already outperforming growth stocks by about 15% so far this year. And it is likely just the beginning.


In this issue, I highlight one of the most dominant technology companies in the world. It is one that has stumbled lately and given way to the competition. But the stock is cheap, wallowing near the four-year low, with limited downside. It is also poised ahead of a likely renewed growth phase. The timing could be just right.

The world has clearly changed in the past two weeks. We see an exceptionally wide range of possible outcomes, which makes predictions about the future (already a low success rate endeavor) basically futile. We offer our timeless investing advice that can be readily applied in such situations.

In the letter, we also provide updates on all of our Recommended Stocks.

Today, I’m recommending an app developer that I previously recommended (we exited for a 114% gain last year). The business is growing like crazy yet trades at a dirt-cheap valuation.
Other key points:

• High insider ownership (19% of the company).
• 25%+ revenue growth this year.
• 34% of its market cap in cash and no debt.

All the details are inside this month’s Issue. Enjoy!

For the past several weeks, we have bought oils and commodity stocks. Today, I’m going to diversify our portfolio a bit, adding American semiconductor supplier, Onsemi (ON).

The situation with Russia’s invasion of Ukraine has added a fresh bout of volatility to the markets.

But U.S. markets, as tracked by the SPDR S&P 500 ETF Trust (SPY), have not plunged far. The SPY fell to an intraday low of 410.64 on February 24 before rallying to finish the session with a gain.



The truth is: Stocks were already toying with a correction prior to the Ukrainian situation heating up.

The iconic phrase above was uttered by James Cagney in the movie White Heat just before his character blew up in a spectacular explosion. The metaphor is a timely one for the broad metals market as prices across the board are skyrocketing to heights not seen in years, or even decades!

But streaking metals prices can quickly reverse based on a dramatic shift in the prevailing geopolitical narrative. For that reason, I recommend tightening up stop-losses and proceeding with caution rather than getting carried away with excessive optimism.



In the portfolio, we just added a new position in a dual steel and aluminum play that looks set to pop.

The S&P 500 crossed above its 25-day moving average line on April 6 and is back above its 50-day moving average line today. It is only 16% off its previous high. Granted, under the circumstances that doesn’t seem quite right. But nevertheless, there it is.

What we may see developing in markets is a rather broad trading range – say from 21,000 to 25,000 in the Dow. This could be our reality until we work our way through the real but uncertain impact of the shutdown on the economy.

There is good news out there. The country is starting to reopen the economy. Sure, there is a political debate, and certain hot spots aren’t ready to reopen yet. But the urgent push to restart this economy is undeniable.

All of our portfolio stocks move to a Hold recommendation while U.S. stock markets react to turmoil in energy markets. I expect more downside to U.S. stocks in the coming days.

Remain defensive, but stay tuned. Despite many crosscurrents and news-driven moves this week, we’re just playing it by the book—our Cabot Tides are close to a buy signal, and if that happens, we’ll take a step back into the market.

As we move closer to the end of another week, investors continue to focus on the potential timeline to open parts of the economy. New York has just said the lockdown for non-essential businesses remains in effect for at least another month, but clearly there are many areas that haven’t been so badly affected.

The market is forward looking. It senses an end to this pandemic crisis and a reopening of the economy sooner rather than later. That’s good news. And I agree. The end-of-the-world pessimism that caused the market crash is being tempered. It’s a very good thing.

Yesterday, while reviewing my entire Buy List, I noticed that the insurance/annuity and investment stocks appear ready to begin new run-ups, after resting for a few days.

Clearly the fundamentals of the U.S. and global economy look awful right now. But the market is looking past the first half of 2020 and into the second half of the year and 2021.

Most positions are up 5%-6% for the week, with a couple of exceptions.

I expect to be adding and removing stocks from these portfolios in 2020, more frequently than usual. That’s because when a stock market recovers from a big drop, stocks tend to get stuck in trading ranges, advancing in fits and starts.

Remain defensive. There are good and bad aspects to the market’s short-term action; overall, we’re optimistic a bottom-building process is underway, but we’ll see how it goes.

This blue-chip Hong Kong conglomerate has a current dividend yield of 7.64%, paid annually.

It was another fantastic month for the Cabot Profit Booster portfolio, and with today being the expiration of July options we are likely going to close seven positions for full profits ranging from 5.4% to 12.3%.

Last quarter, this industrial machinery company beat analysts’ estimates by $0.03.

COVID-19 has beaten this REIT stock down, but it has a long track record of success, and while you wait for appreciation, you can enjoy the 5.38% dividend yield, paid quarterly.

The coronavirus has hit this stock hard, but analysts see the company growing 12.6% next year.

The good news is that leading marijuana stocks have seen some heavy buying in recent days—so much, in fact, that the four leading U.S. marijuana stocks have all broken out above their May or June highs.

The market had a very rough day yesterday, with the Dow closing up 10 points (there was some rotation into lagging areas) but the Nasdaq reversed from huge gains to finish down 227 points.

Piper Sandler also likes this energy stock and just shifted its rating to ‘Overweight’.

This medical device company has been hit by COVID-19, so looks very buyable here for the long-term, and it pays a 1.45% dividend.

This midstream energy company has been clobbered by low oil prices.

The shares of this semiconductor company are about even with their recommended price in January, but our contributor is no longer sold on the stock.

The pandemic has hit this entertainment company hard, so it is no longer on the Buy list for our contributor.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Top Ten Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Top Ten features.