While the headlines read “S&P 500 at All-Time Highs,” it’s not all smooth sailing in the market as countless stocks are still suffering from the Nasdaq rout that started a month ago.

The market as a whole is looking healthier, though there are still symptoms of a broad unfolding market top. But our stocks look healthy and all have the potential to move higher from here, so the only change in our portfolio today is the downgrade of DKNG to Hold.

As for today’s recommendation, it’s a company with a great growth story (in the insurance industry) that just came public last May.



Details inside.

Current Market Outlook


For the first time in a few weeks, we’re seeing some signs of spring when it comes to the Nasdaq and growth stocks, as many found support near or above their early-March lows and have begun to perk up, including some that have rallied back above their 50-day lines. (The Nasdaq itself has done this, too, which is obviously encouraging.) Moreover, we’re seeing many more six- to 10-week structures out there, which are far more palatable than the jagged three-week bases seen a while back. That said, we’re not out of the woods—the major indexes remain divergent (not the healthiest situation) and very few growth names are hitting new highs. For the first time in a while, we do think the market has a chance to kick into gear, but we have to see it to believe it; we’re nudging our Market Monitor up to a level 6, but still think the general game plan (small positions, buying cyclical names on weakness) makes sense for now.

This week’s list is a nice mix of growth and cyclicals, many of which look like either potential breakouts or early-stage pullbacks. Our Top Pick is Amkor Technology (AMKR), which might need a little more seasoning but has held up great during the correction and is now pushing ahead.

Stock Name	Price	Buy Range	Loss Limit
10X Genomics (TXG)	191	182-187	164-168
Align Technology (ALGN)	548	538-560	490-500
Amkor Technology (AMKR)	26	24.5-26.5	21-22
Cleveland-Cliffs (CLF)	19	17.5-19	16-16.5
The Gap, Inc. (GPS)	30	28.5-30.5	25.5-26.5
Lam Research (LRCX)	661	620-645	565-580
Lennar (LEN)	105	98.5-102.5	90-92
Micron Technology, Inc. (MU)	94	91.5-94.5	83-85
Scotts Miracle-Gro (SMG)	253	237-247	220-226
ShockWave Medical, Inc. (SWAV)	133	125-130	110-114

The action of high-growth stocks continues to be sloppy despite the strong performance of most underlying businesses.

To help ease our portfolio thorough this period I’ve been evaluating companies with exposure to the reopening economy, and I think I’ve nailed it.



Today’s stock is an online retailer serving younger generations. These consumers should be among the most active spenders as the world opens up again. And this up-and-coming retailer should be a major beneficiary.



Enjoy!

The second quarter and major league baseball opens today after a good week for Explorer recommendations. Tech stocks struggle a bit but some EV stocks bounce back as investors look to play the long game. The Biden infrastructure plan captures media attention and today’s new recommendation should benefit from one of the plan’s more ambitious goals—universal broadband access

Note: We are publishing this issue early due to our office being closed this Friday for a holiday.

The daffodils and Bradford pear trees are in bloom here in Tennessee; I’ve already begun my spring cleaning; I’ll get my second COVID-19 shot on Monday; and the markets and economy are holding up nicely--all in all, a great way to usher in a new season.



The Dow Jones Industrial Average has managed to stay above 32,000, housing continues to be strong, and more people came back into the job market this month, as unemployment claims declined to 684,000.



In this issue, our Feature Recommendation is a company operating in the container ship industry, which is recovering from crushing blows dealt by the coronavirus pandemic last year. As the flow of goods and services continues to climb, this stock should also profit.



And speaking of profits, we are banking some dollars with the sale of cbdMD, Inc. (YCBD), gaining about 76%.



Many thanks to subscribers who joined us on our first monthly Platinum Club call. We hope you can tune in for our next one on April 13.



We’ll check in with you with a Special Alert if anything major occurs in our portfolio. In the meantime, please let us know if you have any questions or concerns.



Happy Investing!

It’s been seven weeks since the marijuana sector topped, and every day the picture of this correction gets clearer. For example, today saw a rally across the board in the sector, but if you look at the charts, you see it’s really just an inconsequential blip.

Thus, defense remains the watchword for now. In fact, I am selling one stock in this issue, taking profits and freeing up a little more cash.



Long term, however, prospects for the sector remain very bright, as was made clear by our companies’ latest quarterly reports. And of course, we will always hold the leaders of the sector.



Full details in the issue.

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

This month we look at defense industry stocks. These stocks have been left aside as investors rush to capture post-pandemic winners, and as the market has doubts about the Biden administration’s commitment to defense spending. Yet, these concerns appear overdone, and investors aren’t considering the possibility of a ramp-up in response to rising global tensions. We discuss six interesting stocks.



We also look at high yield bonds. Our call in February 2020, that “the Sun May Be Setting On High Yield Bonds,” appears to be the right one once again. Yield levels and spreads have returned to remarkably low levels. Our discussion also outlines what favorable and unfavorable conditions look like.



