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.

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).

It’s one of those special days in the market where the Fed will make a highly anticipated decision on interest rates. It is widely expected that the Central Bank will cut the Fed Funds rate by 0.25%.

Oil prices are volatile now that about half of Saudi Arabia’s oil production is temporarily curtailed. Rising oil prices can help oil and chemical stocks, and hurt airline stocks.

Looking at the broad market, it seemed like a calm week. Even a good week! The S&P 500 moved up near all-time highs and even the languishing S&P 600 Small Cap Index broke out of its funk and shot up near 2019 highs for the first time since early May.

It was a pretty quiet week with most of our stocks up in the 3% -5% range. There are no changes to the portfolio.

The overall market appears to be largely pricing in a continued trade war with China and a slowing global economy. It’s also pricing in a rate cut this month and more to follow. The indexes appear to want to forge higher provided trade frictions don’t get worse, the global economy doesn’t crash and the Fed comes through on the rate cuts.

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 biotech is forecasted to grow 16.10% next year. And four analysts have recently increased their EPS estimates for the company.

Today I want to address the two positions which have March options expiring today.

Zacks just upgraded this pharma stock to ‘Buy’, based on rising earnings estimates.

Because of all the craziness out there I’m pushing back the stock section of this week’s update to tomorrow.

With the market down more than 30% since it peaked a month ago, it’s worth reviewing the reasons for the quick crash.

The quarter’s revenue surged in their Europe and licensing businesses, and lagged in their Americas Retail, Americas Wholesale and Asia businesses.

Shares of this conglomerate have declined to a very discounted value, but once the current volatility lessens, a case for a turnaround will be likely.

Remain defensive. The market took another leg lower today, though our four remaining stocks in the Model Portfolio hung in there.

This eyecare company is forecasted to grow by 16% next year.

We’re taking another incremental step to focus our portfolio today by selling one more stock.

We’re taking another step to adjust our market exposure today.

This streaming company is looking like a bargain at these prices.

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.