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The recent (and ongoing?) tech momentum reversal appears to be due to a variety of concerns ranging from doubt about valuations, worries about the pace of the economy’s recovery, the lack of another stimulus package and slowing growth in the Federal Reserve’s asset purchases.

By far the worst performing sector in recent years has been the energy sector. From its peak in mid-year 2014 when oil prices reached over $100/barrel to its current state of complete disarray, the S&P Energy Sector index has collapsed 63%. For comparison, the broad S&P 500 index has gained 65% and even the often-maligned Materials Sector index has risen by 25%.

Earnings season is upon us again. This quarterly ritual, when all public companies report their most recent results, is when investors can see hard facts about revenues, profits and balance sheets, as well as hear softer commentary from management about their explanations, outlook and plans.

One common belief shared by Cathy Wood and the Cabot Undervalued Stocks Advisor. We comment on the impressive recovery of one of our recommendations as they reported strong fourth-quarter earnings, as well as updates on other recommended stocks.

The Fed is facing a fascinating dilemma. It needs to raise interest rates to address high inflation that seems to be persistent – especially as sharply higher housing prices (about 40% of the Consumer Price Index) work their way into the official inflation numbers. Yet, if the Fed raises rates too high or too fast, it risks a sharp decline in the stock market, a recession and higher financing costs for the federal government.

Current Market Outlook


After two weeks of dreadful action, the perfect storm crashed down on Wall Street this morning, with imploding oil prices and more virus/economic fears causing a panic, though the damage was limited after the open. Short-term, today brought many truly extreme readings (more than 2,800 stocks hit new lows on the NYSE and Nasdaq combined!), so short-term, some sort of bounce or relief rally is possible (even probable). That said, (a) the nature of this decline has been breaking some rules, so there are no sure things, and (b) our focus remains on the intermediate-term, where the trends of just about everything are pointed down. Thus, while we’re keeping our eyes open, we’re focusing mostly on capital preservation and hunting for the potential big winners for the next uptrend.

This week’s list is a great place to start, whether you’re building a watch list or looking to nibble. Our Top Pick is Vipshop (VIPS), which is one of many Chinese stocks that is acting very well.

Stock Name	Price	Buy Range	Loss Limit
eHealth (EHTH)	122.74	125-133	105-108
Etsy (ETSY)	112.97	54.5-57	48.5-50.5
Everbridge (EVBG)	107.90	102-107	91-93
GSX Techedu (GSX)	97.59	38-41	32-34
iRhythm Technologies (IRTC)	51.15	86-89	78-80
Newmont Mining (NEM)	57.31	46-48	42.5-44
Teladoc, Inc. (TDOC)	127.95	123-130	105-108
Tradeweb Markets (TW)	51.44	45.5-47	42-43
Vipshop Holdings (VIPS)	14.25	16-17.5	13-14
ZTO Express (ZTO)	28.84	25.5-26.5	23-23.5

There remain some yellow flags in the market, but when you look at the big picture, there remains far more good than bad. It’s vital to remain flexible of course, as in 2020, things have changed on a dime a couple of times, but with most of the evidence still positive, we remain mostly bullish.

Current Market Outlook


Last week was a microcosm of 2015 as a whole, with plenty of ups and downs, intraday reversals, sector rotation … and not much overall progress for the major indexes. That said, we have seen more and more leading stocks hit the skids during the past two weeks, which is a yellow flag; there are still plenty that remain in good shape, but it’s obvious that picking your spots remains vital. We’ll keep our Market Monitor in neutral territory, waiting for a decisive show of strength or weakness before turning bullish or bearish.

This week’s list has something for everyone—airlines, medical, construction and retail. Our Top Pick is Wayfair (W), a newer stock that blasted out of a base on earnings last week as growth accelerated. Given the market, keep new positions small and try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Wayfair (W)	167.03	46-52	39-42
Vulcan Materials Company (VMC)	137.10	96-99	89-90
Sabre Corp. (SABR)	0.00	28-29	24-25
Molina Healthcare (MOH)	0.00	78-80	72-73
Fortune Brands Home & Security (FBHS)	81.02	49-52	42-43
Expedia Group (EXPE)	0.00	118-123	112-113
Envision Healthcare (EVHC)	0.00	42-44.5	40-41
D. R. Horton (DHI)	66.55	30-31.5	27-27.5
AmSurg (AMSG)	0.00	82-84.5	75-77
Allegiant Travel (ALGT)	170.65	228-236	212-214

The vaccine is changing everything. Stocks that had been left for dead by the market recovery are springing back to life and leading the market higher.

One area of opportunity ahead of the New Year is in banks stocks. As a cyclical sector, banks took it on the chin during the pandemic. They crashed during the bear market and have lagged the recovery. But they are rising fast and have great momentum ahead of what looks to be a promising year for the sector.



In this issue, I highlight one of the very best and most profitable banks in the country. It still sells at a great value, pays one of the highest dividends in the industry and now has solid upward momentum.

The market remains super strong, and we’re pleased to see many growth stocks that rested during December break out to new highs so far this year. Shorter-term, the lack of good entry points among stocks we’re watching is a reason we’re still holding a chunk of cash on the sideline. But we remain very bullish longer-term and think pullbacks and/or shakeouts will provide some solid entry points.

