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Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the September 2021 issue.

This past week was vacation week – a valuable respite from the stresses of investing and other features of daily life. We now return to the investing desk, ready for what could be a very interesting remaining four months of the stock market year.



There hasn’t been much recent news on our names, so we provide a bit more color on some of the issues surrounding Arcos Dorados (ARCO) and some other names. We would like to see a market pullback to bring shares of otherwise attractive companies back to attractive valuations. However, even in the current market, we are starting to find appealing stocks again and will bring them to you.



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.



Thanks!

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the April 2021 issue.

As value investors, we look for companies that are selling at a discount to their underlying value. But how do we measure that value? In this issue, we briefly describe and discuss the EV/EBITDA metric, which is our preferred valuation tool.



While our stocks generally did well this past week, there wasn’t much news. With earnings season starting next week, most companies are remaining fairly quiet.



One change we made was to reduce our rating on Tyson (TSN) from a Buy to a Hold. The shares have about 8% upside to our recently raised price target. From here, we’d like to learn more about its earnings power, which hopefully will be provided in its fiscal second quarter report, before deciding to either raise or sell.



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.



Thanks!

With the war in Ukraine taking center stage, it’s very hard to predict what markets will do. But we don’t need to. All we need to do is keep following proven investing systems.
The only change to the portfolio today is the downgrade of Veeco (VECO) to Hold.


As for the new recommendation, it’s probably a household name for folks in the Chicago area, but it’s a new one for me. And it’s a new stock, as well, having just come public in October.


Details inside.

In the December Issue of Cabot Early Opportunities we try to capitalize on the pullback in stocks with the addition of disruptive players in the electric vehicle (EV) and metaverse arenas as well as an up-and-coming apparel/footwear company. We also take a swing at a dinosaur that may finally start to become relevant again following the spin-out of a dying business segment.

The stock market reached yet another record high on Monday, but it just doesn’t seem the same as earlier records. Investors (and everyone else) is starting to wonder if Covid is now endemic – an inherent component of everyday life. Will cases surge in the winter months and just after holidays instead of going away with a single vaccine cycle? We won’t likely be going back to widespread lockdowns, but previously unfettered socializing and traveling could be restrained, thus suppressing earnings and valuations for many companies.

In the Boston area, we’ve had nearly 8 inches of rain so far this month. This 0.7 inches-per-day average compares to the 0.6 inches-per-day average for a monsoon rainforest, the type found in the tropics along the equator. Sounds a lot like the dampened mood of the stock market. Compared to the crisp 19% return for the average stock in the first half of the year, the 1% return so far this month seems soggy. Part of the reason is that there are too many mixed macro signals – rising inflation but falling bond yields, murkiness over whether the Biden administration’s large spending proposals will be passed, surging Covid cases despite what appeared to be the end of the pandemic, incredibly strong economic and profit growth which may be rolling over. Investors also are stuck in the mud of pre-earnings season, wondering whether high expectations will be exceeded or merely matched and worried that companies missing their estimates will be harshly punished.

The buyers finally stepped up after a brutal first three weeks of April, and suddenly the bull market feels back on again. One week doesn’t make a rally – not if the Fed (which rears its ugly head again this week) has anything to say about it. But for now, the selling has ceased, with an assist from a better-than-expected earnings season. Today’s addition isn’t exciting – it specializes in things like pipes, valves and water meters – but it’s a practical – and potentially quite profitable – way to play America’s geyser of infrastructure spending. It was newly recommended by Mike Cintolo to his Cabot Top Ten Trader readers.

A few weeks ago, we introduced the Gartner Hype Cycle, which traces the path that all tech companies follow in what essentially is an immutable law of tech investing. Currently, tech stocks have passed the Peak of Inflated Expectations and are sliding down to the Trough of Disillusionment. A few will ascend back to prosperity along the “Slope of Enlightenment” if they maintain both their relevance and their competitive edge. But most will lose one or both of these traits and thus continue downward in what could be labeled the “Decline into Oblivion.”

