The $1.2 trillion infrastructure bill money should start flowing this year. This issue we feature two businesses that should benefit from the influx of capital into public spending on top of their already positive growth.

Action in Greentech has us cautiously optimistic that the sector is reversing the bearishness that has gripped tech stocks and renewables for the past few months. In this issue, too, is our ESG Three stocks to consider, a glance at what out Greentech Timer tells us and a full update on our Real Money and Excelsior portfolios.

The big news of last week was inflation data came in well above expectations on Thursday as the consumer price index (CPI) rose 7.5% year over year. This was the largest increase since 1982.
Shortly after, rumors of an emergency rate hike made the rounds on trading desks as the 10-year Treasury yield pierced the 2% mark for the first time in three years. Following this development, rate-sensitive sectors and growth stocks underperformed.

After a three-week rally, stocks hit resistance at logical levels, with the indexes backing off … though they still remain nicely above their January lows. It’s possible we’re starting a re-test phase, with the major indexes and many stocks set to attack their January lows. But, really, we’re less concerned with gaming out the daily action than with sticking to the overall evidence—until proven otherwise, the trends of the major indexes, of growth-oriented funds and of most stocks is pointed down, so we advise remaining generally defensive and patient as we allow more stocks to build bottoms and form legitimate setups.



That doesn’t mean, however, that the wheat isn’t starting to separate from the chaff among individual stocks. This week’s list has a bunch of stocks that have shown some great-volume accumulation during the past two or three weeks, though our Top Pick is a solid long-term setup ahead of earnings.

Note: Due to the Presidents’ Day holiday, when the stock market is closed, your next issue of Cabot Stock of the Week will be published on Tuesday, February 22.
This week’s stock comes from a recent issue of Cabot Top Ten Trader, which is always on top of the market’s strongest stocks—recently has included a lot of energy and financial stocks. This is one of them.



As for the current portfolio, we come into this week holding 16 out of a possible 20 stocks, and …


Details inside.

Welcome to the Inaugural Issue of Cabot Money Club Stock of The Month

Each month, in this advisory, we will be spotlighting a new recommendation from one of our Cabot experts. We will include an interview with the analyst and bring you his or her latest thoughts on the stock we pick as well as a summary of the analyst’s expertise and experience.

We will also include a brief market update, and a longer piece highlighting the macro industry—the pros and the cons—in which our stock pick resides.

And as is usual with our Cabot advisories, we will maintain a portfolio of our stock picks, to give you a one-shot picture of our holdings.

Welcome!

Here is your February Wall Street’s Best Digest, issue 850.

The January markets started off with more volatility than we needed, and some fairly large daily losses. Right now, markets seem oversold, volatility has relaxed, and buying has resumed, although the bulls have not yet recovered all their losses. We continue to be on the side of the bulls, but favor judicious stock-picking right now.


The economy continues to prosper. The markets loved the non-farm payroll numbers last week, coming in at 467,000, compared to the estimate of 150,000. The housing market remains strong, although prices continue to rise. The level of home ownership, at 65.5%, is higher than the historical average of 64%, demand is robust, and inventory is low, so prices will most likely continue to increase in the near-term.



The dip in markets last month has provided our contributors with a lot of stock ideas that have now become buyable at lower levels.

Two weeks ago, we thought the market had likely hit (or would soon) a workable low--and that was right, with the major indexes and (more important to us) a good number of growth stocks perking up. It’s encouraging, but we can’t say we’re bullish yet: The trends of the market and growth funds are still down, and even things that have popped nicely aren’t set up quite yet. All in all, we’re sitting on our hands, but we’re also watchful--another few good days could change things, but at this point the odds still favor more time being needed as a bottom is built.

Interest rates are heading higher.

In normal and efficient markets, a strong economy and steeply rising prices would drive interest rates much higher. But rates have been held down and distorted by the Fed’s hyper-aggressive accommodation.



The Fed dismissed inflation in the early stages as “transitory” and now realizes it missed the boat and inflation is getting out of hand. Behind the curve and embarrassed, the Central Bankers will have to make up for lost time by reversing course, ending its bond buying program and raising the Fed Funds rate.



The main force preventing economic growth and rising prices from pushing interest rates higher is about to be removed, and perhaps quickly. Under the circumstances, it is quite reasonable to expect interest rates to move higher.



In this issue, I highlight an investment in the financial sector. Many companies in the sector benefit from higher rates as they earn higher spreads and profits. This company stands to benefit not only from higher interest rates but a change in consumer behavior as well.

Today, we are making a “jockey bet”. In other words, we are betting primarily on the management team. The management team that we are betting on is responsible for some incredibly value creation in public markets (hint: it’s the same management team as P10 Holdings (PX), a stock that is up over 300% since or original recommendation in 2020).
Other key points:

• Trades at a cheap valuation.
• Paid a special dividend worth over twice its current stock price last year.
• High insider ownership.