Our feature recommendation is pet health company Elanco Animal Health (ELAN). This company has produced mediocre operating and stock price performance since its 2018 spin-off from Eli Lilly. Yet, changes appear to be coming with the arrival of a credible activist that is reshaping the board of directors.



We also include comments on recent price target and rating changes, including our recent Sell recommendations on Valero Energy (VLO) and Volkswagen AG (VWAGY).



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.

It has been a volatile few weeks for the market, with the Nasdaq under consistent selling pressure and more than 7% off its February high, while the S&P 500 hit new all-time highs last week.

The market’s divergent behavior continues, with small growth stocks in particular suffering, but there are still attractive investments, and for investors looking for something in the electric vehicle sector, today’s recommendation is one of them.

As for the current portfolio, I have two sell recommendations, both small, lightly traded stocks that are losing support.



Details inside.

Markets remain strong. The major stock market indexes all ended last week in the black and, after a brief pause Monday, advanced strongly yesterday. Earnings season has began and only rating change today moving a position to hold.

Earnings Season – Second quarter earnings season began late last week. Your brokerage firm probably provides quarterly earnings estimates on a thousand stocks. Call your advisor or use their website chat box to find out where to locate the quarterly earnings estimates.

Talk of trade wars continues to dominate stock market news but investors appear increasingly willing to shrug off related concerns. They do in the U.S. at least, where stocks are faring far better than in both the European Union and emerging markets.

If you own shares of Walt Disney (DIS), it’s time to decide whether you’re planning to hold it forever because you’re in love with the stock, or whether you’d rather trade it for an undervalued growth stock, thereby lowering your portfolio risk and increasing your chances of achieving capital appreciation.

The market’s bounce off support last week was encouraging, and while we remain in a news-driven, choppy environment, our current cash level is too high given the mostly positive evidence. Thus, tonight, we’re adding two new stocks leaving us with a cash position of 20%.

Markets ended last week with a strong performance, despite the mid-week holiday, which typically reduces trading. For now, I have no portfolio changes. If you’re looking to a do a little buying, we have plenty of options in every tier of the portfolio.

It’s earnings season! Hoo-boy, I’d better clear my calendar. Just a guess, but I think we’re going to see fantastic quarterly results from financial stocks that will catch investors with their…er, let’s just say “catch investors by surprise”. Financial stock share prices might have a very good couple of weeks!

Emerging market stocks have been attempting to find a bottom after a month of accelerating declines. The week has been fairly calm, with the iShares EM Fund (EEM) and many of our stocks showing some signs of basing.

In this weekly update, we have one stock that moves from Hold to Buy.

After a one-to-two-week pullback (the S&P 500 and Dow peaked back on June 12, while the Nasdaq high came a week later, on June 20) the broad market has found support for now, moving mostly sideways since our last update. Markets have been closed since 1 p.m. (Eastern time) Tuesday due to the Independence Day holiday.

We could see some funky trading action next week since the Wednesday Fourth of July holiday will mean a lot of people out of the office. But then the market will start looking forward to Q2 earnings reports, which will begin to come out in late July and early August. Stay the course as the volatility probably isn’t over hasn’t yet translated to lowered growth expectations.

In this weekly update, we have no changes to the portfolio, but that’s expected given the current market environment and the recent sales in previous weeks. A lot of of our stocks are influenced by the corporate news splashes and media headlines which I cover in today’s update.

We replaced this fund with more diversified fund.

We are replacing a fund in which 57% of assets are comprised of real estate with one that focuses on technology (36.54% of assets), industrials (23.91%) and healthcare (21.97%).

The cannabis sector has been trending down since the end of March, giving back its spectacular gains from the start of the year, and until now I’ve remained optimistic about our stocks, partially because of their outstanding fundamental growth metrics but also because Cabot’s two main trend-following indicators for the market were positive.

The shares of this cloud-based software company were recently initiated at RBC Capital and upgraded at Wedbush with an ‘Outperform’ rating.

As the futures indicated, the market is down sharply this morning, though the major indexes have bounced from their lows. As of 10:45 am, the Dow is sinking 454 points while the Nasdaq is down 118 points.

The market looks set to open down relatively sharply this morning, with the futures indicating opening losses in the 0.7% to 1% range for the major indexes. However, our focus is really on the overall evidence, which is clearly worsening.

Our second recommendation is some profit-taking in a mutual fund.

Our first idea is an ETF whose top five holdings are: L3Harris Technologies Inc (LHX, 8.25% of assets); Lockheed Martin Corp (LMT, 7.48%), United Technologies Corp, (UTX, 7.01%), Boeing Co (BA, 6.82%), and Honeywell International Inc (HON, 6.61%).

The shares of this global pharmaceutical company were just upgraded to ‘Buy’ at Citigroup.

You may have noticed media articles last Friday regarding U.S. listed Chinese stocks that had a negative impact on share prices.

The shares of this diagnostic company were recently upgraded by Benchmark to ‘Buy’ and Zacks reported that the shares are now ‘Oversold’, and noted that earnings estimates for the company have been increased five times in the past two months.

Shares of this animal health company fell after the announcement of its recent acquisition, but it appears that was an overreaction.

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.