Issues
It’s been eleven weeks since the marijuana sector topped, sending the Marijuana Index down 50%. 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.
Two weeks ago, acting on this belief, I used half our cash to average up in the industry leaders and add one new small stock to the portfolio and today I’m doing just a little more buying, averaging up in another small operator.
After this buying, the portfolio will be roughly 29% in cash, and going forward, we’ll continue to take our cues from the market, always working to own the market’s leaders as we move closer and closer to full federal legalization.
Full details in the issue.
Two weeks ago, acting on this belief, I used half our cash to average up in the industry leaders and add one new small stock to the portfolio and today I’m doing just a little more buying, averaging up in another small operator.
After this buying, the portfolio will be roughly 29% in cash, and going forward, we’ll continue to take our cues from the market, always working to own the market’s leaders as we move closer and closer to full federal legalization.
Full details in the issue.
Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the May 2021 issue.
With the stock market continuing to reach record highs, and with most stocks either participating in the rally or facing structural, fundamental challenges that they won’t likely overcome, finding new ideas can be a challenge. As contrarians, we want to look for stocks in places which others find too unconventional or uncomfortable, as bargains may be found there. One such place is in stocks with low share prices, generally under $10. We discuss five interesting turnarounds among this group.
Real estate investment trusts, or REITs, have surged since Pfizer announced on November 9, 2020 that they had developed an effective Covid vaccine. Yet some REITs haven’t fully participated. We review six laggards that have quite favorable risk/return traits.
Our feature recommendation is Dril-Quip (DRQ). This company manufactures highly-engineered drilling and production equipment for offshore oil and natural gas projects. The shares are heavily out-of-favor yet offer considerable upside, backed by a solid company with a large cash hoard and zero debt.
We mention our April 1st price target increase for Mohawk Industries (MHK) from 180 to 220. As several companies continue to show strong fundamental improvements, we are raising our price targets on Adient (ADNT), Western Digital (WDC) and Wells Fargo (WFC), while moving Jeld-Wen (JELD) to a HOLD. Also, we update our article from last month on high yield bonds.
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.
With the stock market continuing to reach record highs, and with most stocks either participating in the rally or facing structural, fundamental challenges that they won’t likely overcome, finding new ideas can be a challenge. As contrarians, we want to look for stocks in places which others find too unconventional or uncomfortable, as bargains may be found there. One such place is in stocks with low share prices, generally under $10. We discuss five interesting turnarounds among this group.
Real estate investment trusts, or REITs, have surged since Pfizer announced on November 9, 2020 that they had developed an effective Covid vaccine. Yet some REITs haven’t fully participated. We review six laggards that have quite favorable risk/return traits.
Our feature recommendation is Dril-Quip (DRQ). This company manufactures highly-engineered drilling and production equipment for offshore oil and natural gas projects. The shares are heavily out-of-favor yet offer considerable upside, backed by a solid company with a large cash hoard and zero debt.
We mention our April 1st price target increase for Mohawk Industries (MHK) from 180 to 220. As several companies continue to show strong fundamental improvements, we are raising our price targets on Adient (ADNT), Western Digital (WDC) and Wells Fargo (WFC), while moving Jeld-Wen (JELD) to a HOLD. Also, we update our article from last month on high yield bonds.
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.
The market is still trending higher. But it can’t continue at the recent pace. And a 10% or so correction is possible at any time, especially after such a strong move higher. While the short term is always unpredictable, I’m still bullish over the intermediate and longer term.
With the market looking topsy in the near term, it’s a great time to write covered calls. In this issue, I highlight two call writing opportunities on existing portfolio positions. These calls provide a great way to cash in on a high market without giving away too much upside potential.
With the market looking topsy in the near term, it’s a great time to write covered calls. In this issue, I highlight two call writing opportunities on existing portfolio positions. These calls provide a great way to cash in on a high market without giving away too much upside potential.
Not to sound like a broken record, but day-to-day sector rotation continues to be the story of the last week of trading, and almost all of 2021. The good news is that this is a fine situation for the Cabot Profit Booster portfolio as we are rotating with the market, buying the best stocks, and keeping the portfolio as diversified as possible.
The market’s main trend remains up and thus I continue to recommend that you be heavily invested, always working to “upgrade” your portfolio by selling weak stocks and buying healthier ones.
Today’s recommendation is a well-known big technology stock that’s spent the past eight months going sideways, despite the fact that revenue growth has been accelerating. To me, it’s a very attractive setup.
As for our current holdings, there are no changes. After selling two stocks last week, everything looks good today.
Details inside.
Today’s recommendation is a well-known big technology stock that’s spent the past eight months going sideways, despite the fact that revenue growth has been accelerating. To me, it’s a very attractive setup.
As for our current holdings, there are no changes. After selling two stocks last week, everything looks good today.
Details inside.
Current Market OutlookEarnings season is always important, but it looks even more so this time—many growth stocks have been sitting around for the past two to three months (some even longer), while a decent number of cyclical names have been mostly up-and-down for the past four to five weeks. Thus, a collection of positive, powerful reactions to earnings could result in a bunch of good-looking buying opportunities … but, as always, we have to wait to see that happen before pouncing. Just going with what’s in front of us, nothing much has changed, with a lot of good setups but also a lot of selling in names that approach their old highs. Once that changes (due to earnings reports or anything else), it will be time to get more aggressive, but right now we’re sticking mostly with a buy-on-dips approach and waiting for buyers to really flex their muscle.
