Search

Current Market Outlook


There’s little question the overall market environment remains bullish—the intermediate- and longer-term trends are up, most stocks and sectors are in the same boat and we’re spotting more set-ups (either pullbacks or longer bases) out there. Short-term, though, nothing would surprise us—most major indexes haven’t made any progress since mid-December, we’re entering the thick of earnings season and some sentiment measures have gotten extended, indicating investor complacency. We’re not advising any drastic change in stance; our Market Monitor remains in bullish territory at a level 8 out of 10, and we’re looking to latch on to any new leadership that lifts off. But just be sure to have your plan in place, both on the buy side and sell side, as earnings season revs up.

This week’s list is a mixed bag and includes a few stocks that are reporting earnings within a couple of weeks. Our Top Pick is Coherent (COHR), a little-known laser company that’s benefiting from an uptick in OLED demand and from a major acquisition that’s just closed. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Alaska Air Group (ALK)	0.00	90.5-93.5	84-85.5
Charles Schwab (SCHW)	0.00	39.5-41	36.5-37.5
Coherent, Inc. (COHR)	0.00	138-145	128-130
Glaukos Corp. (GKOS)	67.84	37.5-39.5	35-36
HealthEquity, Inc. (HQY)	70.70	45-48	40-42
Incyte Corporation (INCY)	76.98	112.5-118	102-104
MSC Industrial (MSM)	0.00	95-98	91-89
Rio Tinto plc (RIO)	57.05	40-42	37-38
Tesaro (TSRO)	0.00	148-153	134-137
Univar (UNVR)	0.00	27-28.5	25-26

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the February 2021 issue.

This month we look at energy pipeline stocks. These companies are heavily out of favor, yet a secular shift in their strategic priorities may finally restore their appeal. We list five that look attractive.



We also explore some bargains in the United Kingdom. This island nation is dually challenged by Brexit and the pandemic. We highlight seven stocks that have company-specific turnarounds that look promising.



Our feature recommendation is Viatris (VTRS). Created through the recent merger of Mylan and Pfizer’s Upjohn division, this company is now one of the world’s largest generic pharmaceutical manufacturers. Viatris should generate stable revenues and solid free cash flow, but investor skepticism is high. With the shares trading at a low 4.3x earnings, the step-up in leadership quality and transparency, and an attractive 5.2% dividend yield, the shares look poised for considerable gains.



We also include comments on recent price target and ratings changes, including our earlier sell recommendation on DuPont.



Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your 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.

Current Market Outlook


The market bounced back nicely last week, though the major indexes are still in no-man’s land, sitting in the middle of their two-month ranges, and with many stocks still hovering just south of new highs as earnings season gets underway. We have seen a couple of rays of light (growth stocks are showing a hint of outperformance this month, which is a good thing), but overall, the environment remains on the edge—decisive upmoves by the indexes and breakouts from leading stocks would be bullish, while a move below support and a bunch of downside earnings gaps would be bearish. For now, we’re keeping our Market Monitor neutral, but we’ll let you know if we see a sustained trend getting underway.

This week’s list contains a couple of recent earnings winners, as well as a couple of others that shot to new highs on big volume last week. Because of the market environment, our Top Pick will be a slower, but surer, play—Starbucks (SBUX) isn’t going to double, but it’s just the type of mega-cap name that institutions can pile into following a great quarterly report.

Stock Name	Price	Buy Range	Loss Limit
Zebra Technologies (ZBRA)	154.94	81-84	75-76
WisdomTree (WETF)	0.00	17-18	15.5-16.5
Ulta Beauty (ULTA)	331.95	132-137	122-124
United Continental Holdings (UAL)	96.76	68-71.5	61-62
Starbucks (SBUX)	64.49	85-88	77-78
Royal Gold, Inc. (RGLD)	129.66	72-74	65-67
Janus Capital (JNS)	0.00	17-18	14.5-15
Dexcom (DXCM)	421.36	58-61	54-55
Dollar Tree (DLTR)	0.00	68.5-70.5	64-65
Agrium (AGU)	0.00	101-105	94-95

Nancy Zambell, Editor-In-Chief for Financial Freedom Federation and chief analyst of Wall Street’s Best Digest and Wall Street’s Best Stocks, speaks about President Biden’s American Jobs Plan impacts on the U.S. infrastructure and economy and using those impacts to enjoy investment gains.

