The market was in a normal, shake-the-tree correction for most of November, but the past two weeks have seen a massive wave of selling that’s cracked our Cabot Tides and scores of individual stocks. Yes, there’s a chance this could be a big news-driven shakeout (virus and Fed tapering worries, etc.), so we’re not sticking our head in the sand, but there’s no question the sellers are in control and many stocks are going to need a ton of repair work.

We’ve sold a bunch of names from the Model Portfolio in the past two weeks, and while we’re not opposed to adding a half position or two if the market finds its footing, we’re sitting tight with a large cash position tonight.

Today’s new addition is a semiconductor company. It designs products that are the heartbeat of digital technologies. Its content is found in electric vehicles, datacenters, IoT devices, airplanes, mobile devices and more. It is benefitting from surging demand from Apple (AAPL) products, from which it generated 40% of revenue in 2020. While the market cap is a little larger than we typically look for, the opportunity warrants the exception at this time.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the December 2021 issue.

The emergence of the Covid Omicron variant has temporarily upended the market’s emerging post-Covid view of the economy. We share our thoughts on this, as well as on Fed Chair Powell’s testimony this week about accelerating the bond-buying taper. We also comment on how artificial selling pressure as the calendar year-end approaches can drive already-weak stocks to steeply undervalued levels.

Fears over the omicron variant and inflation have markets on edge. That has Greentech pulling back a bit from its recent bull move. We need to be a bit more cautious in the near term as a result, but the outlook for the sector remains excellent – and there remain attractive Greentech stocks to buy even in these conditions.

This issue we add a new stock to our Real Money Portfolio – a company resulting from two mergers less than three months ago. It’s already quite profitable and on a strong growth trajectory. Its shares are at an attractive price today.

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

For most of the year, we have an intense focus on long-term business fundamentals and underlying valuations. However, as year-end approaches, artificial selling pressure can create large enough short-term bargains that even we find worthwhile. We discuss several sources of selling pressure that can turn others’ losses into your gains, and list six stocks that look most promising.



Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.



I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.

This week I’m adding American supplier of camping supplies, recreational vehicles, parts and service, Camping World Holdings (CWH).

While growth stocks had a rough time last week, the broad market remains strong, and thus I continue to think you should remain heavily invested as we head into the last month of the year.

Today’s stock has the potential to be a huge winner as it occupies a central position in a world-changing trend, but risk is high—as it should be when potential is high.



On the sell side, Coupa Software (COUP) gets the ax today, as it is going the wrong way.



Details inside.

The news of a new virus variant came out of left field late last week, whacking the major indexes on Friday … though today brought a so-so rally as some think the economic impact of omicron won’t be as bad as feared. We’re not in our storm cellar, but we’re not ignoring the action, either—on the buy side, we advise going slow and starting small, while for names you own, you want to honor your stops and make sure bad situations (losses, etc.) don’t get much worse.

That said, there remain many stocks that are pulling back or consolidating normally despite all the hectic action. Our Top Pick is one of those that already went through the wringer this year, broke out recently and is holding up well

This is a great time to sell covered calls.

The recent upward movement in the market increases upside speculation, and call premiums have risen. It’s a great time to take advantage of the recent surge in certain stocks to secure a high-income return. Even if the stock gets called, you are taking profits in a very high market ahead of what is likely a choppier environment.



In this issue, I highlight a covered call on the recently red-hot Qualcomm (QCOM). The stock soared 50% in a little over a month but has leveled off in recent days. It’s a great time to secure a huge call premium and lock in a huge income to go along with recent appreciation.

With the short holiday week and only three trading days since last week’s update, we will go directly to a new recommendation. Markets welcomed the nomination of Jerome Powell as head of the Fed for another term, believing that he will keep interest rates low through early next year. As for our stocks, Cloudflare (NET) had a down day yesterday but we have no change in recommendation.

Have a great Thanksgiving holiday.

Rare Earths Lift Off
Driven by strong demand in the magnet market, prices for rare earths like neodymium and praseodymium have skyrocketed and achieved a position of relative strength among the metals in November. Lithium, meanwhile, is also still a strong performer along with nickel, thanks to growing electric vehicle (EV) battery demand and tight supplies. Rising “green technology” demand has further served to fuel the bull market in both metals.

The market is in the midst of a short-term consolidation, which usually dishes out some pain and offers tedious action, which is what we’re seeing so far—earlier this week, we cut bait with one stock and have tight leashes on a couple of others. Further near-term shenanigans are possible, even likely, so we’re taking things on a stock-by-stock basis, but we’re also not opposed to putting money to work in resilient leaders—which we’re doing tonight, starting a half-sized position in a name we’ve long thought has the characteristics of a future winner.

We’ve been fairly lucky this earnings season in that every single one of our portfolio companies that reported earnings managed to meet or beat the market’s expectations. Of course, that doesn’t mean share prices will rise. Oh heavens no! Short-term movements in stock prices can easily resemble a roulette game. Nevertheless, we buy high quality companies and we give their stocks a chance to enhance our net worth.

There has been no big picture change in the market over the last week. As expected, everyone is following earnings reports and trying to make broad assumptions based on what individual companies are reporting.

The Financial Times this week reported that Beijing is preparing plans to remove Hong Kong’s chief executive, Carrie Lam, whose term is not up until 2022, as anti-government protests in the city intensified.

Challenging times for this midstream producer, but as the economy improves, the price of oil should recover.

COVID-19 likely sounds the death knell for many companies, like slow-to-adjust retailers. But it also represents a likely accelerant for others, including those exposed to trends such as work from home (WFH), cloud, e-commerce, internet, digital transformation, streaming, etc.

The stay-at-home orders are boosting the shares of this cybersecurity company.

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.

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.