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More color on our recent sale that generated a 40% gain since September and comments on other recommended stocks.

With all of our stocks now having price targets assigned to them, we thought we’d share with you some of our process behind how we set those price targets.

“Markets are never wrong, only opinions are.” – Jesse Livermore

Few quotes related to investing have stuck with me more than that one.

Jesse Livermore, of course, is an investment legend who, in the early 20^th century, pioneered day trading and who was the basis of the best-selling Edwin Lefevre book, Reminiscences of a Stock Operator – considered by many to be the investing Bible. Many of his words are relevant to today’s market, nearly 85 years after his death. And I think the above quote is as evergreen as any and is important to remember in bull markets like this one.

Renewable energy stocks have never lived up to their considerable promise, having peaked more than 16 years ago. And yet, there’s rarely been a bigger gap between the stocks’ value and the industry’s growth in the wake of the Inflation Reduction Act. Renewable energy projects – solar in particular – have taken off since President Biden signed that bit of eco-friendly legislation, in August 2022. Most solar companies are reporting record revenues these days. But the stocks haven’t followed suit, trading at 2018 levels.

That seems like a pretty extreme divergence between the industry and its companies’ share prices. So in this month’s issue of Cabot Value Investor, we add a solar company that’s capitalizing on the global investment in alternative energy, but is still woefully undervalued, trading at a mere 0.18x record sales.

Details inside.

The markets traded sideways through most of April. But since then, the choppiness has returned—along with worries about the uncertainty regarding the debt ceiling, the expiration of the immigration-limiting legislation, and ongoing debate about the possibility of a recession.

Yet, economically speaking, the trends are still healthy. Manufacturing has held up, employment continues to rise, and job openings are still underutilized (as you can tell if you’ve been in a restaurant lately!).

The election of Donald Trump has altered the trajectory of the economy and the market.

Investors perceive his election will deliver stronger economic growth, primarily through deregulation and tax cuts. Although interest rates spiked higher on the expectation of a stronger economy, the market views the revised prognosis as overwhelmingly bullish, so far.

The new administration will employ drastically different policies that will have a significant effect on different sectors and can’t be ignored. The most obvious sector beneficiary of the new administration is energy.

A huge beneficiary will be natural gas exports. The U.S. has recently become the world’s second-largest exporter of natural gas. Exporters ideally sell cheap American gas overseas where it fetches a much higher price. More production and cheaper domestic prices are ideal for exporters. At the same time, the new administration is likely to encourage as much natural gas exporting as possible.

In this issue, I highlight a company that runs the largest liquid natural gas (LNG) export facility in the country. It is a subsidiary of existing portfolio position Cheniere Energy (LNG), which is up 15% since the election. It pays a huge income and still sells at a reasonable price.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the March 2023 issue.

We discuss how the post-Cold War peace dividend is shifting to a war tax.

We provide updates on earnings and change our rating on Organon (OGN) from Buy to Sell. The company is spending more to generate sales growth even as that growth is becoming more difficult. Our thesis is broken, but fortunately, we exit with only a small (~6%) loss.

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.

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

Capital market conditions have tightened in the past year, making companies that hold excess cash more valuable and less reliant on fickle external financing. Our search for cash-rich companies that have real products and services with proven and enduring demand whose shares are out-of-favor turned up three promising stocks. Several currently recommended Cabot Turnaround Letter names would also make this list.

Our research process involves looking at a large number of possible turnaround ideas. As investing legend Peter Lynch once said, “The person that turns over the most rocks wins the game.” We uncovered six stocks that have both promising turnarounds ahead yet also have discounted share prices.

Stocks began the second half of 2024 exactly the way they behaved for much of the first half: at all-time highs, but with only a couple handfuls of mega-cap tech stocks and artificial intelligence plays doing most of the heavy lifting. It remains both a bull market and a stock picker’s market, so today we pick a stock that’s been attracting a lot of institutional attention of late. It’s a tech stock, but it’s no mega-cap; it’s a small-cap, space-related title that Tyler Laundon recommended to his Cabot Early Opportunities audience last month. Its shares have exactly doubled this year and yet still trade 40% below their 2021 highs.

Details inside.

After a productive but top-heavy first half of the year in the market, we set our sights on the back half of the year, and the potentially shifting winds from mega-cap tech and artificial intelligence into the many other unloved sectors. So to kick off the second half of 2024, today we add a retailer that’s bucking the trend of slowing U.S. retail sales due to its discount offerings – which plays well in an inflationary environment. It’s a new pick from Mike Cintolo in his Cabot Top Ten Trader advisory.

Details inside.

Consumer cyclicals, perhaps more than any other sector, are at the nexus of what we look for in Cabot Value Investor these days: solid growth, but at value prices. And today we add a high-profile stock from one of the most resilient subsectors of an otherwise sluggish retail space. Its shares were overly beaten down in the weeks since underwhelming May retail sales prompted a flash mini-selloff in all things retail. But this remarkably reliable, steady-as-she-goes growth company didn’t deserve it, and shares are now trading at a rare discount.