Current Market Outlook


During the past two-plus weeks, we’ve seen the Nasdaq and most leading growth stocks lag most other indexes, and things came to a head today, with the sellers unloading on many of the market’s biggest winners this year. As for the overall market, there are plenty of areas of strength as money rotates into both turnaround situations and some growth-oriented ones, too. So what should you do? For the stocks you own, follow your plan and honor your stops; it’s OK to take a couple of partial profits, too, if you are holding some long-time winners. As for new buying, you should focus on areas that are working and stocks that have shown good-volume buying recently. We’re moving our Market Monitor back down to a level 7 tonight.

This week’s list has many such possibilities, including a few with solid stories. Our Top Pick is Guess? (GES), which looks like a solid turnaround story as it’s seeing excellent growth overseas.

Stock Name	Price	Buy Range	Loss Limit
Alnylam Pharmaceuticals (ALNY)	143.58	107-113	97-99
Blue Buffalo Pet Products (BUFF)	0.00	26.5-27.5	24.5-25.5
Guess (GES)	0.00	15.6-16.4	14.2-14.8
Juno Therapeutics (JUNO)	0.00	40.5-44	35-37.5
Lending Tree (TREE)	411.51	230-240	215-220
Navistar International (NAV)	0.00	38-40	35-37
RPC Inc. (RES)	0.00	22.5-23.5	20.5-21.5
Sociedad Quimica (SQM)	0.00	51-54	46-48
Ultra Clean Holdings, Inc. (UCTT)	0.00	26.5-28.5	23.5-24.5
Weibo (WB)	98.16	94-97	85-87

Current Market Outlook


The market’s gradual improvement since mid-August continued last week, with the intermediate-term trend of the major indexes turning back up and individual stocks (including both leading growth stocks, as well as many sectors bouncing strongly off prolonged corrections) acting well. We’ve even seen an impressive rebound in the broad market, with the number of stocks hitting new lows drying up drastically. We can’t say the major indexes are incredibly powerful, as many are at or just above their prior highs, but overall, the most bullish thing a market can do is go up, and that’s what we’re seeing. We’ll push our Market Monitor up another notch this week to a level 8 (out of 10) and will continue to put money to work as the evidence improves.

This week’s list has a bunch of strong charts from a variety of industries, including three chip names as that sector reasserts itself. For our Top Pick, we’ll keep it simple and go with one of the market’s liquid leaders—Nvidia (NVDA) has exploded out of a tight base on big volume over the past two days. You could start a position here or on dips.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	0.00	76-79	71-73
Allegheny Technologies (ATI)	27.78	21.5-22.5	19-19.5
Bitauto Holdings (BITA)	0.00	42-45	36.5-38.5
Celgene (CELG)	0.00	139-143	131-133
Lear Corp. (LEA)	0.00	160-166	149-152
Micron Technology, Inc. (MU)	43.31	33-35	30.5-31.5
NVIDIA Corporation (NVDA)	242.42	177-188	164-170
ON Semiconductor (ON)	24.07	16.7-17.4	15.2-16.
Square, Inc. (SQ)	91.04	27-28.5	24.5-25.5
Terex (TEX)	0.00	41.5-43.5	37.5-39

Current Market Outlook


Leading stocks stabilized somewhat during the second half of last week, but we’re still seeing plenty of potholes (mostly on earnings reports) and a bunch of rotation out of fast-growing names and into more cyclical, defensive areas. That’s not to say all growth stocks look terrible—we’re still seeing a good number of positive earnings gaps, including a few in today’s issue—but there remain a bunch of crosscurrents on a day-to-day basis, making it difficult to latch onto top performers. As for the overall market, it’s in solid shape, with the intermediate-term trend tilted up. All in all, we don’t advise hiding in the closet, but it’s important to hold some cash and honor your stops, and on the buy side, to pick your entry points and focus on names that have shown recent, powerful buying.