This week’s list has a broad mix of names, though most are more cyclical or turnaround plays. Our Top Pick is Steel Dynamics (STLD), which just leapt to new highs out of a tight area on huge volume. You can start a position here or (preferably) on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| Burlington Stores (BURL) | 321 | ||
| Floor & Décor (FND) | 113 | ||
| Goldman Sachs Group, Inc. (GS) | 343 | ||
| Harley-Davidson Inc. (HOG) | 48 | ||
| The Middleby Corporation (MIDD) | 181 | ||
| Okta, Inc. (OKTA) | 285 | ||
| Qorvo (QRVO) | 199 | ||
| Seagate Technology (STX) | 93 | ||
| Steel Dynamics (STLD) | 55 | ||
| Tractor Supply Company (TSCO) | 191 |
We continue to see more and more setups among growth stocks, but overall, the market remains in a spin cycle, with few stocks letting loose on the upside and incessant rotation among stocks and sectors. With the recent rally running into trouble, we cut bait with DraftKings (DKNG) earlier this week, but are willing to give the rest of our names some rope as we head into earnings season. Get all our latest thoughts on our stocks and our latest watch list in tonight’s issue.
In the April Issue of Cabot Early Opportunities we take a look at the red-hot real estate market and muse on the dramatic and lasting impacts from the Covid-19 pandemic.
We also take hints from the market’s action that it continues to be a time to focus on diversifying new buys across different markets. We take this evidence to heart and add five stocks that offer exposure to everything from resort travel to Afib surgical tools to digital transformation services.
Enjoy!
We also take hints from the market’s action that it continues to be a time to focus on diversifying new buys across different markets. We take this evidence to heart and add five stocks that offer exposure to everything from resort travel to Afib surgical tools to digital transformation services.
Enjoy!
April was another strong month for the Cabot Profit Booster portfolio as we locked in gains ranging from 3.7% to 7.9% on our six positions. Speaking of earnings, this week’s pick is a recent earnings season winner that busted out to a new high following reporting quarterly results.
Recent crosscurrents in the market have seen changes among sector leadership, and today we have a broad selloff, but overall, the main trend of the market is up and thus I continue to recommend that you be heavily invested.
Today’s recommendation is an attempt to benefit from sector rotation, by targeting a sector that’s still down; if the sector turns up soon, today’s buyers should profit handsomely.
As for our current holdings, two stocks are upgraded to buy today, while two are downgraded to sell as we cut our losses short. The adage that applies: There’s nothing wrong with being wrong; what’s wrong is staying wrong.
Details inside.
Today’s recommendation is an attempt to benefit from sector rotation, by targeting a sector that’s still down; if the sector turns up soon, today’s buyers should profit handsomely.
As for our current holdings, two stocks are upgraded to buy today, while two are downgraded to sell as we cut our losses short. The adage that applies: There’s nothing wrong with being wrong; what’s wrong is staying wrong.
Details inside.
Updates
We continue to see an unusual amount of rotation in the market, with crosscurrents sending sectors up one day and down the next. However, our portfolio looks healthy. We have a two rating changes today, but overall we are in good shape.
Many investors are aware that over the short-term, a stock share price can bounce all over the place, often with no apparent correlation to a company’s successes.
Even though there was some crazy action in the market last week the bulls remain in charge and many stocks are breaking out to fresh highs.
In recent months, I’ve helped investors unwind some of their Benjamin Graham Value stocks, while keeping those with sound fundamentals and good earnings growth prospects.
The overall market and most growth stocks have stabilized in recent days but there are still some yellow flags. Our 50%-plus cash position is a bit too high so we’re going to change that tonight by adding one new position and buying a bit more of another.
Earnings season has seen some huge reactions, and this week brought the drama to our portfolio. There have been sharp selloffs, but we’re not going to overreact. A few rating changes to the portfolio today, but overall we’re in good shape.
Our previous moves to put the portfolio in a defensive stance have given us some protection. But today’s slump in emerging market stocks has put our Buy signal in question and further weakened many of our stocks.
In recent days, there’s been a proliferation of articles and news commentaries about a tentative shift in the market’s multi-year preference of growth stocks over value stocks.
It’s been an eventful week in the market, as some big earnings blowups worsened the ongoing exodus from leading growth stocks and big tech names. We’ve also seen selling in small- and mid-cap stocks. As we navigate the rotation in the market, one of our positions broke down over technical weakness and we are selling 1/3 of that today.
This earnings season, shares of Facebook (FB), Twitter (TWTR) and Netflix (NFLX) got pummeled by investors, and mostly for good reason.
There was a lot going on in the market this week but news flow from our portfolio holdings was relatively quiet.
We’re going through a period of tremendous stock price volatility, very similar to the aftermath of a correction in the broader stock market, except this particular price action is affecting random individual stocks and industries.
Alerts
Baker Hughes changes their corporate name and stock symbol. And, two stocks report third-quarter earnings beats.
This master limited partnership is benefiting from the growth in natural gas exports, but is trading at a discount.
There are a couple quick things to cover today. First, the introduction in the email that went out introducing yesterday’s Issue was placeholder text from a past update. I apologize for the error and hope it didn’t seem too random. Second, I’ve received questions about the stocks in the Special Reports that you have access to as subscribers to Cabot Early Opportunities.
Two stocks report earnings and two more are rising again.
The top five holdings in this ETF are: Abbott Laboratories (ABT, 13.40% of assets); Medtronic PLC (MDT, 13.21%); Thermo Fisher Scientific Inc (TMO, 10.57%); Danaher Corp (DHR, 7.91%); and Intuitive Surgical Inc (ISRG, 4.66%).
It’s been a tough few months for cannabis investors, but no downtrend lasts forever, and yesterday’s blast-off by Aphria (APHA), which sparked buying across the sector, is a sign that the worst has almost certainly passed.
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%).
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.
Portfolios
Strategy
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.