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Tyler recommends selling one stock and gives earnings updates on five more.

Two portfolio stocks reported earnings, and ratings remain the same.

The market has had some wobbles after a strong three-week run, and finding good buy points and keeping an eye on earnings reports remains vital. But overall, most of the evidence remains bullish, so we do, too. Most of the stocks we own are acting well, though we’re still wading through earnings season and will react if need be. In the meantime, we’re still aiming to add exposure, and are buying a half-sized position in an old friend tomorrow.

The cannabis sector remains in a correction, but many of our stocks are doing considerably better than the sector. And the sector itself is very likely near a bottom—which I why today’s issue is titled “Buying Opportunity.”
For new investors, it’s a great time to get started.
However, I’m also recommending reducing positions in four of our holdings, always working to put more of our money in the leading stocks—and with these sales, our cash level will rise—hopefully briefly—to 30%.

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

This month we look into major pharmaceutical stocks, which are selling at their widest discount to the market in decades. We discuss some reasons behind the market’s pessimism and why, for value investors with patience, the shares of five companies offer considerable appeal.



We also include our mid-year stock market update and mid-year bankruptcy review. Stocks have been remarkably strong so far this year and appear poised for more gains, yet we encourage value investors to remain selective and patient amidst the exuberance while keeping the long-term horizon in view.



Easy financial market conditions have helped shrink the number and size of bankruptcies to a fraction of their long-term average. We discuss this phenomenon and why investors in distressed securities should wait for conditions to become favorable again.



Our feature Buy recommendation, Organon & Company (OGN), is a recent spin-off from Merck. Investors have discarded the shares due to revenue concerns, but the bargain valuation and our more optimistic outlook make the shares appealing.



It was a busy month in the portfolio. We raised our price targets on Signet Jewelers (SIG), Molson Coors Beverage Company (TAP) and General Motors (GM), and moved four stocks to Sell: Biogen (BIIB), BorgWarner (BWA), The Mosaic Company (MOS) and Jeld-Wen Holdings (JELD).



Please join us for the our 9th Annual Smarter Investing, Greater Profits Online Conference, held on Tuesday, August 17 through Thursday, August 19. You can see presentations by all of our analysts, which will include updates in their areas of expertise and discussions of their best picks.



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.

The S&P spent most of the first half of July setting new highs. But that changed last week. The technology sector sold off on news of new AI chip export restrictions to China. The S&P fell about 2% for the week, giving up most of the gains for July. It may be a blip. It probably is. But the market is high, and stocks showed vulnerability to bad headlines.

A flatter or down market going forward makes income more valuable. The cash register continues to ring regardless of short-term market gyrations. At the same time, many income stocks are still cheap, and interest rates are likely to trend lower from here.

Some of the very best income stocks are in the energy sector. After recent price shocks and other problems in the energy sector, investors are coming around to realizing energy is a strong business that isn’t going anywhere for a long time.

In this issue, I highlight one of the best natural gas companies on the market. It is a newly formed company in the business of exporting abundant and cheap American natural gas overseas. It’s big business. In a short time, this company has become one of the world’s biggest natural gas exporters.

After falling into correction territory earlier this month, the S&P 500 came off the bottom and has been trending higher. Is that the end of the selling? I don’t think the market has decided yet.

Some tariff clarity could arrive soon. Stocks rallied strongly to start the week partially on news that pending tariffs will be more “targeted.” Technology stocks also rallied on the perception of higher-than-expected AI demand. But the market is very headline sensitive. And the headlines are likely to keep on coming.

If I had to bet, I would say the market probably made the bottom for now and is more likely to trend higher. But I don’t have a high degree of confidence right now. A couple of negative headlines could send stocks plunging to new lows.

There are some select stocks that are actually near the 52-week high. I’m more comfortable selling a covered call on a stock with recent strong performance than initiating a new stock position at this point. In this issue, I highlight a covered call for the biopharmaceutical company AbbVie Inc. (ABBV).

It’s been a tough market. The S&P started this week down about 6% for the month of April, over 10% YTD, and over 14% from the high. And that was before Monday’s selloff. It is entirely possible that the market falls back to a new low and an official bear market.

The tariff uncertainty is continuing, and it could get worse. A bad headline could roil the market any day. We’re not out of the woods yet. The market could get worse before it gets better. But it will get better at some point.

Investing for dividends and income is a longer-term proposition. Investors typically don’t jump in and out of these stocks in a short time. You have to hold the stock long enough for the dividend to make a difference. Although the market remains troubling in the near term, there are some great opportunities for longer-term investors.

It’s been a positive earnings season so far. But the market keeps rolling along just as it had before earnings.

