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U.S. stocks have stabilized over the last few days as investors keep confidence in markets despite the Omicron variant, concern over inflation, and mixed economic data. Today we have two upgrades and a new recommendation from a country with an emerging and vibrant fintech culture supported by its government. The standout stock this week in the Explorer recommendations is Marvell Technology Group (MRVL), which jumped from 71 to 91 after the company recently reported that adjusted earnings soared 72% on a 61% increase in sales.

Cyclical stocks have been getting clobbered over the past month amidst virus concerns. But I think the recent action is creating an opportunity.

The inflation and Fed contraction issues, which are good for energy and financial stocks, will outlast this latest virus strain. The virus will fade away before too long, but the other problems are much stickier. Certain stocks are being knocked back temporarily ahead of a very promising new year.



In this issue I highlight one of the very best financial stocks on the market. It’s has pulled back recently and is about 15% below the 52-week high, yet the company is poised for a fantastic 2022.

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

The emergence of the Covid Omicron variant has temporarily upended the market’s emerging post-Covid view of the economy. We share our thoughts on this, as well as on Fed Chair Powell’s testimony this week about accelerating the bond-buying taper. We also comment on how artificial selling pressure as the calendar year-end approaches can drive already-weak stocks to steeply undervalued levels.

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



Rivian Automotive’s (RIVN) initial public offering, which arrives next week at a likely $60 billion valuation, has us thinking more deeply about General Motors (GM). Investors are assigning little value to its EV and other advanced technologies, which strikes us as incompatible with the valuations of Tesla, Rivian and other EV start-ups. But, perhaps this is right, due to the enormous capital spending that GM has committed to. These vast cash outflows may eliminate the present value of the EVs. We share some of our thinking on this.

In the December Issue of Cabot Early Opportunities we try to capitalize on the pullback in stocks with the addition of disruptive players in the electric vehicle (EV) and metaverse arenas as well as an up-and-coming apparel/footwear company. We also take a swing at a dinosaur that may finally start to become relevant again following the spin-out of a dying business segment.

The market’s action last week, while far from perfect, was about as good as you could have hoped for given the prior damage. But in our view, what happens from here will tell the true tale: The overall market’s intermediate-term trend is still down (or at least not up), and while there has definitely been some improvement, many stocks remain in poor shape—especially in growth land, where a lot of names have failed to bounce at all. To reflect the bounce, we’ll nudge up our Market Monitor to a level 6, but the bulls still have more to prove.

This week’s list is a hodgepodge of stocks and sectors, with everything from infrastructure to lumber to transportation included. Our Top Pick, though, is part of the strong networking theme and staged a powerful breakout last week.

The market is in the midst of a short-term consolidation, which usually dishes out some pain and offers tedious action, which is what we’re seeing so far—earlier this week, we cut bait with one stock and have tight leashes on a couple of others. Further near-term shenanigans are possible, even likely, so we’re taking things on a stock-by-stock basis, but we’re also not opposed to putting money to work in resilient leaders—which we’re doing tonight, starting a half-sized position in a name we’ve long thought has the characteristics of a future winner.

In a market facing inflation, a Taiwan potential takeover, rising oil prices, Explorer stocks had a good week, especially Cloudfare (NET), up twenty points for the week and Sea (SE) is back up to 350, up 7% yesterday. We need to remain confident and my pick today is a niche player in corporate aviation markets.

The market’s correction is about a month old, and so far it’s been fairly garden variety, with some potholes but not much big-picture abnormal action. And, this week, we’re seeing a very encouraging bounce, with most indexes recouping half of their decline in just two days and some growth stocks already testing new high ground. We’re not out of the woods yet, but we’re holding what we own (some of which act great) and fine-tuning our watch list should the trend turn back up.

Current Market Outlook


For many weeks, we’ve been writing that there’s more good than bad in the market, and indeed, while choppy, many names did work their way jadedly higher. But now the shoe is on the other foot: The intermediate-term trend is now down for the major indexes, and we’re starting to see more and more individual stocks follow suit. It’s not a complete disaster, and given the on-again, off-again environment of 2021, we’re not ruling anything out, including a turn back up in the days or weeks ahead. (Even now, we’re fine sticking with your strong, profitable stocks.) But after a couple of rounds of sharp distribution and some breakdowns among leading stocks, we think it’s simplest to say the onus is on the bulls—we need to see at least a few days of constructive action and some upside power in the indexes and individual stocks to conclude the sellers are losing control. We’re leaving our Market Monitor at a level 5 and, until proven otherwise, would play things cautiously with only small new positions, trailing stops and a decent chunk of cash.

This week’s list has an interesting crop of stocks, ranging from commodity to reopening to legitimate growth outfits. Our Top Pick is CF Industries (CF), which is emerging from a multi-month dead period with a lot of power; as with most names in this market, try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Affirm Holdings (AFRM)	108	105-111	89-92
SKIN (SKIN)	26	24.5-25.5	21.5-22
Caesars Entertainment Corp. (CZR)	118	113-117	102-104
CF Industries (CF)	61	58-61	51-53
ConocoPhillips (COP)	71	67-70	61-62.5
International Game Technology (IGT)	28	26-28	22.5-23.5
Live Nation Entertainment, Inc. (LYV)	98	95.5-98.5	87-88.5
Matador Resources Company (MTDR)	40	37-39	32.5-34
Palo Alto Networks (PANW)	470	457-472	417-427
Paycom Software (PAYC)	495	480-495	440-450

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

Current Market Outlook


In true 2021 fashion, just when the market looked ready to go over the falls last week the buyers stepped in, pushing the major indexes sharply higher (recouping nearly 50% of the month-long correction in just three days and seeing many individual stocks pop as well). It’s certainly encouraging, but we need to see a bit more—by our measures, we haven’t seen confirmation of a new intermediate-term uptrend (most indexes remain below their 50-day lines or stuck in the middle of multi-month ranges) and, while a few stocks have popped to new highs, most individual names are in the same no-man’s-land environment. Longer term, the strong, broad bounce is a good sign the overall bull market is alive and well, but near term, it’s still uncertain whether we’ll see another leg lower or more vicious rotation. You shouldn’t be in your bunker, but keeping new buys small and holding some cash makes sense as we see if the strength can persist.

This week’s list is heavier on turnaround and commodity-related names, with many beginning to emerge from long rest periods. Our Top Pick is LPL Financial (LPLA), which won’t be your fastest mover but has staged a good-looking breakout in recent weeks.

Stock Name	Price	Buy Range	Loss Limit
Acuity Brands (AYI)	206	203-210	182-185
Applovin (APP)	87	83-86	73-74.5
Builders FirstSource (BLDR)	55	54.5-56	49-50
The Goodyear Tire & Rubber Company (GT)	19	18-19	16.3-16.8
Hilton Worldwide Holdings (HLT)	143	139-142	126-128
LPL Financial Holdings (LPLA)	167	165-169	148-150
The Mosaic Company (MOS)	42	39-41	35-36
Pioneer Natural Resources (PXD)	193	187-192	165-168
Teck Resources Limited (TECK)	28	26-27.5	23-24
UPST (UPST)	311	285-300	240-250

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.