Novonix (NVNXF) shares broke above 5 this week and have more than doubled since early August even as the market is under pressure due to the slowing of federal stimulus, China’s property debt issues, and some increase in interest rates and inflation.

The marijuana sector peaked in February, bottomed from late March to mid-April, and since then has been building a base, preparing for a resumption of the big advance.

Fundamentals in the industry remain terrific, as second quarter results have recently revealed, and while the trend toward legalization in the U.S. continues, it’s taken a back seat at the federal level for now, so all the action remains at the state level.



In the portfolio today, we continue to hold patiently, with the portfolio one-third in cash, waiting for a new uptrend—but if you’re eager to buy now (while things look cheap) I do have some suggestions.



Full details in the issue.

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

Most investors, and the general public, seem to regard the transportation industry as somewhat dull. But transportation is a fundamental component of human existence, and companies must constantly strive for relevance, and must now navigate a secular shift in fuel sources. We discuss five transportation companies that are updating their strategic playbooks with hopes of turning around their prospects.



The market has a bias against stocks that trade at low prices, making this a go-to source of contrarian investment ideas. We make our case for five such stocks.

Last week, despite a large market decline on Monday, the major indices took a baby step forward. The S&P 500 gained 0.51%, the Dow rose 0.62%, and the Nasdaq eked out 0.02%.



The advance came despite ongoing uncertainties around Chinese property developer Evergrande and the seemingly hawkish message from the Fed announcement. Now the focus has shifted to Washington, D.C.’s finest and the decision around the debt ceiling and infrastructure. Add a sprinkle of Chinese power concerns and there seems to be just enough worry to keep investors on their toes.

The market has recovered remarkably quickly from last Monday’s sharp selloff. Thus, the long bull market remains intact and I continue to recommend that you be heavily invested.

Today’s featured stock is another conservative one, with a good yield, and in an industry that’s truly unloved. And that means its valuation is dirt cheap.



As for the current portfolio, I am selling our biggest loser, DocuSign (DOCU), and downgrading Tesla (TSLA) to Hold.



Details inside.

Current Market Outlook


After last Monday’s plunge, the initial rebound was very encouraging, and the fact that the major indexes are still doing their best to hang in there is a plus. But, while many individual stocks are in decent shape, the wild rotation that has been a hallmark of 2021 has returned, with money racing into cyclical areas and out of growth stocks the past couple of days. We’re still sticking with a stock-by-stock approach, and most names, despite their wobbles, remain in fine shape, simply pulling in after big runs; others, however, look worse and should be pared back or sold. To be fair, such action isn’t totally surprising—big breaks like last Monday’s usually have some reverberations, so we wouldn’t say the action is negative as much as it’s a sign we’re still in the tricky, choppy environment that has existed for some time. We’re going to leave the Market Monitor at a level 5 and see how things play out in the days ahead.

The good news is that this week’s list is full of names that have enjoyed outsized accumulation of late. Our Top Pick is Devon Energy (DVN), which looks like a leader of a fresh breakout in energy stocks (and cyclical stocks more broadly). We suggest aiming for dips as these names usually pull in after powerful rallies.

Stock Name	Price	Buy Range	Loss Limit
Apache (APA)	23	22-23.5	19.5-20
Biohaven Pharmaceutical Holding (BHVN)	133	130-134	116-119
Brooks Automation, Inc. (BRKS)	109	102-106	93-95
Cimarex Energy (XEC)	88	82-85	72.5-74.5
Devon Energy (DVN)	35	32-34	28.5-29.5
DoorDash (DASH)	217	206-212	185-189
SeaWorld Entertainment Inc. (SEAS)	58	56.5-58.5	51.5-52.5
Signet Jewelers (SIG)	84	82-85	73-75
Snap Inc. (SNAP)	80	78-81	69-71
SVB Financial Group (SIVB)	674	655-675	600-610

In the September Issue of Cabot Early Opportunities we continue to focus on tech stocks, while adding a small-cap biotech stock into the mix. We also review some of our portfolio management musings from last month.