Tonight, we’re standing pat once again with our collection of stocks, most of which act great. In the issue, we do write about one big-cap name that we think has regained its status as a liquid leader (Alibaba), and it’s probably the top stock on our watch list today. Elsewhere we do highlight some other ideas, and as always, share our latest thoughts on all the stocks we own.

Current Market Outlook


The big-cap indexes remain in rarified air, as they continue to levitate and the sellers refuse to put up a fight. Even more encouraging is that many stocks that took the prior few weeks off (generally building tight ranges) have resumed their advances, a good sign. That said, the upmove has become a bit more selective (small- and mid-cap indexes haven’t participated lately) and numerous yellow flags among secondary indicators are still in place. All of that is a longwinded way of saying that not much has really changed—it’s a strong bull market that should go higher down the road, but the risk of near-term potholes is elevated. Thus, you should remain bullish and continue to hold most of your strong performers, but picking your spots on the buy side makes sense as well.

This week’s list includes a bunch of names that have shown excellent strength after resting for a few weeks—or in some cases, months. Our Top Pick is blue chip Salesforce.com (CRM), which has accelerated to new highs after a 15 months of base-building.

Stock Name	Price	Buy Range	Loss Limit
Aecom Technology (ACM)	0.00	45.5-47	42-43
Axsome Therapeutics (AXSM)	0.00	83-88	71-75
Dexcom (DXCM)	421.36	225-235	202-206
Dynatrace (DT)	36.59	27.5-29	24-25
Fortinet Inc. (FTNT)	137.53	112-115	103-105
Guess (GES)	0.00	21-22	19-19.5
JD.com (JD)	39.58	38-39.5	34.5-35.5
Qorvo (QRVO)	129.47	112-116	101-102
Salesforce.com (CRM)	0.00	178-182	164-167
Western Digital Corporation (WDC)	0.00	65-67	59-60

It was only a month ago when we wrote about how the seemingly out-of-the-blue turmoil in the banking sector, driven by the sharp increase in interest rates, could lead to a major financial accident that traumatizes the world’s capital markets. Part II recognizes an ever-expanding roster to include additional percolating problems.

In the April issue of Cabot Early Opportunities, we take a quick look at what to expect from portfolio positions set to report in the coming weeks and dive into fresh opportunities that are shaping up nicely now.

At the top of the buy list is a software name we just added to our Watch List last month. We also take a position in a cosmetics stock that looks superb, pull back the curtain on a rising biotech star, tour an enterprise software name based in Canada and revisit a MedTech stock that’s finally getting some respect from the Centers for Medicare and Medicaid Services (CMS).

Enjoy!

Uh oh. The rally is in trouble.

The market sort of wobbled into January after a rough December. It started good but things turned a little ugly last week after a better-than-expected jobs report and worries about sticky inflation.

The market is in a tough spot, and has been for about a month and a half. It doesn’t mean the bull market is on borrowed time – remember, we had a much deeper correction in July and August, only to have stocks roar to all-time highs by Labor Day – but it does make for a tricky environment in the short term. A news-heavy week (inflation data, the start of earnings season, two big industry conferences) could potentially help turn the tide. But right now, the bears are in control. One subsector that has mostly avoided the recent selling is the airlines. So today, we add one of the stronger airline stocks, courtesy of Cabot Turnaround Letter editor Clif Droke.

Details inside.

A week ago, the market was teetering on the brink. But it teetered in the right direction.

The benchmark ten-year Treasury rate had soared above 4.8%, dangerously close to the late 2023 peak of about 5%. December CPI inflation was reported last week. A bad number could have thrust the 10-year rate above the peak, almost certainly prompting a selloff in stocks. But Wall Street was happy with the number and things went the other way.

Something called DeepSeek out of China helped bring the rally in U.S. stocks to a screeching halt to start the week. Artificial intelligence stocks, in particular, are taking it on the chin, as it appears the Chinese firm may have found a cheaper, just-as-advanced alternative that’s rattling the likes of even Nvidia (NVDA). Chances are, the selling is overdone. But it’s a good time to look for overseas alternatives. And today, we add a Dutch company that plays an essential role in global travel – and one that’s taking advantage of the many missteps of its larger U.S. rival. It’s a stock that was first recommended by Carl Delfeld in Cabot Explorer.

Details inside.

Tariff fears have eased, or are at least on extended hold, and the market feels jubilant for the first time in months. Is it the start of an extended rally that could get us back to new highs? Probably too early to tell. But it’s been a boon for our portfolio, led by Tesla (TSLA), which is up 14% in the last week. Today we add an undervalued travel stock to the portfolio that’s a household name that got hammered during Covid but has come out the other side with flying colors – and yet shares are still playing catch-up. It’s a stock I recommended to my Cabot Value Investor audience earlier this month.

Details inside.

The first quarter was kind to our stocks, as they rose, on average, +8.8%, while the broad market fell. We comment on the sources of the gains and any recent news on our recommended stocks.

The market has spent the past six weeks etching a volatile, tedious bottom, with numerous secondary measures offering encouragement, the biggest of which is an ongoing positive divergence in the number of stocks hitting new lows, which tells us fewer stocks are participating in the downside. That’s good to see, but what we really need to see now is real, sustained buying pressure--so far, that hasn’t been the case, so we’re remaining generally defensive.