It’s the same story as it was a month ago, technology is struggling while cyclical sectors are soaring. The S&P 500 has managed an anemic YTD return of 1.27% while energy, consumer, material, and industrial stocks are lighting it up with YTD returns of 19.32%, 14%, 12.45%, and 11.61%, respectively, for the sectors. The bull market continues to broaden out and leave technology behind.

Strong fourth-quarter earnings are confirming what the market was already doing.

Current estimates based on earnings reported so far are for 13.2% overall S&P earnings growth for the quarter. It’s a solid quarter and the fifth straight quarter of double-digit earnings growth. In terms of sector performance, cyclical companies are killing it, and technology is floundering, just like before earnings.

By most measures, 2025 looks pretty good for stocks.

The Fed has begun a rate-cutting cycle that should last for the next two years. Historically, stocks do well when the Fed is cutting rates and there is no recession. And the economy has been solid. This bull market is just 25 months old and has returned 65%. Bull markets usually don’t just run out of gas after two years. In fact, the average bull market has lasted 50 months and returned 152%.

But stocks are expensive. The S&P currently sells at 22.3 times forward earnings compared to an average of 16 times over the last twenty years. The market returned 26% in 2023 and about 28% this year with two weeks to go. It might be tough for stocks to deliver another consecutive year of 20%-plus returns.

It may be that a lot of the easy upside is behind us. Stocks can still perform well, but they’ll probably have to earn it in 2025.

In this issue, I highlight a stock that is poised for a strong earnings rebound in 2025. It is a stock that bounces a lot between the highs and lows. And it is currently well below the high. It is also one of the best healthcare companies on the market at a time when the population is older than ever before and aging at warp speed.

The explosive growth of artificial intelligence, electric cars, and manufacturing is causing an explosion in the demand for electricity in this country.

After nearly two decades of stagnant growth, electricity demand is expected to soar in the years ahead. This year alone, electricity demand is growing 81% more than it did last year. Electricity demand is expected to grow at nearly twice the past rate for the rest of this decade.

The new demand transforms certain previously stodgy and boring utility stocks into growth investments.

In this issue I highlight one of the very best and fastest-growing electricity producers in the country. This company is in an ideal position to benefit from the increasing electricity demand from data centers and other sources. AI may be the cutting edge of technological innovation. But it doesn’t work without electricity. While most investors are running around chasing the same AI stocks, we can reap the rewards of the tremendous new opportunity from Thomas Edison’s invention.

The market has been bouncy in recent days but is still close to the high. Prices are high, but uncertainty is growing.

Stocks sold off on Friday as Israel and Iran exchanged bombings. But the market rose on Monday as investors are expecting a quick end to the conflict. Anything can happen. The conflict adds another degree of uncertainty beyond the tariffs and the economy.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the February 2022 issue.



Word puzzle Wordle is the latest craze, but it isn’t the most popular parlor game. This title is held by “What Is Russian President Vladimir Putin Going to Do With Ukraine?”



We provide our theory which is not found anywhere else yet could readily explain his motivation. Related to this crisis, we move shares of ConocoPhillips (COP) from Buy to Hold, as they have surged above our recently raised 89 price target.



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 world has clearly changed in the past two weeks. We see an exceptionally wide range of possible outcomes, which makes predictions about the future (already a low success rate endeavor) basically futile. We offer our timeless investing advice that can be readily applied in such situations.

In the letter, we also provide updates on all of our Recommended Stocks.

The rally sputtered. And it’s all about interest rates.

Investors had been factoring in falling interest rates and a soft landing. But now, investors are increasingly expecting no landing and continued high rates. Recent strong economic numbers, along with higher-than-expected inflation, are changing the perception.

It looks like these high rates will stick around for a while. And most stocks don’t like high rates. But not all. There are some companies that actually thrive with higher interest rates. And that creates opportunity. In this issue, I highlight a stock that pays a massive dividend generated by these high interest rates. As income investors, we can reap the bounty.

The stock market’s enduring slide must be driven by something – the S&P500 rarely (but occasionally) falls 16% in four months for “no reason.” No doubt the long list of issues led by inflation, war in Europe, the end of cheap and easy money, the cut-off of generous stimulus checks and a possible recession feature large.

Across almost the entire length of the yield curve, interest rates are ticking up. The benchmark 10-year Treasury yield reached 1.53% and may be headed back toward its December 2019 rate of about 1.90%. In an economy that is showing rapid growth, with inflation well above the Fed’s 2% target and likely at 6% or more if housing prices were properly factored in, a sub-2% 10-year Treasury yield doesn’t seem to make sense.

We’re watching with wonder how Tesla is now a $1 trillion company and that Elon Musk, by himself, is worth more than all of ExxonMobil. There is some poetic irony that the pioneer of electric vehicles and solar panels is outshining (no pun intended) the very icon he is working to replace. Tesla is a remarkably powerful one-trick pony that is only starting to develop its potential.