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Today I wrote about a company that announced a new CEO! I then went back and added to the story. My conclusion remains unchanged: I expect the stock to perform poorly through year-end and possibly quite a ways into 2019.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the January 2024 issue.

In this issue, we discuss our Top Five Stocks for 2024. We also dissect and review what happened in the capital markets in 2023 and offer our outlook for the coming year.

This month’s Buy recommendation, Mohawk Industries (MHK), is a major global flooring manufacturer whose shares are deeply out of favor. We discuss three key questions when considering an investment in a cyclical company and describe how Mohawk passes all three with flying colors.

Most stocks have barely budged the last two and a half years, but the Magnificent Seven and a handful of large-cap artificial intelligence-related leaders have picked up the slack, resulting in a 22% gain in the S&P 500 since the start of 2022. So, we’ve tried to play the hits here at Stock of the Week, adding a couple Mag. Seven names to the portfolio and several AI plays. All of them are up double-digit percentages (and one triple-digit winner!) in little more than a year. Now, with the market’s tides starting to shift away from AI and the Mag. Seven and toward other, long unloved sectors, we pivot toward one of the new favorites – retail – by adding a recent recommendation from Mike Cintolo to his Cabot Growth Investor readers.

Details inside.

The market held its own last week and we’re now even seeing the worst areas out there bounce as a bit of stability shows up in the banking sector. That said, on the charts, not much has changed—some growth stocks are acting resiliently but the broad market is still buried. We’re open to anything, including the scenario where an easier Fed combined with limited bank reverberations leads to a sustained advance. Right now, most of the market is hanging in there, but we need to see continued buying before changing our stance. We’ll leave our Market Monitor at a level 5 today.

This week’s list is a bit broader with some turnaround situations out there. Out Top Pick is an old pandemic darling that, after crashing, has spent months bottoming out and is now perking up

Some of the positives that we saw in the latter half of August are still hanging around, not the least of which is a good amount of resilience from growth stocks that popped higher on earnings or otherwise saw good-volume buying. That said, the market as a whole doesn’t look ready, with last week bringing another round of selling in the broad market and the major indexes—the intermediate-term trend never could turn up, and few stocks are really moving up at this point. Long story short, there are some encouraging pieces of evidence, but more patience is likely needed. We’ll leave our Market Monitor at a level 6.

This week’s list is pretty well-rounded, with stocks from a variety of groups and of different sizes and profiles. Our Top Pick is a clear winner in the drug space with two big sellers; we’re OK grabbing a few shares here or (preferably) on dips.

While the financial news obsesses over what the Fed might have vaguely implied in the latest statement, the world is morphing into a different place. The demographic of humanity is rapidly transforming in a way that will massively affect the flow of money for the rest of our lives. The world is currently undergoing a technological revolution that is transforming society and everyday life.

The aging population and the technological revolution are megatrends that will dominate the investment landscape for years to come regardless of what the Fed does, or GDP in the next few quarters, or whoever gets elected president. It’s not an accident that the best performing stocks in the Cabot Dividend Investor portfolio are in healthcare and technology. Nor will it be an accident that these same stocks continue to dominate from this point forward.

In this issue, I highlight the massive opportunity to position yourself in front of a tsunami that could provide the best investments of your lifetime.

Cannabis stocks are trading like a group in need of a catalyst.

* The AdvisorShares Pure U.S. Cannabis (MSOS) exchange traded fund (ETF) has fallen 28% from the peak of the rally caused by last summer’s news of federal government progress on rescheduling.

* The AdvisorShares MSOS 2x Daily (MSOX) ETF is down 38%.

Will the group see a catalyst soon? I put odds at much higher than 50%. This makes cannabis stocks a buy in the current retreat, both for a trade but also as a medium-term, multiyear position.

First, a housekeeping note: With Santa coming in a few days, there will be no issue next Monday, but we will send a “full” update next Monday (in place of the issue) to keep in touch, and we’ll be around if you have any questions. Merry Christmas and Happy Holidays!

