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.

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 S&P 500 is on the cusp of a correction, down 10%. The technology- laden NASDAQ is already well beyond a correction. Energy is the only S&P 500 sector in positive territory YTD.



The problem is inflation and the Fed raising rates to combat it. There is a realization that inflation can’t be handled seamlessly. That means we could face continued high inflation, or much slower economic growth induced by a hyperactive Fed making up for lost time. Neither scenario is good for stocks.



While the year might be difficult for the overall market, the energy and financial sectors should shine. These sectors actually like inflation and rising interest rates. While portfolio positions in those sectors have been dragged lower by the recent indiscriminate selling, I expect them to regain momentum when this selloff ends.



Two fantastic portfolio positions in energy and finance are highlighted to buy in this issue. They had momentum going into the selloff and should pick up where they left off when the selling abates.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the February 2022 issue.



The market seems to be ignoring small- cap stocks. We highlight four high-quality small- cap companies with beaten down share prices. And, amidst the rubble of initial public offerings, we found three worthwhile companies whose shares trade below their IPO price. We also briefly comment on the market’s recent sell-down, and provide an update on the performance of our group of recommended stocks, which have held their value so far this year.



Our featured recommendation this month is Polaris (PII), the leading North American manufacturer of powersports equipment including off-road vehicles, snowmobiles, motorcycles and boats. Investors are overly -discounting near-term issues, leaving the shares significantly undervalued.



We note our recent price target increase for Baker Hughes Company (BKR), from 26 to 31.

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.

Bubbly Conditions for Nickel
The metals needed for the electric vehicle (EV) battery market are on fire right now, as are other industrial metals like tin and aluminum. Other key metals, including copper and steel, are hanging tough as hopes for revived infrastructure demand in China increase. The main story right now is nickel, which appears to be in the early stages of a speculative bubble. In the portfolio, we just added a new position in our favorite gold-tracking fund.

Don’t expect this volatility to subside this week, as the Federal Reserve, economic data releases and a heavy earnings calendar will have traders on their toes.
This week, in an effort to keep the portfolio diversified, I’m adding a pharmaceutical play, AbbVie (ABBV).

In the January Issue of Cabot Early Opportunities I highlight five standout growth stocks that should have meaningful upside from current levels. Recognizing that the current risk-off environment has these types of stocks acting erratically (probably an understatement) I’ve focused first and foremost on companies I like rather than getting hung up on their recent share price performance. In terms of buying, we’ll start very, very slow. The three smaller companies I feature go straight to the Watch List as we’ll try to be opportunistic buyers when things feel more secure. Even with the two larger companies we start with half positions.



Enjoy!

The stock market’s uptrend finally cracked late last week. Is this the beginning of the official market correction, or a prelude, or just a hiccup?

The message this week is to stay invested but don’t go crazy on the buy side and don’t get scared on the sell side. Just be measured and try not to do anything that’s uncharacteristic of what you would do in a “normal” market.

The environment hasn’t changed. It’s a very strong bull trend in the major indexes and most stocks, with our trend-following measures solidly positive.

Here we are in an up leg of a bull market that began three months ago. Since early October the S&P 500 has climbed 14%. With trade issues and Iran out of the headlines, the strong economy and low interest rates are driving stocks higher with technology leading the charge.

The S&P 500 (SPX) index is up 10% since rising above its previous trading range in late November. While 10% is not necessarily a big move for a stock, it is definitely a big move for a major index.

The big thing on most investors’ minds is whether or not this market can go higher.

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.

The first issue of Cabot Income Advisor just came out yesterday. The idea is to sell a covered call, meaning you already own or you just purchased IIPR on the buy recommendation.

Our second recommendation is a sale of a previous idea.

The top five holdings are listed in our first recommendation,

Analysts expect this cloud company to grow by 58.3% this year.

This avocado (plus other foods) grower is due to report earnings on June 8.

This consultancy firm beat analysts’ EPS estimates by $0.04 last quarter and is forecasted to grow at an annual rate of more than 12% over the next five years—one of the bright spots during this pandemic.

Shares of this portfolio stock have taken a hit lately on news of a secondary offering of around $170 million, followed by the pricing announcement

Crista updates three portfolio stocks and has one rating change.

This Virginia bank just reported a good quarter and raised its dividend.

We have no changes in the Model Portfolio tonight, but we’re sending a special bulletin given the wild action in growth stocks over the past two days.

We’ve been waiting for a pullback in high-growth names and that looks to have begun this week.

We’ve been waiting for a pullback in high growth names and that looks to have begun this week.

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 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.