This month we are changing things up a little and featuring a small company I suspect you’ve never heard of. It’s an up-and-coming Canadian media production and distribution company.

The company’s content has increasingly shown up on Netflix, AppleTV+, HBO Max, Amazon and Peacock. Much of the programming is for kids and families, which is where the growth and more significant deal flow is. But the company has also had many years of success in reality TV.



It is a speculative investment and trading liquidity is thin, so treat it appropriately and space out share purchases. Part of the strategy here is that we’re following a micro-cap fund that I respect into this trade, and their successful track record, philosophy and long-term holding strategy lends credibility beyond the increasingly visible presence of the company’s programming.

Growth stocks had worked to set themselves up nicely in recent weeks, but all of that has fallen by the wayside, with names getting obliterated this week before and after earnings.

Despite an already-cautious stance, we’ve sold three more stocks this week, though we are nibbling on one new name in tonight’s issue. Even so, we’re content to remain defensive until the bloodletting stops.



In tonight’s issue, we write about one of the factors that thankfully kept us cautious of late, as well as dive into the energy sector, where the bullish thesis is playing out

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

The stock market, so far in May, hasn’t continued the robust momentum of the first four months. Treasury Secretary Yellen’s comment about the possible need to boost interest rates to ward off inflation seems to be the catalyst. The market and the broad economy will likely respond differently if rates increase. We briefly outline on our asset allocation philosophy, which helps guide us when the market is edgy, in our economic comments.



Earning and proxy voting are in full swing. We’re updating the earnings as they come in.



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.

While some sectors of the market look tired (growth), other sectors and stocks (retail, materials, financials, energy) continue to make new highs and/or come alive. Fortunately, the Cabot Profit Booster portfolio has avoided the hyper-growth stocks that are under pressure, and is positioned in stocks that are in the strongest sectors.

We’re happy to see that the markets – despite a brief pullback – continue to rise. Home prices – as calculated for the Case-Shiller Index of 20 metropolitan areas – now stand at 246.04, up from 220 a year ago.

Consumer confidence and sentiment continue to increase, and that’s great for the economy. In the first quarter of 2021, GDP rose 6.4% – the second-fastest pace for growth since the second quarter of 2003!



This month, our Feature Recommendation is a French company that is the leading fiber telecom platform in rural France. The company has been awarded 4.5 million FTTH (fiber to the home) lines spread across 23 Public Initiative Networks. Additionally, investors will like the very nice 5.60% annual dividend yield.



We’re taking some more profits this month, with the sale of Unilever PLC (UL). Earnings performance has not been great, and it’s having a lot of trouble clearing resistance. We’ll take our 37.5% return to the bank and use it for our new recommendation.



We hope to see you on our May Platinum Club webinar; it’s scheduled for May 6 at 2pm. In the meantime, don’t hesitate to reach out to us if you have any questions.



Happy Investing!



Nancy Zambell and Kate Stalter

Current Market Outlook


To us, the major (and most disappointing) theme of the past few weeks has been the selling in stocks as they approach their old highs—selling on strength has been seen in growth stocks for a couple of months but it’s even seeping into many cyclical-type names, too. In other words, while selling pressures are controlled (the intermediate-term trend remains up), buyers aren’t exactly stepping up in a major way. Of course, the real question is whether earnings seasons causes the bulls to flex their muscles; so far, that hasn’t happened, but there are a ton of reports coming this week and next, so we’ll see how it goes. Not to sound like a broken record, but we continue to think keeping some cash on the sideline and aiming to enter mostly on pullbacks remains the best play. We’re again leaving our Market Monitor at a level 6.

This week’s list has a hodgepodge of names, many of which have reacted well to earnings, so if you’re going to buy strength, these are some top candidates. Our Top Pick is Crocs (CROX), one of the few growth-oriented names that has shown great power of late.

Stock Name	Price	Buy Range	Loss Limit
Academy Sports and Outdoors (ASO)	31	30-31.5	27-28
Bloomin’ Brands (BLMN)	31	29.5-31	26.5-27.5
Capital One Financial (COF)	150	141-146	128-131
Chart Industries (GTLS)	154	149-155	137-140
Crocs (CROX)	98	95-100	84-87
Fortinet Inc. (FTNT)	203	197-204	181-184
Matador Resources Company (MTDR)	26	25-27	22-23
Robert Half (RHI)	88	86-88	78-80
Scientific Games (SGMS)	58	54-56	48-49
United Parcel Service (UPS)	212	203-209	184-188

The market’s main trend remains up and thus I continue to recommend that you be heavily invested in stocks that can help you meet your investing goals, all while remaining diversified to reduce risk.

Today’s recommendation is a high-yielding stock that has a great history of performance—and as it’s still working its way back toward its high of February 2020, it’s attractive technically.



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



Details inside.

Explorer positions have a good week on the back of a market moving up on broadly upbeat first-quarter earnings, rising consumer confidence and, of course, stimulus and spending from Washington. The cash and liquidity has definitely buoyed the market but how it is put to work long term is critical.

This week’s recommendation is a rather aggressive small Canadian player in the commercial drone business.

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.

Coverage of the shares of this interactive fitness company were recently initiated at Bernstein with an ‘Outperform’ rating and at Bank of America, as a ‘Buy’.

This small-cap bank beat analysts’ earnings estimates by $0.05 last quarter.

One of the portfolio stocks is moving to Hold.

Crista reports on four portfolio stocks, two of which just reported earnings beats.

With a new government strategy for increasing domestic production and a mine with a long life, analysts expect this lithium producer to grow at a rate of 27.7% next year.

The weakness in growth stocks in general, and cloud-related stocks in particular, continued today, which caused one of our stocks to trip its loss limit.

Two portfolio stocks delivered strong earnings beats are their recommendations are raised to Strong Buy. A third stock delivered a strong earnings beat.

Wells Fargo recently initiated coverage on this luxury consignment website stock with an ‘Outperform’ rating.

One portfolio stock is up on news of a successful drug trial and another reported a strong earnings beat.

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.

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.