Growth stocks have taken a series of small, positive baby steps during the past three weeks, which, given where things were at early last month, we’ll take. It’s been enough for us to put some money to work.

That said, the environment has a lot of room for improvement; we’re going slow, but will be happy to put more money to work if we see further progress. In the Model Portfolio, we’re averaging up in one of our stocks tonight, but that will still leave us with around 57% in cash.

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

Many of our recommended names are at or approaching our price targets. The decision to keep or sell isn’t easy in a strong market. Our patience is being tested (in a good way).



Few people would attend the Indy 500 and think about investment horizons. But, such is the world that your chief analyst inhabits. The race itself was a thrill, as always. It was also a showcase of different investment horizons, featuring that of new track owner Roger Penske.



Earning season has concluded, so it has been a slow period for company-specific news, although Tyson (TSN) announced the surprise departure of its new CEO. Some companies, including Bristol-Myers (BMY), Cisco (CSCO) and Dow (DOW) are presenting at various investor conferences. These can be worthwhile to watch and are free to the public, with replays available in addition to the live presentations.



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.



Thanks!

This month we’re jumping into a little-known company that makes and sells pop culture products.

It’s sort of an odd duck, but when you dig below the surface you find compelling products and interesting market exposures, including to the nascent Non-Fungible Token (NFT) market, which has exploded in trading value over the last year.



Revenue growth is above 30%, and the chart is strong.



Enjoy!

The market has strengthened again, which is great for our three open covered call positions, all of which are trading above the strike price of the call we sold. That being said, a sideways market is also fine for our volatility selling strategy, that is focused on buying the strongest stocks, while keeping the portfolio diversified.

I hope you enjoyed the long weekend!

Investors in our stocks certainly did, as more and more of them have been hitting new highs. In fact, they’re doing so well that I’m selling none today.



As for today’s recommendation, it’s a young growth stock trading 50% off its recent high—a great opportunity for aggressive investors.



Details inside.

Current Market Outlook


If you had told us three weeks ago that growth stocks would bounce decently, a collection of names would show some big-volume upmoves and other names would start to tighten up, we’d have taken it in a heartbeat. As we’ve written in recent days, the action is encouraging, though not decisive yet, and the next week or two will be key—many prior winners have pushed into resistance, while in recent months most good-looking names have quickly found sellers, so if the buying pressures can continue it would be a sign that the market’s character has changed. As it stands now, the evidence has improved, so you can start putting more money to work if you’ve been relatively defensive. But we think going slow and building as you develop profits is the way to go.

This week’s list has many interesting names, including a few more growth-y titles than we’ve seen recently. For our Top Pick, we’ll take another swing at Nvidia (NVDA)—it’s had two failed breakouts this year, but we think the 3rd time could be the charm.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	53	51-53	45.5-47
Bentley Systems (BSY)	58	54.5-56.5	49.5-50.5
BioCryst Pharmaceuticals (BCRX)	16	14-15.2	12-12.7
CrowdStrike (CRWD)	222	215-224	190-195
Dicks’s Sporting Goods (DKS)	97	93.5-96.5	85-86.5
Ford Motor Co. (F)	15	13.6-14.3	12.2-12.6
NVIDIA Corporation (NVDA)	650	630-655	575-590
Range Resources (RRC)	15	13.7-14.5	12-12.5
Sea Limited (SE)	257	248-260	220-225
Toll Brothers Inc. (TOL)	65	63.5-66	58.5-59.5

It’s been a good spring in the markets and the economy. Unemployment claims are declining, housing is staying steady, and consumer confidence—as well as consumer spending—are rising.

And as we begin to emerge from the pandemic, economic growth looks healthy, with the latest GDP quarterly estimates coming in at 8.2%.



Our Feature Recommendation this month is a Financial company that participates in both the insurance and asset management industries. It pays an attractive dividend, and is seeing healthy growth, especially in Asia.



