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This Friday is the expiration of our six April Covered Call positions. I would categorize these six positions as a good, but somewhat mixed bag, as only one trade looks like it will expire for its full profit potential (ANF), while four (TRIP, SUM, AMKR, AZEK) are in good shape but may need attention in the week to come, and one (ZI) which is mostly trading at a breakeven. As is always the case, I will update on where we stand with these expiring positions Thursday afternoon or Friday morning.

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.

While the headlines read “S&P 500 at All-Time Highs,” it’s not all smooth sailing in the market as countless stocks are still suffering from the Nasdaq rout that started a month ago.

Current Market Outlook


Earnings 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	Buy Range	Loss Limit
Burlington Stores (BURL)	321	312-318	285-290
Floor & Décor (FND)	113	109-113	97-100
Goldman Sachs Group, Inc. (GS)	343	335-345	305-310
Harley-Davidson Inc. (HOG)	48	45-47	40.5-41.5
The Middleby Corporation (MIDD)	181	176-182	160-163
Okta, Inc. (OKTA)	285	275-282	248-252
Qorvo (QRVO)	199	194-200	173-176
Seagate Technology (STX)	93	85-89	76-78
Steel Dynamics (STLD)	55	52.5-55	46-47.5
Tractor Supply Company (TSCO)	191	183-187	167-170

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.

The evidence has clearly improved during the past week or two, and that’s a good thing; we’re putting another couple of toes back into the water tonight, adding two half-sized positions in what we think can be leaders of the next uptrend. That said, we’re content to go slow for now, mostly because, while selling pressures have eased, buying power really hasn’t shown up yet, and until it does, there’s a chance the bears could reappear.

Still, overall, we’re increasingly optimistic, so we think putting a little money to work and then listening to the market’s clues makes sense. Get all the latest inside tonight’s issue.

Current Market Outlook


For the first time in a few weeks, we’re seeing some signs of spring when it comes to the Nasdaq and growth stocks, as many found support near or above their early-March lows and have begun to perk up, including some that have rallied back above their 50-day lines. (The Nasdaq itself has done this, too, which is obviously encouraging.) Moreover, we’re seeing many more six- to 10-week structures out there, which are far more palatable than the jagged three-week bases seen a while back. That said, we’re not out of the woods—the major indexes remain divergent (not the healthiest situation) and very few growth names are hitting new highs. For the first time in a while, we do think the market has a chance to kick into gear, but we have to see it to believe it; we’re nudging our Market Monitor up to a level 6, but still think the general game plan (small positions, buying cyclical names on weakness) makes sense for now.

This week’s list is a nice mix of growth and cyclicals, many of which look like either potential breakouts or early-stage pullbacks. Our Top Pick is Amkor Technology (AMKR), which might need a little more seasoning but has held up great during the correction and is now pushing ahead.

Stock Name	Price	Buy Range	Loss Limit
10X Genomics (TXG)	191	182-187	164-168
Align Technology (ALGN)	548	538-560	490-500
Amkor Technology (AMKR)	26	24.5-26.5	21-22
Cleveland-Cliffs (CLF)	19	17.5-19	16-16.5
The Gap, Inc. (GPS)	30	28.5-30.5	25.5-26.5
Lam Research (LRCX)	661	620-645	565-580
Lennar (LEN)	105	98.5-102.5	90-92
Micron Technology, Inc. (MU)	94	91.5-94.5	83-85
Scotts Miracle-Gro (SMG)	253	237-247	220-226
ShockWave Medical, Inc. (SWAV)	133	125-130	110-114

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

The stock market, so far in May, hasn’t continued the robust momentum of the first four months. Treasury Secretary Yellen’s comment about the possible need to boost interest rates to ward off inflation seems to be the catalyst. The market and the broad economy will likely respond differently if rates increase. We briefly outline on our asset allocation philosophy, which helps guide us when the market is edgy, in our economic comments.



Earning and proxy voting are in full swing. We’re updating the earnings as they come in.



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.

Current Market Outlook


It certainly hasn’t been a buying panic, but last week was another step in the right direction, with growth stocks avoiding selling pressure even as they approach (or in some cases, sneak out to) new highs—a marked change in character from the prior few weeks. There’s still some iffy pieces of evidence out there, including sentiment (complacent), volume (extremely light) and even some of the broad market (materials and energy stocks are beginning to lose some steam), but overall it appears that the sellers have run out of ammunition for the time being. If the buyers can really show up, we could see some solid breakouts going ahead. For now, we’re leaving our Market Monitor at a level 6, but another good week may change that.

This week’s list has a bunch of good-looking charts, most of which have a solid growth story. Our Top Pick is United Therapeutics (UTHR), which recently staged a big-volume breakout on news.

Stock Name	Price	Buy Range	Loss Limit
Acuity Brands (AYI)	173	162-167	145-148
ASML Holding (ASML)	630	605-620	550-560
Boot Barn (BOOT)	67	64-67	58-60
Boston Beer Company (SAM)	1,261	1,200-1,30	1,090-1,110
The Goodyear Tire & Rubber Company (GT)	18	17-18	14.5-15
Pinterest (PINS)	84	80-84	71-73
Sally Beauty (SBH)	21	19.5-20.5	17-17.5
SiteOne Landscape Supply (SITE)	182	174-178	160-162
United Therapeutics (UTHR)	199	192-202	172-177
Yeti Holdings (YETI)	84	81-85	72-74

The second quarter and major league baseball opens today after a good week for Explorer recommendations. Tech stocks struggle a bit but some EV stocks bounce back as investors look to play the long game. The Biden infrastructure plan captures media attention and today’s new recommendation should benefit from one of the plan’s more ambitious goals—universal broadband access

Editor’s Note: For most of its run, Chief Analyst Carl Delfeld has referred to the Cabot Global Stocks Explorer advisory by its short-hand name, “The Explorer.” So we figured we’d join him! We have decided to shorten the name of this publication to simply, “Cabot Explorer.” The product won’t change at all. This merely puts more emphasis on the purpose of this advisory, which is to “explore” for new, often hard-to-find stocks and sectors ready to break out - regardless of market. Enjoy!

Markets seem to be paying more attention to valuations and looking to confirmation from earnings that the economy is moving to growth mode. Stocks are likely to churn a bit for a while after their great uptrend in the last year. We’ll discuss today why SPACs have cooled a bit even as they spread to Asia, and present a new idea to watch which offers huge growth potential but may be a bit pricey.

Despite the current tug of war between cyclical and technology stocks for market leadership, financial stocks are likely the best positioned stock sector in the near term as well as for the rest of the year. They offer a complete package of value, momentum and position in the economic cycle.

Financials tend to thrive in the early stages of an economic cycle, which is where we are now. Financial companies also love rising interest rates. Interest rates are already rising and all but certain to keep climbing amidst a booming economy and trillions of stimulus dollars.



While the financial sector has been the second best performing sector on the S&P YTD, it isn’t as overextended as energy. It’s is only up about half as much so far this year.



In this issue I highlight two fantastic financial stocks for purchase. These stocks offer the very rare combination of value and momentum. It’s a great time to get in cheap ahead of great opportunities to write covered calls for a high income in the weeks and months ahead.