In the May Issue of Cabot Early Opportunities, we spread things around, taking a look at a rising MedTech star, a possible breakout biotech stock, a boring discount retailer, an oil and gas income play and a familiar apparel manufacturer.
Enjoy!

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!

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.

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.

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.

The S&P 500 Index and the Dow Jones Industrial Average began new run-ups yesterday, while the NASDAQ Composite Index continues its uptrend. I’m glad that investors are continuing to make money during this market rebound.

Enjoy the current strength but be aware of the environment we’re in, and why. Accept that we could see a significant retreat in the prices of many of our stocks in the near term, but that the fundamental reasons behind their current strength should persist despite a retreat, and drive them higher over the coming years.

Despite a Chinese economy that has grown three times faster than America’s every year over the past three decades, it has been a bit of a challenge to consistently make money in Chinese stocks.

We are in the midst of a rally that has continued for about two months. This market seems to want to go higher. While the rally has slowed significantly from the initial bounce off the lows in March, the overall market is still in an uptrend.

In keeping with last week’s comments, the stock market continues to show a willingness to rise in the near term. More than any other industry, oil refining stocks offer strong upside, including two within our portfolios.

The market’s evidence has worsened some this week—our Cabot Tides are now on the fence as the broad market has softened.

Under normal market conditions growth investors like to get pulled into strong stocks and buy them as they head higher. This is anything but a normal market, however!

The stock market continues to exhibit a willingness to rise in the near term. I’m seeing constructive price chart patterns on both the S&P 500 index and on many individual stocks.

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.

Volatility is coming back into the market.

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

Our first idea today is a global construction materials company that is expected to grow by 109% next year, and has the makings of a good turnaround.

Analysts expect this mega-tech company to grow by 20.4% this year, and five companies have recently increased their EPS forecasts for the company.

With our portfolio having swelled to 29 positions it’s time to trim a little around the edges to keep things manageable. As in the past, many of these decisions are based on lackluster recent performance and uncertainty regarding the near-term.

The strength in marijuana stocks that began two weeks ago with breakouts by the stocks of the four leading U.S. providers has continued this week, so now I’m going to take the portfolio to a fully invested position.

This global engineering and construction company is forecasted to grow by 16.1% next year.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Momentum 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 Momentum Trader features.