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It’s not 2022 or 2008, of course, but the vast majority of stocks out there are in correction mode, and that includes the growth arena, which after a huge run began to hit turbulence in early December and has generally been under pressure since. Now, there are some rays of light out there, which we discuss in this issue, and we’re not having trouble keeping a full-ish watch list for the next upmove, but we’ve been favoring a cautious stance for a while now and think that remains the right move, as we’ve trimmed further this week and now have 60% on the sideline.

In tonight’s issue, we do write about one big positive factor out there (no strength in defensive stocks), talk about the allure of buying former winners “cheap” and, of course, write about all of our names and a bunch we’re watching for when the buyers retake control.

Remember fintech? It was one of the biggest buzzwords on Wall Street a couple years ago until AI came in and gobbled up all investors’ attention. But the nascent sector never stopped growing, and now share prices are well below their apex as investors have largely ignored the sector the last couple years. In fact, this month’s new fintech addition to the Cabot Value Investor portfolio has almost never been cheaper since coming public in 2020. And yet, the company is still expanding both sales and earnings by more than 25% annually.

It’s a classic growth-at-value-prices story. And we think it has 45% upside in the short-to-intermediate term. Details inside.

The stock market reached yet another record high on Monday, but it just doesn’t seem the same as earlier records. Investors (and everyone else) is starting to wonder if Covid is now endemic – an inherent component of everyday life. Will cases surge in the winter months and just after holidays instead of going away with a single vaccine cycle? We won’t likely be going back to widespread lockdowns, but previously unfettered socializing and traveling could be restrained, thus suppressing earnings and valuations for many companies.

In the Boston area, we’ve had nearly 8 inches of rain so far this month. This 0.7 inches-per-day average compares to the 0.6 inches-per-day average for a monsoon rainforest, the type found in the tropics along the equator. Sounds a lot like the dampened mood of the stock market. Compared to the crisp 19% return for the average stock in the first half of the year, the 1% return so far this month seems soggy. Part of the reason is that there are too many mixed macro signals – rising inflation but falling bond yields, murkiness over whether the Biden administration’s large spending proposals will be passed, surging Covid cases despite what appeared to be the end of the pandemic, incredibly strong economic and profit growth which may be rolling over. Investors also are stuck in the mud of pre-earnings season, wondering whether high expectations will be exceeded or merely matched and worried that companies missing their estimates will be harshly punished.

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.

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 market was hit hard again last week, so all trends remain down, and increased caution is still advised.


This week I’m selling two stocks that have weakened since reporting first-quarter results last week, but I’m also upgrading one to buy!


As for the new recommendation, it’s a well-known retailer with a slow but solid growth story whose stock is cheap.


Details inside.

The overall market continues to look healthy—though we haven’t yet received an “all-clear” signal from our long-term trend indicator—and our stocks are certainly behaving well, with several hitting new highs and none behaving badly.
So the only sell recommendation I have today is a bit of short-term profit-taking in one of my recent recommendations—a stock that is due for a bit of a rest.


As for today’s recommendation, it’s a very well-known U.S. telecommunications company with a solid yield that has not only held up well in recent months but that has good growth prospects as the communications revolution continues.


Full details in the issue.

Throughout U.S. history, federalists and states’ rights advocates have battled it out. Federalists believe in strong centralized power. The other side wants issues to get resolved locally. Federalists are usually on the left, and states’ rights advocates are normally conservatives. But not always. It depends on the issue.

The market is bouncing around a lot on a road to nowhere.

It rallies one day and then sells off again the next. The indexes fell into correction territory when Russia invaded Ukraine and have bounced around the same level since. The invasion didn’t cause much of a selloff. But the market can’t get any real traction as long as the uncertainly remains.

Roughly 32% of respondents agreed that all eight rules were stupid. Here are some of the best answers.

The truth about the looming crisis that nobody talks about.