The chart below follows the same pattern as the Tech Hype Cycle chart while it more specifically traces the pattern of revenues and profits. The peak of the Hype Cycle corresponds, of course, to the peak of the Sales cycle in the Maturity Stage. Most tech companies follow the Decline Stage line into oblivion.

So far, our recommended companies have reported strong earnings but the share performances following the reports have generally been sloppy. What’s going on?

Investors, of course, are forward-looking. So, decent trailing results can take a back seat to the incremental changes in near-term prospects. As we note in our discussion about the recent and continued slide in shares of Citigroup (C), investors are assuming that the company not only has no chance of improving its earning power but are also assuming that profits will probably slide backward. Comcast (CMCSA) reported one of the strongest quarters in its history, yet the outlook is for incremental headwinds in its customer count, so the shares slid.

The market is at all-time highs, the Chiefs beat the 49ers in the most recent Super Bowl, and so-called meme stocks are headed to the moon. Is it January 2021 all over again? Sure feels like it.

Yes, GameStop (GME), AMC Entertainment (AMC) and the like are back, with those and a few others nearly tripling this week. The last time that happened, things didn’t end so well for the meme stocks. Or the market. Should it be a similar red flag for the bull market this time around?

In the July Issue of Cabot Early Opportunities I snag two stocks from our Watch List and profile three fresh names that have caught my eye. Officially, we add three of these positions to our portfolio, including a rapid growth software stock, an oil and gas producer with a growing midstream asset base, and a rapidly expanding coffee shop.
Enjoy!

The latest issue of Cabot Marijuana Investor is now available, with my current advice on the twelve stocks in the portfolio, as well as one new addition and profit-taking advice on one of our early investments.

As the fastest-growing industry in America, marijuana presents many exciting investment opportunities.

But I do want to caution you, especially if you’re one of my newer readers; for all the potential, there is also substantial short-term risk in all these stocks, as they tend to be lower-priced and more volatile than our typical recommendations. So take care to understand the risks before you act.

My goal is to make you a successful long-term investor in the sector, and the best way to do that is to get off on the right foot.

The market’s traditional “spooky season” is here, and stocks are dutifully selling off as they normally do the first week of September. The selling could last a few days or a few weeks. But on the other side of it, there will be big buying opportunities. Until then, let’s try and limit the damage, which we do in today’s issue by selling off one underperformer that’s taken a beating after an underwhelming earnings report and buying a deep value consumer staple that’s too oversold. It’s a stock Clif Droke recommended to his Cabot Turnaround Letter audience last week, and we follow suit here today.

Details inside.

Dividend growth is an income investor’s dream. Here are the 10 best dividend-paying stocks for dividend growth investors.

Talk of trade wars continues to dominate stock market news but investors appear increasingly willing to shrug off related concerns. They do in the U.S. at least, where stocks are faring far better than in both the European Union and emerging markets.

The good news about the cannabis sector is that after a year-long decline, the stocks are cheap, and the sector is building a bottom.

The bad news is that we don’t have an uptrend yet.



But I do see a lot of constructive chart patterns, and as fourth-quarter reports are released in the weeks ahead (there’s one tonight), I’m optimistic that buyers will find their way back to the stocks of this great growth industry.



Full details in the issue.



Yours for wealth and wisdom.

After a bumpy first half of the year, there are plenty of undervalued dividend stocks out there. Here are 10 poised for a big second half of 2018.

GoPro (GPRO) has been a disaster since coming public. But GPRO stock is showing some long overdue signs of life. Is it the start of a longer rally?

It’s one step forward and two steps back in this crummy market.
The indexes seem to stage an impressive rally at some point every week. But the S&P 500 has fallen for seven consecutive weeks, the longest such streak since 2001. It came within a whisker of a bear market (down 20% from the high on a closing basis) before the latest temporary rally on Monday.