Search

Not much has changed with the market’s picture—most stocks (especially cyclical stocks) are very strong, and we’re happy that the Model Portfolio is off to a good start this year after a great 2020. However, things are also quite frothy, few stocks are at attractive entry points and there remains a bunch of crosscurrents (day-to-day rotation, etc.) that’s making timing trickier.

Despite some weakness early in the week, the indexes bounced back in a big way, closing at new all-time highs. For the week the S&P 500 gained 1%, the Dow added 1.07%, and the Nasdaq soared higher by 2%.

Despite some weakness early in the week, the indexes bounced back in a big way, closing at new all-time highs. For the week the S&P 500 gained 1%, the Dow added 1.07%, and the Nasdaq soared higher by 2%.

Current Market Outlook


The market’s rebound continues, and encouragingly, we’re seeing some power develop—stocks have shown two major accumulation days (one the day after Christmas, when the Dow rose 1,000 points, and the other last Friday after soothing words from the Fed) and breadth has been terrific. We can’t say we’re out of the woods yet; even after today’s rally, the intermediate-term trends of the major indexes are clearly down (all indexes are still near their 25-day moving average, in fact). But even so, there’s no denying the rally is off to a good start, and to this point, the market and potential leading stocks are doing what they “should” to carve out a sustainable low. You should still keep plenty of cash on the sideline, but we’re not opposed to adding some small positions in potential leaders and seeing how things progress. We’re nudging our Market Monitor up a notch.

This week’s list has a broad mix of stories and charts, but all of them look like they want to head higher if the market cooperates. Our Top Pick is Chipotle Mexican Grill (CMG), which, after a massive shakeout, looks primed to continue its turnaround.

Stock Name	Price	Buy Range	Loss Limit
AZUL (AZUL)	29.41	26.5-28	24-25
Buenaventura (BVN)	16.23	15.5-16.5	14-14.5
Chegg (CHGG)	74.21	28.5-30	25-26
Chipotle Mexican Grill (CMG)	773.32	465-485	425-435
Etsy (ETSY)	112.97	49-51.5	42-43.5
Incyte Corporation (INCY)	76.98	70-73	64-66
Kirkland Lake Gold (KL)	51.30	24-25.5	21.5-22.5
Okta, Inc. (OKTA)	148.41	63-66	54-56
Telephone & Data (TDS)	35.36	33.5-35	30.5-31.5
Workday (WDAY)	194.88	157-164	143-147

With the arrival of earnings season and perhaps some indications that the 10-year US Treasury yield will peak at around 5%, the broad stock market appears to have found at least momentary stability. Whether this is just another “eye of the storm,” or a true end to the bear market, is unknown and unknowable.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the November 2023 issue.

We discuss recent earnings from our companies and move shares of Sensata Technologies (ST) from Buy to Hold given the company’s lower overall quality compared to our initial understanding.

We also include some thoughts on the current stock market and how rising interest rates and other factors have led investors to unload shares of most companies and riskier companies in particular.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the February 2024 issue.

Spin-offs should be in every value investor’s toolkit. In this issue, we are adding a spin-off, Worthington Enterprises (WOR), to our Buy recommendations roster.

We comment on recent earnings from Comcast (CMCSA) and provide updates on our other recommended stocks.

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.

The market had a very rough day yesterday, with the Dow closing up 10 points (there was some rotation into lagging areas) but the Nasdaq reversed from huge gains to finish down 227 points.

The coming boom in marijuana stocks reminds of internet stocks just before the turn of the century. That means plenty of opportunities - and potholes.

Market performance for the rest of the year will depend upon a full recovery brought on by the vaccines the removal of lockdowns and restrictions. If that doesn’t happen, look out. But I’m confident it will.

Of course, the pricey market indexes don’t apply to many individual stocks. Some stocks are very overvalued while others remain undervalued. At this point, the more conservative play is to target stocks with cheap valuations to buy, especially while many of those bargain stocks also have newfound momentum.



In this issue, I highlight a blue-chip energy stock. It sells at a dirt-cheap valuation while paying a high and safe dividend. It also has strong momentum ahead of what is likely to be a year of vastly improved profits.

Longer-term subscribers are no doubt familiar with our immense patience with beleaguered discount retailer Big Lots (BIG). Its shares initially sagged due to bloated inventory, similar to other more highly regarded retailers like Target and Walmart, leading to our initial recommendation. We had expected that its earnings would be weakened as it offloaded its excess goods at sizeable discounts, but also that it would ultimately work its way out of its difficult but by no means impossible situation. At the time, Big Lots had a cash-heavy, nearly debt-free balance sheet, was generating positive free cash flow and traded at a depressed 3x EV/EBITDA multiple. What could go wrong?

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the February 2022 issue.



Word puzzle Wordle is the latest craze, but it isn’t the most popular parlor game. This title is held by “What Is Russian President Vladimir Putin Going to Do With Ukraine?”



We provide our theory which is not found anywhere else yet could readily explain his motivation. Related to this crisis, we move shares of ConocoPhillips (COP) from Buy to Hold, as they have surged above our recently raised 89 price target.



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.

The world of major pharmaceutical stocks can be split into two camps: winners and laggards. Eli Lilly (LLY) is a clear winner, with its successful roll-outs of new treatments led by the immense promise of weight-control drugs like Mounjaro and Zepbound. Lilly’s shares have surged 545% (up 5.5x) in the past five years and are increasingly mentioned as a replacement for Tesla in the “Magnificent Seven.” The shares trade at 47x estimated 2024 EBITDA.

Just a quick update on two of our positions and a bit of an educational component by using the strategy of averaging up, rather than averaging down.

Today I want to share with you the story of my greatest trade. And it was pure luck!

As the coronavirus plagues China, Apple’s iPhone and AirPod production is at risk - and so is Apple stock. Rare earth stocks are the best way to hedge it.

Today’s new addition is a semiconductor company. It designs products that are the heartbeat of digital technologies. Its content is found in electric vehicles, datacenters, IoT devices, airplanes, mobile devices and more. It is benefitting from surging demand from Apple (AAPL) products, from which it generated 40% of revenue in 2020. While the market cap is a little larger than we typically look for, the opportunity warrants the exception at this time.