Issues
The market’s correction is about a month old, and so far it’s been fairly garden variety, with some potholes but not much big-picture abnormal action. And, this week, we’re seeing a very encouraging bounce, with most indexes recouping half of their decline in just two days and some growth stocks already testing new high ground. We’re not out of the woods yet, but we’re holding what we own (some of which act great) and fine-tuning our watch list should the trend turn back up.
Today we are jumping into a small-cap biotech company that has a drug delivery platform that could completely revolutionize how injectable drugs are delivered.
The short version is that millions of people that require injections could, if all goes well, just take a pill instead.
While the risks are meaningful with any biotech, so too is the potential. Early data shows this platform works, and already there are programs being designed to deliver treatments for osteoporosis, Type-2 diabetes and arthritis.
It’s all inside this month’s Issue.
The short version is that millions of people that require injections could, if all goes well, just take a pill instead.
While the risks are meaningful with any biotech, so too is the potential. Early data shows this platform works, and already there are programs being designed to deliver treatments for osteoporosis, Type-2 diabetes and arthritis.
It’s all inside this month’s Issue.
Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the October 2021 issue.
Volatility is a value/contrarian investors’ friend. With the markets becoming more volatile, we’ve made some changes to the portfolio this past month. We recently added ConocoPhillips (COP), a major oil and gas producer that is also an undervalued cash flow machine at current commodity prices.
Volatility is a value/contrarian investors’ friend. With the markets becoming more volatile, we’ve made some changes to the portfolio this past month. We recently added ConocoPhillips (COP), a major oil and gas producer that is also an undervalued cash flow machine at current commodity prices.
The current market is giving investors headaches, but it’s not unusual in Greentech to find savvy investors looking past the near-term economic fears and focusing on companies that are tapping into what promises to be terrific growth from de-carbonizing the economy.
This issue, we highlight a small cap stock with amazing engineering savvy at a minor, but essential, feature of electric vehicles. Management expects it can grow revenue about 50% every year through the rest of the decade as automaker customers begin to churn out EVs. It’s in the early stages of growth and is seeing strong fund buying as well as exceptional technicals.
We also highlight three ESG stocks showing the best technicals in the group, as part of our recurring ESG Three, give the current sector outlook indicated by our Greentech Timer, and provide a detailed rundown of the stocks in our current portfolios. We have some ratings changes and refreshed sell-stop recommendations for many of our holdings.
Read through for more details.
This issue, we highlight a small cap stock with amazing engineering savvy at a minor, but essential, feature of electric vehicles. Management expects it can grow revenue about 50% every year through the rest of the decade as automaker customers begin to churn out EVs. It’s in the early stages of growth and is seeing strong fund buying as well as exceptional technicals.
We also highlight three ESG stocks showing the best technicals in the group, as part of our recurring ESG Three, give the current sector outlook indicated by our Greentech Timer, and provide a detailed rundown of the stocks in our current portfolios. We have some ratings changes and refreshed sell-stop recommendations for many of our holdings.
Read through for more details.
Last week the major indices pulled back in a meaningful way. The S&P 500 lost 2.20%, the Dow declined 1.36%, and the Nasdaq pulled back 3.20%.
The benchmark index sank 4.8% in September, marking its worst month since March 2020. It was also the first losing month for the S&P after seven straight months of gains. The outlook didn’t look much brighter Monday as the market saw another bout of losses.
The benchmark index sank 4.8% in September, marking its worst month since March 2020. It was also the first losing month for the S&P after seven straight months of gains. The outlook didn’t look much brighter Monday as the market saw another bout of losses.
Bearish sentiment has risen a bit last month, following the market’s up and down gyrations—mostly due to COVID-19 (although new cases finally seem to be slowing), as well as the continuing drama from Congress, who doesn’t appear to be able to agree on anything!
However, the economy is continuing on a strong bent. Durable goods manufacturing has risen, the unemployment rate remains healthy, and housing is strong. Building permits and housing starts—along with prices—continue to rise. There has been some abatement in the rate of pricing increases, which is a good sign. We are seeing a little more inventory, just not enough to put a big damper on prices as of yet.
It’s a mixed outlook for the markets right now—we’re seeing some major pullbacks in certain big names, but today’s action was very positive. We may continue to see some dips in the next few weeks, but overall, I’m optimistic that the economy is still strong. And as long as earnings continue to outperform, the markets should hold up nicely.
