It’s still an amazing market. The S&P is up 96% from the bear market low in March of 2020. The index is also up over 20% so far this year.

While the overall market may be pricey, there are still undervalued pockets within the market. The indexes don’t tell the whole story. Even in a market like this, some stocks get neglected.



The yield curve has flattened and two stocks in the portfolio, AGNC and USB, have pulled back as a result. I believe this interest rate dynamic is temporary and these stocks are good buys ahead of a likely reversal.

Current Market Outlook


We traded in our crystal ball years ago, especially when it comes to short-term predictions, but our screens over the weekend told a clear tale: While it’s not 1999 out there, many growth stocks and indexes have enjoyed good moves of late, and when you combine that with some signs of complacency, a retrenchment looks possible. (Today, in fact, might be the start of that, as many growth stocks were hit.) Still, this isn’t some grand market call—overall, the environment remains the same, with some divergent and rotational action, but also more and more names acting well—but our point is more to make sure you’re still sticking with great-looking stocks at decent entry points, as opposed to chasing things higher. We’ll leave our Market Monitor unchanged this week.

This week’s list has a bunch of strong names thanks to recent earnings reports and other news items. Our Top Pick is Ambarella (AMBA), which staged a massive blastoff on earnings—we’re OK starting small here or on dips.

Stock Name	Price	Buy Range	Loss Limit
Academy Sports and Outdoors (ASO)	45	43-46	38-39
Ambarella (AMBA)	136	132-138	112-115
Asana Inc. (ASAN)	95	88-92.5	75-78
Avalara (AVLR)	188	180-185	164-167
Chipotle Mexican Grill (CMG)	1895	1850-1900	1700-1760
Floor & Décor (FND)	125	122-126	110-112
Macy’s, Inc. (M)	22	21-22	18.5-19
Nutanix (NTNX)	44	41.5-44	36.5-37.5
Quanta Services (PWR)	115	109-113	97.5-99.5
TX (TX)	54	51.5-53.5	46.5-47.5

Thanks to all of you who joined us for our Cabot Wealth Summit in August. It was a great few days—lots of new ideas to share amid a backdrop of a still bullish market.

Sentiment continues to be bullish, but cautious. And Value stocks are still leading Growth. So far in 2021, we are seeing double-digit returns across both styles, with the exception of small-cap growth stocks, which are up 7.6% year-to-date.



The Dow Jones Industrial Average has stayed above 35,000, propped up by a fabulous earnings season. According to FactSet, 87% of S&P 500 companies reported both a positive EPS and revenue surprises.



The economy continues strengthening, with a nice drop in the unemployment rate, to 5.2%. Home sales are helping tremendously. Although inventory continues to be a challenge, the rise in prices (18.6%) are helping to mitigate that.



Consumer confidence remains strong, although we are still battling COVID, and hoping that the variant does not derail all the good progress.



In the meantime, I’m constantly searching for new ideas for you, and am pleased that our portfolio continues to outperform.



Please don’t hesitate to email me with your thoughts and questions. I look forward to hearing from you.



Happy Investing!

The bull market remains intact, so I continue to recommend that you be heavily invested in stocks that help achieve your investing goals.

Today’s featured stock is one of my favorite kinds of stocks—a small company that’s not well known but that’s growing fast by making a big difference in a global marketplace.



As for the current portfolio, most of our stocks look good, and many are hitting new highs, but I have two sells, Five Below (FIVE) and Molson Coors (TAP).



Details inside.

Today’s new addition has all the attributes we look for in a small-cap software stock.

The company is young, management is insanely smart, the products fit a huge need, growth is 30%+, and the sales team is growing quickly.



In short, it’s an extremely attractive opportunity. Which is why we’re jumping in right after the company came public.



Enjoy!

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the September 2021 issue.

This past week was vacation week – a valuable respite from the stresses of investing and other features of daily life. We now return to the investing desk, ready for what could be a very interesting remaining four months of the stock market year.



There hasn’t been much recent news on our names, so we provide a bit more color on some of the issues surrounding Arcos Dorados (ARCO) and some other names. We would like to see a market pullback to bring shares of otherwise attractive companies back to attractive valuations. However, even in the current market, we are starting to find appealing stocks again and will bring them to you.



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.



I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.



Thanks!

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the September 2021 issue.

While the stock market continues to set new record highs, oil and gas exploration and production (E&P) companies have been left behind. Yet, at current commodity prices, which we believe are sustainable, several companies have shares that trade at surprisingly high free cash flow yields, some as high as 24%. We make our case for five stocks.



Related to this, our featured recommendation is Marathon Oil Company (MRO), a mid-cap oil-focused E&P company. Its strong fundamentals, including a high-quality asset base, strong free cash flow and a solid balance sheet, make it particularly attractive.