This week’s Top Ten has a diverse mix of stocks, and happily, it includes a good number of stocks with solid growth stories. Our Top Pick is Paycom Software (PAYC), which staged a fantastic earnings gap (and follow-through) last week.

Stock Name	Price	Buy Range	Loss Limit
BJs Wholesale (BJ)	36.69	24.5-26	22-22.5
CarGurus (CARG)	41.58	42-45	38-40
Chart Industries (GTLS)	72.05	73.5-77	66-68
Greenbrier (GBX)	57.73	56.5-58.5	52-53
Illumina Inc. (ILMN)	289.74	320-330	295-302
Ingevity Corp. (NGVT)	99.98	96-100	87-90
Neurocrine Biosciences (NBIX)	123.40	110-114	100-102
Paycom Software (PAYC)	0.00	127-133	114-117
SodaStream (SODA)	142.91	111-116	98-101
Zendesk (ZEN)	82.19	59-62	53.5-55.5

Current Market Outlook


Turkey’s currency crisis is the latest of what seems like a never-ending string of worries this year (volatility implosions, trade wars, rate hikes, etc.) that have hit the market to some extent. That said, we’re relatively encouraged by what we’ve seen during the past couple of weeks, with the major indexes holding and bouncing off important support, some new leadership emerging on earnings and other leading names forming solid bases. It’s still a tricky, narrow and choppy environment, which is a good reason to pick your spots, honor your stops and hold some cash. But we’re nudging our Market Monitor up another notch, as we see a healthy number of good-looking leading stocks and the market’s major trends remain up.

For the second week in a row, we have a growth-oriented list, a positive sign after the late-July selloff. Our Top Pick is Roku (ROKU), a very volatile name with a very big story. Keep it small, try to buy on dips and expect plenty of wiggles.

Stock Name	Price	Buy Range	Loss Limit
Alteryx (AYX)	132.78	51-54	44-46
Carvana (CVNA)	82.90	49-52	42-43.5
CF Industries (CF)	45.23	46.5-48.5	43-44
CyberArk (CYBR)	111.74	68-71	62-64
Match (MTCH)	0.00	47-49.5	43.5-45.5
Michael Kors Holdings Limited (KORS)	73.22	70-72.5	65-66.5
Roku, Inc. (ROKU)	150.46	53.5-56.5	47-49
Seattle Genetics (SGEN)	150.85	71-74	64.5-66.5
Teladoc, Inc. (TDOC)	127.95	67.5-71	59.5-62
Wingstop (WING)	121.52	58-60	53-54.5

Current Market Outlook


Last week saw a continuation of the market’s rally, with most major indexes (save small caps) lifting to new recovery highs, led by many “old world” sectors like financials, mining, transports and the like. Meanwhile, many hot growth stocks (mostly technology) lagged, with a bunch falling to key intermediate-term support. What does it mean? As we wrote in Friday’s update, you should take things on a stock-by-stock basis—most stocks still look great, and if you have some winners, you should continue giving them a chance to crank higher. But it’s important not to be complacent, either, so be sure to honor your loss limits and stops in case the selling in growth stocks continues and/or the selling spreads to other corners of the market. Overall, we remain mostly bullish as most of the evidence continues to point up.
Not surprisingly, this week’s list has many newer names to the publication as the buying power rotates to other areas. Our Top Pick is Wynn Resorts (WYNN), which, along with many gaming peers, looks to have changed character last week. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Acacia Communications (ACIA)	51.83	55.5-58	50-52
Advanced Micro Devices (AMD)	82.24	26.5-28	24-25
Amphenol (APH)	91.75	99-102	92-93
Autohome (ATHM)	98.65	103-108	94-96
Cabot Microelectronics (CCMP)	156.17	118-123	107-110
Delta Air Lines (DAL)	54.28	56-58	52-53.5
Lennox International (LII)	270.56	260-268	242-247
Lululemon Athletica (LULU)	304.69	166-171	150-153
Rio Tinto plc (RIO)	57.05	58-60	53.5-54.5
Wynn Resorts (WYNN)	121.08	136-142	122-125

