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

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.

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!

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

Good investing ideas can come from anywhere. One useful source is to borrow ideas from some of the best value-oriented investors. Their holdings can be found in the 13F and 13D regulatory filings which are required every quarter. In the letter, we briefly describe these filings, how we use them, and six stocks that look attractive from the many holdings we analyzed.



A slightly shocking source of turnaround ideas can come from the electric utility industry – about the last place that contrarians might look these days. We discuss three with interesting stories and strong upside potential.



Our feature Buy recommendation, Vistra Corporation (VST), comes from this illuminating search through the utility sector. Vistra is the nation’s largest independent power producer with an emerging retail business. Its shares were jolted by the winter storms yet look like an attractive turnaround situation.



We also mention our May 12th move from Buy to Sell on shares of Mohawk Industries (MHK).



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.

It looks like this relentless bull market is finally stalling out. The market isn’t correcting, or really selling off in any substantial way. It has just stopped moving higher, for now. Given the returns in the past year and recent months, the market had to take a break. That pace couldn’t last.

Stock prices may be stuck in mud for the time being, but there are some fantastic income opportunities out there. Many high-dividend stocks are still well below pre-pandemic prices and offer some of the highest yields in a decade. In this month’s issue I highlight a phenomenal stock with a sky-high yield and a price that’s trending higher.

It’s been fifteen weeks since the marijuana sector topped, sending the Marijuana Index down 55%. But as the picture of this correction gets clearer, every day I get a little more bullish about the possibility that the sector is ready to turn up again. Most of our stocks are exhibiting typical base-building behavior, though there’s no sign of real buying power yet.

But the fundamentals of the industry remain excellent, so there’s no question that eventually these stocks will get going again.



In the portfolio today there are only two small changes. IIPR moves to Hold, and TPB moves to Sell.



Full details in the issue.

This week’s covered call idea is a company that is growing fast, and is doing the good work of helping families overcome a problem.

Current Market Outlook


After a couple of horrid weeks for growth stocks, we’ve seen a ray of light lately, as many found solid support with some volume beginning to show up in some stocks as they rally, an early sign that big investors are engaged. Thus, we’ll chalk it up as a nice first step, and definitely a change from the recent carnage, but we still need to see more—many indexes are now doing more chopping than rising (the overall intermediate-term trend is basically neutral at this point), and most of the action in recent days has been among stocks that took the biggest hits (and thus still have a ton of overhead to chew through). Don’t get us wrong, we’re intrigued by what we see—it could prove to be the early stages of a change in character for growth stocks after three months in the outhouse—but the bulls still have more to prove before we meaningfully increase our exposure.

This week’s list remains mixed, with lots of turnaround and cyclical situations, but with a few growth-y issues too. Our Top Pick is Analog Devices (ADI), which has come back to life after a three-month rest thanks to great earnings, huge cash flow and a pending acquisition.

Stock Name	Price	Buy Range	Loss Limit
Acuity Brands (AYI)	180	176-181	162-165
Analog Devices (ADI)	163	159-164	145-148
Avery Dennison Corp. (AVY)	219	215-220	197-200
Blackstone Group (BX)	91	86-89	79-81
Children’s Place (PLCE)	95	90-93	80-82
EOG Resources, Inc. (EOG)	80	78-81	70-72
EPAM Systems (EPAM)	485	465-475	425-430
Owens Corning (OC)	105	101-104	92-94
Progyny (PGNY)	59	54.5-57.5	48-50
Roblox Corporation (RBLX)	89	85.5-89.5	73.5-76.5

First, a reminder that the market is closed for the Memorial Day holiday next Monday so we’ll publish our next issue on Tuesday, June 1.

This week, the broad market continues to give mixed messages, with growth stocks as a whole lagging, but some newer stocks giving bullish signals. One of those is today’s featured stock. It came public in March and on Friday it broke out to a new high!



As for the current portfolio, there are no changes. Everything is working at the moment!

I’ve mentioned a few times this year that I expect the shortage of truck drivers in the U.S. to be the lynchpin in the current economic cycle’s eventual inflation surge. Now that Wal-Mart (WMT) is publicly discussing their driver shortage, let’s review this theory.

Remain mostly bullish as our trend-following indicators are still positive and most leading stocks are in solid uptrends. We have no changes in the Model Portfolio tonight as we are keeping some cash (17%) on the sidelines.

The stock market has started September with a small pullback but the big picture is still bullish. If you’re underinvested, it’s time to come off the sidelines. Most of the stocks in our portfolio are healthy, and I’m putting one of our holdings back on Buy today.

Despite a modest dip yesterday the market generally looks healthy, with the S&P 500 finally breaking out to a new high this week, the NASDAQ trading above 8,000, and the S&P 600 Small Cap Index continuing to trade right up at all-time highs. This index is up 17% year-to-date and more than 30% over the last 12 months!

We are continuing to fly a caution flag from the Cabot Emerging Markets Timer. We remain in a defensive stance as we wait for some good news to turn investors’ sentiment around.

Investors who subscribe to Cabot Undervalued Stocks Advisor run the gamut from speculative investors who are looking for very short-term profits to buy-and-hold investors who want to build a portfolio full of good, market-leading companies like FedEx (FDX) and Amazon (AMZN).

There continues to be a lot of noise out there regarding Donald Trump, his legal team, trade, tariffs and security threats/manipulation on social media platforms in advance of the upcoming mid-term elections

Stay bullish. We’ve seen an improvement in the evidence during the past week, with growth stocks acting well and more names hitting new highs. We’re moving one of our positions back to buy and our cash position stands at 27%.

The broad market looks healthy. The S&P 500 is close to breaking out to new highs, and the Dow is at its highest level since February, propelled by strong performances from industrial and consumer staples stocks. Energy stocks are still lagging a bit, but everything else looks healthy. We are putting four stocks back on Buy today.

It’s fairly easy to find stock market prognosticators who will tell you to head for the hills, and buy gold along the way. As for me, the market is doing everything that I expected this year, despite the harrowing headlines. Stick with your investment plan.

It’s been a relatively quiet week in our portfolio so there aren’t many stock-specific updates to cover.

Our Buy signal from the Cabot Emerging Markets Timer has turned decidedly negative and most of our stocks are under selling pressure.

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.

We’re selling one stock, but we’re going to reinvest the proceeds in two steps—first, by adding another half-sized position in one and by initiating a half-sized position in another. Our cash position will still be in the low 50% range after these moves.

This bank is expected to grow at an annual rate of 12% over the next five years.

Yesterday was the worst day of the year for cannabis stocks, with HEXO (no longer in our portfolio) leading the way down with a plunge of 22.5% after the company announced that revenue for the fiscal fourth quarter, ended July, would be $14.5 to $16.5 million, well short of analysts’ expectations of $24.8 million.

This oil and natural gas company is selling some assets, and our contributor thinks this may result in a hefty one-time special dividend.

This space tech company beat analysts’ earnings estimates by $0.19 per share last quarter.

This week’s update is both early and much shorter than normal.

The market has been changing faster than the weather here in the northeast. And like any big change it’s been a bit tough to navigate.

Coverage of the shares of this software company was recently initiated at William Blair with an ‘Outperform’ rating.

This energy company recently reported a significant rise in earnings.

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.