Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the September 2020 issue.

With earnings season mostly completed, the markets have drifted upwards in the waning days of this otherwise unusual summer. Some splashy IPOs and stock splits have provided some excitement, but the bigger and more enduring news came from the Fed’s official change in its priorities. We discuss our thoughts on this shift in the letter.



We also introduce price targets for several recommended stocks. Over the next few weeks, we will provide targets for the remaining stocks and all newly recommended stocks. Price targets help stay the course when our stocks weaken on noise, and provide a tangible exit point. The assumptions behind the price targets provide a roadmap to gauge the company’s recovery process.



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.

The Turnaround Letter has been acquired by the Cabot Wealth Network, a family-owned business based in nearby Salem, Massachusetts. Founded in 1970 by Carlton Lutts, Cabot is celebrating its 50th year in business, having served hundreds of thousands of investors. The company focuses exclusively on publishing high-quality investment newsletters and currently has a portfolio of 20 advisory services.

In this issue you’ll read about an energy company and a powerful catalyst for turnarounds.

Today’s recommendation had been in a slow, steady uptrend for years, though it got dented with everything else in March of this year.

Current Market Outlook


We don’t want to repeat ourselves too much, but the environment has remained mostly the same during the past few weeks. First, overall, this is a bull market that’s likely to carry nicely higher when looking out a few months; there remains plenty of doubt and uncertainty, which is (contrarily) a good thing. Second, though, making money has become trickier—there are far more news-driven moves, buying pressures seem to come and go for many leading stocks (as opposed to the sustained upmoves seen earlier this year) and there’s no question most indexes are extended to the upside. That’s no reason to get overly worried (most stocks are still acting normally), and in fact, we’re nudging our Market Monitor up a notch this week as leading stocks have perked up a bit. But it remains important to look for good entry points, honor your stops and take some partial profits when the opportunity arises.

Encouragingly, this week’s list is very broad, with all different types of sectors, sizes and growth/value outlook represented. There are many good names to choose from, but our Top Pick is Horizon Pharmaceuticals (HZNP), which has huge earnings estimates and a tight chart.

Stock Name	Price	Buy Range	Loss Limit
Anaplan (PLAN)	61.25	59.5-62.5	53-55
Enphase Energy (ENPH)	77.23	72-76	64-66
FedEx (FDX)	219.84	206-213	184-188
Futu Holdings (FUTU)	32.17	30-32	26-27
Horizon Therapeutics (HZNP)	75.12	72-76	65-67
Lithia Motors Inc. (LAD)	248.96	238-250	215-220
Roku, Inc. (ROKU)	173.48	167-174	147-150
Salesforce.com (CRM)	272.65	263-273	233-239
Trupanion (TRUP)	62.73	60.5-63	53-55
Tupperware Brands (TUP)	16.29	14.5-15.5	12-12.5

The market remains in fine health, with the major indexes regularly hitting new highs as investors look forward to a recovery from the intentional recession. At some point, that means we’ll have a top, but it’s hard to predict when.

In the meantime, the portfolio continues to recommend a well-diversified group of high-potential stocks, including this week’s—a well-known pharmaceutical giant that is coming off a normal correction.



As for our current stocks, most look great, but something’s got to be sold to keep the portfolio under 21 holdings, and the victim is our weakest stock, GFL Environmental (GFL).



Full details in the issue.

Growth stocks remain mostly hit or miss, but the evidence has improved somewhat during the past couple of weeks. We’re not flooring the accelerator, but we are doing a little new buying tonight, though still keeping about one-quarter of the Model Portfolio in cash.

Elsewhere in tonight’s issue, we talk about the thinning out of the advance and dive into all our stocks (a couple of which have earnings coming up), as well as talk about our new recommendations and game plan going forward.

Thank you to everyone who joined us last week for our virtual Cabot Summit. We really missed seeing you in person, but were so happy that we could at least share some of our investing ideas and strategies during this strange time in which we are living. I hope you enjoyed the Summit!

We are keeping our fingers crossed that the coronavirus trend seems to be improving. Unemployment is still dismal, but there are some very bright spots in the economy—both housing starts, building permits, and manufacturing are rising.



And as you’ll see in our Advisor Sentiment Barometer and Market Views, sentiment continues to be bullish.

Thank you to everyone who joined us last week for our virtual Cabot Summit. We really missed seeing you in person, but were so happy that we could at least share some of our investing ideas and strategies during this strange time in which we are living. I hope you enjoyed the Summit!

