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The Federal Reserve is expected to lower interest rates this week, with a likely announcement on July 31. The stock market has fully priced in a rate reduction, which means if the Fed fails to lower rates, investors can expect the market to fall for a few days.

EBITDA, or earnings before interest, taxes, depreciation and amortization, is a straight-forward measure (not a perfect measure, though) of a company’s cash operating profits. But, like seemingly all metrics published by company managements, it is usually adjusted for unusual items that may be non-recurring.

The title of this note might be, “What to expect when you’re expecting … earnings.” As companies in the Cabot Undervalued Stocks Advisor portfolio start reporting earnings this week, let’s look into what is behind the results and estimates.

After rising 25% from its December low to its May high, the S&P 500 index is finally taking a breather. I don’t expect a shocking price drop like we saw in December. Rather, I anticipate the S&P 500 receding to 2,750, which would be down 200 points from the recent high, or even 2,650. Pullbacks aren’t any fun, but they are normal, and they provide opportunities for investors to buy stocks while they’re on sale.

Investors remain in a buying mood, as last week’s lower-than-expected Consumer Price Index (CPI) number added fuel to the recent rally. With inflation still high and a recession likely upon us, another correction may be in the offing. But for now, it’s time to buy. This week, we add a dirt-cheap mid-cap stock from new Stock of the Week contributor Clif Droke, Chief Analyst of our Cabot SX Gold & Metals Advisor. It’s from an industry that never goes out of fashion and is gaining steam from the shifting automotive landscape.

Details inside.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the October 2022 issue.

Following the sharp drop in stocks due to fears of a major policy error, we see an opportunity for subscribers to add to their existing positions in many of our recommended names at very attractive prices.

Is a deep recession likely? Perhaps we are instead experiencing an old-fashioned inventory cycle.

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.

There’s little doubt the market’s evidence has worsened of late, with our Cabot Tides and Two-Second Indicator re-joining the Cabot Trend Lines on the bearish side of the fence; thankfully, we went slow on the buy side in July and early August, and today, stand with about 65% in cash. But we’re also not completely in the storm cellar, as we still see signs the market could be in a bottoming effort (and in-between phase between bear and bull), so we’re happy to hold onto some resilient stocks and aim to nibble on potential leaders if the market can find its footing.


In tonight’s issue, we dive further into our thoughts on the market, but spend most of the time writing about future leaders, including a few from one sector that’s clearly in pole position to do well if the bulls can step up to the plate

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the November 2022 issue.

At it most basic, investing is a mental game supplemented by a calculator. Our articles use one or both aspects to find attractive investing ideas.

Our first group covers enduring companies with out-of-favor stocks with theses well supported by a calculator. Our other articles discuss companies with deeper issues but whose shares have been so heavily sold that their risk/return trade-offs are highly attractive, even if their theses rely less on a calculator and more on pure contrarian instincts.

Our feature recommendation this month is a high-quality, well-capitalized bank that emphasizes credit card loans

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the July 2023 issue.

While much of our emphasis is on mid-cap and large-cap turnarounds, there are often attractive turnarounds in the small-cap segment of the market. Companies in this group, with market values generally below $1 billion, can offer worthwhile investment opportunities. This month, we are focusing our research exclusively on small-cap turnarounds and discuss eight names with interesting potential.

Our feature recommendation this month is L. B. Foster Company (FSTR), a small-cap manufacturing and distribution company focused on the railroad, precast concrete structures and customized steel fabrication, coatings and measurement industries. After years of difficulties, a diligent and impressive turnaround effort is underway and starting to show progress, even as investors overly discount its prospects.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the June 2023 issue.

It’s no secret that a fresh fascination with artificial intelligence has ignited shares of companies like Alphabet (GOOG), Microsoft (MSFT) and Nvidia (NVDA), while “safety stocks” like Apple (AAPL) have rebounded on recession fears. Shares of more prosaic technology companies have lagged, but a few offer highly relevant albeit slow-growth products and services, making their businesses highly resilient. They are often well-supported by durable balance sheets and capable management. We highlight four such companies.

As a follow-up to our April edition that featured banks, we have found additional interesting financial stocks by looking at the 13F filings of like-minded value investors. We discuss three that saw sizeable new purchases or meaningful additions to already-sizeable holdings by well-respected value managers.

Our feature recommendation this month is Tyson Foods (TSN), a major producer of chicken, beef and pork products. Its earnings and shares have tumbled due to an unusual simultaneous downturn in all three protein groups. The hardest time to buy a commodity cyclical is at the bottom of the cycle, as there appears to be no end in sight to the malaise. We think this is the time to buy Tyson.

The awful financial market conditions continue to deteriorate. As everyone knows, the domestic stock market ticked below its midsummer low and is now down over 23% from its November 2021 peak. Stock prices in developed country markets have fallen in local terms just as much if not more that the major U.S. stock indices. Emerging market returns (in local terms) have slid 21% YTD. With the awe-inspiring gains in the U.S. dollar, up 19% YTD, global stock returns for American investors have been downright dismal.

