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In the November Issue of Cabot Early Opportunities, we take our first step into the crypto economy, delve deeper into international e-commerce markets, bring in another security specialist, attempt to fix the world’s supply chains and jump back into a high-end consigner that’s finally past the pandemic’s ill effects.

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The rally after the early-December low has clearly come under pressure, especially with growth stocks, most of which are in shambles; our Cabot Tides remain negative and we’re remaining cautious in the Model Portfolio, with 50%-ish cash for the past three weeks. We’re not ruling out the fact that, for the overall market, we could have a workable low if things hold up here. But there’s no question that the sellers are in control of most stocks and indexes, so we advise caution and defense while waiting for the sellers to finish their work. In the portfolio, we continue to pare back when needed, though we’re also holding our more resilient names and keeping our watch list up to date; this is still a bull market, but right now it’s about preserving capital and waiting patiently for the next uptrend.

Omicron, inflation and the Fed all seem to be conspiring to make traders restless. While Greentech is down, we appear to be at the bottom end of a long-term trading range. The sector has managed to find the strength to rebound at current levels before over the past half year, we expect it to find reason to do so again.

We set aside the high-growth, high-volatility stock this issue to focus on a quotidian task: collecting waste oil and waste water for purifying and recycling. Our featured stock this issue is a leader in the U.S. and Canada. It makes money, has a good price chart and trades at a discount to its main competitor.

Alternate Energy Metals Steal the Spotlight
The metals necessary for the worldwide clean energy agenda are significantly outperforming their industrial and precious metal counterparts. Specifically, lithium, nickel and cobalt are showing relative strength, while steel, iron ore and silver continue to lag. Meanwhile, continued strong demand in the magnet market is keeping prices for rare earths like neodymium and praseodymium buoyant. As a result of this strength, our rare earth stock holdings continue to perform well.

This week I’m adding a recent earnings winner, American telecommunications networking equipment and software services supplier Ciena (CIEN).

Last week we sold four stocks from the portfolio, clearing away the weakest stocks and giving us some breathing room (and cash), so this week there is no need for more selling But I do have two downgrades to hold (CSCO and SE).

As for today’s recommendation, it’s a household name whose stock is temporarily on sale—and you get a nice dividend too.



Details inside.

The market’s action last week, while far from perfect, was about as good as you could have hoped for given the prior damage. But in our view, what happens from here will tell the true tale: The overall market’s intermediate-term trend is still down (or at least not up), and while there has definitely been some improvement, many stocks remain in poor shape—especially in growth land, where a lot of names have failed to bounce at all. To reflect the bounce, we’ll nudge up our Market Monitor to a level 6, but the bulls still have more to prove.

This week’s list is a hodgepodge of stocks and sectors, with everything from infrastructure to lumber to transportation included. Our Top Pick, though, is part of the strong networking theme and staged a powerful breakout last week.

Happy Holidays!



The markets seem to be recovering from the initial scares of the Omicron COVID variant. We’ve seen some nice rises in the last couple of days.



Despite Washington’s hostile environment, the latest worries about the possible invasion of Ukraine by Russia, and the Fed’s new dedication to tapering, the economy still looks pretty solid.



While both Black Friday and Cyber Monday retail sales underperformed, by 1.1% and 1.4%, respectively, industry pundits reminded us that many sales were just pushed forward this year, as pre-Black Friday sales began by late October. Online sales look strong for the holidays, up 11.9^ from November 1 through Cyber Monday.

U.S. stocks have stabilized over the last few days as investors keep confidence in markets despite the Omicron variant, concern over inflation, and mixed economic data. Today we have two upgrades and a new recommendation from a country with an emerging and vibrant fintech culture supported by its government. The standout stock this week in the Explorer recommendations is Marvell Technology Group (MRVL), which jumped from 71 to 91 after the company recently reported that adjusted earnings soared 72% on a 61% increase in sales.

Good news was able to outrun the problems in 2021. But the problems are catching up. The economy ran so hot because if was picking up the slack from the pandemic and making up for lost time. But that slack will soon run out.

We are likely heading towards a more normal environment on the other side of the pandemic recovery. It is highly unlikely that market returns going forward are as high as they have been. That pace can’t be sustained. We are likely headed for choppier waters and a more sideways market where stock picking should be more crucial.



Inflation and rising interest rates may not be great for the overall market, but certain sectors can thrive in such an environment. In this issue, I highlight one such stock. The stock should shine on the other side of the pandemic recovery that lies ahead in the new year.

Today, we are recommending a rapidly growing bank that is based in Nashville, Tennessee. It looks like a very attractive long-term holding:

• High insider ownership (insiders own ~20% of shares outstanding).
  
• Strong momentum (stock is near 52 week high).
  
• ~17%+ historical earnings growth.
  
• Low valuation: P/E ratio of 13x.
  
• ~43% upside to fair value.

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

The big news pertaining to global investing is the signing in Washington yesterday of the phase-one “truce” trade deal between America and China.

The year is starting out great! There was some volatility associated with the Iran thing but it looks like that, along with trade issues, has faded from the headlines, for now.

Fourth quarter 2019 earnings season began yesterday with a few large banks reporting very strong results.

The market is off to a superb start to 2020 with many growth sectors finding their groove and ripping higher. The S&P 600 Small Cap Index continues to trade above the all-important (my opinion) 1,000 level and we’re seeing participation from a wider breadth of sectors than in the past.

Remain bullish, but keep your wits about you. The market remains very strong, and we’re glad to see many of our stocks that consolidated during December come to life in recent days.

Here we are at the beginning of a new year and a new decade. A pivotal calendar turn like this is a great time to stop, get off the train, look around and see where we are, and where we might be going.

For the most part, global stock markets performed strongly in 2019. But if you dig a bit deeper, you will see sizable and interesting gaps between countries.

There was very little news or new analyst research on our portfolio stocks last week. I expect a surge in new information by mid-January as businesspeople and Wall Street analysts get back to work after the holidays.

Remain bullish. The bull market rolls on, and while there are legitimate shorter-term yellow flags (a good reason to be choosy on the buy side), the big-picture outlook is solid. We have no changes in the Model Portfolio today.

I previously gave you a heads up that new low-sulfur diesel regulations (IMO 2020) and a serious hog disease in China (African Swine Fever) are quite likely to increase inflation numbers in 2020 and beyond. Are you ready for the next sweeping industrywide change that will be hitting the credit markets?

The S&P 600 Small Cap Index, which hadn’t broken above 1,000 for most of 2019, is now comfortably above that level and appears to be heading higher.

Yesterday, after the market closed, rumors emerged that this portfolio stock is once again in talks to sell their gas stations.

There are five holdings in this fund.

Yesterday we decided to sell a stock due to lackluster performance over the last month.

Tomorrow is the expiration of June options and we are going to close five positions for full profits ranging from 9.75% to 17.64%.

COVID-19 caused travel and destination companies to lose ground, but this ski resort is holding up well.

Nine analysts have increased their earnings estimates for this semiconductor manufacturer in the past 30 days.

Our next recommendation is profit-taking on a previous pick.

Our first idea today is a tobacco company that has an 8.55% dividend yield, paid monthly.

This portfolio stock reported good second-quarter results and moves from Hold to Buy.

This Canadian telecom company just launched its 1.5 gigabit TELUS PureFibre, the only 100% fiber-to-the-premise network widely available from a major carrier in Western Canada.

This investment bank just came off a huge quarter, with revenues of $200.2 million compared with $128.1 million for the prior year quarter.

This is a is a fully integrated investment banking company.

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.