The market is getting stronger and higher-growth names are leading the charge.

This month we dig into an overlooked company with a global payments platform that’s helping solve digital payment challenges in complex industries.



Growth is expected to be over 30% for a number of years, and the stock is acting well.



Enjoy!

Explorer stocks had a great week as Centrus (LEU) is up another 10%, Cloudflare (NET) adds 20%, Infineon (IFNNY) reports revenue jumping 33% and Ford (F) reports eye-popping sales results for July. Data and analysts are divided so stay cautiously optimistic and consider today’s new recommendation at the heart of U.S.-China rivalry.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the August 2022 issue.



When considering turnaround situations, our most-preferred catalyst is a chief executive officer change. When a business is sliding backwards, this could be exactly the change needed to restore its prosperity. For frustrated shareholders, the change can bring immense potential. We discuss six new CEO situations that look appealing.
Long ago, astute investors noticed that the stocks with the highest dividend yields in the Dow Jones Industrial Average tended to become the index’ best performers in future years. Following the recent market sell-off, we re-visited this group to look for interesting opportunities. We review six of the highest dividend yielding Dow stocks, and leave out three that have immense strategic and profit pressures.
Our feature recommendation this month is Volkswagen AG (VWAGY). The shares have plummeted after our timely sale last year for a 182% total return and we take this opportunity to repurchase them at the current low price. The financially sturdy company has a new CEO and another possible catalyst from a Porsche initial public offering.



We note our recent ratings change of Credit Suisse (CS) from Buy to a Sell.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the August 2022 issue.

Ernest Hemingway’s quote about “… gradually then suddenly…” could apply to the escalating geopolitical tensions.



It has been a quiet month for new recommendations and ratings changes as we patiently wait for attractive opportunities in a difficult investing climate.



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!

July concluded with an impressive rally, led by strong earnings reactions from mega-cap technology stocks (MSFT/AMZN/AAPL) which helped propel the S&P 500 to gain 4.25% on the week, the Dow to rise 3%, and the Nasdaq to soar higher by 4.7%.

What a week for the market! That’s not something we’ve said a whole lot this year. But we’ll take the good news and try and capitalize on the momentum by adding the first pure growth stock to the Stock of the Week portfolio in a while – one that Cabot Growth Investor analyst Mike Cintolo thinks could be a new leader in its fast-blossoming field.

Plus, with a lot of our stocks acting well, we’ve upgraded two of our existing recommendations to Buy. Details inside!

2022 has been pretty sour this year, but let’s give credit where it’s due—the market has been able to put one foot in front of the other for a few weeks now, and importantly, after showing enough strength to turn the intermediate-term trend up two weeks ago, the buyers have kept on buying, really the first time we’ve seen that all year. The vast majority of action has been from off-the-bottom names, so it’s not the time to go bananas on the buy side. But with the evidence continuing to improve, we’re OK extending your line as things start working.



This week’s list has a wide range of names in a variety of sectors. Our Top Pick has a reliable story and solid growth, and its sector is suddenly acting very spunky. Try to buy on dips after the recent move.

As we enter the fourth week of earnings we’ve been averaging only one trade per week. No biggie. We should still see our average of 8-12 trades by the end of the season and with a few key opportunities next week I hope to make at least two, potentially three trades. Of course, Mr. Market will truly decide whether or not we are able to place more than one or two trades next week.

The recent rally in the market has helped all our positions. If this keeps up, we should reap quite a bit of premium for the August expiration cycle.

We added JPM to our shorter-term Income Trades Portfolio and plan to add several more as we progress through earnings season. My intent is to add at least two to three more to that portfolio by the end of next week as the opportunities are plentiful currently. As I’ve stated in the past, the goal is to ladder our shorter-term trades, so we have trades expiring on a weekly basis. Of course, we are in the beginning stages of the service, with a challenging market, so I will remain patient in my selection. If Mr. Market cooperates, stay tuned for several trade alerts as we move through next week.

We locked in another gain this week, marking our fifth straight winner since starting the Quant Trader service. Our cumulative total is 56.26%, for an average winner of 11.25%. The gains have been on the smaller side, but given the volatility we’ve seen in this market, I’ve chosen to take winners off the table when we can lock in 50% to 75% of the original premium sold. In some cases, I might let a few winners run a little longer, but not in this market. There is no need to press. And when you think the market has lost 2.6% over the same time frame, well, I think we’ve done okay for ourselves.

The market’s slow, steady improvement continues, with our Cabot Tides turning positive last week and some more stocks starting to shape up. That said, we still think it’s best to go slow here, partially due to more time being needed for setups to emerge, and partly because so many names we’re watching actually report earnings in the next week or two; the reactions will go a long way toward telling us if this rally has legs. Right now, we’re cautiously optimistic--we have no more buys tonight but could in the days ahead if things go well.