It’s turning out to be a typical volatile January, with last week’s harsh selling among leading stocks leading to this week’s strong snapback that’s seen many leaders (including a few names we own) roar back to new high ground. That’s not to say the wobbles are over--in fact, we’d half-expect some more wiggles given earnings season is just getting started. But overall, things are volatile, but still bullish, so while we’re not flooring the accelerator, we are staying positive.


Last week, we sold half of one stock and placed another on Hold, but tonight, we’re going to start a new half-sized position in an old (from last year) favorite that we think got derailed mostly by the market environment last summer and fall--and now looks poised to do well if the market holds together.

The market remains in a solid uptrend, though there’s no question some sellers are beginning to step up, with more volatility in the Nasdaq seen in the past month and, outside of chip stocks, some churning in the leading stocks. That’s not bearish, per se, as we’re still riding our winners, but for new buying we’re being more selective and looking for fresher leaders that have recently emerged with some power. In the Model Portfolio, we sold one stock in the past two weeks while starting a half-sized stake in one of those fresher leaders, and tonight, we’re averaging up in that name and starting another new position, too.

Today’s Cabot Small-Cap Confidential addition isn’t a cloud-based software provider. But it is a perfect example of what I’ve been talking about – a company in an established industry that’s shaking things up largely because cloud-based technologies are at the center of its DNA. The company’s platform is helping it grow roughly 10 times faster than its industry average, while delivering profits.
It’s an exciting story that I’ve been looking forward to sharing with you. Enjoy!

Amidst a bearish stock market, we’re adding one big-dividend stock to our portfolios today. Lacking much stock market excitement and lower-risk near-term capital gain opportunities, I decided to post some corporate news and price action on a couple stocks—not featured in our portfolios, but still of interest to many investors.

Current Market Outlook


While the major indexes remain above their October lows and a good number of recent earnings winners (many of which have been featured in Top Ten) are still holding up well, the fact is that the intermediate-term trend for the market remains down and, even if you own the best stocks, no money is being made. Thus, we continue to recommend a defensive stance—preserving capital and confidence will pay off in spades when the next sustained advance gets underway. On a scheduling note, there will be no Friday update this week (holiday), and there is no issue next week (one of our two weeks off all year). But I do plan to send a brief update Monday, November 26 just to keep in touch.

Back to this week’s list, we have another batch of resilient stocks, which are providing a ray of light. Our Top Pick is Canada Goose (GOOS), which we think can be an institutional favorite once this market downturn ends.

Stock Name	Price	Buy Range	Loss Limit
Acacia Communications (ACIA)	51.83	41-43	37-38
Amedisys (AMED)	174.06	115-120	105-108
Canada Goose Holdings (GOOS)	46.21	63-67	55-57
Crocs (CROX)	0.00	24.5-26	22.5-23.5
Elastic (ESTC)	86.17	65-69	58-60
Planet Fitness (PLNT)	0.00	49.5-51.5	47-45.5
Repligen (RGEN)	91.34	60-64	56-58
Tableau Software (DATA)	126.42	108.5-110.5	99-101
TripAdvisor (TRIP)	55.14	57-60	52-54
Zebra Technologies (ZBRA)	154.94	167-172	158-161

Current Market Outlook


The ping pong environment we referenced on this page last Monday continued last week, with growth stocks bouncing back from a ragged prior week, while some of the recently-strong cyclical groups took a breather. We expect more under-the-surface volatility going forward, mostly due to earnings season, which is now moving ahead at a breakneck pace; so far, there have been a few potholes, but many stocks have reacted well to their reports. All in all, we remain mostly bullish, but two pieces of advice: First, don’t forget to book some partial profits when you have them, and second, be sure to keep your feet on the ground and look for advantageous entry points. We’ll keep our Market Monitor where it is as we see how leaders react to earnings.

This week’s list is heavier on emerging market and retail stocks than usual, which could be a clue to future leadership. Our Top Pick is ServiceNow (NOW), a blue chip-ish cloud software firm that decisively broke out of a tight launching pad on earnings next week. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
GDS Holdings Limited (GDS)	80.15	37-39	34-35
Huazhu Group (HTHT)	30.89	41.5-43.5	37.5-39
Ollie’s Bargain Outlet (OLLI)	103.94	93.5-97	85.5-87.5
Pilgrims Pride (PPC)	25.52	25-26.5	22-23
Sea Limited (SE)	132.86	24.5-26	21.5-22.5
ServiceNow (NOW)	341.86	263-273	237-244
Sinclair Broadcasting (SBGI)	54.14	42-44	39-40.5
Ulta Beauty (ULTA)	331.95	345-355	320-325
VeriSign (VRSN)	190.71	191-196	178-181
Workday (WDAY)	194.88	200-206	185-188

Current Market Outlook


We’ve now seen four constructive weeks in a row for the overall market, not just because the major indexes are rallying, but also due to the amazing breadth during the advance (a good longer-term sign and indicative of a vacuum of selling pressure) and the action of individual stocks, a ton of which are setting up good-looking launching pads. That said, it’s not all peaches and cream—the intermediate-term trend is still on the fence (could turn up this week, but hasn’t quite yet), most indexes and stocks are below longer-term moving averages and, after four good weeks, some shakeouts and potholes (possibly on earnings) could emerge. Overall, we’re optimistic and are bumping up our Market Monitor to a level 6, but it’s best to step (not plunge) into stocks and keep looking for lower-risk entry points.

