Search

AST SpaceMobile (ASTS) is up more than 140% so far in 2024. What’s behind the rise of this space-based cellular broadband company?

Consumer Staples and Communication Services are two sectors that have held up well in the recent correction. Today, I’ll highlight a stock from each sector.

In the October Issue of Cabot Early Opportunities, we try to interpret some of the latest commentary from Fed officials and look at the future cadence of expected interest rate hikes.

Then we dive into five stocks that seem poised for gains into the end of the year. On balance, we’re still optimistic the worst is behind us. But it’s not (yet) time to be overly aggressive. We try to balance the risks and possible rewards by managing position sizes and continuing to build up our Watch List.

In the October Issue of Cabot Early Opportunities, we try to interpret some of the latest commentary from Fed officials and look at the future cadence of expected interest rate hikes.

Then we dive into five stocks that seem poised for gains into the end of the year. On balance, we’re still optimistic the worst is behind us. But it’s not (yet) time to be overly aggressive. We try to balance the risks and possible rewards by managing position sizes and continuing to build up our Watch List.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the December 2020 issue.

We briefly share our thoughts on the surging stock market and run through some valuation math that looks out a few years. Our conclusion: the market’s earnings growth, even side-stepping the pandemic’s effects, doesn’t look that impressive, while the market’s valuation is on the high side of average. It is starting to look like a good time to be pickier about which stocks to own.



With this thought in mind, we are moving Broadcom (AVGO) from a Hold to a Sell, as the shares have essentially reached our price target.



It’s been a fairly active month for a value-oriented newsletter, adding three new names and selling six, including Broadcom. This leaves the holdings list at 12 names. We anticipate expanding this roster over the next month or two, as there are many interesting value ideas out there.



We also tweaked the descriptions under the portfolio titles to more accurately reflect what types of stocks we look for. This should also help add some clarity to the differences between the two categories.



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.

Last week had a few potential potholes for the market’s nascent rally, including some influential big-cap earnings releases and an inflation report before the long weekend—but despite some selling that popped up here and there, the market and fresh leaders handled themselves well. Stepping back, we’re definitely encouraged by the market’s snapback and the numerous upside moves in individual, growth-oriented stocks during the past month; we think the odds favor the next major, sustained move is up. That said, a lot of stocks have set up (but not broken out), old leaders (chip names in particular) look suspect and it’s a fact that defensive areas continue to ramp higher, which is a sign that big investors are hunting for some safety. Again, we’re encouraged overall, but continue to think going slow makes sense, especially now that some selling pressures are beginning to emerge, stickign with mostly small positions and keeping some cash on the sideline. We’ll keep our Market Monitor at a level 6 today.

This week’s list is a bit of a hodgepodge, with some recent earnings winners, some fresh names and a few stodgier types. Our Top Pick is Rocket Cos. (RKT), which is basically a cyclical (mortgage lending) company that should be lean and mean after the multi-year dry period—meaning its earnings power should be big as rates head lower.

Last week was a split tape, with the big-cap indexes continuing their thrust higher, though the broad market remains a soft spot. Overall, the intermediate-term trend is effectively neutral, and we think what happens from here will tell the tale, with further strength indicating that a year-end rally is underway, though should the broad market infect the leadership, all bets are off. Right now, we’re more optimistic than not, but are simply looking for more confirmation on the upside—we’ll leave our Market Monitor at a level 5.

We think the most bullish thing the market has going for it is the action of individual stocks, a good number of which are beginning to percolate. Our Top Pick definitely quacks like a liquid leading name.

With the market on edge we’re going with a slightly larger company than normal with this month’s Cabot Small-Cap Confidential selection. But we’re not being overly conservative. Shares of this software stock have been climbing steadily after a breakout move in May. The reasons? Growth is reaccelerating, profit margins are climbing, and the proportion of recurring revenue is going up.

Current Market Outlook


Stocks notched another solid week, with most major indexes rising 1.5% or so and a bunch of stocks going along for the ride. We saw the S&P 500, S&P 400 Midcap, Nasdaq, NYSE Composites and the NYSE Advance-Decline line all hit new highs. That’s bullish! We’re also encouraged by the increasing number of powerful earnings reactions we’re seeing, with many stocks surging on their heaviest volume in over a year. Short-term, pullbacks and shakeouts are always possible, but looking at the big picture, we saw the market blast out of an 18-month trading range in November, consolidate tightly for two months through January, and now resume its uptrend, with more stocks and sectors participating. All told, we’ll bump our Market Monitor up another notch to level 9 (out of 10).

This week’s list has another crop of very strong stocks, most of which have either gapped up on earnings or are just emerging from consolidations. Our Top Pick is ON Semiconductor (ON), a chip firm that just blew away estimates and is expecting huge bottom-line growth thanks in part to its acquisition of Fairchild.

Stock Name	Price	Buy Range	Loss Limit
Arista Networks (ANET)	0.00	115-120	102-105
NetEase, Inc. (NTES)	0.00	285-295	260-265
ON Semiconductor (ON)	24.07	14.5-15.5	13.5-14
Paycom Software (PAYC)	0.00	51-53	47-48.5
Portola Pharmaceuticals (PTLA)	0.00	29.5-31.5	26-27
Shopify (SHOP)	585.00	56.5-61.5	50-53
TIM Participacoes (TSU)	0.00	15-15.5	13.8-14.2
TTM Technologies (TTMI)	0.00	15.8-16.8	14.5-15
United States Steel Corporation (X)	0.00	37.5-39.5	35-36
Wix.com (WIX)	302.53	58-62	52-55

A brief guide on using the Cabot Top Ten Trader.

2020 has been a bad year for many things, but not cloud computing. As a result, these cloud computing stocks and ETFs have taken flight.

The market was hit hard last week, so all trends are down, and increased caution is advised.
In the portfolio this week, we’re selling four stocks, which will both reduce risk and raise cash.


As for the new recommendation, it’s one of the world’s leading uranium companies, which has a great growth story thanks to growing negative attitudes toward Russian energy and growing positive attitudes toward carbon-free energy.


Details inside.

Down year on Wall Street, right? So far, yes. But the 20 best-performing large-cap stocks through the first half have all doubled. Here are their names.

Carla Pasternak discusses a high-yield bull market she discovered in a little-known asset class.

Every now and then one of our stocks is the target of a short report by a myriad of research houses that try to make the case that a company is garbage and its stock is wildly overvalued.

A stimulus bill looks like it is right around the corner but we need to get through this winter before vaccines are widely available. Facebook faces a real challenge to break it up and accept legal liability for content. An EU-China summit is cancelled after China tried to limit speakers critical of China’s clampdown of Hong Kong. On the Explorer front this past week, MP Materials (MP) and NovoCure (NVCR) were particularly strong as Sea Limited (SE) briefly made a new high at 200. As promised, our new idea this week hails from Brazil and is a monopoly play on the most essential of all resources.

Due to the holidays, the next issue of Cabot Global Stocks Explorer will be published on January 7, 2021.