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%.

Current Market Outlook


After a very strong rally from the late-January lows, the major indexes are again in the midst of a pullback—during the past week and a half we’ve seen a few days of churning and distribution as worries over inflation (and a less-loose Federal Reserve) cause some profit taking, and today saw a big rotation out of growth stocks. Could this be the start of a “real” correction? It could be, as the intermediate-term advance is long in the tooth and sentiment remains giddy. That said, we never anticipate, and so far, we really haven’t seen much abnormal action yet—while a few stocks have fallen apart after earnings, most leaders are intact and even the weakest major index (Nasdaq) is near its 25-day line, which is acceptable. Given some of the yellow flags out there, our antennae are up, but with most of the evidence still positive, we’re keeping our Market Monitor at a level 7.

This week’s list has many recent earnings winners, including a few that are busting loose from good-sized bases (regular or post-IPO). Our Top Pick is Wix.com (WIX), which has a great story, accelerating growth and just staged a very powerful breakout.

Stock Name	Price	Buy Range	Loss Limit
The AZEK Company (AZEK)	47	45-47.5	40.5-41.5
Deere & Company (DE)	338	318-328	288-294
DraftKings Inc. (DKNG)	60	59.5-62.5	52-53.5
Magna International Inc. (MGA)	87	81-85	73-75
Mohawk Industries (MHK)	174	162-168	146-149
MongoDB (MDB)	392	395-407	355-365
SelectQuote (SLQT)	30	27-29	24-25
Sonos (SONO)	38	34.5-36.5	29.5-30.5
Teck Resources Limited (TECK)	23	21-22	18.7-19.5
Wix.com (WIX)	335	333-346	295-305

The bull market is alive and well, and our holdings, in general, are delivering as expected, with the usual zigs and zags to keep us on our toes.

Today’s recommendation is a big solid technology company that should benefit for years from the ongoing 5G communications rollout—and it pays a nice dividend, too.



As for our current holdings, there are no changes. With the new addition, the portfolio is once again fully invested.



Details inside.

Many of our stocks appear to be advancing this week. There are a few that I’ll be selling soon due to either valuation or upside price resistance, yet they remain excellent longer-term investments, including Alphabet (GOOGL).

This feels like one of those markets that you’re not sure you should trust given how volatile it was in February. But the combination of revenue growth, earnings growth and decent charts, especially among growth stocks, suggests it’s best not to try to predict too far into the future. For now, the evidence in front of us favors the bulls.

Given the mixed evidence, we think the Model Portfolio is in a proper stance, with about one-third in cash, but also holding onto a bunch of attractive stocks that could be leaders of the next upturn.

Volatility continues on Wall Street. Every time stocks seem to be building sustainable momentum, they run into a brick wall. The CBOE Volatility Index (VIX), a.k.a. the investor “fear gauge,” remains well above its 52-week average, showing that there are still some concerned investors out there.

he iShares EM Fund (EEM) has dropped decisively below its 25- and 50-day moving averages, which returns the Emerging Markets Timer to a negative reading. We take the Timer’s advice seriously, so we are shifting a couple of stocks to Hold ratings, but because the damage to the portfolio thus far has been minimal, we don’t have any sells tonight.

Warren Buffett’s highly anticipated annual letter to shareholders was released on Saturday. In it, Buffett reaffirmed our conservative outlook on the market.

The stock market correction came and went rapidly in recent weeks! Granted, stocks are not done bouncing around yet, and a few sectors are lagging the broader market, including energy and healthcare.

Small caps paused this week to digest a few wild weeks. The S&P 600 Small Cap Index is essentially unchanged since I last wrote, which I think is a victory at this point.

Two of our stocks released earnings in the past week but there was no significant news. The economy, in general, is doing great, corporate profits are reaching record highs, and the European economy is improving. Although market reacted sharply to inflationary concerns, inflation is in line with Fed expectations.

The market has recovered well from its January–February slide, but after forming a V-shaped bounce, the major indexes have stalled out over the last few days. It’s likely that markets will need a while to catch their breath, and we don’t want to get ahead of them. In the Model Portfolio, while we are close to recommending new buys, we want to have the Cabot Tides at our back when we do so.

The market is certainly healthier, but it probably won’t go straight up from here. In fact, it’s more likely that sellers will see this bounce as an opportunity, and we’ll get another, probably smaller, leg down before the market starts a sustainable new uptrend.

Now that the stock market correction finally arrived, I want to sketch out what investors can expect in the near future.

Analysts expect this Indian online travel company to grow at an annual rate of 56.9% over the next five years.

Today’s news: One stock is now Retired from the Growth & Income Portfolio; and one stock joins the Buy Low Opportunities Portfolio as a Strong Buy.

This homebuilder beat analysts’ estimates by $.07 last quarter.

Three of our portfolio stocks reported second-quarter (2Q) results. Here’s what you need to know.

This staffing firm just purchased two consulting firms, which should be immediately accretive.

The broad market is in fine shape, with most major indexes at or near their highs and all Cabot’s market-timing indicators bullish.

Two analysts have raised their earnings estimates for this drug company in the past 30 days.

Our second recommendation is a little profit-taking.

Zacks rates our first idea today—a gold miner—‘Strong Buy’ based on rising volume and earnings estimates.

Every now and then one of our stocks is the target of a short report by a myriad of research houses that try to make the case that a company is garbage and its stock is wildly overvalued.

Goldman Sachs just upgraded this tech company’s shares to ‘Buy’.

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.