Current Market Outlook


Last week’s issue was titled “Next Few Days Should be Key,” and we think they were—in a bullish way. The market’s strong snapback to new highs (in the indexes and many leaders) made the prior dip look like a shakeout, which generally bodes well. That said, the action didn’t erase all the yellow flags out there, either, as sentiment is bubbly, many stocks are extended in time and price and, most important, tons of names are set to report earnings in the days ahead, which will be key for the intermediate term. Don’t get us wrong, we’re encouraged, but we still think it’s best to pick your spots on the buy side and trail your stops (and book some partial profits here and there) as opportunities arise. We’ll move our Market Monitor back up a notch and see how things go from here.

This week’s list is brimming with strong names, including more than a few that reacted well to earnings last week. For our Top Pick, we’ll go with Dynatrace (DT), which has just gotten going from a multi-month structure and looks ready for a sustained advance.

Stock Name	Price	Buy Range	Loss Limit
Align Technology (ALGN)	602	585-605	525-540
Bill.com Holdings (BILL)	179	170-177	150-154
Canada Goose Holdings (GOOS)	42	40-42.5	35.5-37
Dynatrace (DT)	56	53-56	47.5-49
PayPal (PYPL)	282	267-277	240-246
Pinduoduo (PDD)	188	178-186	160-164
SM Energy (SM)	12	10-11	8-8.8
Snap Inc. (SNAP)	64	60.5-63.5	53-54.5
Tapestry, Inc. (TPR)	39	35-37	31.5-33
Zendesk (ZEN)	156	150-155	138-141

First, note that next week’s Presidents Day holiday means we will publish Cabot Stock of the Week a day later, on Tuesday, February 16th.

As for the market. last week’s GameStop affair had the potential to trigger a broad correction—but it didn’t. Thus, the bull market remains intact, the buyers remain in charge and I am happy to recommend a fast-growing company with a great story today.



Sadly, that means I need to sell something to stay at or under 20 stocks, and the victim today (locking in a nice profit) is Qualcomm (QCOM).



Details inside.

Years from now, I wonder how historians will label this new decade. Will it be the “Terrific Twenties” or the “Turbulent Twenties”? It’s obviously too soon to tell, but we remain optimistic about the future today with a new idea at the fringe of the powerful clean energy trend that has moved past an inflection point. Meanwhile, the Explorer’s group of stocks had another good week as Virgin Galactic (SPCE) launched into space. I wonder if its take-off might be wrapped up in the Reddit revolution?

There is no shortage of great stories in the medical technology field. Today we’re jumping in on one that’s been on my radar for some time.

The company has just begun to commercialize a revolutionary technology for treating BPH and prostate cancer, which affects millions of men around the world. Regulatory approval is in hand across three continents, and revenue growth is in the 80% to 100% range.



There are plenty of challenges ahead, but this company appears to be on the path to enormous success.



All the details are inside. Enjoy!

In January’s Issue of Cabot Early Opportunities we take a trip down memory lane to January 2020, and try to take some of our own advice that seems even more timely now.

We also dig into five stocks that cover a wide variety of end market exposures. We unpack a small stock that represents a play on infrastructure and clean energy, two rising stars in MedTech, a consumer name that just won’t quit and even a beaten down growth stock that should recover as people get back out there later in 2021.



As always, there should be something for everyone!

Get this Investor Briefing now, Growth Investing Strategies that Will Make You Rich, and you’ll learn about strategies that will ensure your financial freedom and security. From the ten rules for making big profits with growth stocks to six ways to pick monster growth stocks … from nine tips for better investing to key indicators a bull market is ahead … and from stocks to buy when volatility sets in to stocks that thrive during a pandemic. Growth Investing Strategies that Will Make You Rich is your best guide to building a fortune so you can live a happy and stress-free life.

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

We briefly comment on how the response by hedge funds to the Reddit trades may have led to last week’s sell-off and this week’s rebound in the stock market. Is there a bubble? Yes, and our note touches upon how all four ingredients of a bubble, outlined in a recent book on bubbles, are in place.



Earnings season is upon us. We review the reports from Dow (DOW) and JetBlue (JBLU), and look forward to six more reports in the coming week.



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 stock market was under a bit more selling pressure last week as investors seem to be acting negative, even in response to positive earnings results. Unfortunately, the volatility shook us out of our Coeur Mining (CDE) covered call position. We won’t get every trade right, but that highlights the importance of risk management, especially in turbulent markets. This leads me to this week’s Cabot Profit Booster recommendation from a somewhat more defensive sector.

Welcome to Wall Street’s Best Stocks! We are thrilled that you have joined us on this journey to find undervalued growth stocks that offer great upside potential.

