After pushing into correction territory towards the latter part of January, the broad market seems, if only temporarily, to have found a foundation, as it rose four of the five days last week. The Dow gained 1.0%, the S&P 500 bounced 1.5% and the tech-heavy Nasdaq pushed higher by 2.4%. Year-to-date the Dow, S&P 500 and Nasdaq are lower by 3.4%, 5.6% and 9.9%, respectively.
Today, I’m adding specialty metals company Allegheny Technologies (ATI).

With the markets in a cyclical rally, rebounding from January lows, it’s an excellent time to review your ETF holdings to make sure you’re invested properly for the current market conditions.

In this issue of the Cabot ETF Strategist, you’ll find fully diversified portfolios tailored for aggressive, moderate and conservative risk tolerances.



We’ve also rolled out a tactical “undiscovered” portfolio consisting of smaller or lesser-known ETFs, allocated specifically to the current market cycle. This portfolio is designed to rotate more than a strategic allocation. You’ll be receiving alerts when a change is made here, or in one of the more traditional portfolios.



Use whichever portfolio matches your risk tolerance and goals. Happy investing!



Details inside.

For many weeks the selling pressure was overwhelming, so the first thing we needed to see was the bulls at least put up a fight—and they did two weeks ago, with lots of hectic action after some oversold extremes. And then we saw some lift for the first time in a while, with many beaten-down names finally getting off their knees and a few stocks pop on earning. All in all, we consider it a good start, with the January 24 likely representing a workable low that the market can build off of.



We’ll take it, but in terms of the overall picture, the bulls still have more work to do: The intermediate-term trend of the major indexes remains down, and most individual stocks are still buried beneath major resistance (just 37% of NYSE and 19% of Nasdaq stocks came into today above their 200-day lines). Near-term, we do think the odds favor some further upside, but the rest test will come as indexes and potential leaders run into resistance; as has been the case, we’re not opposed to starting positions in a potential leader or two, but we continue to think a defensive stance remains mostly appropriate until we see some “real” buying and positive trend changes. Our Market Monitor remains at a level 4.



This week’s list has a variety of recent earnings winners and other setups ahead of their reports. Our Top Pick is Stifel Financial (SF), which (interestingly) is part of a strong Bull Market stock sector and recent surged back to its peaks after a solid Q4 report.

The past week’s rally has lifted all the stocks in our portfolio (in fact, two have hit recent highs!) and thus I have no sell ratings today. But I do think caution is still important, as the market’s main trend is now down.

Holding some cash is advisable, but there are definitely overlooked bargains out there, and I think today’s recommendation is one of them.



Details inside.

With the bulls and bears continuing to fight it out in the growth arena, we’re moving into a more cyclical industry with today’s addition.

The company is a leading maker of semiconductor manufacturing equipment. This industry is growing rapidly as the current innovation wave requires smaller, faster and more durable chips.



Making those chips at scale can only be done with specialized measurement and process control equipment. Which is exactly what this company specializes in.



Enjoy!

The Facebook/Meta stumble will weigh on markets today as we await earnings on Amazon (AMZN) and Ford (F). Explorer stocks did well this week as markets continue to be volatile. Total electric vehicle sales in 2021 including hybrid vehicles doubled the number from 2020, which brings us to the Explorer’s new recommendation.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the February 2022 issue.



Word puzzle Wordle is the latest craze, but it isn’t the most popular parlor game. This title is held by “What Is Russian President Vladimir Putin Going to Do With Ukraine?”



We provide our theory which is not found anywhere else yet could readily explain his motivation. Related to this crisis, we move shares of ConocoPhillips (COP) from Buy to Hold, as they have surged above our recently raised 89 price target.



Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the 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.

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.

A high percentage of stocks that I follow are exhibiting bullish price charts right now. Obviously, you already knew that the stock market has been acting well. I simply want to reiterate that the recent bullishness appears to be sustainable. Enjoy!

This has been a good year for the market. With only weeks left in 2019, the S&P 500 is more than 23% higher for the year. Some of that is the undoing of the overselling at the end of last year. But the market has trended consistently higher all year and is close to the all-time high.

Remain bullish. The market and leading stocks continue to act well, and while a pullback, shakeout or some other potholes could occur in the short-term, the odds continue to favor higher prices over time.

Today will be an important day for our retail apparel stocks.

Both large and small growth stocks continue to advance off their October lows despite all the political turmoil from the impeachment hearings.

The Cabot Global Stocks Explorer portfolio is doing well in 2019 and a number of recommendations have recently surged on the strength of impressive earnings and an improving environment for emerging and international stocks.

The market mood is always changing. Just last week the market indexes were forging new all-time highs and cyclical stocks were the best performers. What a difference a week makes.

This portfolio stock has exploded over 25% to all-time highs following a beat and raise Q1 that seemed in the cards, but still comes very much as a surprise to me.

Several portfolio stocks recently reported earnings and move to Strong Buy.

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.

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.