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

As value investors, we follow the goings-on at Berkshire Hathaway, and comment briefly on its earnings and Warren Buffett’s annual shareholder letter, released this past Saturday. Your chief analyst owns some Berkshire shares (the lower-priced Class B shares), but isn’t a full-fledged Berkshire “groupie.”



We also discuss our new Buy recommendation – British insurance company Aviva, Plc (AVVIY). This company is emerging from a period of global sprawl and weak leadership, led by a new and impressive CEO.



Currently-recommended Dow (DOW) is a strong beneficiary of the global economic re-opening, with higher earnings likely ahead, so we are raising our price target to reflect this still-undervalued stock’s potential.



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!

The markets have been mostly positive in the past month, with the Dow rising about 1,000 points. The economy is rolling along nicely. Consumer confidence is up, employment is steadily rising, and the housing market is still booming.

That bodes well for the next few months, and we remain bullish on the markets, albeit with a dose of caution.



We are expecting—once this first Biden stimulus package gets underway—that Infrastructure spending will be next on the new president’s agenda, and that is where our Feature Recommendation should shine. The company is already seeing double-digit sales and earnings increases, as the economy recovers, and rising Infrastructure outlays should exponentially boost its profits.



We are taking some profits this month with the sale of Clean Energy Fuels Corp. (CLNE), which has gained 388%. We’ll be looking at some additional opportunities to cash in, and we’ll make sure to alert you should we make those decisions or any other portfolio changes between issues.



Happy Investing!

Fears of rising inflation, and what that would mean for interest rates, weighed on the market last week, especially growth stocks, which were crushed. Fortunately, the Cabot Profit Booster portfolio is well diversified, and our stocks held up spectacularly for the most part, and some even made new all-time highs.

Current Market Outlook


The market staged a nice-looking rebound today, especially given that both the S&P 500 and Nasdaq were hanging around their 50-day lines coming into today. Up is definitely good, but when examining the evidence, we see a tale of two markets. Growth stocks still look ragged, as many cracked key support last week and have been extraordinarily choppy during the past month (a sign bulls and bears are fighting it out after big runs). However, the broad market is largely fine, with small- and mid-cap indexes perched near their highs and many sectors acting fine. All in all, the evidence has worsened, so we’re knocking our Market Monitor down a notch, but we’re mostly taking things on a stock-by-stock basis, ditching those that break down while targeting new buying at resilient names.

This week’s list is heavy on cyclical and re-opening plays, though chip stocks remain a bastion of resilience. Our Top Pick is Kulicke & Soffa (KLIC), which staged a long-term breakout in November, has huge growth and has been unaffected by the market’s wobbles.

Stock Name	Price	Buy Range	Loss Limit
Ameriprise Financial, Inc. (AMP)	229	218-225	200-204
Amkor Technology (AMKR)	25	23-25	19-20
Avis Budget Group (CAR)	58	53.5-56.5	46-48
Bausch Health Companies (BHC)	32	29.5-31	26.5-27.5
The Cheesecake Factory (CAKE)	55	51.5-54	45-46.5
HubSpot (HUBS)	527	490-510	430-440
Kulicke and Soffa Industries (KLIC)	52	48.5-52	41-43
Pioneer Natural Resources (PXD)	149	141-146	125-128
Shake Shack (SHAK)	118	113-118	100-103
Valmont Industries (VMI)	244	226-236	203-208

Last Tuesday the market sold off big-time. Today it recovered equally big. But many stocks haven’t bounced as much as they fell, and some of them are in our portfolio. That’s the general reason for my four sell recommendations today.

Still, while there are growing divergences, the bull market is not dead yet, and today’s recommendation is a mass-market retail name whose stock looks great as investors look forward to more expansion.

November through most of January was relatively smooth, but we’ve seen more cracks over the past month—especially this week, as growth stocks have come under severe pressure. To be fair, our trend following indicators are still positive, so we’re not selling wholesale, but we’re not letting stocks get away from us on the downside, either.

Earlier this week, we cut bait on CrowdStrike, and tonight, we’re letting to of NovoCure, taking small profits in each. Our cash position will now be around 40%, and as always, we’ll remain flexible going forward, prepared to either put money to work (if this is another short-term shakeout) or raise more cash (if a “real” correction unfolds.)

The timing is right for alternative energy.

Alternative energy (also referred to as clean or alternative energy) is by far the fastest growing energy source. The International Energy Agency (IEA) estimates that global renewable power supply will grow 50% in just the next 5 years.



While clean energy has been a story and knocking at the door for a while now, a certain critical mass in growth and development seems to be taking place recently. The market usually gets it. And it’s telling us something.



The iShares Global Clean Energy ETF (ICLN), which tracks 30 stocks in the Global Clean Energy Index, has taken off lately after going nowhere for more than a decade. ICLN soared 100% over the past year and 178% for the past two years, compared to S&P 500 returns of 22% and 44% respectively over the same period.



The market clearly sees big changes looming in the energy sector. It also helps that the Biden Administration will likely reward clean energy companies with more tax breaks and subsidies and other goodies. But more importantly, the focus will draw still more investor attention to the booming growth in alternative energy. And investor intrigue will only accelerate.



This month’s highlighted stock NextEra Energy (NEE) should clearly benefit going forward. It may not be the sexiest clean energy. But it provides a great way for more conservative, income oriented investors to play the trend.

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

This month we look at post-bankruptcy energy stocks. Companies that have emerged from bankruptcy are generally shunned by investors, as are energy stocks in general in the current market. Combined, these two traits offer some attractive investment opportunities. We discuss four of them.



