Here is your April Wall Street’s Best Digest issue 840.

I love spring! You may not know this but I’m a Master Gardener, which means when the Bradford pears, Forsythia, and Redbud trees come into bloom, I am just a happy camper!



And this year, with the end of COVID almost in sight and the economy in recovery mode, I feel very optimistic. And as you can see from our Market Views and our Advisor Sentiment Barometer, our contributors are considerably bullish.



Our Spotlight Stock this month, exemplifies that optimism, as we are recommending one of the nation’s top home builders. Certainly, its shares have been driving upwards, but we feel there is much more room to grow.



In Growth, you’ll find a variety of ideas, from the airline, gaming, automobile, yacht, and online education sectors. In Growth & Income, our advisors offer recommendations from the shipping, restaurant, RV, and engineering industries.



Value stocks are finally finding their moments of sunshine, and here we like an aircraft manufacturer and an aerospace and defense contractor. Financial companies are also rebounding, like these asset manager, insurance, and banking businesses. In Healthcare, our contributors favor a technology and an animal healthcare company that is in the midst of a turnaround.



Our Technology offerings include an e-commerce and a semiconductor company. This month, you’ll also find several ideas in the Resources and Energy section. And in Low-Priced Stocks, we offer a couple more speculative companies, coming from the cannabis and marketing sectors.



In REITs and Preferred Stocks, our contributors find financial and self-storage interesting this month. And lastly, our Funds & ETFs section includes some income, small-cap value, and healthcare ideas.



Don’t forget to register for my monthly webinars, along with Kate Stalter, my partner on the Wall Street’s Best Stocks and Wall Street’s Best ETF newsletters. And we’ve begun sending out invitations for our August 17-19 Summit, entitled Smarter Investing, Greater Profits. You can register here.



Please don’t hesitate to send me your feedback and questions. My new email address is nancy@financialfreedomfederation.com.

Editor’s Note: For most of its run, Chief Analyst Carl Delfeld has referred to the Cabot Global Stocks Explorer advisory by its short-hand name, “The Explorer.” So we figured we’d join him! We have decided to shorten the name of this publication to simply, “Cabot Explorer.” The product won’t change at all. This merely puts more emphasis on the purpose of this advisory, which is to “explore” for new, often hard-to-find stocks and sectors ready to break out - regardless of market. Enjoy!

Markets seem to be paying more attention to valuations and looking to confirmation from earnings that the economy is moving to growth mode. Stocks are likely to churn a bit for a while after their great uptrend in the last year. We’ll discuss today why SPACs have cooled a bit even as they spread to Asia, and present a new idea to watch which offers huge growth potential but may be a bit pricey.

Today, we are recommending a call center outsourcing company.

At first blush, it doesn’t sound like a sexy opportunity.



But after you learn the details, it quickly becomes a lot more interesting:

• The call center industry is consolidating, and this company would be a perfect acquisition candidate for a several strategic competitors
• Sophisticated private equity investors own 60% of the company will likely run an auction to sell the company within 13 months
• The stock is incredibly cheap on an absolute basis (3.5x FCF) and relative to peers (3.6x EBITDA vs. peers at 10.0x)

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

While the direction of the market is highly unpredictable in the short term, it’s a safe bet that this economy will continue to recover after the covid recession. It is also highly likely that interest rates will continue to rise.

Interest rates tend to move higher as the economy emerges from recession and gains traction. It’s already happening. The benchmark 10-year Treasury bond yield has already risen sharply this year. Yet, rates are still well below pre-pandemic levels, and the economy is about to ignite. There will also be trillions in stimulus dollars causing inflationary pressures and upward pressure on rates.



Certain dividend stocks and income paying securities endure despite rising rates. And certain special securities can actually thrive. In this issue, I highlight an investment that loves rising rates. In fact, profits increase directly as a result. The stock pays a stratospheric 8.4% yield and pays dividends every month.



In this issue, I highlight an investment that loves rising rates. In fact, profits increase directly as a result. The stock pays a stratospheric 8.4% yield and pays dividends every month.

This Friday is the expiration of our six April Covered Call positions. I would categorize these six positions as a good, but somewhat mixed bag, as only one trade looks like it will expire for its full profit potential (ANF), while four (TRIP, SUM, AMKR, AZEK) are in good shape but may need attention in the week to come, and one (ZI) which is mostly trading at a breakeven. As is always the case, I will update on where we stand with these expiring positions Thursday afternoon or Friday morning.

While there are still symptoms of a broad unfolding market top, and the market as a whole is soft today, the main trend is still clearly up and thus I continue to recommend you be substantially invested.

In fact, in our recommended portfolio all our stocks look fine; there are no recommended changes today.



As for today’s recommendation, it’s a technology company that’s a household name, but still small enough to grow very fast.



Details inside.

