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Rare earths are critical inputs to next-generation technology, and sourcing them domestically (or at least from an ally) is a U.S. priority. These rare earth stocks stand to benefit.

NerdWallet (NRDS): Sell A Quarter and Hold the Rest

Stop us if you’ve heard this scenario before: The market gets a head of steam going, but after some inflationary reports, the Fed begins to jawbone the market, which leads to the market giving up the ghost. That happened at least a couple of times in 2022, so our antennae are up given the recent inflation reports and some tough talk from Fedheads last week. That said, once again, the bottom line is that most of the key evidence is still bullish, so while we’re honoring stops and aren’t piling in here, but we’re also holding onto names that are acting normally. We will drop our Market Monitor down a notch (to a level 6) to respect the recent dip, but we’re most interested in how the market responds now that it’s down near support.

This week’s list again has something for everyone, with our Top Pick a well-situated firm that’s helping to lead a group move and just reacted well to earnings.

The market has hit its first real rough patch of 2023, but so far the damage has been fairly limited. Still, it makes sense to add some protection, so today we’re adding a value stock that’s been one of the better performers in Bruce Kaser’s Cabot Undervalued Stocks Advisor portfolio for the past six months – but still has plenty of upside. Also, with the Stock of the Week portfolio at max capacity, we are parting ways with several positions to clear out some room for better opportunities in the coming weeks.

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

While large restaurant companies cruised through the pandemic, smaller companies struggled. Some, however, are now undertaking promising turnarounds. We highlight four new ideas and provide updates on two previously discussed small-cap restaurants.

For struggling companies, free cash flow is their lifeblood. By using free cash flow yield, we can identify undervalued companies with plenty of cash flow that provides a margin of safety. We discuss three interesting stocks.

Our feature recommendation this month is a high free cash flow yield situation. Retailer Kohl’s (KSS) is viewed by investors as a broken company left behind by time, trends and technology, with unsettled leadership, further pressured by bloated inventory, a possible recession, and rising labor and goods costs. We see a company with a history of stable revenues and cash flows, that now has a highly capable operator at the helm, whose shares have a free cash flow yield of 13%. The generous dividend pays out close to half of this cash flow, producing a 6.2% dividend yield.

Although the red-hot housing market has cooled down, rent prices and mortgage rates are up. So what’s the better option, buying or renting?

Stocks have rallied so far this year on optimism that we can get through this inflation and Fed rate hiking cycle without much economic pain. That’s what seems to be happening so far. But this latest “soft landing” rally is facing a formidable foe – history.

Rate hikes almost always slow the economy. But there is typically a long lag time. Since 1961, the Fed has embarked on nine inflation-busting, rate-hiking cycles. Eight of those cycles have led to recession. The yield curve has inverted, a phenomenon that has almost always preceded a recession.

What started out looking like another positive week for the market later turned into a week of little gains or losses, as economic data and Fed speak weighed on stocks on Thursday and Friday. For the week the S&P 500 and Dow fell marginally, while the Nasdaq rose just over 0.5%.

With individual company specifics likely to be a big driver in 2023, I wanted to highlight three small-cap stocks that look intriguing.

This week, we comment on earnings from Conduent (CNDT), Ironwood Pharmaceuticals (IRWD), Organon (OGN), Toshiba (TOSYY) and TreeHouse Foods (THS).

What started out looking like another positive week for the market later turned into a week of little gains or losses, as economic data and Fed speak weighed on stocks on Thursday and Friday. For the week the S&P 500 and Dow fell marginally, while the Nasdaq rose just over 0.5%.

A resurgence in Chinese economic activity following the end of Covid lockdowns could portend higher commodities prices ahead, especially in the price of copper.

The holiday-shortened week was mostly a non-event as the S&P 500, Dow and Nasdaq were mixed. And while the week was quiet, under the surface there was selling pressure in growth stocks and materials that raised some yellow flags.

As widely reported, Jamie Dimon, the 23-year-and-counting CEO of JPMorgan and its predecessor Bank One, recently penned his annual letter to shareholders. The 43-page tome covered topics ranging from the bank’s “Steadfast Principles Worth Repeating” to “Our Serious Need for More Effective Public Policy and Competent Government” along with some impressive numbers about JPMorgan’s financial, operational and share price performance over the decades.

The market is still like a jar of mixed nuts. Some good, some bad.

Earnings season begins this week as large-cap banks start delivering Q1 results. Across small-, mid- and large-cap stocks (all sectors) earnings estimates have been trending down for several quarters.

WHAT TO DO NOW: Continue to play things in the middle, as the on-again, off-again environment remains in place. We are seeing some improvement from our Cabot Tides and Two-Second Indicator, which is a plus, but most of the evidence is stuck in the middle, so we think having a good chunk of cash as well as a few resilient growth names makes sense. We have no changes in the Model Portfolio tonight; our cash position remains just under 50%.

It can pay to pay attention to what investment legends are doing to cope in these turbulent times.

Warren Buffett still has a knack for seeking value and a history of going to Japan to find it in times of volatility. Overall, Japan’s Topix index trades at 13.3 times expected earnings, according to S&P Global Market Intelligence. That compares with 18.9 times for the S&P 500.

Small-cap stocks have underperformed of late. That’s likely to change – soon. When it does, you’ll want to own this ETF and these two stocks.

The cannabis sector remains under pressure. But the stock price weakness makes the group a good buy for contrarians because there are plausible catalysts on the horizon.

Let’s be clear. It won’t be easy to buy. It never is, when sentiment is so dark.

Buying right never feels good, as the saying goes. When the right time to buy comes along, you won’t want to, is how technical analyst Walter Deemer puts it.