As investors are broadly satisfied with the current outlook, it seems that we have arrived at the end of the beginning of the post-pandemic era. However, there remains immense uncertainly about how the middle-game will play out.



This week, we took advantage of the strong performance of some of our stocks to reduce our ratings. And, as not every stock works right out of the gates, we are moving Big Lots (BIG) from Buy to Hold as we want to rethink our outlook and valuation given its dismal recent earnings report.

It’s been nearly four weeks since the market’s correction and consolidation began, and overall, the damage hasn’t been that great—interest rate-sensitive names have been hammered, but many growth stocks remain in good shape. Now the question is whether buying power will return; holding up is all well and good, but we want to see evidence that institutional investors are adding shares of resilient stocks, even buying them as they reach new high ground. If we see that, we’ll switch the Market Monitor back into the green. But right now, we advise holding some cash and keeping new positions small.

Once again, we’re pleased to see many enticing names in this week’s list. Our favorite is one of the first stocks to hit new-high ground—Oasis Petroleum (OAS) is emerging from a gigantic base, and if the market gets going on the upside, it looks like a new leader.

Stock Name	Price	Buy Range	Loss Limit
Tenneco (TEN)	0.00	44-47	38-40
Shutterfly (SFLY)	94.71	50-52	44-46
Oasis Petroleum (OAS)	12.57	39-42	36-37
Northrop Grumman (NOC)	0.00	81-83	77-78
Morgan Stanley (MS)	0.00	25-26	22.5-23.5
3D Systems (DDD)	0.00	45-46	41-42
Delta Air Lines (DAL)	54.28	18-19	16.5-17
Carter’s (CRI)	0.00	70-72	66-67
Celldex Therapeutics (CLDX)	0.00	14.5-15.5	12-13
CBOE Holdings (CBOE)	0.00	41-42	37-38

The market has followed through on last week’s rebound rally and we’re seeing an increasing number of strong growth stocks with good setups. The big news is that the rally has lifted many of the indexes we follow above their 25- and 50-day moving averages, giving us a green light for new buying. We don’t advise jumping in with both feet—new buy signals do not guarantee a continued advance—but you should be taking a serious inventory of your watch list (and the stocks in this week’s issue) to select a few favorites for buying.
This week’s list includes several bigger names and a few recent IPOs, which indicates good breadth for the rally. Our favorite is SunPower (SPWR), which is making the turnaround in the solar industry look like a sound growth proposition.

Stock Name	Price	Buy Range	Loss Limit
SunPower (SPWR)	12.26	19.5-22	17-18
Splunk (SPLK)	207.67	45-47	41-42
Proto Labs (PRLB)	0.00	63-65	55-56
The Priceline Group Inc. (PCLN)	0.00	810-840	779-780
Illumina Inc. (ILMN)	289.74	72-74	67-68
Ciena (CIEN)	44.25	19-20	17.5-18
Bloomin’ Brands (BLMN)	0.00	24-25	22.5-23
Boeing (BA)	432.22	99-102	94-95
American Axle (AXL)	0.00	17.5-18.5	16-16.5
Actavis (ACT)	0.00	123-127	108-110

