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This week, we comment on earnings from Adient (ADNT), Brookfield Re (BANR), Brookfield Asset Management (BAM), Goodyear Tire (GT), Mattel (MAT), Newell Brands (NWL) and Western Union (WU).


Next week, Toshiba (TOSYY), TreeHouse Foods (THS), Conduent (CNDT), Ironwood Pharmaceuticals (IRWD) and Organon (OGN) report earnings.

This week’s update includes commentary on earnings from Adient (ADNT), Berkshire Hathaway (BRK/B), Brookfield Reinsurance (BAMR), Elanco Animal Health (ELAN), TreeHouse Foods (THS), Viatris (VTRS) and ZimVie (ZIMV).

We all prefer rising markets to declining markets, but there is a silver lining to a weak tape – when most stocks are heading south, it becomes easy to spot abnormal strength. That’s what OptiMo, our proprietary stock screening system, has been doing in recent weeks; if big investors aren’t selling shares in this market, they’re likely to buy with abandon during the next bull move. Of course, with the bears in control of most stocks, you should stick with a defensive stance for now – no use investing a ton of money when the odds are against you. But nibbling on a couple of leaders and readying your watch list should pay off when the bulls return. This week’s Top Ten contains another batch of commodity, solar and emerging market stocks. Our favorite of the week is ICICI Bank (IBN), an Indian bank that’s directly leveraged to that country’s tremendous growth. The stock broke out last week, and Indian stocks are acting well.

Stock Name	Price	Buy Range	Loss Limit
ABX (ABX)	0.00	48-53	-
ASTI (ASTI)	0.00	17-23	-
CF (CF)	0.00	100-110	-
CHU (CHU)	0.00	20-23	-
HOLX (HOLX)	0.00	66 - 68 1/2	-
IBN (IBN)	0.00	66-72	-
ILMN (ILMN)	0.00	64-72	-
JASO (JASO)	0.00	65-70	-
KGC (KGC)	0.00	21-24	-
SWN (SWN)	0.00	56-58	-

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), Janus Henderson Group (JHG), Paramount Global (PARA), Starbucks (SBUX) and Teladoc Health (TDOC).

In today’s note, we discuss developments and institutional ratings upgrades for some of the stocks in the portfolio, including Agnico-Eagle Mines (AEM), Atlassian (TEAM), GE Aerospace (GE), SPDR S&P Retail ETF (XRT) and Starbucks (SBUX).

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the April 2021 issue.

This month we look at defense industry stocks. These stocks have been left aside as investors rush to capture post-pandemic winners, and as the market has doubts about the Biden administration’s commitment to defense spending. Yet, these concerns appear overdone, and investors aren’t considering the possibility of a ramp-up in response to rising global tensions. We discuss six interesting stocks.



We also look at high yield bonds. Our call in February 2020, that “the Sun May Be Setting On High Yield Bonds,” appears to be the right one once again. Yield levels and spreads have returned to remarkably low levels. Our discussion also outlines what favorable and unfavorable conditions look like.



Our feature recommendation is pet health company Elanco Animal Health (ELAN). This company has produced mediocre operating and stock price performance since its 2018 spin-off from Eli Lilly. Yet, changes appear to be coming with the arrival of a credible activist that is reshaping the board of directors.



We also include comments on recent price target and rating changes, including our recent Sell recommendations on Valero Energy (VLO) and Volkswagen AG (VWAGY).



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.

Current Market Outlook


The market enjoyed a nice bounce after last Monday’s shakeout, especially in growth-oriented sectors and indexes like the Nasdaq. But we don’t think the market is quite out of the woods—by our measures, the intermediate-term trend is still on the fence (most indexes are just above or below their 50-day lines), and the fact is that far fewer stocks are hitting new highs now than the past couple of times the indexes have tested their highs. To be clear, we’re not overly negative, as the longer-term trend looks great, as do many stocks, and the major indexes are just a couple of percent from all-time highs. But we think it’s best to play things carefully (holding some cash, keeping new buys relatively small, etc.) until the market confirms that the post-election uptrend is back on track.

This week’s list is a mixed bag, with some turnarounds, some recent earnings winners and others that have soared on news. For our Top Pick, we’re going with Western Digital (WDC), which, after a brief shakeout, has come storming back to new highs on great volume.

Stock Name	Price	Buy Range	Loss Limit
Huntsman (HUN)	0.00	23-24.5	21-22
Jabil Inc. (JBL)	41.50	27.5-29	26-26.5
Jazz Pharmaceuticals (JAZZ)	0.00	138-144	129-130
Lending Tree (TREE)	411.51	120-124	112.5-115
Penn National Gaming (PENN)	45.38	17.5-18.5	15.8-16.5
PRA Health Sciences Inc. (PRAH)	96.08	63-65	58-59
RH Inc. (RH)	252.93	44-46	40-41.5
Tesla, Inc. (TSLA)	818.87	280-295	260-270
Vertex Pharmaceuticals (VRTX)	230.36	104-109	95-100
Western Digital Corporation (WDC)	0.00	79.5-82.5	73-75

Current Market Outlook


The market’s rebound since its sharp one-day selloff on Wednesday, May 17, has been impressive and encouraging—the Nasdaq and leading growth stocks spiked to higher highs, and even the S&P 500 nosed out above its March 1 peak. It’s certainly a good sign and pretty much brings us back to where we stood two weeks ago. On the positive side, most growth-oriented stocks are in good shape and most indexes are either at, or just a couple of percent off, all-time highs. But much of the broad market (and many indexes) is just marking time and the number of stocks hitting new lows is at unhealthy levels. Even so, the long-term trend and leading stocks are the most important pieces of evidence, and they’re both bullish. Thus, you should be, too.

