For many weeks the selling pressure was overwhelming, so the first thing we needed to see was the bulls at least put up a fight—and they did two weeks ago, with lots of hectic action after some oversold extremes. And then we saw some lift for the first time in a while, with many beaten-down names finally getting off their knees and a few stocks pop on earning. All in all, we consider it a good start, with the January 24 likely representing a workable low that the market can build off of.



We’ll take it, but in terms of the overall picture, the bulls still have more work to do: The intermediate-term trend of the major indexes remains down, and most individual stocks are still buried beneath major resistance (just 37% of NYSE and 19% of Nasdaq stocks came into today above their 200-day lines). Near-term, we do think the odds favor some further upside, but the rest test will come as indexes and potential leaders run into resistance; as has been the case, we’re not opposed to starting positions in a potential leader or two, but we continue to think a defensive stance remains mostly appropriate until we see some “real” buying and positive trend changes. Our Market Monitor remains at a level 4.



This week’s list has a variety of recent earnings winners and other setups ahead of their reports. Our Top Pick is Stifel Financial (SF), which (interestingly) is part of a strong Bull Market stock sector and recent surged back to its peaks after a solid Q4 report.

The past week’s rally has lifted all the stocks in our portfolio (in fact, two have hit recent highs!) and thus I have no sell ratings today. But I do think caution is still important, as the market’s main trend is now down.

Holding some cash is advisable, but there are definitely overlooked bargains out there, and I think today’s recommendation is one of them.



Details inside.

With the bulls and bears continuing to fight it out in the growth arena, we’re moving into a more cyclical industry with today’s addition.

The company is a leading maker of semiconductor manufacturing equipment. This industry is growing rapidly as the current innovation wave requires smaller, faster and more durable chips.



Making those chips at scale can only be done with specialized measurement and process control equipment. Which is exactly what this company specializes in.



Enjoy!

The Facebook/Meta stumble will weigh on markets today as we await earnings on Amazon (AMZN) and Ford (F). Explorer stocks did well this week as markets continue to be volatile. Total electric vehicle sales in 2021 including hybrid vehicles doubled the number from 2020, which brings us to the Explorer’s new recommendation.

It’s a bear market but there are still good stocks. This issue we add two to our Real Money Portfolio. One is a little-known company that with a niche in transporting renewable energy parts, like turbine blades. Its stock, technically, looks great and a management turnaround is taking hold. Our other pick is a Greentech special purpose acquisition company that will preserve our capital while giving us multiple options down the line to score big profits.



Also inside: our ESG Three, Greentech Timer and a full update on our Real Money and Excelsior portfolios.

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



Word puzzle Wordle is the latest craze, but it isn’t the most popular parlor game. This title is held by “What Is Russian President Vladimir Putin Going to Do With Ukraine?”



We provide our theory which is not found anywhere else yet could readily explain his motivation. Related to this crisis, we move shares of ConocoPhillips (COP) from Buy to Hold, as they have surged above our recently raised 89 price target.



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.

Inflation fears, COVID and Russia have roiled the markets since the beginning of the year. Now that the Fed has made clear that interest rates are going to move up, I think some of the volatility will level out a bit.

The market seems oversold right now, so we can expect a few up days in the near future. But we remain stock pickers, not dart throwers.



The economy is certainly continuing to gain strength. Unemployment is steadily declining, and Fed Chairman Powell said this week that he believes moderate inflation will not disturb that scenario.



Meanwhile, housing continues at a robust pace. Inventories are still depleted, and home building is exploding all over the country. Sales of existing homes, housing starts, and permits are climbing, and the demand is continuing to boost prices. Once rates begin rising, we may see some pullback in demand, but even with rate increases, rates will still be at incredibly low levels, so I don’t see a significant slowdown in home demand.



This month, I’m adding a marine shipper to our portfolio–a company that is benefiting from the shipping demand/supply equation.



I look forward to hearing from you, so please keep your emails coming.



Happy Investing!

As for market performance, speculative and growth areas continue to struggle while stocks tied to rising rates and cyclicals managed to garner the most attention from buyers. However, the recent short-term rally could see higher-beta areas come back into play.



Today, I’m adding Corning (GLW), which reported blowout earnings last week.

As we wrote in last week’s issue, we started to see some extremes out there when it comes to selling pressure, with a few different breadth-related measures nearly reaching levels seen at prior major lows of the past decade. And the major indexes did mostly hold their Monday lows for the rest of the week, even flashing an encouraging turnaround on Friday with a couple of minor positive divergences, before today’s pop higher. The question is how far this nascent bounce can go--so far the Nasdaq has bounced about 1,000 points after declining 3,100, and up action has been limited to just a day or so before the sellers are back at it. That can always change, of course—in fact, we think the odds are decent that it will—but our point is that the onus remains on the buyers to continue to step up to form a workable low the market can build from. In the meantime, we’re sticking with the same cautious stance, holding plenty of cash and keeping new positions small.



