For the second month in a row we’re going where the growth appears most resilient. Which means MedTech.

This month it’s another company focused on the spine. But a very specific area. The company specializes in implants for sacroiliac joint (SI) fusion. It already reported Q1 results (beat expectations) and the stock is acting well.

Enjoy!

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the May 2023 issue.

Capital market conditions have tightened in the past year, making companies that hold excess cash more valuable and less reliant on fickle external financing. Our search for cash-rich companies that have real products and services with proven and enduring demand whose shares are out-of-favor turned up three promising stocks. Several currently recommended Cabot Turnaround Letter names would also make this list.

Our research process involves looking at a large number of possible turnaround ideas. As investing legend Peter Lynch once said, “The person that turns over the most rocks wins the game.” We uncovered six stocks that have both promising turnarounds ahead yet also have discounted share prices.

Led by mega-cap tech stocks, the indexes tacked on modest gains last week. The S&P 500 rose 1%, the Dow added 0.84%, and the Nasdaq gained 0.7%.

Thank you for subscribing to the Cabot Value Investor. The new name for the former Cabot Undervalued Stocks Advisor more clearly and broadly describes our mission to serve value-oriented investors. We hope you enjoy reading the May 2023 issue.

Fitting for a value investment newsletter, your chief analyst will be making the pilgrimage to the Berkshire Hathaway Annual Shareholders Meeting this coming weekend.

In this month’s letter, we include our recent new Buy recommendation: NOV, Inc. (NOV). This high quality mid-cap company ($7.3 billion market cap) appears to be in front of an upshift in demand for sophisticated drilling equipment even as its shares trade at a modest valuation.

We also cover earnings reports and provide other relevant updates on our recommended companies.

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.

For the big-cap indexes, last week was intriguing, with a sharp dip from resistance on Monday and Tuesday leading to an equally-sharp snapback—a possible shakeout of sorts. That said, the bullish action remains concentrated in a handful of names; the broad market is still meandering at best and there were more than a few air pockets last week among potential leaders. All in all, we’ll drop our Market Monitor to a level 4—that said, there are still tons of earnings reports on tap this week and next, so a bunch of gaps up (and broad market strength) could give us plenty to work with.

This week’s list has a bunch of recent earnings winners as well as a few that are set to report. Our Top Pick was an early leader off last year’s October lows and looks to be resuming its uptrend after a two-month rest.

The good times keep rolling in the Stock of the Week portfolio, as more than a handful of our stocks are either at 52-week highs or all-time highs thanks in part to big earnings boosts in recent weeks.

While there are myriad potential potholes out there – another big regional bank failed, another interest rate hike is likely coming this week, the debt ceiling and mild recession are looming, earnings overall have been mixed, and so on – the market has been remarkably resilient of late. So this week we take another big swing by sticking with what has been our bread-and-butter niche since taking over this advisory last summer: up-and-coming retail leaders. The latest addition is a favorite of Cabot Growth Investor Chief Analyst Mike Cintolo.

Details inside.

Our focus this week will be on CVS Health (CVS), Starbucks (SBUX), ConocoPhillips (COP) and Apple (AAPL).


Last Friday, during our live webinar, we took a detailed look at what type of trading opportunities the four companies above (and several others) were offering prior to their earnings releases this week. Fortunately, it looks like all four offer some decent trading opportunities, although Mr. Market will ultimately dictate whether or not the same opportunities are available at the time of the trade. My hope is that we are able to get two to three trades off this week, bringing our total for this earnings season to seven.

We have two positions on at the moment, both due to expire at the June 16 expiration date. Fortunately, both are hovering around the same price we sold them for, so all is well at the moment. And given we are leaning slightly bearish in both positions, a move lower should certainly help both positions and possibly lead to some early profit taking.


My hope this week is to add one more trade to the June 16 expiration cycle, preferably a bullish leaning trade to balance out the deltas in the portfolio. Otherwise, we will simply sit on our hands and allow time decay to work in our favor.

We are 18 days away from the May 19, 2023, expiration cycle coming to a close and the three remaining May positions all remain in good standing. Moreover, time decay continues to accelerate, which has already started to give us an opportunity to roll our positions in an attempt to collect more premium.

We locked in profits in both PFE and KO and immediately sold more premium last week and if all goes well this week, I intend to do the same with the remaining three May positions.

*Since we started the Income Trader service back in early June 2022, we’ve brought in a total of 69.14% in income. My hope is that we can step up our gains even further by adding as we progress through 2023.

Led by mega-cap tech stocks, the indexes tacked on modest gains last week. The S&P 500 rose 1%, the Dow added 0.84%, and the Nasdaq gained 0.7%.

Led by mega-cap tech stocks, the indexes tacked on modest gains last week. The S&P 500 rose 1%, the Dow added 0.84%, and the Nasdaq gained 0.7%.

After another month of dramatic declines in March, cannabis stocks showed a little more stability in April.

This is encouraging, even though it is never really possible to “call the bottom” in out-of-favor groups.

How out of favor is cannabis? I’ve invested through three bear markets, and I don’t think I have ever seen a group as unloved as cannabis is now. Remember, this is a good thing if you are a contrarian investor looking for bargains, as long as the group in question is not a value trap. (Like the declining newspaper industry years ago, a value trap that Warren Buffett got caught in.)