As for the market, the post-Fed action was clearly a downer and is threatening to reverse the intermediate-term uptrend, which was the lone positive piece of top-down evidence. To this point, we will say many individual stocks have bent but haven’t broken, but the onus is once again on the bulls to step up and offer support. We’ll move our Market Monitor down to a level 4, and it could sink further should the bears keep at it.

The good news is we’re still finding many solid-looking charts, though they’re from all nooks and crannies of the market. Our Top Pick today is in the surprisingly resilient housing group.

Current Market Outlook


There’s been a bunch of news during the past few trading days, including this morning’s revelation that a likely autumn Italian election could threaten the euro, as well as continued China trade shenanigans, both of which attracted sellers. Today’s move did put a dent in a couple of indexes—the NYSE Composite’s intermediate-term green light went up in smoke, for instance—but the other indexes continue to hold most of their early May gains. Much more selling from here could put a fork in this rally, so our antennae are up. But right here, we are still leaning bullish though we are knocking our Market Monitor down a notch. Thus, continue to hold your resilient performers, but don’t forget to take some partial profits when you have them and hold some cash until the buyers truly take control.

This week’s list has an array of ideas from various corners of the market. Our Top Pick is Carpenter Technologies (CRS), a specialty metals firm with huge earnings estimates and whose stock is hitting new highs.

Stock Name	Price	Buy Range	Loss Limit
Carpenter Technology (CRS)	53.25	56.5-58.5	51-53
Foundation Medicine (FMI)	136.68	88-92	80-82
iQIYI (IQ)	0.00	21.5-22.5	19-19.5
Lululemon Athletica (LULU)	304.69	100-104	93-96
Macy’s, Inc. (M)	36.36	33-35	30-31
Micron Technology, Inc. (MU)	43.31	59-62	52-54
PBF Energy (PBF)	38.93	42-45	38-39.5
Turtle Beach (HEAR)	26.70	14.5-17	11-12.5
WTW (WTW)	100.47	76.5-79.5	70-72
ZTO Express (ZTO)	28.84	19.5-21	17.5-18.2

We wrap up a fruitful year with a December Issue of Cabot Early Opportunities highlighting five names spanning everything from bottled water to social media to bitcoin mining.

I like the diversity of this Issue, which has something for everyone.

Every three to six months, I will revisit some of the important themes and strategies used by Cabot Options Trader since I became the editor.

Last week we bemoaned the fact that the market had not yet decisively broken out to the upside, and indeed, most major indexes were below resistance and close to their longer-term 200-day moving averages. However, last week, leading stocks separated themselves from the pack—even during days the indexes were flat, the best stocks cranked out solid gains. We know that a pullback or correction could occur at a moment’s notice, yet we remain optimistic the best is yet to come. This week’s Top Ten reflects the broad bullish action among leading stocks last week, as we have a good mix of growth and commodity, big and small. Our favorite of the week is MasterCard (MA), a big-cap leader of this market advance that reacted very well to earnings last month, and has since quieted down beautifully. You can start a position in this area, and don’t worry about the high share price—just buy fewer shares.

Stock Name	Price	Buy Range	Loss Limit
ARG (ARG)	0.00	54-58	-
CLR (CLR)	0.00	47-52	-
EGLE (EGLE)	0.00	30-32	-
FLR (FLR)	0.00	185-195	-
GU (GU)	0.00	15-17	-
MA (MA)	0.00	270-290	-
MTL (MTL)	0.00	155-165	-
PXD (PXD)	0.00	64-68	-
UNT (UNT)	0.00	69-73	-
WTI (WTI)	0.00	46-50	-

Last week’s U.S.-China trade truce fell flat but the tone of emerging market and international stocks remains positive. The EEM began 2019 at 40 and moved nicely to 44 in late spring before coming back to 39 in late summer. Since then, EEM has been in a choppy uptrend to reach 42. Today we move south of the border for a new recommendation in a strong uptrend and way off its high.