Current Market Outlook


Not much happened last week, with the major indexes up a fraction of a percent and most leading stocks in a similar boat. But to us, that was a good thing—the fact that stocks held up following the prior week’s romp higher and a bunch of bad news (Iran tensions) and upcoming uncertainties (Fed meeting and G20 powwow) at least shows sellers didn’t pounce on the opportunity to bail. As we wrote last week, there’s more positive evidence than negative evidence, which is why we’re leaning bullish—but the intermediate-term trend of the major indexes and many stocks and sectors has yet to turn positive, so we’re also not pounding the bullish drums. Holding your strong stocks and nibbling on some good-looking charts is fine by us, but we also advise sitting with a chunk of cash and patiently waiting to see if the market can follow through on its recent strength.
This week’s list is a bit broader than those we’ve seen recently, with a lot of good charts and growth stories. Our Top Pick is Blackstone (BX), which has shown great power of late.

Stock Name	Price	Buy Range	Loss Limit
AngloGold Ashanti (AU)	20.45	14.6-15.4	13-13.5
Blackstone Group (BX)	49.12	42-44.5	38-40
Boot Barn (BOOT)	43.24	31.5-33.5	27.5-29
Casey’s General Store (CASY)	165.73	148-153	136-138
Haemonetics (HAE)	136.59	107-111	98-100
Innovative Industrial Properties (IIPR)	214.38	104-110	91-94
Mirati Therapeutics (MRTX)	104.98	94-98	81-83
Penumbra Inc. (PEN)	173.25	161-166	147-150
Trade Desk (TTD)	468.02	237-244	212-215
Universal Display (OLED)	187.54	169-175	153-156

Current Market Outlook


As the year winds to a close, nothing has changed with the market’s overall stance—big picture, it’s a bull market, and numerous factors tell us that the uptrend has farther to go; the odds favor higher prices when looking months down the road. Shorter-term, though, there are also many signs that tell us risk is elevated—that doesn’t necessarily mean a huge correction is on tap, but we think it’s safe to say that the next few weeks are likely to be more challenging than the past few weeks, with potholes, rotation and news-driven moves possible. As we’ve been writing, that’s no reason to bail out, but being discerning on the buy side (good entry points, starting small, etc.) and booking some partial profits makes sense.

Our last list of 2019 is a broad mix of strong stocks, including turnarounds, recent breakouts and fresh setups. Our Top Pick is Crocs (CROX), which is benefiting from some rotation into retail titles and a string of solid quarterly reports.

Stock Name	Price	Buy Range	Loss Limit
Bed Bath & Beyond (BBBY)	0.00	16-17	14.3-14.9
Cardlytics (CDLX)	0.00	58-61	51-52.5
Carvana (CVNA)	82.90	91-94	83-85
Crocs (CROX)	0.00	39-41	35.5-36.5
Floor & Décor (FND)	68.03	49-51	45.5-46.5
GSX Techedu (GSX)	97.59	19.5-20.5	17-18
Luckin Coffee (LK)	0.00	34-36.5	30-31.5
Paycom Software (PAYC)	0.00	257-267	237-241
Sea Limited (SE)	132.86	38-39.5	34-35
United Rentals, Inc. (URI)	0.00	163-167	150-152

Current Market Outlook


The rapid spread of China’s coronavirus provided the impetus for a selloff that began last Friday and exploded onto the scene today. Where does that leave us? First, the intermediate-term trend of the indexes is still positive but close to the fence; the big-cap indexes look OK, but the broader measures (small and mid caps) are right around their key 50-day lines. Beyond the charts, it’s likely that more time is needed for investors to trim/hedge after four months of straight-up action. As for leading stocks, we’re taking it on a case-by-case basis—some are looking ragged and ripe for a deeper correction, but most are pulling back normally. If you’re heavily invested, our advice is to follow the usual plan: Hold most of your shares in your strong, profitable stocks, while selling or keeping tight leashes on losers and laggards. We’re moving our Market Monitor down to a level 6.

