Growth stocks had worked to set themselves up nicely in recent weeks, but all of that has fallen by the wayside, with names getting obliterated this week before and after earnings.

Despite an already-cautious stance, we’ve sold three more stocks this week, though we are nibbling on one new name in tonight’s issue. Even so, we’re content to remain defensive until the bloodletting stops.



In tonight’s issue, we write about one of the factors that thankfully kept us cautious of late, as well as dive into the energy sector, where the bullish thesis is playing out

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

The stock market, so far in May, hasn’t continued the robust momentum of the first four months. Treasury Secretary Yellen’s comment about the possible need to boost interest rates to ward off inflation seems to be the catalyst. The market and the broad economy will likely respond differently if rates increase. We briefly outline on our asset allocation philosophy, which helps guide us when the market is edgy, in our economic comments.



Earning and proxy voting are in full swing. We’re updating the earnings as they come in.



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.

We’re happy to see that the markets – despite a brief pullback – continue to rise. Home prices – as calculated for the Case-Shiller Index of 20 metropolitan areas – now stand at 246.04, up from 220 a year ago.

Consumer confidence and sentiment continue to increase, and that’s great for the economy. In the first quarter of 2021, GDP rose 6.4% – the second-fastest pace for growth since the second quarter of 2003!



This month, our Feature Recommendation is a French company that is the leading fiber telecom platform in rural France. The company has been awarded 4.5 million FTTH (fiber to the home) lines spread across 23 Public Initiative Networks. Additionally, investors will like the very nice 5.60% annual dividend yield.



We’re taking some more profits this month, with the sale of Unilever PLC (UL). Earnings performance has not been great, and it’s having a lot of trouble clearing resistance. We’ll take our 37.5% return to the bank and use it for our new recommendation.



We hope to see you on our May Platinum Club webinar; it’s scheduled for May 6 at 2pm. In the meantime, don’t hesitate to reach out to us if you have any questions.



Happy Investing!



Nancy Zambell and Kate Stalter

While some sectors of the market look tired (growth), other sectors and stocks (retail, materials, financials, energy) continue to make new highs and/or come alive. Fortunately, the Cabot Profit Booster portfolio has avoided the hyper-growth stocks that are under pressure, and is positioned in stocks that are in the strongest sectors.

The market’s main trend remains up and thus I continue to recommend that you be heavily invested in stocks that can help you meet your investing goals, all while remaining diversified to reduce risk.

Today’s recommendation is a high-yielding stock that has a great history of performance—and as it’s still working its way back toward its high of February 2020, it’s attractive technically.



As for our current holdings, there are no changes. With the new addition, the portfolio is fully invested.



Details inside.

Current Market Outlook


To us, the major (and most disappointing) theme of the past few weeks has been the selling in stocks as they approach their old highs—selling on strength has been seen in growth stocks for a couple of months but it’s even seeping into many cyclical-type names, too. In other words, while selling pressures are controlled (the intermediate-term trend remains up), buyers aren’t exactly stepping up in a major way. Of course, the real question is whether earnings seasons causes the bulls to flex their muscles; so far, that hasn’t happened, but there are a ton of reports coming this week and next, so we’ll see how it goes. Not to sound like a broken record, but we continue to think keeping some cash on the sideline and aiming to enter mostly on pullbacks remains the best play. We’re again leaving our Market Monitor at a level 6.

This week’s list has a hodgepodge of names, many of which have reacted well to earnings, so if you’re going to buy strength, these are some top candidates. Our Top Pick is Crocs (CROX), one of the few growth-oriented names that has shown great power of late.

