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While the market was weak this morning, the bull market remains intact, so I continue to recommend that you be heavily invested in stocks that help achieve your investing goals.

Today’s featured stock is a low-risk dividend payer whose products you have probably bought—and probably never knowing the company’s name. More importantly, Tom Hutchinson says it’s cheap.



As for the current portfolio, most of our stocks look good, so the only changes is an upgrade of Five Below (FIVE) to Buy.

The market’s correction is about a month old, and so far it’s been fairly garden variety, with some potholes but not much big-picture abnormal action. And, this week, we’re seeing a very encouraging bounce, with most indexes recouping half of their decline in just two days and some growth stocks already testing new high ground. We’re not out of the woods yet, but we’re holding what we own (some of which act great) and fine-tuning our watch list should the trend turn back up.

Growth stocks have gotten off a bit of a sour start in September, with a couple of leaders cracking near-term support and a few collapsing completely. That tells us the tricky environment remains in effect ... and yet, we don’t think the action is bad at all. Indeed, most growth stocks remain in good shape, and frankly a further pullback should offer up some high-odds entry points.

Tonight, though, we’re standing pat with our 32% cash position after selling one stock earlier this week.

In the July Issue of Cabot Early Opportunities, we take a quick look at earnings expectations for each of our positions. And we dig into five opportunities spanning AI, HVAC services, retail, real estate and quantum computing.

This may just be our most diverse group of stocks ever.

Enjoy!

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

The U.S. presidential election, “only” seventeen months away, is shaping up to follow a predictable script. Investors should keep their personal views and their investing process separate.

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 bull market finally expanded to more than just a select few names last week, with small caps, Chinese stocks and other sectors finally getting some love. It’s a good sign for the rally’s longevity and could be a boon for our diverse portfolio. So today, we add another non-AI, non-tech stock that’s been attracting some overdue buying. It’s a big-name, resilient growth company whose stock consistently outperforms the market – and yet is undervalued at the moment. It’s a recommendation I just shared with my Cabot Value Investor readers, and today it joins our Stock of the Week portfolio.

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

Our letter describes our view that 2022 was a bridge year and that we may need some or all of 2023 to complete the bridge-crossing. We also provide our outlook for the stock market, the economy and the geopolitical environment, with some caveats about forecasting and model use provided by Yogi Berra and George Box.

All-in, we see 2023 as a year with many changes but also a year in which consumers, companies and countries – amazing sources of ingenuity and resolve – work their magic to adapt to whatever curve balls are thrown at them. Our optimism is undaunted.

We also have moved our rating for Arcos Dorados (ARCO) from Hold to 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.

Only three months ago, the financial community, including investors, analysts, economists, commentators and others, despaired that the Fed’s rate tightening program would produce a hard landing. The resulting combination, of higher interest rates and slowing/negative earnings and economic growth, is toxic for stock markets. Not surprisingly, the S&P 500 tumbled 27% from its highs to touch 3,500 in mid-October.



With the turn of the calendar and minimal discouraging economic news, the same financial community is now optimistic that we’re headed for a soft landing, or possibly no landing at all (economic growth remains positive). Worries that the Fed will inexorably keep raising interest rates have been replaced with the view that perhaps only 25 or 50 basis points of further increases are ahead. The outlook previously labeled as “toxic” has been transformed into “supportive” for equities. In the three short weeks since year’s end, the S&P has lifted 5%.

Cannabis stocks have fallen sharply since the beginning of April. The AdvisorShares Pure U.S. Cannabis (MSOS) is down 15.4% since April 1. There are two reasons.

First, investor enthusiasm for stocks overall has waned, creating significant declines across indices. Because cannabis is perceived as a riskier sector, cannabis stocks decline more than most stocks when investors move into risk-off mode.

Second, many analysts and investors had hoped for visible progress on key catalysts by now – chiefly rescheduling and cannabis banking reform. They have been disappointed.