Our portfolio is sailing along, and we think this addition to our holdings will be a profitable move.



We hope to see you on our June Platinum Club webinar; it’s scheduled for June 8 at 2pm. In the meantime, don’t hesitate to contact us with any questions or comments.



Happy Investing!



Nancy Zambell and Kate Stalter

The Dow Jones Industrial Average celebrated 125 Years yesterday as the index has increased an average of 7.7% each year. Markets continue to consolidate and churn with solid earnings offsetting concerns over inflation and valuations. This week Virgin Galactic (SPCE) took off while overall Explorer positions moved forward. Today’s new recommendation is a big data software stock that is in an uptrend on the back of some big government contracts. Enjoy!

U.S. stock markets continue to suffer, revisiting lows from October and November. We could see modest improvement through year end, but I don’t expect a strong stock market rebound until at least January.

Trade war uncertainties have nipped our young buy signal in the bud, but the situation is highly fluid, so we’ll be making portfolio choices on a stock-by-stock basis.

With our mix of conservative, growth-oriented and high-yield investments, our portfolio continues to do well. Most of our non-Safe Income stocks are still on Hold, so it’s time to start thinking about becoming more aggressive, if the market becomes more constructive. But we don’t want to get ahead of the market, so no rating changes for now.

We have three changes in the portfolio this week.

Remain defensive, but stay tuned as we could get a Cabot Tides buy signal as early as tomorrow if the market cooperates. Tonight, we’ll stand pat with our huge (90%-plus) cash position, but we’ll send out a bulletin if we get a green light.

Following the second 10% U.S. stock market correction of 2018, stocks are trying to get their footing. We’re witnessing some large daily price swings, especially among energy stocks, which are being buffeted by falling oil prices.

I think we can all use a break from this market, and there’s no new fundamental news related to any of our positions. So today I’m just going speak for a few minutes on the state of the market and small caps.

Emerging market stocks, as tracked by the MSCI Emerging Market ETF (EEM) aren’t making much progress. But, and this is important, they aren’t losing much ground either.

The stock market slump that started last week has intensified in recent days, bringing the major indexes back to their October lows. I do have one rating change today, selling one third of a position, but the rest of the portfolio is in good shape given the housekeeping we did during last month’s selloff.

The S&P 500 index continues to bounce near recent lows, as it slowly works its way through its second 10% U.S. stock market correction of 2018

The major market indexes have been retracing their steps back to their late-October lows. With the trend down, it should come as no surprise that most of our stocks lost ground over the last five trading days, too.

There’s been plenty of volatility in recent weeks, but nothing has really changed with the market (trends are down) or our stance (highly defensive). We’re not heading to our Panic Room, though, as a strong rally from here could actually produce a Cabot Tides buy signal. In the Model Portfolio, we have no changes tonight, with three stocks and a cash position of around 76%.

This is a short week but I wanted to give you some news on a couple of my recommendations that have been making news.

In the past 30 days, 11 analysts have raised their earnings estimates for this defense technology company.

The shares of this semiconductor stock were just upgraded by Mizuho to ‘Buy’.

This industrial company is expected to grow by 12.9% this year.

Yesterday, the House Judiciary Committee approved the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act), which has Democratic Presidential candidate and former prosecutor Kamala Harris as one of its sponsors.

Three analysts have recently increased their EPS estimates for this Mexican media company, and are forecasting growth of 33.3% for the company next year.

This space technology company has had its ups and downs but recent moves to deleverage are stoking investors’ interest.

This BDC is a recent IPO and has a current dividend yield of 6.81%, paid quarterly.

This gold company beat analysts’ EPS estimates by $0.04 last quarter and raised its quarterly dividend by 25%, to $0.05 per share.

A leading provider of financial advice joins the Special Situation Stock Portfolio as a Strong Buy.

This regional bank is expected to grow by 22.6% this year.

I’m making four changes to the portfolio 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.