In the March Issue of Cabot Early Opportunities we offer up a diverse mix of growth stocks with exposure to vastly different markets, all of which should be healthy for the duration of 2021.

While it’s been a rough month since the February Issue and investors are still on edge, stimulus checks should be hitting the economy soon and the broader economic picture is a heck of a lot better than even a couple months ago.



Still, on balance it’s best to keep new buying on the small side and average into these positions as the market seeks the firm footing that is needed to launch a sustained advance higher.



Enjoy!

This week is the expiration of March options, and the good news is we appear to be headed to full profits on four of our March positions (JCI, SONO, GS, APHA) and are in good shape with our one position that is unlikely to be called away Friday (DT). Expect to hear from me Thursday afternoon or early Friday morning on these expiring covered calls.

The market rallied nicely last week, and growth stocks joined the crowd (which is good), but today’s strong open didn’t last and now we’re seeing deterioration across the board, reminding us that the market is a two-way street. Plus, in the background is the fact that investor sentiment is so high, and the economic news has been so good, that eventually we’re going to need a big correction.

Still, looking at the stocks in our portfolio, I see no need for any ratings changes today.



As for today’s new recommendation, it’s a growth stock that hit a new high just last Friday and has a long runway of growth ahead of it as its young industry expands.



Details inside.

Current Market Outlook


Up is good, so last week’s rebound in growth and continued push higher in the broad market was encouraging. That said, nothing much has changed with the overall evidence—many areas of the market look just fine, with a few indexes actually hitting all-time highs, but growth stocks are still (mostly) in a corrective mode, with a bunch of names having rallied only into resistance. Really, we think the action of the next week or two will tell the tale—resilience and upside from here would suggest the huge pullback earlier this month was more of a shakeout, but renewed selling pressure would hint toward another leg down. Right now, we’re playing things halfway—we’re OK with some buying, especially in stronger names that pull back some, but we’re not pushing the envelope and need to see more from growth before concluding the storm has passed. We’re leaving our Market Monitor at a level 5 today.

This week’s list is very much a mixed bag, with cyclicals, retail, growth and turnarounds all making the cut. Our Top Pick is Thor Industries (THO), which looks like the leader of a fresh move for that group. You could nibble here or (preferably) on dips.

Stock Name	Price	Buy Range	Loss Limit
Big Lots (BIG)	71	66-69	59-61
Devon Energy (DVN)	25	22-23.5	19-20
Dropbox (DBX)	28	26.5-28	24-25
Dycom Industries (DY)	100	95-98	85-87
Groupon Inc. (GRPN)	60	57-60	48-50
Inari Medical (NARI)	114	110.5-115.5	98-101
Macy’s, Inc. (M)	21	18-19.5	15.5-16.5
Owens & Minor (OMI)	37	33.5-35.5	30-31
Summit Materials (SUM)	30	28-30	25-26
Thor Industries (THO)	147	140-147	125-128

The overall market remains in good shape, with many indexes actually stretching to new highs this week. But growth stocks are another ball of wax, with many leaders having decisively cracked their uptrends and the Nasdaq itself stuck in no-man’s land even after this week’s bounce.

We’re open to anything, and in fact we’re putting a small piece of cash back to work tonight (buying a half-sized position in a high-potential stock), but we’re mostly going slow and waiting for growth stocks to set up properly. Our cash position will be right around 50%.

Cyclical or open-up stocks are on fire, and for good reason.

The U.S. economy has far exceeded expectations at every phase of the recovery so far. The vaccines promise to end the remaining lockdowns and restrictions. With the shackles removed, the economy will kick into high gear. Even several normally dour economists are predicting the highest GDP growth in decades this year.



In anticipation, cyclical financial stocks are on fire. The Financial Sector SPDR Fund (XLF) is up 45% just since the vaccine announcement in early November. Yet, many financial stocks are still undervalued ahead of what should be an ideal environment for the sector.



In addition to the bright near-term prospects for financial stocks in general, there is also an incredible growth trend in a particular niche area, alternative investments. These include investments outside of the stock and bond markets. Individuals and institutions desperate to diversify are piling in. And massive growth in this arena is accelerating.



In this issue, I highlight a company I believe to be the very best player in alternative investments. Stock performance has far exceeded its peers and there is every reason to believe the outperformance will continue going forward.

Today, we are recommending a biotech company.

The company is trading well below an offer to take it private and has numerous other catalysts on the horizon.



This company’s characteristics include:

• Insiders own over 40% of the company.
• A proxy fight - A hedge fund is lobbying to have the company sold to the highest bidder.
• Royalty income streams which provide downside protection.
• Much, much more.

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

The last two weeks have seen a massive rally into cyclical stocks, and a purge of growth stocks. Massive! Whether this trend will continue is anyone’s guess.

The good news for the Cabot Profit Booster portfolio is we have a relatively diverse portfolio. And as I eyeball our portfolio, I would say we have five cyclical stocks (AZEK, JCI, SONO, GS, APHA) and “only” two growth stocks (DT, AMKR), and the premiums we collected via our covered call sales have partially buffered us from big losses on those stocks that have been hit hard.