Stock Name	Price	Buy Range	Loss Limit
Academy Sports and Outdoors (ASO)	31	30-31.5	27-28
Bloomin’ Brands (BLMN)	31	29.5-31	26.5-27.5
Capital One Financial (COF)	150	141-146	128-131
Chart Industries (GTLS)	154	149-155	137-140
Crocs (CROX)	98	95-100	84-87
Fortinet Inc. (FTNT)	203	197-204	181-184
Matador Resources Company (MTDR)	26	25-27	22-23
Robert Half (RHI)	88	86-88	78-80
Scientific Games (SGMS)	58	54-56	48-49
United Parcel Service (UPS)	212	203-209	184-188

Explorer positions have a good week on the back of a market moving up on broadly upbeat first-quarter earnings, rising consumer confidence and, of course, stimulus and spending from Washington. The cash and liquidity has definitely buoyed the market but how it is put to work long term is critical.

This week’s recommendation is a rather aggressive small Canadian player in the commercial drone business.

It’s been eleven weeks since the marijuana sector topped, sending the Marijuana Index down 50%. But as the picture of this correction gets clearer, every day I get a little more bullish about the possibility that the sector is ready to turn up again.

Two weeks ago, acting on this belief, I used half our cash to average up in the industry leaders and add one new small stock to the portfolio and today I’m doing just a little more buying, averaging up in another small operator.



After this buying, the portfolio will be roughly 29% in cash, and going forward, we’ll continue to take our cues from the market, always working to own the market’s leaders as we move closer and closer to full federal legalization.



Full details in the issue.

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

With the stock market continuing to reach record highs, and with most stocks either participating in the rally or facing structural, fundamental challenges that they won’t likely overcome, finding new ideas can be a challenge. As contrarians, we want to look for stocks in places which others find too unconventional or uncomfortable, as bargains may be found there. One such place is in stocks with low share prices, generally under $10. We discuss five interesting turnarounds among this group.



Real estate investment trusts, or REITs, have surged since Pfizer announced on November 9, 2020 that they had developed an effective Covid vaccine. Yet some REITs haven’t fully participated. We review six laggards that have quite favorable risk/return traits.



Our feature recommendation is Dril-Quip (DRQ). This company manufactures highly-engineered drilling and production equipment for offshore oil and natural gas projects. The shares are heavily out-of-favor yet offer considerable upside, backed by a solid company with a large cash hoard and zero debt.



We mention our April 1st price target increase for Mohawk Industries (MHK) from 180 to 220. As several companies continue to show strong fundamental improvements, we are raising our price targets on Adient (ADNT), Western Digital (WDC) and Wells Fargo (WFC), while moving Jeld-Wen (JELD) to a HOLD. Also, we update our article from last month on high yield bonds.



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.

The market is still trending higher. But it can’t continue at the recent pace. And a 10% or so correction is possible at any time, especially after such a strong move higher. While the short term is always unpredictable, I’m still bullish over the intermediate and longer term.

With the market looking topsy in the near term, it’s a great time to write covered calls. In this issue, I highlight two call writing opportunities on existing portfolio positions. These calls provide a great way to cash in on a high market without giving away too much upside potential.

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.

Raise some cash. Our Cabot Tides are now on the fence, and more important, individual stocks have been hammered during the past week, with a few showing abnormal action. In the Model Portfolio, we’ve sold a few positions lately, leaving us with around 40% in cash.

In today’s update, I outline the reasons why I have every intention of remaining invested in various oil industry stocks in the foreseeable future and give a detailed update on all positions in the portfolio.

Despite all the tariff talk, small caps continue to hold up well and even rose by 0.3% this past week.

Emerging market stocks have had a nasty week, with the iShares EM Fund (EEM) dropping decisively below its 25- and 50-day moving averages. While we have several stocks that are vulnerable, we’re going to stand pat for now and have no moves in the portfolio.

In this weekly update, you’ll find great news from RV-makers Thor Industries (THO) and Winnebago (WBO), the potential for a near-term breakout in shares of Intercontinental Exchange (ICE), and exciting news about the Disney-Comcast-Fox takeover tussle and how it’s affecting the Discovery Communications (DISCA) share price.

Stocks pulled back yesterday, but the market’s intermediate-term trend remains up. Stay the course, and resist overreacting to the oscillations.

Our second recommendation is some profit-taking.

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.

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.