This week’s list is actually fairly mixed between sectors, with some commodities, some biotechs and some earnings winners. Given the environment, our Top Pick is Corning (GLW), which isn’t their fastest horse, but it has a solid business and a very good chart, having just enjoyed a nice buying cluster after earnings.

With the market in a downtrend—though possibly ready for a rally—the prudent course is to continue to focus on strong sectors (like energy) and cheap stocks, which is what we’re doing with today’s recommendation.



As for the current portfolio, we’re down to 15 stocks, from a maximum of 20, and selling none of them today.



Details inside.

The market remains under pressure, with our Cabot Tides and the “Growth Tides” (see more in this issue) negative, and even our longer-term Cabot Trend Lines on the verge of a sell signal. To be fair, we are starting to see some “real” extremes in terms of some sentiment and oversold measures, so we’re hopeful a bounce could get underway soon; we’re not ruling out some nibbling or re-jiggering in the Model Portfolio. But the main trends remain down, so our main advice is to stay mostly on the sideline and keep your watch list updated with potential fresh leaders.

The first news is the renaming of our advisory, from Cabot Marijuana Investor to Cabot Sector Xpress Cannabis Advisor, which is explained in today’s issue.

While the broad market was falling apart over the past week, several of our cannabis stocks held firm above their December lows, telling us that after an 11-month downtrend, the selling pressures are pretty much spent in that sector.



Today’s issue brings a few tweaks to our portfolio, but no big changes, as we are well positioned for the sector’s next uptrend.



Full details in the issue.

The past week has seen the market rocket higher on hopes for a massive $2 trillion economic stimulus plan that would try to help consumers and businesses get through the tunnel of productivity and financial devastation that this pandemic has created.

In such an environment it’s easy to assume the worst and miss the flipside of the equation – great companies trading at prices that just a month ago we would have considered incredible. Market volatility and uncertainty are creating great opportunities.

The market doesn’t know how long this will last. And that’s why it hasn’t been able to find a bottom. But there has been some very encouraging news in the past week.

The economy has fallen into a recession. The official economic statistics are not at our doorsteps yet – two quarters of falling GDP – but it’s fairly obvious that American business has gone into hibernation for at least a few months.

As financial markets begin to thaw, global leaders build consensus on how to address this pandemic, options of potential interim treatments for Covid-19 surface and the framework of economic relief starts to firm up (even though it won’t be enough), the stock market may be showing early signs of stability (a relative term).

Remain defensive. There are certainly indications that a countertrend rally could start at any time, so we’re not anxious to raise more cash, but we’re sticking with the trend, which remains down. In the Model Portfolio, we have no changes tonight—we’re holding four resilient stocks and a cash position of 71%.

Fear of the spread of a new virus has devolved into an economic disaster, at least in the short term.

Well, we’re in the thick of it. New citywide, statewide and national mandates are being pronounced daily, the stock market fell dramatically, my two daughters were sent home from college, three close relatives lost jobs/projects, and one close relative is a basket case over potentially losing his business.

To say that the coronavirus has infected the stock market would be to state the obvious. Less obvious is the answer to the question; what’s the antidote?

Ironically, China’s blue-chip CSI 300 Index hit its highest point this week since February 2018.

Monday’s market downturn was a bit breathtaking. First we had a stock market that was overdue for a pullback. Then the coronavirus hit, harming the Chinese economy, which in turn harms every business that sells products and services in China and manufactures products in China.

Remain cautious. The market has been gyrating wildly this week, holding above its lows from last Friday.

Five holdings are in this ETF.

Two portfolio stocks reported earnings, and ratings remain the same.

This small cap stock was recently added as a member of the US Small-Cap Russell 2000® Index.

This instrument company will report earnings on August 5.

This portfolio stock reported last night what can only be described as an outstanding quarter.

Two portfolio stocks reported earnings yesterday and both remain Buys.

This trucking company has been in the acquisition mode and has a current dividend yield of 1.89%, paid quarterly.

Tyler updates four stocks in the Cabot Early Opportunities Portfolio.

We provide the top five holdings in this fund.

This online educator’s price target was just raised by Morgan Stanley, to $83.

With China beginning to ease restrictions and sports betting rising, this casino operator has excellent potential.

This REIT will announce quarterly earnings on July 30; analysts are forecasting $0.48 per share.

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.