The past week has seen a reversal of the bullishness in Greentech, with five of the past six trading sessions down days and nearly two-thirds of stocks in our coverage universe lower over the past week too. Interestingly, our benchmark index, the Wilderhill Clean Energy Index, has seen much more bearishness among its 78 components, with 70 of them lower the past week. Comparing the two shows that EVs and batteries, which the Wilderhill holds a lot of, are the very poor performers. The good performers, most of which the Wilderhill doesn’t hold, are nuclear-related stocks, infrastructure companies, and organic food-related stocks.

We briefly discuss our thoughts on valuation and raise our price target on shares of a consumer staples company and introduce a new Buy rating on a retail company.

Prices have been pushed lower across the board for stocks and crypto, as traders look to appropriately price riskier assets in a rising interest rate environment. The VIX has moved higher and is now over 23 as demand for option protection has increased.

Correlation between stocks and crypto assets have been positive, especially in recent months. According to Bloomberg, and Arcane Research, BTC has a correlation to the S&P of .40. For BTC to truly hedge, it would be important to see inverse correlation via a negative coefficient.

This week we review earnings from one of our companies and provide updates on others. Our podcast covers these topics and some thoughts on why waving off rising interest rates because they are “fully discounted” may not be a good idea.

The rise in interest rates and the Russia-Ukraine situation are roiling markets and the Fed will soon begin reducing its $9 trillion holdings of Treasury bonds, putting a dent in liquidity that was propping up markets. This is impacting stocks, especially the tech-heavy Nasdaq market.
Agricultural and food markets are also volatile since almost one-quarter of the world’s grain comes from Russia and Ukraine. Across Ukraine’s farm belt, silos are stuck with 15 million tons of corn from the autumn harvest – most of which should have been hitting world markets by now. Impacted by supply-chain bottlenecks and surging freight rates, the $120 billion global grains trade is bracing for upheavals and severe shortages, not to mention political instability.

The big market rebound has petered. And ugliness might be resuming.

The waning of war panic and relief about the Fed’s March 0.25% rate hike have given way to new concerns. There may be a new round of economic fallout from the war as Europe proposes additional sanctions on Russia. There are also growing concerns about economic growth going forward because of inflation and a more aggressive Fed.

The sharp recovery from the recent bottom has leveled off, at least for now. From here, the prognosis looks murky at best.
New concerns have arisen. There is worry that Europe will impose additional sanctions on Russia, which may include natural gas. That would certainly increase the negative economic fallout from the war. Also, there is increasing concern about slowing economic growth later this year and next.

For more than a year, gold remained stuck in a holding pattern while other metals roared higher in response to global manufacturing demand and supply shortages. All the while, the global economic and geopolitical situation was becoming increasingly tenuous, prompting us to repeatedly wonder when a flight to the safety of gold would transpire.

As market conditions continue to shift, with large-cap U.S. stocks resuming an uptrend in the past two weeks, we are once again making some changes within the tactical Undiscovered Portfolio.

The Update includes comments on earnings from recommended companies, other updates and the Catalyst Report, a powerful tool that anyone can use for finding attractive turnaround stocks. In the April monthly edition we highlight three companies with new CEOs, and summarize our deep-dive into the cannabis industry including six companies whose shares look appealing for long-term investors. We also discuss a spin-off which is our feature recommendation.

Stocks had their second straight bad day today to close out the quarter. At day’s end, the Dow had sunk 550 points, the Nasdaq dropped 222 points and many growth stocks got hit hard.

After a so-so bounce yesterday (good for the major indexes, not great for the broad market), a combination of fresh virus fears and hawkish words from the Federal Reserve is sending the market reeling again. As of 12:30 EST, the Dow is off 590 points and the Nasdaq is down 264 points.

This mega restaurant company beat analysts’ earnings by $0.30 last quarter. The shares have a current dividend yield of 2.21%, paid quarterly.

This giant oil company blew right through analysts’ earnings estimates, posting EPS of $2.96, compared to the forecast of $2.21. The shares have a current dividend yield of 4.71%, paid quarterly.

General Motors has made a remarkable transition from bankruptcy in 2009 to a highly-profitable and innovative contender in the rapidly changing global auto industry, driven by CEO Mary Barra.

This is the world’s largest uranium company, and its shares were just upgraded at BofA to ‘Buy.’

On to the market, we’re in a good old-fashioned correction for growth stocks. The action in a lot of individual names is as ugly as we’ve seen in a while, with some stocks looking just downright awful. This is a broad move – very few stocks are being left out of it. I suspect the selling has been exacerbated by this being a holiday week.

Today, MRO stock is up 2% along with its oil stock peers. We are going to take advantage of today’s stock gains to exit this stock position for a small loss, so we can move this capital into a fresher idea next week (reminder: tomorrow is one of our two weeks off per year from publishing Profit Booster).

Despite what the broad market indices say, it’s a gross day for the market, and for software stocks in particular. This had been an interesting group in recent months. We’ve seen several rocket to unbelievable heights, while others have continued to falter. It doesn’t take a lot of imagination to foresee a scenario where there is some mean reversion here (i.e. the strongest ones come down, weakest ones pop back up).

The major indexes are doing well today thanks to some mega-cap names, but under the surface, we’re seeing a ton of damage among leading growth stocks. As of 11:15 am ET, the Dow is up 240 points and the Nasdaq is up 91 points, but most growth-oriented funds are down and many names are off big.

Our first pick is a semiconductor company that just closed its acquisition of software company Oculii. The company will report earnings on November 11; current estimates are EPS of $0.49 on revenues of $90.35 million. Our second recommendation is some profit-taking on a previous idea.

It’s time for a seasonal copper trade, and this ETF is a good entry point for the metal.

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.