In tonight’s issue, we write about our new additions, review some other top ideas (including one that’s shown repeated huge-volume buying over the past many months) and remind you that the market is very capable of getting going despite the bad economy.

This week’s GDP number should confirm that we are in a recession. That might be good news for the market.
The worst situation for stocks tends to be a “looming recession”. Stocks tend to fall most as a recession approaches and in the early phases of an actual recession. Stocks also tend to recover before the economy because the market anticipates six to nine months into future. In a typical recession, stocks fall before it hits and recover before it’s over.


If this week’s number confirms that we are in a recession that began at the beginning of the year, the market should be in a more desirable position than if a recession is anticipated later this year or early next year.<.p>


The recent rally in technology is encouraging. I mentioned in last month’s issue that technology stocks had fallen before the overall market and were likely to recover before most other sectors. Since then, portfolio position Qualcomm (QCOM) is up nearly 30%.


This month’s issue highlights another technology stock, Intel (INTC) . The stock is still very cheap with bright prospects in the future. If the market turns south again, the stock should hold up better than the technology sector and be a solid longer-term hold. But if this rally in technology proves to be lasting and QCOM gets called away, we will still have another tech stock that should move higher as well and provide a great call writing opportunity.

The indexes are having another good day today, led by growth stocks this time—as of 3:30pm, the Dow is up 253 points and the Nasdaq is up a big 322 points.

The New Year is a wild one so far in the market with big up and down swings. The Dow was down big Monday and it’s up big today as bank stocks have caught fire.

As I think about the market in 2021, I’m conflicted. While I see signs of market excess, I have high conviction in our list of open recommendations and continue to find a bunch of additional companies that look attractive.

The major indexes had a down day on the first trading day of the year.

This month saw several major mergers/acquisitions and changes in CEOs and at least two high-profile activist campaigns.

As we head into a new year, I would like to thank all of you for your support and wish you all both good health and profits in 2021. But today, we have a piece of unfinished business that needs to be dealt with - Alibaba (BABA).

I’m sending this week’s update out a day early because I have a window to work now with the kids somewhat entertained with Christmas presents. And it’s always nice not to load up our team with communications the day before a holiday (Cabot is closed Friday).

The New Year looks promising for dividend stocks. With prices in many growth sectors at high levels ahead of a very promising economic year, the relative performance of dividend stocks in general should be much better this year than in 2020.

With the turn of the calendar only a few days ahead, just about every investor is mapping out their market views for the coming year. Some do this formally, like Wall Street brokerage firms who publish their opinions on where the S&P 500 and interest rates will finish next year and their outlooks for all sorts of economic and financial indicators. Others will informally develop their views and expectations for the coming year.

Zweig’s research indicates that the market rallies 0.53% or 176% on an annualized basis on the day before New Year’s Day. Who knows what next year will bring, but odds are the market will finish 2020 on a high note!

The situation looks bright in 2021. Several high dividend paying stocks and sectors have had a big move higher after the vaccine announcements.

We’re mixing things up a little this week and next and going with very brief Weekly Updates.

Late yesterday Accolade (ACCD) announced it was diving deeper into the telehealth market by acquiring 2nd.MD, a small start-up based in Houston, TX. The acquisition target provides expert medical consultation services to patients, typically at a critical point in the patients’ lives when a second opinion and/or consultation and provider care options are of utmost importance.

What a market! Despite all the noise out there our portfolio’s performance continues to exceed expectations. Our average gain across 30 positions is hovering between 80% and 85% as I write.

The expiration of our January covered calls is today, and we have one position (UBER) likely to be called away for maximum gains (great scenario) and another (ADNT) that is too close to call and will likely come down to the close (good scenario).

The shares of this large bank were recently upgraded to ‘Buy’ at UBS and Jefferies.

This biotech is forecasted to grow at an annual rate of 35.60% over the next five years.

Moving DuPont (DD) to Sell.

Part of the marijuana sector’s strength, of course, is because the broad market is also trending higher. But a substantial part comes from the growing realization, especially in wake of last week’s election that promised us a uniformly Democratic federal government, that this industry will continue to boom as legal barriers are removed.

This week, this biotech reported that its full-year 2020 net sales exceeded the high end of the company’s guidance range of $2.12 billion to $2.14 billion, growing more than 65%.

Karyopharm (KPTI) pre-announced Q4 2020 results yesterday morning and I watched the stock, which was weak (closed down 8%) throughout the day as I pondered the results. I’ll get to my thoughts in a minute. First, the numbers.

This Top Pick is a speculative buy, but has recently become more buyable after the company announced its plans to offer up to $35 million in additional shares.

This tech company beat analysts’ EPS estimates by $0.10 last quarter.

Yesterday after the close Accolade (ACCD) reported Q3 results that surpassed expectations on both the top and bottom lines.

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.