Search

The long-awaited pullback appears to have arrived, with fears and uncertainty surrounding the coronavirus and its impact on economic growth bringing out the sellers; our Cabot Tides, in fact, are now on the fence. In the near-term, the odds favor some more pain being dished out, not necessarily because of the virus, but as the market consolidates its strong four-month advance. Big picture, though, this is still a bull market, so while we’ve trimmed a bit, we’re aiming to hold our strong, profitable stocks, thinking higher highs are likely once this pullback does its work.

In the Model Portfolio, we took partial profits on DocuSign and ProShares S&P 500 Fund earlier this week, which lifted our cash position to around 20%. And from here, we’ll just take it as it comes, as we explain in tonight’s issue.

Market performance for the rest of the year will depend upon a full recovery brought on by the vaccines the removal of lockdowns and restrictions. If that doesn’t happen, look out. But I’m confident it will.

Of course, the pricey market indexes don’t apply to many individual stocks. Some stocks are very overvalued while others remain undervalued. At this point, the more conservative play is to target stocks with cheap valuations to buy, especially while many of those bargain stocks also have newfound momentum.



In this issue, I highlight a blue-chip energy stock. It sells at a dirt-cheap valuation while paying a high and safe dividend. It also has strong momentum ahead of what is likely to be a year of vastly improved profits.

While the direction of the market is highly unpredictable in the short term, it’s a safe bet that this economy will continue to recover after the covid recession. It is also highly likely that interest rates will continue to rise.

Interest rates tend to move higher as the economy emerges from recession and gains traction. It’s already happening. The benchmark 10-year Treasury bond yield has already risen sharply this year. Yet, rates are still well below pre-pandemic levels, and the economy is about to ignite. There will also be trillions in stimulus dollars causing inflationary pressures and upward pressure on rates.



Certain dividend stocks and income paying securities endure despite rising rates. And certain special securities can actually thrive. In this issue, I highlight an investment that loves rising rates. In fact, profits increase directly as a result. The stock pays a stratospheric 8.4% yield and pays dividends every month.



In this issue, I highlight an investment that loves rising rates. In fact, profits increase directly as a result. The stock pays a stratospheric 8.4% yield and pays dividends every month.

While everyone is focused on the near-term risks and inconveniences of this pandemic, lasting changes are being forged. Major events have a way of reshaping the American psyche and changing behavior. This pandemic ordeal is forever altering aspects of our culture, creating an a unique opportunity for investors.
In this month’s issue I highlight a stock that directly benefits from the fact that people will continue to do more things from home than they did before the pandemic. It sells popular packaged food brands. Business is booming and should stay good for a long time.


A former slow-growth stock is being transformed into a fast-growing, high-yielding investment that is ideal to hold through the crisis and beyond. Investors are just beginning to realize the opportunity. But you can still get in cheap.

This month we review how the capital markets performed in 2020 and provide our outlook for 2021. We look at the broad equity market and trends below the surface, including growth/value, large/small and sector returns. We also briefly discuss the global equity and commodity markets as well as the U.S. fixed income markets. Our outlook starts with a review of how our 2020 outlook turned out, then dives into what we see for 2021 for the S&P 500, touches upon the rising influence of the two “Easts” and our wariness about speculation, and concludes with some timeless perspective about investing.

The issue also reviews the high yield bond market. We follow the high yield bond market as it provides a different perspective on equity markets. Importantly, there is considerable overlap among high yield bond investors, turnaround investors and private equity investors who may acquire undervalued companies.



Each January, we highlight our “Top Five” stocks for the coming year, based on a combination of favorable risk/return and timeliness. For 2021, our Top Five includes Conduent (CNDT), Meredith Publishing (MDP), Newell Brands (NWL), Signet Jewelers (SIG) and Wells Fargo (WFC).



Our feature recommendation is Ironwood Pharmaceuticals (IRWD). The market views Ironwood as a failed pharmaceutical company but its low share valuation, steady/rising profits and the presence of an effective activist investor make the stock a stand-out value, in our view.



The letter also includes a summary of our recent sales of GameStop (GME) and Freeport-McMoran (FCX), our price target increases for Trinity Industries (TRN), Adient (ADNT), DuPont (DD) and General Motors (GM) as well as the full roster of our current recommendations.



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.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the January 2024 issue.

In this issue, we discuss our Top Five Stocks for 2024. We also dissect and review what happened in the capital markets in 2023 and offer our outlook for the coming year.

This month’s Buy recommendation, Mohawk Industries (MHK), is a major global flooring manufacturer whose shares are deeply out of favor. We discuss three key questions when considering an investment in a cyclical company and describe how Mohawk passes all three with flying colors.

Today’s note includes earnings updates, ratings changes, the podcast and the Catalyst Report.

While every situation is different, a pretty good rule of thumb for investors is to look for stocks of well-run companies with solid fundamentals in a sector that has been out of favor. Then check that the stock is in an uptrend with clear catalysts that support a further rise in its stock price.

Today, we add a stock that checks all those boxes.

Before we dive into this morning’s Weekly Review, I wanted to bring to your attention to the schedule for this holiday week. I will be working/trading as normal Monday through Wednesday, and then will be off Thursday through Monday morning, which means we won’t be sending a Daily Watchlist or the Week in Review on Monday, November 27. Have a great Thanksgiving!

Lapel buttons acquired at the Contrary Opinion Forum provide inspiration and insight.

Video games have a little bit of an image problem. Partly it’s the name--having “game” right in there makes it hard for some people to take them seriously. Video games also suffer from being seen as a “niche” product and not something with mainstream appeal. But video games have grown into...

The key to diversifying without clutter is selecting investments that have low or negative correlations.

Paul tells MoneyShow.com that now may be “exactly the kind of discouraging, hope-squashing environment that provides the seed bed for the bright future.”

Buying “the boom” — a good story and an impressive run — can be a costly mistake. The best way to generate sustainable returns is to buy “the trend.”

What’s the outlook for Baidu (BIDU)? It’s the reaction from investors that will really tell the tale, but here’s what BIDU looks like right now.

Interest rates are certainly a big factor when it comes to investing, but which investments benefit, and which ones are more sensitive to changes?

The yield curve between short- and long-term interest rates is sure to steepen soon, and when it does, these two dividend stocks should rise.

I’m glad that Chinese stocks are doing better. The Golden Dragon ETF has been making good progress, holding above its moving averages.