Current Market Outlook


It certainly hasn’t been a buying panic, but last week was another step in the right direction, with growth stocks avoiding selling pressure even as they approach (or in some cases, sneak out to) new highs—a marked change in character from the prior few weeks. There’s still some iffy pieces of evidence out there, including sentiment (complacent), volume (extremely light) and even some of the broad market (materials and energy stocks are beginning to lose some steam), but overall it appears that the sellers have run out of ammunition for the time being. If the buyers can really show up, we could see some solid breakouts going ahead. For now, we’re leaving our Market Monitor at a level 6, but another good week may change that.

This week’s list has a bunch of good-looking charts, most of which have a solid growth story. Our Top Pick is United Therapeutics (UTHR), which recently staged a big-volume breakout on news.

Stock Name	Price	Buy Range	Loss Limit
Acuity Brands (AYI)	173	162-167	145-148
ASML Holding (ASML)	630	605-620	550-560
Boot Barn (BOOT)	67	64-67	58-60
Boston Beer Company (SAM)	1,261	1,200-1,30	1,090-1,110
The Goodyear Tire & Rubber Company (GT)	18	17-18	14.5-15
Pinterest (PINS)	84	80-84	71-73
Sally Beauty (SBH)	21	19.5-20.5	17-17.5
SiteOne Landscape Supply (SITE)	182	174-178	160-162
United Therapeutics (UTHR)	199	192-202	172-177
Yeti Holdings (YETI)	84	81-85	72-74

The evidence has clearly improved during the past week or two, and that’s a good thing; we’re putting another couple of toes back into the water tonight, adding two half-sized positions in what we think can be leaders of the next uptrend. That said, we’re content to go slow for now, mostly because, while selling pressures have eased, buying power really hasn’t shown up yet, and until it does, there’s a chance the bears could reappear.

Still, overall, we’re increasingly optimistic, so we think putting a little money to work and then listening to the market’s clues makes sense. Get all the latest inside tonight’s issue.

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

As value investors, we look for companies that are selling at a discount to their underlying value. But how do we measure that value? In this issue, we briefly describe and discuss the EV/EBITDA metric, which is our preferred valuation tool.



While our stocks generally did well this past week, there wasn’t much news. With earnings season starting next week, most companies are remaining fairly quiet.



One change we made was to reduce our rating on Tyson (TSN) from a Buy to a Hold. The shares have about 8% upside to our recently raised price target. From here, we’d like to learn more about its earnings power, which hopefully will be provided in its fiscal second quarter report, before deciding to either raise or sell.



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!

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.

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.

The S&P 600 Small Cap Index broke out to a fresh all-time high this week and is now officially above the 1,000 level! I suspect that milestone isn’t going to make many headlines, but in our little corner of the world it’s kind of a big deal.

Today we’re selling one stock and ask you to consider owning another in its place, because their debt numbers and price chart are improving, and their EPS and P/E numbers continue to look very appealing!

Remain optimistic, but continue to take it day by day. The green light from the Cabot Tides remains in effect, which, combined with our solidly bullish Cabot Trend Lines, tell us to lean bullish. Tonight, we have no changes in the Model Portfolio, where we’re holding about 30% in cash.

After a two-week rally, the major indexes pulled back yesterday, but the retreat isn’t surprising given the market’s recent gains. The last two weeks have turned the market’s intermediate-term trend up, and conditions are in place for a sustained rally. Most importantly, the major indexes have now successfully (meaning they bounced) re-tested their correction lows three times since the start of the year.

Energy stocks are thriving, and some of them have risen into the stratosphere. I never recommend that people chase stocks that just rose 20% to 50% without resting. Let them rest, then jump in to catch the next run-up. On the flip side, financial stocks are just now emerging from a resting period. Many of my favorites appear ready to not only retrace their recent highs, but to surpass them as well!

This was another big week for our portfolio as four stocks reported quarterly results. Fortunately, the wind was at our backs as the broad market is on track for its best weekly gain since March!

Three retail stocks reported earnings.

This technology company focusing on energy and water beat analysts’ estimates by a whopping $0.40 last quarter, and eight analysts have recently increased their EPS forecasts for the company.

This specialty measurement company beat analysts’ estimates by $0.03 last quarter.

This time share company is forecasted to grow 27.4% this year.

Nine analysts have increased their earnings estimates for this royalty company in the past 30 days, and they forecast the company will grow by 21.9% annually over the next five years.

A Spanish news outlet, Intereconomia.com, is reporting that biotech company Amgen (AMGN) is in talks to buy Alexion Pharmaceuticals (ALXN) for close to $200 per share.

We provide the top five holdings of this cybersecurity ETF.

This equipment company is expected to report earnings tomorrow, and analysts expect EPS of $0.74 per share.

This fintech company beat analysts’ earnings estimates by a whopping $0.62 last quarter and four analysts have recently raised their EPS forecasts for the company.

This pharma beat earnings estimates by $1.62 last quarter and 29 analysts have raised their EPS forecasts for the company in the past 30 days.

There are five holdings in this fund.

This discount retailer beat analysts’ earnings estimates by $0.09 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.