This week, as we continue to keep the portfolio diversified, we are adding a biotech/pharma play that recently reported strong earnings.

Last week brought some true extremes when looking at sentiment and oversold conditions, telling us some type of bounce was likely. That’s what we saw starting Thursday afternoon, and we’re optimistic we may have hit a workable low—“workable” in this case meaning the market can work higher for more than just a couple of days. That said, we’ll just see how it goes: While there are a few stocks acting well and set up decently, the vast majority of evidence remains negative, so we still favor defense and patience as the market tries to etch a bottom.
Encouragingly, though, this week’s list does have a few names that have shown outsized support during the past couple of weeks, often after earnings, and our Top Pick is one of them as it attempts to round out its launching pad.

While there’s a very possibility of a good market bounce after last week’s washout, the overall picture is still very weak and thus continued defensiveness is still advised.
This week’s recommendation is the world’s largest manufacturer of industrial robots, yet most U.S. investors don’t even know its name. It looks like a great low-risk buy here.


As for the portfolio, we’re selling one stock, a small company in the beleaguered technology sector.


Details inside.

A difficult stretch causes us to sell two underperformers this week but we move forward today with a high-quality Japanese company at the heart of an unstoppable trend and a high-quality stock on sale.

As Mike Cintolo, Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader always says, “you shouldn’t fight the tape.” The markets are battling it out these days, trying to find a bottom. The constant news cycle of Russia-Ukraine, rising rates (up 0.5% last week) and increasing inflation are causing a severe case of market indigestion and volatility.



What’s an investor to do? As I’ve been saying for the past 6 or so months, judicious investing is the key. While most sectors (except Energy and Utilities) and the majority of equities, are down for 2022, there are still pockets of ideas worth investigating, including some defensive moves.



With that being said, I think investors should be keeping some cash on the sidelines, as when this market shows signs of a long-term turn, there will be plentiful bargains to be had.

It might not be too early to bargain hunt very selectively. Companies that are likely to continue to grow earnings and the dividend are likely to recover. There is one such opportunity in the cannabis sector.


The sector has been decimated in this market. The ETFMG Alternative Harvest ETF (MJ), the largest cannabis ETF, has fallen almost 50%, and 70% from the 2021 high. The selloff has taken the most reliable money maker in the sector down with it, despite continuing success and earnings growth.


In this issue, I highlight this reliable and high-growth stock. It pays a better than 5% yield and the payout is likely to grow, as earnings are expected to grow 37% this year.

Today, I’m recommending a company that will benefit from the post-pandemic travel boom.
Other key points:
•145% quarterly revenue growth
•Cheap valuation: 5.7x EBITDA
•Hidden high-growth payments division
•High insider ownership (21% of the company).
All the details are inside this month’s Issue. Enjoy!

One key tenet of asset allocation is risk management. You’ll find that principle to be much more salient when it comes to investing an entire portfolio, as opposed to simply trading individual stocks.

That’s even more critical during a bout of market volatility, such as what we’re currently experiencing.



Sure, it’s possible and even desirable to diversify in a single-stock account. For example, you can potentially mitigate risk by owning stocks from various sectors, or at least sub-industries within a sector.



That’s exactly why ETFs serve a role as “instant diversifiers.” Because they track a basket of securities, you’ll generally smooth out performance to a larger degree than with a single-stock portfolio.

Rising Rates Pressure Gold

Gold is outperforming the major risk assets this year, but remains pressured in the near term by rising bond rates. For reasons explained in this issue, I don’t expect this dynamic to persist for long, however.



Titanium and steelmaking coal remain the top performers right now, with both minerals supported by shrinking availability and increasing demand. Steel is also strong, meanwhile, while copper remains weak.



For now, I continue to recommend that we maintain a mostly defensive stance.

There is no sugarcoating it: We are in the midst of a pretty nasty bear market, which unfortunately means we are going to be stopped out of our Cleveland-Cliffs (CLF) position today.

The market was hit hard again last week, so all trends remain down, and increased caution is still advised.


This week I’m selling two stocks that have weakened since reporting first-quarter results last week, but I’m also upgrading one to buy!


As for the new recommendation, it’s a well-known retailer with a slow but solid growth story whose stock is cheap.


Details inside.

Today was another day of bloodletting, with the major indexes and many former leaders continuing to melt down. Short-term, there’s little doubt things are getting emotional—thus, it’s certainly possible we’re close to a low point, but of course you could have said that a few days ago as well. As always, you shouldn’t fight the tape—with most things cratering, you should be holding much more cash than stocks, though we’re still not opposed to a nibble here or there. When this maelstrom is over, there are going to be some great buying opportunities, but right now, you should remain defensive. Our Market Monitor is down to a level 2.



This week’s list is heavy on commodity names, which did get hit today but in general remain in uptrends. Our Top Pick is a refining name that has recently shown accelerating strength.

There isn’t any major news for any of our stocks.