This week’s list has another crop of very strong names from many strong sectors. For our Top Pick, we’re going with a big-cap turnaround play—Best Buy (BBY) has surprisingly strong earnings figures, a big share buyback program and the stock just gapped up after its quarterly report.

Stock Name	Price	Buy Range	Loss Limit
Alibaba (BABA)	254.81	120-124	111-112
Best Buy (BBY)	0.00	57-60	52-54
Domino’s Pizza (DPZ)	339.47	200-205	187-190
FMC Corp. (FMC)	0.00	73.5-76	69-71
MercadoLibre, Inc. (MELI)	980.83	272-282	248-254
MuleSoft (MULE)	0.00	25.5-28	22.5-24.5
Regeneron Pharmaceuticals (REGN)	512.96	435-455	400-410
Wayfair (W)	167.03	60-64	57-58
West Pharmaceutical (WST)	210.25	94-97	88-90
Wynn Resorts (WYNN)	121.08	123-127	114-117

Current Market Outlook


It’s not a wild, rampaging bull market, but there’s no question the evidence has improved during the past couple of weeks—earnings season has offered more good than bad, with a decent number of positive reactions and breakouts, and for the first time in months, we’re seeing some follow-on buying (strength leading to more strength), which is typical of what you see in a sustained uptrend. There are still hurdles to overcome (most indexes are still testing the top of multi-month ranges), and short-term, investors are a touch complacent, so we wouldn’t be shocked to see some wiggles or further crosscurrents. But with more stocks acting well and with the trends of the major indexes pointed up, we think extending your line makes sense. We’re nudging our Market Monitor up to a level 7 on tonight’s issue.

This week’s list is chock-full of recent earnings winners, including many that appear to be early in new uptrends. Our Top Pick is Qorvo (QRVO), a well-traded chip maker that’s just staged a wild earnings gap. Start small and preferably on weakness.

Stock Name	Price	Buy Range	Loss Limit
Agnico Eagle Mines (AEM)	79.05	58-61	53-55
Bristol-Myers (BMY)	66.24	54-56	50.5-51.5
Garmin (GRMN)	97.45	92-94.5	84.5-86
Inphi (IPHI)	120.16	68.5-71	61.5-63
Leggett & Platt, Incorporated (LEG)	49.79	49-51	43.5-44.5
MasTec, Inc. (MTZ)	66.65	68-71	62-63
MurphyUSA (MUSA)	118.21	113-117	98-100
Qorvo (QRVO)	129.47	97-102	87-90
TopBuild (BLD)	111.00	103.5-107	94-96
TransDigm (TDG)	599.41	520-540	480-490

With airline and cruise bookings eclipsing pre-pandemic levels, it appears that vacationers’ pent-up travel demands are finally being unleashed in this “revenge travel” summer. Here’s how you can save money as you tick a few items off your own travel bucket list and profit from the most in-demand travel companies.

Explorer stocks were all up this week though it is not clear we are out of the woods yet. Sociedad Química y Minera de Chile S.A. (SQM) jumped from 83 to 90, Infineon Technologies (IFNNY) shares had double-digit gains, and Kraken (KRKNF) was up 8% yesterday and almost 20% over the last two weeks as smaller stocks are in favor.

Current Market Outlook


Earnings season. The upcoming U.S. elections. Spiking COVID positives and accompanying Europe lockdowns. All told, what was a cleaner situation a couple of weeks ago has turned into one with a lot of crosscurrents, and that has caused a buyers’ strike of sorts, with the major indexes and many leaders pulling back of late. It’s not a disaster, but today’s action has put the intermediate term back on the fence; basically, it looks like the market is still in a consolidation phase after the big March-through-August rally. It’s a similar deal with leading stocks, as many have taken on water, though few have cracked. (In fact, we see a lot of good setups out there should buyers step up soon.) All in all, we’re not making any huge moves, but we’ll knock our Market Monitor down a notch and keep a close eye on things.