Details inside.

Current Market Outlook


It’s been four weeks since the August 24 panic low and the market has done a decent job hanging in there—all of the major indexes probed higher into last week before selling off on Friday. Currently, the major trends of the market remain down, so we’re staying defensive. However, the next few days will be telling—if the indexes can advance from here, we could receive an intermediate-term buy signal late this week, which will have us loosening the wallet a bit. But if the sellers show up again, all bets are off. For now, it’s best not to anticipate anything; you should continue to hold plenty of cash and keep new buys small. We’ll let you know on Friday if the outlook has changed.

In the meantime, we are encouraged by the action of many individual growth stocks, which are showing lots of relative strength even as the market struggles. Our Top Pick this week is Activision Blizzard (ATVI), which is pushing higher on the back of some very good product news. Consider nibbling on dips.

Stock Name	Price	Buy Range	Loss Limit
Tyler Technologies (TYL)	0.00	145-151	132-134
T-Mobile US (TMUS)	0.00	41-42.5	38-39
Sucampo Pharmaceuticals (SCMP)	0.00	26-28	23.5-24
Pandora Media Inc. (P)	0.00	19-21	17.5-18
Masco (MAS)	0.00	26-27	24.5-25
Expedia Group (EXPE)	0.00	120-125	110-112
Dexcom (DXCM)	421.36	98-100	88-90
Activision Blizzard, Inc. (ATVI)	0.00	29-31	26.5-27
Athenahealth (ATHN)	0.00	138-140	130-132
Adaptive Biotechnologies Corporation (ADPT)	39.41	110-114	98-99

Current Market Outlook


Once again, nothing has changed in the market’s bigger picture health—the intermediate- and longer-term trends of all the major indexes are still up (though small-cap indexes are now testing their 50-day lines) and the broad market is healthy, with few stocks breaking down and even fewer hitting new lows. That said, we’re now entering the sixth week of no progress in most indexes, so it’s clear that the short-term trend is neutral, which has capped most stocks, too. We’re still overall optimistic, but we are going to nudge down our Market Monitor by one notch (to level 7 out of 10), so be sure to honor your stops, and be selective on the buy side or take smaller than normal positions until the bulls return. On the flip side, you should continue to give your strong stocks a chance to resume their rally.

The good news is that there are still many strong charts despite the market’s pause. Our Top Pick this week is Netflix (NFLX), which reacted well to earnings last week and looks like a big-cap leader if the market gets going from here.

Stock Name	Price	Buy Range	Loss Limit
ASML Holding (ASML)	350.01	117-121	109-111
Adient (ADNT)	0.00	60-63	55-56
Alcoa (AA)	0.00	34-36	31-32
Charter Communications (CHTR)	0.00	295-305	278-283
Hancock Holding (HBHC)	0.00	43.5-46	40-41.5
Netflix, Inc. (NFLX)	423.92	133.5-138	122-125
Southern Copper (SCCO)	0.00	34.5-36	32-33
T-Mobile US (TMUS)	0.00	57-59	53-54
TD Ameritrade (AMTD)	0.00	44.5-46	41-42.5
United Rentals, Inc. (URI)	0.00	107-110	100-102

Current Market Outlook


We could recap all of the market’s ups and downs of the past few days, or couple of weeks … or past few months, for that matter. But the bottom line is that, right now, the main trend of the major indexes is sideways until proven otherwise. As for individual stocks and sectors, it’s all about being selective—there are pockets of strength, but stock selection and timing your buys is important in this choppy environment. We’re knocking our Market Monitor down one more notch, not because we’re feeling terribly bearish but more to reflect the overall market’s neutral position.


The good news is that Top Ten automatically hones in on the market’s strongest stocks, and despite the usual batch of earnings potholes, most are still in good shape. Our Top Pick this week is SunEdison (SUNE), which is leading the new recovery in solar stocks thanks to its huge pipeline and yieldco strategy.

Stock Name	Price	Buy Range	Loss Limit
XPO Logistics (XPO)	0.00	47-50	43-44
SunEdison (SUNE)	0.00	27-28.5	24.5-25
Qunar (QUNR)	0.00	48-50	44-46
Norwegian Cruise Lines (NCLH)	0.00	53-55	50-51
Martin Marietta Materials (MLM)	261.52	150-153	141-142
Global Payments Inc. (GPN)	0.00	100-102	94-95
Tableau Software (DATA)	126.42	107-110	97-98
Carter’s (CRI)	0.00	97.5-100.5	94-95
Celanese (CE)	0.00	65.5-67.5	62-63
AMAG Pharm. (AMAG)	0.00	58-61	53-54

We are entering the heart of earnings season. So far, the results are unimpressive. The entire retail sector is on alert after Walmart’s pre-announcement about weaker earnings due to their accelerating efforts to offload surplus inventory.