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

After pushing into correction territory towards the latter part of January, the broad market seems, if only temporarily, to have found a foundation, as it rose four of the five days last week. The Dow gained 1.0%, the S&P 500 bounced 1.5% and the tech-heavy Nasdaq pushed higher by 2.4%. Year-to-date the Dow, S&P 500 and Nasdaq are lower by 3.4%, 5.6% and 9.9%, respectively.
Today, I’m adding specialty metals company Allegheny Technologies (ATI).

Weakening Dollar Boosts Base Metals
Industrial metals got another boost last week when the U.S. dollar index suddenly and swiftly reversed a prior rally. Gold barely budged, but a recent development in the stock market suggests the yellow metal could soon get another buying bid. In the white metals, silver slept but palladium is on the rise once again.

In the portfolio, we recently added a new position in our favorite commodity-tracking fund and have initiated four additional new buys in various industrial and precious metal plays.

With the markets in a cyclical rally, rebounding from January lows, it’s an excellent time to review your ETF holdings to make sure you’re invested properly for the current market conditions.

In this issue of the Cabot ETF Strategist, you’ll find fully diversified portfolios tailored for aggressive, moderate and conservative risk tolerances.



We’ve also rolled out a tactical “undiscovered” portfolio consisting of smaller or lesser-known ETFs, allocated specifically to the current market cycle. This portfolio is designed to rotate more than a strategic allocation. You’ll be receiving alerts when a change is made here, or in one of the more traditional portfolios.



Use whichever portfolio matches your risk tolerance and goals. Happy investing!



Details inside.

What we may see developing in markets is a rather broad trading range – say from 21,000 to 25,000 in the Dow. This could be our reality until we work our way through the real but uncertain impact of the shutdown on the economy.

There is good news out there. The country is starting to reopen the economy. Sure, there is a political debate, and certain hot spots aren’t ready to reopen yet. But the urgent push to restart this economy is undeniable.

All of our portfolio stocks move to a Hold recommendation while U.S. stock markets react to turmoil in energy markets. I expect more downside to U.S. stocks in the coming days.

Remain defensive, but stay tuned. Despite many crosscurrents and news-driven moves this week, we’re just playing it by the book—our Cabot Tides are close to a buy signal, and if that happens, we’ll take a step back into the market.

As we move closer to the end of another week, investors continue to focus on the potential timeline to open parts of the economy. New York has just said the lockdown for non-essential businesses remains in effect for at least another month, but clearly there are many areas that haven’t been so badly affected.

The market is forward looking. It senses an end to this pandemic crisis and a reopening of the economy sooner rather than later. That’s good news. And I agree. The end-of-the-world pessimism that caused the market crash is being tempered. It’s a very good thing.

Yesterday, while reviewing my entire Buy List, I noticed that the insurance/annuity and investment stocks appear ready to begin new run-ups, after resting for a few days.

Clearly the fundamentals of the U.S. and global economy look awful right now. But the market is looking past the first half of 2020 and into the second half of the year and 2021.

Most positions are up 5%-6% for the week, with a couple of exceptions.

I expect to be adding and removing stocks from these portfolios in 2020, more frequently than usual. That’s because when a stock market recovers from a big drop, stocks tend to get stuck in trading ranges, advancing in fits and starts.

Remain defensive. There are good and bad aspects to the market’s short-term action; overall, we’re optimistic a bottom-building process is underway, but we’ll see how it goes.

After falling over 30% in record time, the market has had a nice rebound. In less than a week the market jumped 15% from the lows. It has since stabilized somewhat with less volatility. While the worst may be over, I don’t think we’re out of the woods yet.

This asset manager saw its revenues increase 90%, to $28.3 million in the latest quarter.

Growth stocks continue to look iffy, with selling pressure becoming more persistent while money flows into other areas.

This lawn, garden, and pet supply company had a great third quarter.

This week has been good for the overall market, but for the leading growth titles, we’re seeing more abnormal selling than we have in a while.

This portfolio stock reported yesterday that Q2 revenue grew by 35% to $65.4 million (beating by $2.4 million) while adjusted EPS of $0.06 beat by $0.27.

I have a number of notes and recommended actions regarding several of our stocks that have made earnings-related moves recently.

This tobacco company is making waves, with its’ ‘heat-not-burn’ tobacco platform.

As you know if you’ve read anything about this deal, these two companies are the “it” players in digital health. Both have business-to-business-to-consumer (B2B2C) business models, meaning they sell to companies, but solutions are used by consumers like you and me.

Two portfolio stocks reported earnings recently and they both are still rated Buy.

This engineering and construction firm is expected to grow by 22.1% next year.

Six portfolio stocks reported earnings recently.

Over the past week, marijuana stocks have been particularly strong, with the strongest being the four leading U.S. multi-state operators that we own—and that means it’s time for another brief update on strategy.

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.