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

This issue includes our Top Five Stocks for 2022, our annual market review and outlook for 2022, as well as our update on the bankruptcy and high-yield bond markets.



Our featured recommendation this month is Brookfield Asset Management Reinsurance Partners Ltd (BAMR). This recent spin-off has received little market attention yet offers considerable long term potential.



We note our recent ratings change that moved shares of GCP Applied Technologies (GCP) to a Sell with a +77% total return.



Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your 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.

It’s been seven weeks since the marijuana sector topped, and every day the picture of this correction gets clearer. For example, today saw a rally across the board in the sector, but if you look at the charts, you see it’s really just an inconsequential blip.

Thus, defense remains the watchword for now. In fact, I am selling one stock in this issue, taking profits and freeing up a little more cash.



Long term, however, prospects for the sector remain very bright, as was made clear by our companies’ latest quarterly reports. And of course, we will always hold the leaders of the sector.



Full details in the issue.

Yesterday was a rough day for stocks in the marijuana sector. Today was better. But overall, I continue to hold the opinion that the sector peaked two weeks ago and that it needs a longer cooling-off phase—a real correction.

Such a correction can take many forms, and it’s hardly worth speculating about what form this one will take. Yet by managing your portfolio carefully, based in large part on the action of each stock, you can get through this correction with minimal pain and be well-positioned to add to your gains when the uptrend resumes—because in the long run, this remains a fantastic sector to be invested in.



Full details in the issue.

NEW! Download your copy of Cabot’s 10 Favorite Low-Priced Stocks for 2022 Report - a subscriber-exclusive benefit.



The rally after the early-December low has clearly come under pressure, especially with growth stocks, most of which are in shambles; our Cabot Tides remain negative and we’re remaining cautious in the Model Portfolio, with 50%-ish cash for the past three weeks. We’re not ruling out the fact that, for the overall market, we could have a workable low if things hold up here. But there’s no question that the sellers are in control of most stocks and indexes, so we advise caution and defense while waiting for the sellers to finish their work. In the portfolio, we continue to pare back when needed, though we’re also holding our more resilient names and keeping our watch list up to date; this is still a bull market, but right now it’s about preserving capital and waiting patiently for the next uptrend.

The bull market remains intact, despite this morning’s sharp selloff, so I continue to recommend that you be heavily invested in stocks that help achieve your investing goals.

Today’s featured stock is a very conservative one, a solid financial institution with a good dividend, and the prospect of growing earnings as interest rates rise.



As for the current portfolio, there are no changes. It will be interesting to see which stocks bounce best after the selling pressures ease.

The market situation is changing. Amidst persistent high inflation and concerns about future economic and earnings growth, investors are adjusting. Energy is up nearly 40% YTD as that sector benefits from inflation. Utilities and Consumer Staples are also thriving as investors focus on value, defense, and income in the market uncertainty.
Many stocks in the CDI portfolio have performed well and are likely to continue doing so. But because of the high prices they are rated a HOLD. However, there are two standout positions. In this month’s issue, I highlight two stocks that have what it takes in this market. They both benefit in the current environment, sell at reasonable valuations, and pay sky-high yields.


The market situation is changing for the worse overall. But there are still great opportunities if you know where to look.

The market remains healthy and thus I continue to recommend that you remain fully invested in a diversified portfolio. My last two recommendations were chip companies that consumers can’t really “see,” but this week’s recommendation is a consumer-facing company, so you can easily “kick the tires.”
As for the current portfolio, there are no sales, but four stocks get downgraded to Hold, for various reasons.


Details inside.

From a top-down perspective, there’s really not many stones you can throw at the market given where it was just three weeks ago. However, when looking at individual stocks, it remains a tricky environment—specifically, most stocks that have approached their old highs have either stagnated or been soundly rejected, with the action has thus far been concentrated in the worst performers of the prior few months. To be clear, we see this more as descriptive than predictive, but we’ll have to see the selling-on-strength vibe change if the upmove is going to continue to gather steam.



This week’s list is again a mixed bag, with some growth but a lot of commodities and cyclicals, too. Our Top Pick is a big player in the steel space that just recently emerged from a big rest period.

Inflation is hot and the Fed just began raising rates. It is expected to hike ten more times by the end of next year.

While yield curve inversion and recession risk is out there, many banks are flush with cash. And consumers are in great shape. As rates go steadily higher, bank stocks are poised to significantly grow earnings.