I’m looking forward to the colorful fall, which is already starting here in Tennessee. I wish you a pleasant autumn and hope you will email me with your thoughts and questions. I look forward to hearing from you.
Happy Investing!
However, the economy is continuing on a strong bent. Durable goods manufacturing has risen, the unemployment rate remains healthy, and housing is strong. Building permits and housing starts—along with prices—continue to rise. There has been some abatement in the rate of pricing increases, which is a good sign. We are seeing a little more inventory, just not enough to put a big damper on prices as of yet.
It’s a mixed outlook for the markets right now—we’re seeing some major pullbacks in certain big names, but today’s action was very positive. We may continue to see some dips in the next few weeks, but overall, I’m optimistic that the economy is still strong. And as long as earnings continue to outperform, the markets should hold up nicely.
I’m looking forward to the colorful fall, which is already starting here in Tennessee. I wish you a pleasant autumn and hope you will email me with your thoughts and questions. I look forward to hearing from you.
Happy Investing!
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.
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 OutlookFor 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 | ||
|---|---|---|---|
| Affirm Holdings (AFRM) | 108 | ||
| SKIN (SKIN) | 26 | ||
| Caesars Entertainment Corp. (CZR) | 118 | ||
| CF Industries (CF) | 61 | ||
| ConocoPhillips (COP) | 71 | ||
| International Game Technology (IGT) | 28 | ||
| Live Nation Entertainment, Inc. (LYV) | 98 | ||
| Matador Resources Company (MTDR) | 40 | ||
| Palo Alto Networks (PANW) | 470 | ||
| Paycom Software (PAYC) | 495 |
Updates
The Federal Reserve is expected to lower interest rates this week, with a likely announcement on July 31. The stock market has fully priced in a rate reduction, which means if the Fed fails to lower rates, investors can expect the market to fall for a few days.
Our portfolio is outperforming the index by roughly 100%, on average. But we’re not the only ones. Many targeted mutual funds are also demolishing the Russell 2000 Small Cap Index.
Remain bullish, but continue to take things on a stock-by-stock basis. Some potholes based on earnings, rotation and news flow are certainly possible, but overall, the bull market is in good shape and most leading stocks act well.
It’s the middle of the summer swoon. But there’s a lot going on in the market, namely earnings. Overall, this earnings season is shaping up to be positive but uninspired.
Last week’s economic reports delivered good news, presuming that you are rooting for a stable or strong U.S. economy. June retail sales rose 0.4% vs. May, when economists expected an 0.2% increase; and retail sales also rose 3.4% vs. a year ago.
This week marks the beginning of the second-quarter earnings season. I don’t foresee any major changes in the trends in any of our companies, but stock price reactions and trends don’t always line up in the short term.
Our emerging markets (EEM) signal continues to be positive and right on top of its 20-day moving average as China and other emerging markets are bumping along and lacking a decisive uptrend.
Things look pretty darn good. The S&P 500 has broken the 3000 level for the first time ever and is within a whisker of its all-time high. The index is up over 9% since the beginning of June and 20% so far in 2019.
Alerts
The rolling market crash of the past three weeks is continuing today.
In the largest insider purchase of this year, the Non-Executive Chairman of the Board, John Gibson, recently bought US$497k worth of stock, paying US$39.11 for each share.
As you pour over stock websites and ponder which stocks you might like to buy in the coming weeks, think hard about how badly these companies might be harmed by the cessation of public gatherings.
We’ve just been through a harrowing period in the stock market and the path forward remains uncertain.
This vaccine maker just announced that it has initiated development of two product candidates for the treatment and prevention of coronavirus disease (COVID-19).
In this rare, mid-week update I will try to be brief, because I know you have a lot to read, including numerous notices of cancellations and closings.
The good news is that the amount of cannabis intercepted along all U.S. borders has fallen by 89% since 2011, from 2.5 million pounds per year to about 270,000 pounds in 2019.
We are now living through an unprecedented time in the U.S., and in the world at large, when institutions, schools, universities and more are being shut down from public attendance so as to curtail the spread of a virus named COVID-19.
The fund has five sectors with an annual dividend yield of 2.45%, paid quarterly.
After a sharp one-day bounce, the sellers are at it again today, with the indexes quickly diving back to Monday’s lows, bringing with them most every stock in the market
With this stock below its September lows, we’re back to square one. How did we get here?
Monday’s overnight market decline of 7% caused several stocks in the Profit Booster portfolio to blow through their stops before we could act.
Portfolios
Strategy
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.