The Cabot Global Stocks Explorer portfolio had another good week, with four stocks all making major moves.

These are the dog days of summer. It’s a rare time of year when a certain degree of slackery is not only tolerated, but expected. People tend to focus on enjoying the waning days of summer. More serious issues and considerations get postponed until after Labor Day.

Starting next Monday, August 31, before the market opens, the Dow Jones Industrial Average will have a new look.

This week, the main updates are from a stock that reported earnings and another portfolio stock that announced that it has sold its midstream business and will liquidate the company.

As far as the last week goes our stocks are up an average of 3%.

2020 has surely been one for the record books—the sharpest selloff in history from a record high to a bear market and then the sharpest rebound in history from a bear market to a new record high.

It has been an amazing market. The S&P 500 just made a new all time high. It has rallied a staggering 55% since the lows in less than five months. The market is forward looking and anticipates a rapidly growing economy, a friendly Fed and record low interest rates and a vaccine in the months ahead.

After a brief decline in early June, the market has resumed the uptrend that began on March 24th. It has been a spectacular 55% rally in less than five months.

Second quarter earnings season is winding down. It was quite a quarter! We’re impressed that so many companies have aggressively reduced their operating costs in the recently completed quarter.

Many of our micro-cap stocks reported excellent quarters.

This week is off to a good start for growth stocks—many of the names that have been acting wobbly during the past couple of weeks bounced decently yesterday and today.

Just a brief update today, mainly to discuss this morning’s sharp drop in the stock that we added to the portfolio last week.

In the past 30 days, four analysts have boosted their EPS estimates for this insurance company.

This contract research company beat earnings estimates by $0.32 last quarter.

he overall evidence remains mostly positive, though after a heady rebound, the indexes and many growth stocks are correcting and consolidating.

On Friday three of our stocks closed above our short strike price for full profits.

This Consumer Defensive company beat analysts’ EPS estimates by $0.13 last quarter.

Acme United Corporation (ACU)
From SmallCap Informer

For more than 150 years, Acme United Corporation has supplied innovative cutting, measuring, first aid, and sharpening products to the school, home, office, arts and crafts, hardware,
sporting goods, fishing tools, and industrial markets. Its top brands include First Aid
Only, PhysiciansCare, Pac-Kit, Spill Magic, Westcott, Clauss, Camillus, Cuda, and DMT.

The company’s diversified end markets provide exposure to both hobbyists and industrial facilities. Growing concerns about industrial health safety is driving interest in many of Acme
United’s products. Its safety solutions include component kits that are often required by industrial safety regulations and can be restocked using its SafetyHub app. The kits focus on different needs, such as first aid, eye washes, or medications, and the app can deliver push messages about refills and maintain an OSHA compliance log.

The company is diversified globally, with operations in the U.S., Canada, Europe, and Asia.

Management sees several drivers for Acme United’s growth. New first aid programs being put into place at large industrial, food service, and other distributors should drive growth, along with an expanding refill business. The company’s widening product line should increase cross-selling
opportunities, as well.

Acquisitions are part of the company’s growth strategy, enabled by a strong balance sheet and good cash flow. In January 2020, Acme United acquired First Aid Central, a Canadian supplier of first aid kits, refills, and safety products for a broad range of customers. This acquisition expanded the company’s distribution capabilities, product offerings, and online presence.

The COVID-19 pandemic caused an uptick in Acme United’s sales a wide array of products including fishing tools, hunting knives, craft scissors, sharpening tools, first aid, and safety products. Increasing awareness of the need for safe workplaces should benefit the company as the nation returns to work.

In the second quarter ended June 30, 2020, sales grew 9.5% and EPS grew 19.5% over Q2 2019. In the first half of 2020, EPS reached $1.28, up 27% over 2019 first half performance and closing in already on the 2019 full FY EPS of $1.60. Analysts expect EPS to reach $1.92 for the full year, a healthy increase over 2019.

We project future annual average growth of EPS and sales to be around 10% a year, plus dividends. Acme has increased dividends every year in the last decade.

Acme United’s stock is currently selling a P/E ratio of 12.0, just below our revised
average P/E ratio of 12.4. We think the stock can sell for a P/E ratio of 15.7, which would
take the price as high as $47.
This Consumer Defensive company beat analysts’ EPS estimates by $0.13 last quarter.

We are raising our price target on shares of Jeld-Wen (JELD) to 28 from 25.

Our covered call ideas for the October expiration cycle are on their way to yielding us another solid month of profits ranging from 7.88% to 17.41%.

This payment solutions company is expected to grow at triple-digit rates in the next five years.

Chart is an interesting company, for sure, and we would be happy to buy again at much lower prices.

This closed-end fund has a current annual dividend yield of 6.73%, paid quarterly.

After last week’s two rounds of buying, the portfolio’s cash level is now down to 27%, and all our stocks look good. So now the question is whether we should continue buying.

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.