The market weakness has been spreading in recent weeks, and as a result, we have three sell recommendations in today’s issue, as well as three downgrades to Hold.

As for the new recommendation, it’s a major retailer with a stable of familiar names that has transitioned its business very successfully through the pandemic, and it pays a nice dividend!



Details inside.

Current Market Outlook


For many weeks, we’ve been writing that there’s more good than bad in the market, and indeed, while choppy, many names did work their way jadedly higher. But now the shoe is on the other foot: The intermediate-term trend is now down for the major indexes, and we’re starting to see more and more individual stocks follow suit. It’s not a complete disaster, and given the on-again, off-again environment of 2021, we’re not ruling anything out, including a turn back up in the days or weeks ahead. (Even now, we’re fine sticking with your strong, profitable stocks.) But after a couple of rounds of sharp distribution and some breakdowns among leading stocks, we think it’s simplest to say the onus is on the bulls—we need to see at least a few days of constructive action and some upside power in the indexes and individual stocks to conclude the sellers are losing control. We’re leaving our Market Monitor at a level 5 and, until proven otherwise, would play things cautiously with only small new positions, trailing stops and a decent chunk of cash.

This week’s list has an interesting crop of stocks, ranging from commodity to reopening to legitimate growth outfits. Our Top Pick is CF Industries (CF), which is emerging from a multi-month dead period with a lot of power; as with most names in this market, try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Affirm Holdings (AFRM)	108	105-111	89-92
SKIN (SKIN)	26	24.5-25.5	21.5-22
Caesars Entertainment Corp. (CZR)	118	113-117	102-104
CF Industries (CF)	61	58-61	51-53
ConocoPhillips (COP)	71	67-70	61-62.5
International Game Technology (IGT)	28	26-28	22.5-23.5
Live Nation Entertainment, Inc. (LYV)	98	95.5-98.5	87-88.5
Matador Resources Company (MTDR)	40	37-39	32.5-34
Palo Alto Networks (PANW)	470	457-472	417-427
Paycom Software (PAYC)	495	480-495	440-450

Novonix (NVNXF) shares broke above 5 this week and have more than doubled since early August even as the market is under pressure due to the slowing of federal stimulus, China’s property debt issues, and some increase in interest rates and inflation.

The marijuana sector peaked in February, bottomed from late March to mid-April, and since then has been building a base, preparing for a resumption of the big advance.

Fundamentals in the industry remain terrific, as second quarter results have recently revealed, and while the trend toward legalization in the U.S. continues, it’s taken a back seat at the federal level for now, so all the action remains at the state level.



In the portfolio today, we continue to hold patiently, with the portfolio one-third in cash, waiting for a new uptrend—but if you’re eager to buy now (while things look cheap) I do have some suggestions.



Full details in the issue.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the October 2021 issue.

Most investors, and the general public, seem to regard the transportation industry as somewhat dull. But transportation is a fundamental component of human existence, and companies must constantly strive for relevance, and must now navigate a secular shift in fuel sources. We discuss five transportation companies that are updating their strategic playbooks with hopes of turning around their prospects.



The market has a bias against stocks that trade at low prices, making this a go-to source of contrarian investment ideas. We make our case for five such stocks.

Last week, despite a large market decline on Monday, the major indices took a baby step forward. The S&P 500 gained 0.51%, the Dow rose 0.62%, and the Nasdaq eked out 0.02%.



The advance came despite ongoing uncertainties around Chinese property developer Evergrande and the seemingly hawkish message from the Fed announcement. Now the focus has shifted to Washington, D.C.’s finest and the decision around the debt ceiling and infrastructure. Add a sprinkle of Chinese power concerns and there seems to be just enough worry to keep investors on their toes.

The market has recovered remarkably quickly from last Monday’s sharp selloff. Thus, the long bull market remains intact and I continue to recommend that you be heavily invested.

Today’s featured stock is another conservative one, with a good yield, and in an industry that’s truly unloved. And that means its valuation is dirt cheap.



As for the current portfolio, I am selling our biggest loser, DocuSign (DOCU), and downgrading Tesla (TSLA) to Hold.



Details inside.

Current Market Outlook


After last Monday’s plunge, the initial rebound was very encouraging, and the fact that the major indexes are still doing their best to hang in there is a plus. But, while many individual stocks are in decent shape, the wild rotation that has been a hallmark of 2021 has returned, with money racing into cyclical areas and out of growth stocks the past couple of days. We’re still sticking with a stock-by-stock approach, and most names, despite their wobbles, remain in fine shape, simply pulling in after big runs; others, however, look worse and should be pared back or sold. To be fair, such action isn’t totally surprising—big breaks like last Monday’s usually have some reverberations, so we wouldn’t say the action is negative as much as it’s a sign we’re still in the tricky, choppy environment that has existed for some time. We’re going to leave the Market Monitor at a level 5 and see how things play out in the days ahead.