This week’s list is an interesting mix of growth and turnaround situations, including a couple that have their hands in both cookie jars. Our Top Pick is Align Technology (ALGN), which just galloped out of a two-year base after earnings. Aim to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Align Technology (ALGN)	448.51	420-440	375-390
AAXN (AAXN)	101.69	99.5-102.5	90-92
Exact Sciences (EXAS)	107.06	103-107	91-93
The Gap, Inc. (GPS)	17.75	19.5-20.5	17-17.5
General Motors Company (GM)	36.83	34-36	31-32
GrowGeneration (GRWG)	17.75	16.5-18	14-15
MercadoLibre, Inc. (MELI)	1270.86	1180-1240	1070-1110
NIO Limited (NIO)	25.86	23.5-25	20.5-21.5
Shift4 Payments (FOUR)	55.98	51.5-54	46-47.5
Square, Inc. (SQ)	176.77	164-171	148-152

Current Market Outlook


The first week of the year was extremely volatile, but all in all the action ended up positive, with major indexes kissing fresh all-time highs and many leading stocks ending up nicely on the week. Overall, then, not much has changed—the primary evidence remains positive, so we’re content to ride things higher, but there’s little doubt the environment is hot and heavy (basically the opposite of what we saw 10 months ago), so you should continue to keep your feet on the ground (trail stops, take partial profits when available) and be discerning with your buys (aiming to enter after a bit of rest or some sharp shakeouts to support areas).

Because of this, most of our buy ranges are a bit below current prices (looking for pullbacks), though we still see some solid setups. One is Snap (SNAP), which is a clear leader in the internet space and has just returned to its highs after its first test of the 10-week line since its October blastoff.

Stock Name	Price	Buy Range	Loss Limit
8x8, Inc. (EGHT)	35.5	32.5-34.5	27.5-29
LPL Financial Holdings (LPLA)	116.8	108-112	97-99
The Mosaic Company (MOS)	26.8	25-27	21.5-22.5
Palo Alto Networks (PANW)	364.6	345-360	310-320
Progyny (PGNY)	44.9	40.5-43	36.5-38
Snap Inc. (SNAP)	54.4	53-55	47-48.5
Spotify (SPOT)	344.2	335-347	297-304
Sunrun (RUN)	95.8	87-91	74-77
Vale S.A. (VALE)	18.6	17.4-18.2	15.8-16.2
Zillow (Z)	143.2	134-140	119-122

The market’s rebound has been very impressive, though there are a couple of flies in the ointment (we’re not huge fans of defensive sectors rallying strongly) and this week looks like a good test for a couple of reasons: First, there are some key quarterly reports coming out in key technology areas, and trend-wise, many growth-oriented measures are closing in on five-week highs, which could turn the intermediate-term trend up … if all goes well. For now, nothing has officially changed: If we see more breakouts and further upside, it would obviously be bullish, but while some retrenchment from here wouldn’t necessarily be bearish, it would be a sign the market likely needs more time to set up. We’ll leave our Market Monitor at level 6 this week.

This week’s list is a bit more diversified than the past two weeks, and for our Top Pick, we’re going with a name that’s very strong following quarterly results, has triple-digit growth and a great story—if you enter, be sure to keep it small and use a loose stop.

The good news is that four weeks of upside action has brought a new buy signal from Cabot’s intermediate-term market timing indicator. But this doesn’t mean you can jump in with both feet yet; there’s still reason for caution.

One way Cabot Stock of the Week exercises caution is by diversifying widely, not only among industries but also among investment strategies. Today’s recommendation, a big undervalued robotics company in Japan, is an excellent example.



As for the rest of the portfolio, it’s acting well and thus the only change today is a downgrade of one stock—which has got a bit high—from buy to hold.



Full details in the issue.

Today we’re breaking into a familiar market by going back to the insurance industry.

But today’s addition is very different from our other rapid growth insurance companies in a major way (as you’ll soon see!).



The stock is acting strong and the fundamentals remain great, despite COVID-19.



All the details are inside this month’s Issue. Enjoy!

The market remains healthy, with all major indexes in uptrends and no major signs of divergence, and thus I continue to recommend heavy investment in stocks that meet your portfolio’s goals.

This week’s recommendation is an American apparel company whose stock is cheap and thus has great capital gains potential. Plus it pays a 5.8% dividend!

As for the current portfolio, most of our stocks are performing fine; a few are hitting record highs; and one or two stocks have become worrisome, but not enough to cause me to take action.

As we march toward spring it appears real-world risks are decreasing (more vaccines, lower case count, etc.) while the market risk for growth stocks has gone up (higher yields, volatility, etc.), at least in the short term.

As I scanned through dozens of charts and evaluated stories for this month’s addition my focus was repeatedly drawn to one stock. The chart is compelling, the story is enticing, and the recent Q4 report and forward guidance illustrate sound fundamentals, supported by long-term demand growth.



The stock appropriately balances the potential risks and rewards in the current market.



Enjoy!

The market’s main trend remains up, with many major indexes hitting new highs in recent days—and many of our stocks doing the same. Those are the stocks you should hang onto tightly—because there’s no telling how far they’ll run.

After a brief shakeout last Monday, supposedly on fears that Italy would leave the EU, the market reversed course and has been pushing higher and higher since, supposedly cheering on the continued strong performance of the U.S. economy.

I’m enjoying the ride, and I assume you are, too. But I must remind you that good news is prevalent at market tops, while bad news is what you wallow in at market bottoms. So keep your eyes on the exits—while continuing to hold the best stocks as long as the market supports them.