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).

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.

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.

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.

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.

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!

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.

It’s been an interesting month in the markets. Since last month’s issue, the Dow Jones Industrial Average lost about 1,200 points, mostly due to the new COVID variant, Omicron, which has now hit the United States. The jury is still out as to whether or not the variant is more contagious, more dangerous, etc. Also, there remains some market uncertainty due to the polarization in Washington, D.C. And, lastly, Fed Chairman Powell’s remarks about speeding up tapering also affected investors.

But overall, we’ve had some pretty good days, in addition to the declines. After all, the economy is still chugging right along. Housing remains very strong, with price rises seeming to moderate for the moment. There is still a huge dearth of inventory, and now the slow real estate season is upon us. Perhaps that will give homebuilders an opportunity to play catch-up, as builders in my area tell me that they are now more than two years out. And some are not taking any more folks on their waiting lists! I have myself on such a list, and I’m looking at about 2 ½ years until I can be in my new home.

This week I’m adding a recent earnings season winner, an American developer of all-flash data storage hardware and software products, Pure Storage (PSTG).

You can analyze omicron’s spike protein, slice and dice the words of the Fed chairman or do a deep dive into last week’s jobs report all you want. But at the end of the day, all that matters now is that the sellers are in control. To be fair, some short-term measures are stretched, so some type of bounce is possible. Thus, if you’re already defensive, we wouldn’t be in a rush to sell a ton of stuff here, but there’s no question the onus remains on the bulls to begin repairing the damage. We’ll keep our Market Monitor at a level 5.

This week’s list is a hodgepodge of strong names, be it due to company-specific moves, earnings or sector resilience. Our Top Pick is a direct beneficiary of all things construction and infrastructure, and its stock is holding up well.

While the market is up today, the correction that began a month ago remains in force, making it tough for stocks (growth stocks in particular) to make real headway. Thus we have four Sell recommendations today, as well as one upgrade to Buy.

As for the new recommendation, it’s a solid growth company that dominates a totally unexciting industry in the U.S., and long-term prospects are great.



Details inside.

I wasn’t expecting that of the seven companies we had reporting Monday through Thursday this week that the average gain would be nearly 9% though. What an intense week. As you’ve no doubt noticed, our portfolio has done well this week.

Our emerging markets timer strengthened this week as the EEM climbed over 44 today, just short of its high for the year.

The economy is still solid and the trade war thaw is taking away a big headline risk for the market.

Put a little money to work. There are still issues with many growth stocks and plenty of crosscurrents, but the overall market is looking good and we have seen some earnings-induced breakouts.

This technology company’s stock has almost recovered from the March market rout and is closing in on its 52-week high.

Several portfolio stocks recently reported earnings.

This newly-merged defense and aerospace company is forecasted to grow by 23.5% next year.

This portfolio stock reported Q1 results after the close yesterday that should have investors feeling pretty good about the company’s ability to weather this pandemic.

This assisted-living REIT will report earnings on May 4. Analysts expect revenue growth on flat earnings.

The major theme that I’m noticing during this earnings season is that Wall Street analysts were low-balling their earnings and revenue estimates as they cautiously assessed the potential impact of the COVID-19 virus on business activity.

This social media platform was hit hard in March, but looks to be regaining its footing.

This REIT just reported that its Funds from Operations rose 6.4%, to $1.82 per share, last quarter as a result of increased rents and strong leasing activity.

This portfolio stock reported preliminary first-quarter results after yesterday’s market close. The results are strong enough that they could enhance the share price today.

This automation company, whom you may have never heard of, has been building robots since the 1970s.

On April expiration this recommendation’s calls that we sold for $0.70 expired worthless.

There are several portfolio changes today

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.