The good news is that this week’s list is full of names that have enjoyed outsized accumulation of late. Our Top Pick is Devon Energy (DVN), which looks like a leader of a fresh breakout in energy stocks (and cyclical stocks more broadly). We suggest aiming for dips as these names usually pull in after powerful rallies.

Stock Name	Price	Buy Range	Loss Limit
Apache (APA)	23	22-23.5	19.5-20
Biohaven Pharmaceutical Holding (BHVN)	133	130-134	116-119
Brooks Automation, Inc. (BRKS)	109	102-106	93-95
Cimarex Energy (XEC)	88	82-85	72.5-74.5
Devon Energy (DVN)	35	32-34	28.5-29.5
DoorDash (DASH)	217	206-212	185-189
SeaWorld Entertainment Inc. (SEAS)	58	56.5-58.5	51.5-52.5
Signet Jewelers (SIG)	84	82-85	73-75
Snap Inc. (SNAP)	80	78-81	69-71
SVB Financial Group (SIVB)	674	655-675	600-610

In the September Issue of Cabot Early Opportunities we continue to focus on tech stocks, while adding a small-cap biotech stock into the mix. We also review some of our portfolio management musings from last month.

Enjoy!

The S&P 500 (SPX) stock index rose to new all-time highs in July, commenced a pullback during the final week of that month, then traded between 2840-2940 in a very orderly pattern during August. For that, I am grateful.

Remain cautious, but stay open minded. We’re encouraged by the recent action from the market, including some of the power and breadth of the rally.

The economy is still solid and the market isn’t overpriced in this low interest rate world. The S&P 500 is only 2% higher than it was in January of 2018, 20 months ago. The stock market is still the best place to be. Fear spikes and then it wanes. And when fear inevitably wanes, money always trickles back into the market because it’s the only game in town.

This is one of those periods when there’s not much going on in the market. Earnings season is essentially over, the summer is winding down, kids are about to go back to school and it feels like fall is right around the corner.

Hopefully, we can all gain from the growing realization that while America and China will be fierce rivals for some time—they can also benefit from playing some ball with each other.

This week’s update of Cabot Undervalued Stocks Advisor is focused on portfolio stocks that are being affected by recent news or upcoming earnings reports. Next week’s September issue will include all portfolio stocks, with at least one new portfolio addition.

With earnings season largely over most of our stocks are now moving based on news that affects the broad market, and less on company-specific trends, with a few exceptions.

Remain generally cautious given that our Cabot Tides are still negative, though you shouldn’t be outright defensive given the encouraging action from so many growth stocks.

The market seems to be rebounding and stabilizing after a tumultuous couple of weeks. The escalation of trade tensions, a sputtering global economy and talk of the next recession spooked investors. But as fear wanes investors realize that money has no place else to go but stocks to earn a decent return and they come back into the market.

Today’s and next week’s issues of Cabot Undervalued Stocks Advisor are going to look a bit different. I won’t be reviewing all of our portfolio stocks today. Many Wall Street analysts are on vacation, so there will be very little in the way of changes in earnings estimates or new research reports for several weeks.

The big news that affected the market this week was, of course, the dreaded yield curve inversion. This happens when the 10-year Treasury yield goes below the 2-year yield.

I remain cautious on U.S. stocks in the coming days. I find it disturbing that the stock market barely reacted to the oil price crash, and more importantly, the energy downturn’s broader implications. In contrast to what I consider to be a dire economic forecast, stocks are acting well.

Analysts are forecasting annual growth of more than 20% for the next five years for this internet retailer.

Two portfolio stocks report first quarter results.

Coverage of the shares of this home builder were just initiated at Citigroup with a ‘Buy’ rating.

Sell half your position for a 142% gain.

Yesterday’s steep drop in oil prices will inevitably take stock prices down, and not just for one day. I’m estimating that we’ll see U.S. stock markets trade back down to their March lows in the coming days.

Our second recommendation is a sale of a Bear ETF fund.

Share of our first recommendation, a steel company, were just upgraded at B. Riley to ‘Buy’.

This is a Bulletin for experienced stock investors who like to trade stocks or options over the short-term: a few days or weeks.

Expiration Friday of our April Cabot Profit Booster Positions went largely as expected.

Our Cabot Tides are now positive, which means it’s time to put some money to work.

This insurance company reported mixed results for the quarter, but nine analysts have recently increased 2020 EPS estimates for the 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.