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.

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!

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.

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.

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 story remains mostly the same: When it comes to rubber-meets-the-road evidence, nothing has changed—the intermediate-term trend of the major indexes remains down, and growth funds and individual stocks are in the same boat. Until some of that changes, it’s telling you the bulls are swimming upstream, so it’s best to be defensive. However, we also don’t want to ignore many secondary measures that are showing some encouraging action, including the indexes holding above their recent lows and increasingly negative sentiment. The pieces are in place for some sort of turnaround, but we’ll have to see it happen before taking action.


This week’s list is again heavy in commodity-type names, though a few other areas popped up as well. For our Top Pick, we’re going with a growth-y name that’s holding well—it’s probably the best-looking non-commodity stock in the market today.

With the market under pressure because of the war in Ukraine (not to mention lurking inflationary influences), defense continues to be important.
Today the portfolio is selling two stocks and downgrading two to hold.


But there’s always something to buy, and today it’s energy stocks, as I add our third energy stock to the portfolio.


Details inside.

With so much going on in the world the trends are a bit messy. That said, I have noticed an uptick in several of the small-cap MedTech players on my watch list.

These businesses could be poised for a nice recovery in 2022 and 2023 as COVID-19 recedes. And the one that tops my list is posting massive growth as its revolutionary treatment for BPH has just gained full Medicare backing and is rolling out into U.S. hospitals.



With revenue set to grow by multiples in the coming years and the stock trading at an apparent steep discount to peers, we’ll jump in now.



Enjoy!

Despite a Ukraine conflict that’s roiled markets, Explorer stocks had a good week. And while Sea (SE) reported a mixed and disappointing quarter, Ford (F) made a big announcement as it moves into a new era.

Markets had held up pretty well—weathering inflation and interest rate worries—until the last week of February, when Russia’s Putin decided to invade Ukraine. That radical move sent the markets roiling with some pretty hefty drops and increased volatility. But action today was impressive, with the Dow Jones Industrial Average up almost 600 points, the S&P 500 up 80, and the Nasdaq up 219.

Fossil fuel energy market turmoil sparked by Russia has spurred buyers into Greentech, giving our sector its best stance in three months. This issue, we feature two stocks. One is a play on re-shoring, scarcity and even national defense in addition to the boom in renewable energy. The other is a nearly guaranteed way to preserve capital with private-equity-like upside.

Also in this issue, we detail our current portfolio recommendations, the state of Greentech and offer up a fresh ESG Three stocks to consider.

The market’s snapback has been impressive, pushing our Cabot Tides back to a green light and pulling most stocks up after short, sharp pullbacks.

But the market is rising back faster than it fell. The solid economy and low interest rates are continuing to drive stocks higher, for now.

As far as the market goes, there’s no doubt this coronavirus has thrown a wrench into things.

The market seems to be a bit complacent given the risks of the virus spreading rapidly in China and elsewhere but we need to remain a bit cautious. There is some suspicion that China is downplaying the numbers.

News of the spread from China of a brand new virus roiled markets earlier this week. Although the market has bounced back somewhat, I don’t think we’re out of the woods yet by a darn sight.

The stock market’s uptrend finally cracked late last week. Is this the beginning of the official market correction, or a prelude, or just a hiccup?

The message this week is to stay invested but don’t go crazy on the buy side and don’t get scared on the sell side. Just be measured and try not to do anything that’s uncharacteristic of what you would do in a “normal” market.

The environment hasn’t changed. It’s a very strong bull trend in the major indexes and most stocks, with our trend-following measures solidly positive.

We have no changes in the Model Portfolio tonight, but we’re sending a special bulletin given the wild action in growth stocks over the past two days.

We’ve been waiting for a pullback in high-growth names and that looks to have begun this week.

We’ve been waiting for a pullback in high growth names and that looks to have begun this week.

Analysts expect this optoelectronics manufacturer to post 87.2% growth this year.

This food distributor beat analysts’ EPS forecasts by a penny last quarter.

The S&P 500 and Dow Jones stock indexes appear to have tentatively begun rising above a trading range that lasted for six weeks.

Hospitality may be down but not out, and this preferred stock will reap the benefits as the market recovers.

Long-term, the odds are very good that this recommendation will move higher, so there is an argument for holding patiently. But we will sell.

This steel and aluminum company beat analysts’ EPS estimates by $0.35 last quarter.

The shares of this frozen potato provider have recovered somewhat since the pandemic started, but are still trading at a low valuation.

While the broad market enjoyed a powerful upmove yesterday, the marijuana sector was even stronger, with the Marijuana Index surging 15%.

This gaming company beat analysts’ estimates by $0.02 last quarter.

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 Momentum 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 Momentum Trader features.