In this monthly newsletter, our goal is to add to your knowledge about the markets while helping you make money. We’ll do that by leveraging our combined years of market expertise to uncover stocks in a variety of industries to help you build a diverse portfolio of growing wealth. We’ll tell you how to buy the stocks, giving you both our target price, as well as a stop-loss strategy.

Each month, we’ll also give you our take on the markets and keep you up to date on our stocks, including any important news that may affect our view of the stocks, as well as price and rating changes. And should an event occur that requires immediate notification to you, in between issues, we will send you an email containing all the information you need to know.

In this inaugural issue, you’ll see that we’ve already built a base portfolio, which will be augmented each month with a new stock. Right now, the market has risen so quickly that the stocks in the existing portfolio are too pricey to enter, but keep your eyes glued to your email, in case we see an opportunity to add shares. And, of course, in each monthly issue, we will update those ratings with either Buy, Hold, or Sell.

As for the markets right now, we are very bullish, but cautious. We believe these are markets that require judicious stock-picking, not the dartboard approach, and we will be very diligent in our selections.

The economy is beginning to gain strength, and as more of our population is vaccinated, we should see some great opportunities in industries and sectors that were hit pretty hard by COVID-19.

We are ready to roll, and are looking forward to bringing you some great investment opportunities.

Happy Investing!

Nancy Zambell and Kate Stalter

Current Market Outlook


After one of the wildest weeks in months, you’ve probably seen countless articles talking about the action and the reasons for it. To us, though, it’s what happens during the next few trading sessions that will count most—right now, the intermediate-term trend of the major indexes is up, though it’s more of a mixed bag for leading stocks (both growth and cyclical). In our view, there’s been enough iffy action to warrant some action; we’re moving our Market Monitor down to a level 6 in today’s issue and have a fair number of sells. But what comes next will count most, with a strong, broad rebound (including some positive earnings reactions) likely boding well, while an inability to bounce/further selling possibly putting a nail in the coffin of the post-November advance. For now, we’re paring back and tightening stops but still giving most of our winners a chance to hold support and resume their advances.

This week’s list has a surprising number of solid charts given the recent turmoil, though we generally still favor buying on dips or some tightening action. Our Top Pick is PagerDuty (PD), which is refusing to budge.

Stock Name	Price	Buy Range	Loss Limit
Affiliated Managers Group, Inc. (AMG)	114	108.5-111.5	98-99.5
Aphria Inc. (APHA)	13	11.5-12.5	10-10.5
Axon Enterprise, Inc. (AXON)	166	157-163	140-143
Marvell Technology Group (MRVL)	53	50.5-53	45.5-47
Matador Resources Company (MTDR)	16	15-16	12.8-13.3
The Michaels Companies (MIK)	15	14.5-15.2	12.8-13.2
Novavax, Inc. (NVAX)	269	225-245	185-200
PagerDuty (PD)	51	47-50	41-42.5
Penn National Gaming (PENN)	104	97-104	85-88
Redfin (RDFN)	75	72-76	64-66

Good news. The U.S. economy is delivering Goldilocks-like growth—strong but not too strong—and the stock market is back in a good mood. Inflation rose 0.2% in February, meeting expectations but down a notch from last month’s 0.5% rate. And Friday’s jobs report showed that job creation remains robust, but wages are still increasing slowly (up 0.1% in February). The report pushed the yield on the 10-year treasury to within 0.06 percentage points of 3%, but it stopped just shy of breaking through.

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.

Our emerging markets signal turned negative as EEM lost 3.67% today.

The Dow imploded 767 points today, while the Nasdaq plunged 278 points.

This is a very short message—the point of which is essentially to say we’re not making any dramatic changes in the portfolio right now.

The cannabis sector is still in correction mode ... looking for a bottom somewhere.

The top three sectors in this Growth fund are: Financial Services (25.93% of assets), Consumer Cyclical (20.77%), and Technology (18.58%).

This stock took a beating on earnings disappointment, but analysts forecast a 17.5% growth rate for this year.

While long-term prospects for the cannabis industry remain excellent, the sector as a whole remains in correction mode today, with the big Canadian stocks under the greatest pressure—and no one knows where the bottom is, though history tells us it will come when the last holdout capitulates.

Crista is changing the rating on two stocks and retiring another.

Earnings for this social media site were recently raised by 34%, and the company is forecasted to grow at an annual rate of 67.4% over the next five years.

Two stocks in the portfolio recently reported earnings.

Crista reports good earnings announcements in five portfolio stocks.

Analysts expect this semiconductor company to grow at a rate more than 29% this year.

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.