Enjoy!

The market’s weak start to September and this Monday’s decline flipped our Cabot Tides to bearish; we responded by selling half of our leveraged long fund (SSO) and holding the cash. However, even with that decline, we were encouraged to see growth stocks hold firm, and the bounce back since then has also been good to see. If this turns out to be one big shakeout, there are many names on our watch list that we’d like to start positions in, but it’s too soon to conclude that.

Tonight, we have no changes, though the next few days should be key.

The news media continues to whip investors into a frenzy over the direction of interest rates. Depending on where you look, you can find knowledgeable financial pundits making the case for steady, unchanging interest rates or for the Fed to lower the fed funds rate in July.

The S&P 500 is at new all time highs as I write this. We have a market that wants to go higher, but it just keeps getting interrupted with negative headlines. It seems like we can’t get through a week without bad trade news or signs of a weakening global economy that prevents the market from taking off.

The G-20 meetings in Japan yielded only incremental progress. This was grudgingly accepted as a positive by markets with most emerging market stocks getting a boost as we headed into a slow and short week.

Not surprisingly, this week wasn’t a great one for our portfolio. I had a feeling the party was winding down last week, when we had an average gain of 105% going and had just seen our stocks pop an average of 6% over five days.

Lean bullish. The market’s evidence remains mostly positive, though the action of growth stocks over the past two weeks has been less than stellar. But when looking at the overall market, we see more positive vibes than negative ones.

Last week’s much-awaited pronouncement by the Federal Open Market Committee (FOMC) turned out to be a big “nothing burger.” I did not personally expect a cut in the fed funds rate.

This was another one of those weeks where you look at what the S&P 500 did—up 1.5% to a 52-week high—and you look at what the S&P 600 Small Cap Index did—up 1% to 945 and back above its 50-day line, but well off its 2019 high of 994 (let alone its 52-week high of 1,100) and you think the big picture is pretty good, but this still isn’t a broad-based market rally.

Emerging markets got a boost this week as it appears that there will be a high level meeting between the U.S. and China at the upcoming G-20 meeting.

The FOMC is meeting this week and investors can hardly contain their euphoric bliss. In-the-know pundits are already factoring in a rate cut next month and more before the end of the year. The market rallied strongly yesterday as it salivated over the prospect.

All across America, but especially in the Northeast and the Midwest, Boomers will be putting their homes up for sale, and often leaving those areas for warmer climates.

With the market having come back strong since its swift retreat in early June the immediate threat of a larger correction has diminished. The S&P 500 index is back above its 50-day line and within a couple percentage points of its all-time high.

The stock market is down again today due to oil price competition and aggression between Russia and Saudi Arabia, which led to plummeting oil prices.

I had already sensed an opportunity in big oil over the weekend and wrote an article that will appear on the Cabot website in the coming days.

The Model Portfolio is holding its own in this storm thus far, but we continue to pare back as needed given the selling wave.

This bank is trading at an undervalued level and has a current dividend yield of 4.91%, paid monthly.

It looks like we’ll be ending this week on a big down note as stocks are heading south once again. The culprit is no surprise; concern that this virus will spark at least a short-term economic downturn.

This financial company is expected to produce growth of more than 27% this year, and recently announced a 3-for-2 stock split.

Please understand that stock market corrections are about market adjustments and reactions to news and economic scenarios.

Wall Street expects this REIT to grow by 10.3% annually over the next five years. The REIT has a current dividend yield of 3.93%, paid quarterly.

This portfolio stock reported preliminary Q4 revenue results a while back that were better than expected, and last night in the official earnings release and on the conference call management announced that profitability was also way above expectations.

This credit information company beat earnings estimates by $0.04 last quarter.

This biopharma handily beat earnings estimates this past week, posting EPS of $0.08, significantly higher than the -$0.06 loss that was expected.

After seven consecutive down days and a swift, brutal stock market correction, we’re bound to see a few up days quite soon. Please be cautious.

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.