On the buy side, newer names that are holding up well should be near the top of your shopping list. This week features plenty of those, with our Top Pick being Kansas City Southern (KSU), a reliable grower that just reacted well to earnings.

Stock Name	Price	Buy Range	Loss Limit
Agios Pharmaceuticals, Inc. (AGIO)	52.43	50.5-52.5	45.5-47
Bristol-Myers (BMY)	66.24	62-64	59-60.5
Datadog (DDOG)	81.52	39.5-41.5	36.5-38
Kansas City Southern (KSU)	176.54	162-165	150-152
Sea Limited (SE)	132.86	42.5-44.5	38-39
Snap Inc. (SNAP)	16.68	18-19	16-16.5
STMicroelectronics (STM)	30.09	27.5-28.5	25-25.5
Taiwan Semiconductor (TSM)	78.41	57-58.5	53-54
Wix.com (WIX)	302.53	137.5-141	127.5-129
Zillow (Z)	76.64	46-48	42.5-44

On last Friday’s Cabot Street Check episode, the weekly podcast I co-host with my colleague Brad Simmerman, we welcomed on four different Cabot analysts to help us take the market’s temperature in the midst of an eventful and rather volatile start to 2025. All four of them – Mike Cintolo, Cabot’s Chief Investment Strategist; Jacob Mintz, our options trading expert; Tyler Laundon, our small-cap and early-stage stock expert; and Clif Droke, my fellow value investor who runs the Cabot Turnaround Letter – described themselves as varying degrees of “cautiously bullish.” Given all the headlines of late, that qualifies as a victory.

The U.S. stock market is doing just fine. More than fine, in fact. On Tuesday, the S&P 500 closed at a new all-time high, and the index is up roughly 4% year to date through the first seven weeks of 2025. That comes on the heels of back-to-back years of gains in excess of 20%. And while the current bull market has been mostly spearheaded by a handful of artificial intelligence and Magnificent Seven stocks, the rally is finally starting to spread, with the Equal Weight index also up 4% this year, the Dow Jones Industrial up nearly 5%, and the Russell 2000 up nearly 3%.

After an amazing run higher, growth stocks hit an air pocket this week, with many highfliers coming down and some abnormal action being seen. We haven’t exactly floored the accelerator during the past few weeks, and we took our cues from individual stocks, paring back this week and leaving us with a good-sized cash position. That said, we’re not making any major market call--the trends remain up, and many growth stocks are acting OK--so while we want to see how growth reacts from here, we’re flexible and could put some money back to work soon if key names stabilize.

After a huge run and a choppy two-month stretch, the sellers have taken control and are crushing most stocks, especially growth titles, many of which broken down and--for the big winners of last year--are flashing abnormal action. With our Cabot Tides, Two-Second Indicator and Aggression Index firmly negative, we’re mostly on the sideline and are content to wait things out until the next uptrend gets underway.

Encouragingly, though, there are still a good number of fresher growth stocks (got going in the last two or three months) that are taking the selling in stride; upside will be limited for now, of course, but tonight we have an expanded watch list of names that could be new leaders down the road. Eventually, the sun will shine again, but for now it’s best to focus mostly on capital preservation, which will allow us to make that much more money when the bulls are back.

After weeks of withstanding a geyser of negative headlines – higher inflation, tariffs, slower interest rate cuts, the DeepSeek impact on AI, etc. – the market finally took on water last Thursday and Friday. Whether that’s the start of a deeper correction, we’ll likely know in the next few days. Even if it is, it’s nothing abnormal. After all, the S&P just touched new all-time highs three trading days ago. A pullback was probably inevitable.

Out of respect for the about-face in U.S. stocks in recent days, however, today we’ll turn our attention to Europe, where stocks have been outperforming their U.S. counterparts by more than 2-to-1 so far this year. Our new addition comes from Spain and is a company that’s been in Carl Delfeld’s Cabot Explorer portfolio for several months.

Details inside.