There’s been a lot of bad news in the past couple of weeks, but nothing has changed with the market--it’s still trending down, and the broad market remains on the outs, and today, we started to see the first signs that even the many resilient stocks are coming under the gun. Big picture, we’re continuing to advise a cautious stance with much more cash than stocks and patience as we wait for the bulls to re-take control.


And we do think they can re-take control, possibly sooner than most think: There’s so much negativity and bearishness out there that any spark could ignite a big rally, if not a sustained uptrend. But as always, we have to see it first to act on it, so we’re continuing to stay close to shore--we’re selling one name tonight and placing the rest on Hold.


We spend most of tonight’s issue discussing the overwhelming negativity out there, which is setting the stage for the next advance, as well as diving into a handful of new names to watch, including one cheap cookie-cutter story that looks ready to go if the market can stabilize.

Another event with consequences is the earnings report for recommended name Big Lots (BIG), scheduled for pre-market release on December 1.

Although uncertainty in the market is growing, there are still strong income stocks out there. But we must be careful to find the right ones. A good stock needs to be resilient in a continuing recession, yet able to thrive amidst high inflation, or both, or neither. In this issue, I highlight such a rare bird.


The portfolio is also eliminating a cyclical position and adding a more defensive one. At the same time, we are seizing upon recent strong performance in another stock and selling a call to lock in a high income in this uncertain market.

Cannabis investors continue to await a significant catalyst which may hit inside the next month or two.

I expect Attorney General Pam Bondi to implement President Donald Trump’s executive order to reschedule cannabis in that time frame. That’s my best guess based on analysis from people close to the process. No one knows for sure, however.

The news would spark a sellable rally for traders. Long-term investors should hold through.

Rescheduling means moving cannabis to Schedule III from Schedule I under the Controlled Substances Act. That will save the larger publicly traded cannabis companies tens of millions of dollars each in annual tax expenses. That’s because rescheduling neutralizes an IRS rule that bars the deduction of operating expenses against the sale of Schedule I substances.

Large-cap stocks are starting to show some cracks. But small caps aren’t.

After years of underperformance, small-cap stocks appear to finally be poised for a breakout 2026 thanks to a combination of lower interest rates and soaring earnings. So in this month’s Cabot Value Investor issue, we present a small-cap company that is already coming off a very strong quarter, whose sales and earnings have more than doubled since Covid, but whose shares were overly punished last fall and are just now starting the long climb back. The combination of double-digit earnings growth and a well-below-average valuation makes this small cap ripe for our Buy Low Opportunities Portfolio.

Details inside.

The speed and magnitude of changes in securities prices in the past 5½ months has been breathtaking. A quick recap: S&P500 down 20%, Nasdaq Composite down 31%, dozens of former mega-cap, hyper-growth tech stocks down 75%, investment-grade corporate bond prices down 16%, crude oil up 62% and the U.S. dollar index up 9%.

The stock market’s uptrend finally cracked late last week. Is this the beginning of the official market correction, or a prelude, or just a hiccup?

The financial press is full of chatter about what to do in the current market downturn. Common themes include timing the bottom (which usually includes the opposing suggestions to not time the markets followed by suggestions on how to do it), buying on the dips (highlighting the appeal vs. the danger that this is a secular bear market), and buying stocks that have been beaten down by 50% or more year-to-date. There are other themes, but these are the ones I see most often.

The media, including highly reputable sources like Bloomberg, Barron’s and The Wall Street Journal, have written that “real” interest rates are now positive. As such, they imply that the Fed’s interest rate policy is already restrictive and so interest rates may not need to be raised much more. Our view is that the journalists are mistaken.

The U.S. stock market rebounded on Tuesday, following testimony from Chair Powell at his Senate confirmation hearing. Investors liked what he said, implying that the three anticipated quarter-point rate increases, which could start in March, would likely be enough to quell inflation (along with a hoped-for return to normal supply conditions).

Earnings reports from two recommended companies were mildly encouraging. There was very little news on other recommended companies. We note our recent Sell recommendation that produced a 41% return since our September 2021 Buy recommendation. We also comment on an emerging macro concept useful for value investors.