This week’s list contains another batch of great stories, with a variety of strong charts (some coming off lows, others at new highs, others setting up). Our Top Pick is Coupa Software (COUP), which is in a strong group and has seen superb buying volume in recent days.

Stock Name	Price	Buy Range	Loss Limit
Alarm.com (ALRM)	71.33	57-59	51.5-53
Bilibili (BILI)	28.71	15.5-17	13.5-14.5
Coupa Software (COUP)	262.20	73-77	64-67.5
Cronos Group (CRON)	17.62	13-14.5	10-11
HubSpot (HUBS)	582.89	148-153	135-138
Lending Tree (TREE)	411.51	275-285	253-259
LPL Financial Holdings (LPLA)	85.22	67.5-70	62-64
Novocure (NVCR)	0.00	43-46	38-39.5
Pinduoduo (PDD)	87.53	23.5-25.5	21-22
Veeva Systems (VEEV)	180.23	103-107	93-95

Current Market Outlook


Most major indexes have finally taken a bit of a breather during the past few trading days, with the 200-day moving average providing a bit of logical resistance. So far, the damage has been very limited and, in fact, many leading growth stocks actually hit new highs today. Without predicting any specific path, the big prior run, overhead resistance and still-iffy longer-term trend probably means more choppiness and potholes are on the way, especially as earnings season continues. But the overall evidence (which, by the way, includes a lack of meaningful pullbacks so far) continues to impress. We still think the next big move from here is up, but be sure to pick your spots (and your stocks) on the buy side, and practice patience with your strongest performers, giving them a chance to continue advancing.

This week’s list sports a bunch of recent earnings winners from a variety of industries. Our Top Pick is Array Biopharma (ARRY), which has shown fantastic accumulation pre- and post-earnings as it lifted to all-time highs.

Stock Name	Price	Buy Range	Loss Limit
Array Biopharma (ARRY)	46.35	20-21.5	17.5-18.5
Chipotle Mexican Grill (CMG)	773.32	575-605	530-540
Columbia Sportswear (COLM)	102.15	103.5-107.5	95-97
Glaukos Corp. (GKOS)	67.84	65.5-68	59-61
Kirkland Lake Gold (KL)	51.30	30-32	27-28.5
LPL Financial Holdings (LPLA)	85.22	74.5-77	67.5-69.5
Palo Alto Networks (PANW)	236.92	213-220	193-199
Paycom Software (PAYC)	0.00	163-170	146-151
Spirit AeroSystems (SPR)	92.54	90-93	83.5-85
Zendesk (ZEN)	82.19	73.5-77	65-67

Current Market Outlook


Last week was a great one for the major indexes and leading stocks, with many surging higher on big volume to notch new highs, a good sign that big investors are putting money to work in growth stocks. That said, it’s not all peaches and cream out there—hundreds of stocks are actually hitting new 52-week lows (mostly energy and interest rate-sensitive stocks, but others, too), and to this point, only the Nasdaq has reached new high ground; the intermediate-term trend for most indexes remains neutral. Reflecting the terrific action of Top Ten stocks, we’ll nudge our Market Monitor up a notch; if you see a good set-up, go ahead and take it. But we’re still advising holding some cash on the sideline and being selective on the buy side.

This week’s list has a hodgepodge of stocks, many of which haven’t been featured here for a long time. For our Top Pick, we’ll stick with the big-cap growth stock theme that’s working well—Celgene (CELG) just popped out of a four-month base on big volume last week following a major acquisition. It’s buyable around here.

Stock Name	Price	Buy Range	Loss Limit
Intrexon (XON)	0.00	55-57	49-50
Take-Two Interactive (TTWO)	123.32	29.5-31	27.5-28
Progressive Corp. (PGR)	0.00	30-31	27-28
Blackhawk Network (HAWK)	0.00	41-43	38-38.5
Alphabet, Inc. (GOOGL)	0.00	675-700	630-635
Fitbit Inc. (FIT)	0.00	42-46	37-38
Domino’s Pizza (DPZ)	339.47	128-134	117-118
Celgene (CELG)	0.00	130-135	119-121
Barnes & Noble (BKS)	0.00	27.5-29	24-25
Alaska Air Group (ALK)	0.00	72-74	66-67
ACADIA Pharmaceuticals (ACAD)	47.84	47-50	42-43