Current Market Outlook


The market remains in great shape with all the major indexes in gear on the upside, a ton of stocks and sectors acting well and a general lack of selling pressure even after the recent run. Surprisingly, we’re still seeing hesitation among investors in terms of money flows, which, from a contrary point of view, is bullish. The next big test for the market and (especially) individual stocks is earnings season—how leading stocks respond (both those that have been running for a while, and new leaders that emerged in September) will have a big say on the market’s short-term future. But given the overall evidence, the odds continue to favor higher prices down the road, so any reasonable dips should be viewed as buying opportunities.

This week’s list is another good-looking mix of growth and industrial stocks with strong charts. Our Top Pick is Adient (ADNT), which owns about one-third of the car seat market and has big earnings, a cheap valuation and a tidy pullback after a powerful September breakout. Keep new positions small ahead of earnings.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	0.00	82-85	75-77
Atlassian (TEAM)	182.16	38-40	35.5-37
Baidu (BIDU)	0.00	257-267	236-240
CF Industries (CF)	45.23	35-37	32-33
DXC Technology (DXC)	0.00	88.5-91.5	83-84
LPL Financial Holdings (LPLA)	85.22	51-53	47-48.5
Monolithic Power (MPWR)	0.00	109-113	102-104
Sherwin-Williams (SHW)	526.09	370-380	350-355
Thor Industries (THO)	104.76	124-128	114-116
Vishay (VSH)	0.00	20-21	18.5-19

Current Market Outlook


The answer to the question above is simple: Go up! And that’s what all of the major indexes have been doing in recent days, knocking out all-time highs amid a vacuum of selling pressure. Short-term, there are some signs of complacency, and of course earnings season is coming up, which always adds volatility to the mix. Both of those factors probably mean you shouldn’t buy stocks with both fists. But the big picture is clear: It’s a bull market, and while the below-the-surface action continues to show some rotation, the odds favor higher prices ahead. You should be holding your top performers and looking to grab shares of new leaders as opportunities arise.

This week’s list has a nice mix of growth, “old world,” big and small, reflecting the broad strength in the market. Our Top Pick today is HubSpot (HUBS), which is a bit thin and jumpy, but has a great fundamental story and recently broke out on excellent volume.

Stock Name	Price	Buy Range	Loss Limit
BeiGene (BGNE)	170.20	106-112	95-98
Five Below (FIVE)	134.58	54-57	50-52
HubSpot (HUBS)	582.89	82-85	75.5-77
LGI Homes (LGIH)	86.04	49-52	45.5-47.5
MyoKardia (MYOK)	108.56	39-42	34-36
RH Inc. (RH)	252.93	69-73	64-67
ServiceNow (NOW)	341.86	117-122	109-112
Tronox (TROX)	0.00	23.5-25.5	21.5-22.5
United Rentals, Inc. (URI)	0.00	136-140	126-128
Yelp (YELP)	41.30	44-46	40-41

Starting next week, you will receive your Cabot Undervalued Stocks Advisor issues and updates on Tuesdays instead of Wednesdays. So look for next week’s update in your email inbox a day earlier, on Tuesday, December 13.

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

While we are not market or economic forecasters, we try to make sense of what is going on. As we’ve commented on in earlier notes, we may be seeing the return of the long-forgotten inventory cycle. If we’re right, this is the time to buy over-discounted and reasonably healthy cyclicals like the ones on our recommended list.

Our letter comments on Big Lots (BIG) earnings, our price target reduction to 25, and why it remains a Hold rather than a Sell.

Current Market Outlook


The Nasdaq and leading growth stocks were whacked again last week, extending the correction in that group to just over three weeks. At this point, the major trend is still up, but intermediate-term, the onus is on the bulls, as many stocks (and the Nasdaq itself) have fallen toward key support—a couple of big selloffs from here would be a red flag, especially for names that have had big runs during the past year, though a strong sign of support could arrest the decline. Right now, we remain mostly bullish because many stocks are still in good shape, especially early-stage growth stocks that are trading resiliently and new leadership is emerging as money rotates into other areas.

This week’s list is a mix of both categories. Our Top Pick this week is Citigroup (C), which, despite its huge size, has great potential thanks to industry trends and recent news flow. The stock was the first big bank to leap to new highs recently, too.

Stock Name	Price	Buy Range	Loss Limit
Carvana (CVNA)	82.90	18-20	15-16.5
Citigroup Inc. (C)	0.00	66-68	63-64
Exelixis (EXEL)	27.35	23.5-25	21-21.5
iRhythm Technologies (IRTC)	51.15	41-43	37-38
Nintendo Co., Ltd. (NTDOY)	0.00	39.5-41.5	36-37
Packaging Corp (PKG)	0.00	108-111	101-103
Square, Inc. (SQ)	91.04	22-23.5	20-21
Teladoc, Inc. (TDOC)	127.95	32.5-34	29.5-31
Wayfair (W)	167.03	72-75	65-67
Winnebago (WGO)	48.56	34-35.5	31-32

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