We also look at tobacco stocks. Shares of these companies have fallen sharply in recent years due to an acceleration in the decline rate of cigarette volumes. However, that trend appears to be moderating, leaving the shares undervalued yet paying high dividend yields. Our feature recommendation, Altria Group (MO), is a stand-out value among the group.



We also include comments on recent price target and rating changes, including our recent Sell recommendations on Trinity Industries (TRN) and ViacomCBS (VIAC).



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.

Yesterday was a rough day for stocks in the marijuana sector. Today was better. But overall, I continue to hold the opinion that the sector peaked two weeks ago and that it needs a longer cooling-off phase—a real correction.

Such a correction can take many forms, and it’s hardly worth speculating about what form this one will take. Yet by managing your portfolio carefully, based in large part on the action of each stock, you can get through this correction with minimal pain and be well-positioned to add to your gains when the uptrend resumes—because in the long run, this remains a fantastic sector to be invested in.



Full details in the issue.

Your Cabot Profit Booster portfolio closed out three more positions that were assigned at expiration last week. Those were Alcoa (AA) earning profits of $255 per contract for a yield of 13.8%; Kohl’s (KSS) earning profits of $400 per contract, or a yield of 11.1%; and Snap Inc. (SNAP) with $500 in profits earned for a yield of 10%.

In this weekly update, we have no changes to the portfolio, but that’s expected given the current market environment and the recent sales in previous weeks. A lot of of our stocks are influenced by the corporate news splashes and media headlines which I cover in today’s update.

Raise some cash. Our Cabot Tides are now on the fence, and more important, individual stocks have been hammered during the past week, with a few showing abnormal action. In the Model Portfolio, we’ve sold a few positions lately, leaving us with around 40% in cash.

In today’s update, I outline the reasons why I have every intention of remaining invested in various oil industry stocks in the foreseeable future and give a detailed update on all positions in the portfolio.

Despite all the tariff talk, small caps continue to hold up well and even rose by 0.3% this past week.

Emerging market stocks have had a nasty week, with the iShares EM Fund (EEM) dropping decisively below its 25- and 50-day moving averages. While we have several stocks that are vulnerable, we’re going to stand pat for now and have no moves in the portfolio.

In this weekly update, you’ll find great news from RV-makers Thor Industries (THO) and Winnebago (WBO), the potential for a near-term breakout in shares of Intercontinental Exchange (ICE), and exciting news about the Disney-Comcast-Fox takeover tussle and how it’s affecting the Discovery Communications (DISCA) share price.

Stocks pulled back yesterday, but the market’s intermediate-term trend remains up. Stay the course, and resist overreacting to the oscillations.

I wrote to you recently about upcoming changes in the Global Industry Classification Standard (GICS), which classifies stocks into 11 sectors and dozens of industries, and is commonly used in professional portfolio management as a guideline to portfolio diversity.

Small caps were basically flat over the past week. Since the beginning of May, the S&P 600 Small-Cap Index has made a strong move above prior resistance in the 980 to 990 range. And even with a little dip on Wednesday, the index is sitting right near an all-time high.

There is one change today: from hold to sell at 111.5.

Markets remain volatile, and some stock indexes started to diverge toward the end of last week. The rotation means some stocks are looking stronger than others, but overall the intermediate trend remains up. There are still plenty of yellow flags out there, but the market’s trend remains up, so if you’re underinvested, feel free to do a little buying here.

Remain bullish. Our stance hasn’t changed since last week, as our trend-following indicators are bullish and growth stocks are acting very well in general. Our cash position remains at 20%, though we could do new buying if we see a proper setup.

Coverage of the shares of this alcoholic beverage producer was recently initiated at MKM Partners with a ‘Buy’ rating, and 10 analysts have increased their EPS estimates for the company in the past 30 days.

Four analysts have increased their EPS forecasts for this financial firm in the past 30 days.

As we’ve seen in recent days, the major indexes are a bit soft this morning, with the Dow down 73 points and the Nasdaq down 15 points.

Baker Hughes changes their corporate name and stock symbol. And, two stocks report third-quarter earnings beats.

This master limited partnership is benefiting from the growth in natural gas exports, but is trading at a discount.

There are a couple quick things to cover today. First, the introduction in the email that went out introducing yesterday’s Issue was placeholder text from a past update. I apologize for the error and hope it didn’t seem too random. Second, I’ve received questions about the stocks in the Special Reports that you have access to as subscribers to Cabot Early Opportunities.

Two stocks report earnings and two more are rising again.

The top five holdings in this ETF are: Abbott Laboratories (ABT, 13.40% of assets); Medtronic PLC (MDT, 13.21%); Thermo Fisher Scientific Inc (TMO, 10.57%); Danaher Corp (DHR, 7.91%); and Intuitive Surgical Inc (ISRG, 4.66%).

It’s been a tough few months for cannabis investors, but no downtrend lasts forever, and yesterday’s blast-off by Aphria (APHA), which sparked buying across the sector, is a sign that the worst has almost certainly passed.

Tyler is selling one stock.

The top five holdings of this fund are Weyerhaeuser Co (WY, 6.23% of assets), Brookfield Asset Management Inc Class A (BAM.A.TO, 5.37%), Five Point Holdings LLC A (FPH, 5.16%),
Lennar Corp (LEN, 5.03%), and CK Asset Holdings Ltd (01113.HK, 4.88%).

Shares of this semiconductor stock are attractive, on hopes of an easing of the trade war with China.

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.