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The resilient summer market got a cold slap in the face last week. There was a big recovery on Monday. But the market still looks wobblier than it did a week ago.

One day’s headlines seemed to undo the positive market narrative.

Today’s selection is a little-known small-cap stock with a revolutionary process that may change one of the world’s most noxious industrial processes. Plus, I think the stock is at a good entry point here.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the November 2020 issue.

We briefly discuss the soon-to-evaporate election cloud, the merits of holding value stocks when growth/momentum stocks tumble, and highlight one of our portfolio stocks that had some earnings issues along with several others that reported strong earnings that lifted their share prices meaningfully.



Earnings season is in full swing. Six portfolio companies report later this week. We encourage subscribers to visit the reporting companies’ websites to review their earnings-related slide presentations and listen to the post-earnings conference call. These are all available to the public under the “Investor Relations” tab. Sometimes what portfolio companies actually do can seem murky – a quick visit to their website can help clarify, and (at least to me, a certified investment geek) provide some fascinating reading.



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 market remains in fine health, with all major indexes in strong uptrends and no signs of divergence that typically precede major market tops. Additionally, numerous market-timing indicators tell us the market is likely to be higher months from now. However, as all investors know, corrections will occur, and it’s looking increasingly likely that one is due. So, you should be prepared. This might mean taking profits in stocks that are extended—as many are now. Or it just might mean setting some stops, so that winners don’t turn into losers. In the meantime, there are plenty of fine-looking stocks to buy, and today I’m leaning toward an Asian company that happens to have my favorite fundamental characteristic—accelerating revenue growth.

Details in the issue.

The market’s main trends remain up, and thus I remain bullish. But there are some serious crosscurrents out there making investing a bit more challenging.

In this update, we take a look at recent news and earnings reports from our portfolio stocks, and raise the ratings on Boise Cascade (BCC), Delta Air Lines (DAL) and D.R. Horton (DHI) to Buy.

It’s been a sideways summer market. Perhaps earnings will change that. But summer markets have a tendency to do whatever they were doing before investors stopped paying attention in the dog days of August.

In this issue I highlight a high-paying REIT that has been bucking the trend and moving higher in this market. It presents a timely buying opportunity that can create a call writing opportunity in a short amount of time.



Few income stocks have had consistent upward momentum in this market, but those that do generally fetch higher call premiums. The target buy is a fantastic REIT that pays a high dividend and continues to move higher. It should provide a great income opportunity in an otherwise lackluster summer market.

It looks like this relentless bull market is finally stalling out. The market isn’t correcting, or really selling off in any substantial way. It has just stopped moving higher, for now. Given the returns in the past year and recent months, the market had to take a break. That pace couldn’t last.

Stock prices may be stuck in mud for the time being, but there are some fantastic income opportunities out there. Many high-dividend stocks are still well below pre-pandemic prices and offer some of the highest yields in a decade. In this month’s issue I highlight a phenomenal stock with a sky-high yield and a price that’s trending higher.

The S&P 500 and the Nasdaq just made new all-time highs. Strong earnings and a booming economy are outweighing concerns about the delta variant, the Chinese slowdown, inflation and a Fed tapering of bond purchases.

It’s difficult to say what narrative will be dominant after the summer. The cyclical slump could gain traction or turn around. Much will depend on the headlines, which are unpredictable. While I like the way the current portfolio is positioned, it needs more stocks with momentum that generate high call premiums.



In this issue I highlight for purchase one of the very best financial stocks on the market. Prospects are dazzling over the rest of this year. But the stock is also moving right now. It should offer a quick opportunity to ring the income register with a covered call.

The nature of this newsletter is that 90% of our focus is centered on finding early-stage opportunities and vetting them. But to have investing success – in any type of stocks – over the long haul we must follow some basic portfolio management strategies.

This month I’m laying out five simple tips that you should follow when investing in the stock I feature in these pages. There is nothing that’s super innovative or worth discussing at a cocktail party here. No hedging or options trading techniques. Just solid, basic, common sense tips that will help you reduce risk, increase your probability of success, and sleep better at night.

With the market down big today, it’s possible that the growth stock correction has done enough damage—but until we see real strength, it’s better to adjust to the trend—and that means going with a value stock today—an old technology name that you’ll recognize. As for our current holdings, there is only one change, a downgrade of one stock, Broadcom (AVGO), to hold.

What a difference a week makes! Since our last issue, stocks have recovered from their worst trading day since March to reach new all-time highs. So, the bull market remains very much intact, though some growth stocks continue to wobble. Fortunately, today’s featured stock combines both elements of growth and value – and unlike many traditional growth stocks right now, it’s hitting two-year highs.

Details inside.



Lastly, I hope you’ll join me for the 9th Annual Smarter Investing, Greater Profits Online Conference, August 17-19. We have an incredible lineup of experts ready to share their best picks.

The market’s main trend remains up, and thus I continue to recommend that you be heavily invested.

At the same time, it’s important (as ever) to monitor your individual stocks and prune any from your portfolio that no longer deserve to be there. In our portfolio, Berkeley Lights (BLI) is being pruned this week, for a small loss.



As for today’s recommendation, it’s a fast-growing consumer streaming service that came public in 2018 and has hit new highs recently—and you may be familiar with it.

With two strong weeks of action behind us, the short-term trend of markets is once again positive, and thus I am happy to once again recommend that you be heavily invested in a diversified group of stocks that meet your investing needs.

Today’s recommendation is a repeat; we sold the stock in March for a nice 30% profit, and now we’re going to try again.



As for selling, there is one recommendation, a short-term sell of ConocoPhillips (COP), which has been unusually strong. But if you want, and it suits your style, you can hold.



Details inside.

The market’s main trend remains up, and thus I continue to recommend that you be heavily invested.

At the same time, it’s important (as ever) to monitor your individual stocks and prune any from your portfolio that no longer deserve to be there. In our portfolio, there are no stocks that fall into that category this week.



But the market is pricey. Stocks are extended. So today’s recommendation is a low-risk dividend-payer with solid growth prospects as the world transitions to a world of clean energy.



Details inside.

A few weeks ago I asked the question: “Why are gun stocks strong?” The first reason is that many Americans fear the president and his associates will soon make guns more difficult to buy, so they’re buying them now. The second reason is fear of burglary and robbery, and the other crimes that tend to increase during recessionary times. I followed that with profiles of the three top-performing stocks in the sector, Sturm, Ruger (RGR) and Smith & Wesson (SWHC), who make guns, and Cabela’s (CAB), who sells them to the public. In the three weeks since then, all three stocks have done very well. Sturm, Ruger is up 13%, Smith & Wesson is up 10% and Cabela’s is up 18%.