Current Market Outlook


The selling pressure that we saw emerge two weeks ago really picked up last week, with the vast majority of leading growth stocks cracking intermediate-term support. That said, the rest of the market has refused to follow the Nasdaq’s lead; there’s been some damage and plenty of wobbles, but so far the broader indexes have held up, and buying in many cyclical areas has picked up. Just going with the evidence, we’d be shying away from growth stocks while looking for opportunities in the strong sectors should they rest or shakeout. Our biggest thought, though, is that making money has become much harder during the past month and a half, with wild moves, rotation and volatility, so now’s a time to go slow and give some thought to capital preservation until we see the buyers really flex their muscles. We’re moving our Market Monitor to a level 5.

As expected, this week’s list is heavy on cyclical and re-opening themes, with many names showing excellent action. Our Top Pick is Marriott Vacations (VAC), which has soaring earnings estimates and a stock that just lifted out of a three-year base on huge volume.

Stock Name	Price	Buy Range	Loss Limit
Abercrombie & Fitch (ANF)	32	28.5-30.5	24.5-25.5
Affiliated Managers Group, Inc. (AMG)	139	134-140	119-123
Applied Materials (AMAT)	106	102-107	92-94
Diamondback Energy (FANG)	84	76-80	66-68
Lyft (LYFT)	64	58-62	51-53.5
Marriott Vacations (VAC)	184	177-183	154-158
The Middleby Corporation (MIDD)	166	162-167	144-147
Nucor Corporation (NUE)	66	63-65	56.5-57.5
PDC Energy (PDCE)	38	34-36.5	28-29.5
Texas Roadhouse (TXRH)	95	91.5-94	82.5-84

The Dow was up big today but growth stocks are still having a rough time, and I’m growing increasingly concerned that the broad market will eventually roll over, too. The news has been so good, and investors have become so bullish, that eventually we’re going to need a big correction.

Last week I recommended selling four stocks and this week I’m recommending selling two more.



In the meantime, I’ve got to recommend something to buy; that’s the name of the publication! So today’s recommendation is a little-known small company in a solid industry that will likely be substantially larger in years to come.



Details inside.

Thursday marked the first day of somewhat significant turbulence in our portfolio in what seems like forever, but indications are that Friday will be back to business as usual, at least for the first part of the day.

Emerging market stocks have had a volatile week, with the iShares EM Fund (EEM) popping above its 25- and 50-day moving averages on Wednesday, but slipping back to the 50-day today.

Two stocks are being sold from the portfolio.

After one strong week in the market, over half the stocks in our portfolio are either at 52-week highs or close to their year-to-date highs. And that’s both good and bad.

Several of our stocks appear capable of beginning a new run-up.

Continue to lean bullish. The market’s rebound today after yesterday’s Italy-induced selloff was very encouraging, and both of our trend-following indicators remain bullish.

There are no rating changes in today’s weekly update.

While I’m keeping most stocks at Buy this week, I do think near-term upside is somewhat limited and that being more selective with new purchases is a wise decision. Look to nibble on those stocks that aren’t overly extended but still have strong momentum.

Emerging market stocks have had another soft week, with the iShares EM Fund (EEM) below its 25-, 50- and 200-day moving averages, although Chinese stocks continue to hold steady.

This week’s retail news and earnings reports brought great surges in the share prices of two of the stocks in our portfolio.

The yield on the 10-year Treasury rose over 3.1% last week following several strong economic releases and a handful of speeches by current and incoming Fed members. That’s kept utilities and other high-yield investments depressed for another week. Most of our holdings are looking constructive and a few potentially on the cusp of big breakouts.

There’s one thing that common stocks and the price of oil—and virtually all other investments—have in common: their price charts. The study of price charts is called technical analysis.

Our first idea is a semiconductor industry company that beat analysts’ EPS estimates by $0.14 last quarter.

This tech company is seeing interest from some big pockets on Wall Street.

Oil prices and shares of oil-related stocks surged this morning after a terrorist attack on Saudi Arabian oil fields shut down about half of Saudi Arabia’s daily oil output.

We provide the top five holdings in this fund.

Earnings estimates are moving up for this alcohol beverage company.

One major factor in investing, particularly in small stocks and young sectors where growing pains are still the norm, is sentiment. Good sentiment can take a sector to extreme highs—as it has done for the marijuana sector at every major legalization milepost.

One of our portfolio stocks moves is being retired and there is news on five more.

This global insurance company beat analysts’ EPS estimates by $0.04 last quarter.

This energy company has absorbed its most recent acquisition and is posting significant cash flow, yet the shares remain undervalued.

The major indexes were mixed today, with the Dow up 74 points and the Nasdaq losing three points. But the story once again was weakness under the surface, as growth stocks remained under the gun.

This P&C and energy services company beat EPS estimates by, $0.03 last quarter.

We’re making some portfolio adjustments today.

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.