We highlight three former Cabot Turnaround Letter winners whose shares have retreated since our exit. These now look interesting once again.
In this issue we also discuss three one-off contrarian ideas that have considerable appeal.



During the month, we had a few ratings changes: we moved Berkshire Hathaway (BRK/B) to a Hold, and moved Albertsons (ACI) and Oaktree Specialty Lending (OCSL) from Buy to Sell.



Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.



I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.

Greentech peaked in February and bottomed in May. There are still headwinds – as there are for many growth stocks – but we’re seeing the sector build a base for a resumption of its long-term bull move. We’re also seeing more stocks that are setting up for long-term success and more predictable performance from our current holdings.

This issue, we examine one of the leading providers of an essential technology for residential solar systems, a fast-growing market. The last two quarters for home-based solar have been the best ever in the U.S. Our pick this week is gaining market share with a unique approach that makes systems more efficient and more reliable. It’s also expanding into segments that could quadruple sales in coming years.



We also have newly recommended ratings and sell-stops for many of our current portfolio holdings.



Read through for more details.

Up, up and away! The S&P 500 rose 1.52%, the Dow advanced 0.96%, and the Nasdaq climbed 2.82% last week, aided by Federal Reserve Chairman Jerome Powell’s dovish commentary.

There is no doubt this year’s rally has been one of the most impressive rallies market participants have ever seen. More than 50 new closing highs and over 200 trading sessions without a 5% pullback defines the power and consistency of this rally. And as we have all witnessed, the slightest pullback seems to act as a frenzied feeding ground for buyers.

The bull market remains intact, so I continue to recommend that you be heavily invested in stocks that help achieve your investing goals.

Today’s featured stock is a speculative suggestion—a small company with great potential to grow as the market for electric vehicle charging booms.



As for the current portfolio, most of our stocks look good, and many are hitting new highs, so I’m downgrading three to hold because they are ripe for correction.



Lastly, a reminder that because of the Labor Day holiday, next week’s issue will be published on Tuesday, September 7.



Details inside.

Things look pretty darn good. The S&P 500 has broken the 3000 level for the first time ever and is within a whisker of its all-time high. The index is up over 9% since the beginning of June and 20% so far in 2019.

From a stock market point of view, I suggest avoiding homebuilder stocks in the coming years. Companies that build single-family homes will be competing with a glut of existing homes on the market.

This week’s market recap is a familiar story—the major big-cap market indices are doing great! But the small cap index is still wallowing in the mud.

Remain mostly bullish, but continue to pick your spots. The overall market looks great, and our own 7.5% Rule has flashed, portending higher prices in the months ahead.

The market is at new all-time highs. If there’s more bad news, it could go a lot higher. The biggest risk to the market right now is stronger-than-expected second-quarter GDP growth.

The news media continues to whip investors into a frenzy over the direction of interest rates. Depending on where you look, you can find knowledgeable financial pundits making the case for steady, unchanging interest rates or for the Fed to lower the fed funds rate in July.

The S&P 500 is at new all time highs as I write this. We have a market that wants to go higher, but it just keeps getting interrupted with negative headlines. It seems like we can’t get through a week without bad trade news or signs of a weakening global economy that prevents the market from taking off.

The G-20 meetings in Japan yielded only incremental progress. This was grudgingly accepted as a positive by markets with most emerging market stocks getting a boost as we headed into a slow and short week.

Not surprisingly, this week wasn’t a great one for our portfolio. I had a feeling the party was winding down last week, when we had an average gain of 105% going and had just seen our stocks pop an average of 6% over five days.

Analysts are forecasting 13.6% growth for this meat producer this year.

In the past quarter, 27 hedge funds have this financial stock in their portfolios, up from 24 in the previous quarter.

This portfolio stock has just pulled Q1 2020 guidance, saying revenue will be roughly 35% to 45% below the low end of its prior revenue guidance ($47 million) due to global disruptions from COVID-19.

This car reseller will report quarterly earnings on April 2. Forecasted EPS is $1.12.

This biotech is working on a coronavirus vaccine that looks promising.

The market has bounced decently during the past couple of days, and we’re cautiously optimistic that a workable low is in.

This gaming stock has lost 115% of its value since the coronavirus has shut the door on entertainment.

Shares fell below a 10% trailing stop.

This maker of electronic display systems is expected to grow this year, at triple-digit rates.

This biotech is forecasted to grow 16.10% next year. And four analysts have recently increased their EPS estimates for the company.

Today I want to address the two positions which have March options expiring today.

Zacks just upgraded this pharma stock to ‘Buy’, based on rising earnings estimates.

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.