The most aggressive way to play this is with a bank that’s leveraged to short-term rates. That’s the strategy we’ll take today with a pure-play digital currency bank.



Enjoy!

Explorer recommendations were pretty flat this week but demonstrated some strength as well. JPMorgan led the banks, reporting a first quarter with a net profit of $8 billion on over $32 billion of revenue. Keep your perspective and play defense and offense. Emerging markets offer you both and we will be adding to the portfolio selectively. This week I highlight a defensive healthcare play of the highest quality.

The first quarter was kind to our stocks, as they rose, on average, +8.8%, while the broad market fell. We comment on the sources of the gains and any recent news on our recommended stocks.

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



All companies are collections of assets. When companies are struggling, a new CEO can redirect how those assets are utilized – a valuable catalyst for a turnaround. We highlight three recent CEO changes and how they might help drive up the value of their companies.



While we have been slow and perhaps reluctant to consider cannabis companies, we find that the time has arrived to look more closely. We summarize our deep-dive into this emerging industry and its major participants, and suggest six companies with impressive growth yet trade at surprisingly low valuations.



Our featured recommendation this month is ZimVie (ZIMV), a company that was recently spun off from medical technology giant Zimmer Biomet. Its shares have been summarily sold by the market, creating what we believe is an attractive turnaround situation.



We note our second price target increase for Marathon Oil (MRO) and our move to sell shares of Baker Hughes (BKR).

There were a lot of positives that built up for the market during February and early March, but that multi-week stretch of improving evidence has certainly run into a wall—the market has taken it on the chin during the past couple of weeks, with the major indexes giving up a big chunk of their gains (the brief intermediate-term trend all-clear is gone), and more worrisome to us, nearly every stock that has run into resistance has at least stalled out, if not come unglued. We don’t believe all of the good vibes built up are out the window; this recent action could easily be part of a longer bottoming process for the market. But we never advise ignoring the evidence in front of us, so we’re pulling our Market Monitor down to a level 5.



This week’s list is heavy on some cyclicals but also some dependable growth outfits. Our Top Pick looks to be one of those, a medical firm with a few good-selling drugs on the market and sold earnings growth projections.

With commodities and energy stocks still holding up, though, today I’m adding an American company engaged in hydrocarbon exploration: Marathon Oil (MRO).

The market’s evidence improved under the surface for much of February and early March, with the strong rally last month only adding to the good vibes. A pullback wasn’t unexpected, but so far, the way things have retreated hasn’t been encouraging, with a lot of potential leaders taking it on the chin and our nascent Cabot Tides buy signal back on the fence.


To be fair, the decline hasn’t cracked the uptrend in the market or most stocks, and a couple of good days would do wonders. But with few stocks really making headway, we advise going slow, adhering to your stops and holding a good chunk of cash.


Earlier this week, we sold one of our recent buys, and while we have no new sells tonight, we are placing a couple more names on Hold and have relatively tight stops in place in case the selling continues.

Today’s recommendation is a well-known pharmaceutical giant whose stock recently broke out above the high it hit in 2000, 22 years ago! But that’s not why it’s recommended today. Today’s story is all about new drugs and renewed growth.
As for the current portfolio, there are four stocks rated sell!


Details inside.

With the market continuing to improve, and chip stocks increasingly in demand, we add another chip stock (a very established one) to the portfolio today.
But we’re selling one stock too (VECO), taking profits and looking to reinvest them in something with greater potential.


Details inside.

While the majority of Mike Cintolo’s Top Ten Trader is focused on commodity stocks this week, we already have exposure to this group via CLF and MRO. Because of that exposure, I am going to add Box Inc. (BOX) which develops and markets cloud-based content management, collaboration, and file sharing tools for businesses.

Today, I’m adding Cleveland, Ohio-based company Cleveland Cliffs (CLF), the largest flat-rolled steel producer in North America.

In the March Issue of Cabot Early Opportunities we talk honestly about the current state of the market and what to do now.
I also cover five opportunities that continue to pique my interest. I have a familiar software stock that’s been resilient lately, an alternative energy supplier that could help reduce Europe’s reliance on Russian energy, a pharma company set to make big moves over the coming years, an early-stage electric vehicle play, and an innovative MedTech company that’s growing like a fertilized weed in early spring.


Enjoy!