We are keeping our fingers crossed that the coronavirus trend seems to be improving. Unemployment is still dismal, but there are some very bright spots in the economy—both housing starts, building permits, and manufacturing are rising.

And as you’ll see in our Advisor Sentiment Barometer and Market Views, sentiment continues to be bullish.

In this month’s issue of Cabot Early Opportunities we serve up a diverse group of stocks with exposure to vastly different areas of the economy.

There’s some software and biotech, and plenty of IPOs, but also a few ways to play rising strength in cyclical stocks.

Enjoy!

A lot has happened with our marijuana stocks in recent weeks, with the most important being the release of excellent quarterly reports by all the major U.S. multi-state operators that explained why the sector had been so strong in recent months.

However, growth stocks in general—and marijuana stocks in particular—have now begun a well-deserved correction, so I’m now getting a bit more cautious.



Full details in the issue.

Stock indexes stumbled again yesterday, June 29, led by large-cap tech stocks. Thus far, the profit-taking looks normal. Technology stocks have been on a tear in 2017, so investors are taking advantage of sky-high prices to harvest extraordinary gains.

Our trend following indicators remain bullish and most growth stocks are still in good shape, so we’re sticking with our current stance. Our only change tonight is that we’re placing one of our stocks on Hold.

I’ve been watching for opportunities to add companies to the Cabot Undervalued Stocks Advisor portfolios that are outside the financial, energy and construction sectors and industries. Today, I’m adding an aerospace manufacturer to the Growth Portfolio as a Strong Buy.

All things considered, the past week has been tame. The S&P 600 Small Cap Index retreated 1.4% to get back to its 50-day moving average, while the S&P 500 Index traded sideways.

Stock indexes are situated just a tad below all-time highs, yet tech stocks are sitting on quicksand, energy prices are dropping, and President Trump’s policy agenda is falling apart. The bears have plenty of reasons to push prices lower, but stocks keep rising.

The iShares EM Fund has been trading effectively sideways since the middle of May, and that has kept the Emerging Markets Timer above its moving averages. We have one portfolio move tonight.

The market looks healthier today than it has in nearly two weeks. After its big drop on June 9, the Nasdaq found support repeatedly last week, and this Monday brought an impressive surge in all the indexes.

We could see a stock market correction in the near future, due to an abnormal concentration of capital in technology stocks and S&P 500 index ETFs (exchange traded funds).

Small caps broke above their six-month trading range last Friday (albeit very modestly and very briefly) even as tech was selling off hard. The reason appears to be that money was flowing out of small cap tech and, potentially, into small cap financials, industrials and consumer staples.

In this Weekly Update, I report on a sell candidate, plus four companies that raised their dividends. I also include one question from a subscriber with my answer.

We’re focused on seeing how the market and leading growth stocks act following the Friday/Monday wave of selling; so far, there’s been some abnormal selling but most stocks are holding key support. The overall market is also still in good shape, and thus, we’re generally standing pat, with around 22% in cash.

For now, the long-term trend remains up, and so do most of our Cabot Dividend Investor positions. Here’s what’s going on with each of them as we enter summer.

Two of the portfolio stocks each reported strong quarterly earnings beats.

The shares of this pharmaceutical stock is seeing new analyst coverage.

This engineering and consulting firm is eating up its competition.

This gene therapy company has been getting lots of good attention from analysts, with coverage of the shares being initiated at Evercore ISI Group, with an ‘Outperform’ rating.

The shares of this cosmetic company were recently upgraded by JP Morgan to ‘Overweight’.

This fast food giant beat earnings estimates by $0.04 last quarter, and three analysts recently raised their EPS forecasts for the company.

It’s not entirely unusual for a new CEO at a company to change the dividend policy due to having a different idea of how the company should be using its cash flow.

In the past 30 days, seven analysts have raised their earnings forecast for this restaurant company.

Two stocks are moving up and a third stock is moving from Buy to Strong Buy.

This auto parts supplier beat analysts’ estimates by a whopping $1.53 per share last quarter.

The top five institutional holders of our first idea, a technology fund, are: Yakira Capital Management, Inc., 0.91% of shares; Ladenburg Thalmann Financial Services Inc., 0.58%; Royal Bank of Canada, 0.55%; Herzfeld (Thomas J.) Advisors, Inc, 0.52%; and INTL FCSTONE INC., 0.39%.

Our second recommendation today is a sale of a previous holding.

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.