Search

Cannabis legalization is spreading but cannabis stocks are trading near all-time lows, which leaves these four industry leaders poised for a rebound.

Current Market Outlook


The good news is that the market found some support in the middle of last week and has finally been able to get off its knees during the past couple of days; some potential growth stock leaders, too, have bounced back nicely, including a few in today’s issue. We do think the current bounce will likely go further given the severe selling of the past month and some of the climactic readings seen last week. But it’s going to take more than a couple of up days to change the market’s intermediate-term trend, which remains firmly down. We’re keeping our Market Monitor in bearish territory, and while a little nibbling is fine, the main goal is to remain defensive until a sustained uptrend emerges.

This week’s list is very interesting, as there are a few vibrant growth stocks that have snapped back nicely. Still, our Top Pick is more slow-and-steady —Domino’s Pizza (DPZ) just leapt out of a tight base on huge volume thanks to a bullish earnings report. Dips look buyable.

Stock Name	Price	Buy Range	Loss Limit
Zoës Kitchen (ZOES)	0.00	32-34	29.5-30.5
XPO Logistics (XPO)	0.00	34-37	31-32
Sherwin-Williams (SHW)	526.09	213-217	204-206
Regeneron Pharmaceuticals (REGN)	512.96	350-365	335-340
Pacira Biosiences (PCRX)	54.85	97-101	90-92
Palo Alto Networks (PANW)	236.92	95-98	88-89
Jack in the Box (JACK)	0.00	65-68	62-63
Domino’s Pizza (DPZ)	339.47	82-84.5	78-79
Autohome (ATHM)	98.65	44-47	39-40
Advance Auto Parts (AAP)	0.00	135-138	129-130

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

In this issue we look into the bear case for the energy sector and discuss why energy stocks might provide some tonic for sober investors in an otherwise tech-intoxicated stock market. We highlight a selection of six energy stocks worthy of at least a sip.

This month’s Buy recommendation, VF Corporation (VFC), is a major apparel and footwear maker whose shares have collapsed 83% and now trade at their 2006 price. The new CEO, an unusual selection from outside the industry, is undertaking a complete overhaul of the company, with some early signs of progress.

Last week’s much-awaited pronouncement by the Federal Open Market Committee (FOMC) turned out to be a big “nothing burger.” I did not personally expect a cut in the fed funds rate.

Several portfolio stocks recently reported earnings and move to Strong Buy.

This month we’re adding a high-growth biotech name that has just begun to commercialize a unique compound for fighting aggressive cancers and other diseases including, potentially, COVID-19.

The company just began booking revenue from its first cancer treatment. That launch significantly de-risks the stock and raises the potential for future approval of the same compound for other indications.



The stock has retreated lately because prescription sales were curbed during the COVID-19 outbreak. This should be a temporary dip as there are many potential stock-moving catalysts coming this year. We’re hoping to sneak in and buy the dip on this high-potential name.



All the details are inside this month’s Issue. Enjoy!

To begin, I would like to highlight that I have decided to omit the brief company review section that followed our weekly stock updates. This section caused some confusion and the information about each company is widely available. Likewise, I’m ending the Explorer watch list. If you own the stocks on the list right now, I see no reason to sell them.

Moving on to the market, the debates regarding the market’s direction seem endless.

The fact that the major indexes and, especially, a ton of growth stocks bounced sharply late last week is a bullish sign; it at least tells you buyers are still interested, especially when it comes to some fast-growing names that recently reported outstanding results. That said, we can’t conclude the market is off to the races again—all the major indexes (save the Nasdaq) are still below their 50-day lines, the number of stocks hitting new highs is still tiny, and much of the broad market has taken on lots of water. Some new buying is fine, as is holding your top performers, but be sure to hold some cash until the market confirms a new uptrend.

This week’s list has a bunch of stocks that are acting bullishly, including a few that recently gapped up on earnings. Our Top Pick is Michael Kors (KORS), a well-sponsored name that reported a blowout quarter last week. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Yelp (YELP)	41.30	86-92	75-76
Valeant Pharmaceuticals (VRX)	0.00	133-138	124-125
USG Corp. (USG)	0.00	31-33	29.5-30
Salix Pharmaceuticals (SLXP)	0.00	95-99	89-90
ServiceNow (NOW)	341.86	63-65	57-58
Michael Kors Holdings Limited (KORS)	73.22	91-96	83-84
Incyte Corporation (INCY)	76.98	62.5-65	54-55
Keurig Green Mountain (GMCR)	0.00	102-107	89-90
Tableau Software (DATA)	126.42	84-88	78-80
Canadian Solar (CSIQ)	0.00	36.5-38.5	32-33

It was another good week for small caps, and the S&P 600 Small Cap Index keeps grinding higher. The 1% gain over the past week has the index well above its moving average lines and just slightly behind large caps in terms of year-to-date performance.

All Explorer positions except Grupo Televisa (TV) advanced this past week and the emerging markets timer (EEM) is positive in an uptrend and above both its 20-day and 50-day moving averages.

Today’s recommendation is a company showing some relative strength that offers a nice blend of emerging growth and Western management. It’s a business with a diversified portfolio of fuel distribution, sugar production, ethanol and electricity, rail transportation and warehousing as well as the distribution of natural gas.

Last week, I wrote here about how lending-averse banks are causing a hitch in the Fed’s plan to stimulate the economy with low interest rates. You can read the issue by clicking here. I concluded by asking you if you thought the tighter lending practices were a problem, and...

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

It’s a raging bear market in technology.
But technology has been by far the best performing sector for well over a decade for good reasons. We are in fact in a technological revolution. Technological advances are accelerating. It feeds on itself and is transforming the world. Technology is where there is massive growth and excitement for the future.


Sure, the market might get cranky in the near term. Inflation and higher rates might be all the rage right now. But technology isn’t going away. It’s likely to grow even bigger in the future. The time to buy such stocks is when they are cheap and out of favor.


In this issue, I highlight three existing portfolio positions in the technology sector ready for purchase. All of these stocks sell at compelling valuations with strong growth likely ahead. They are victims of indiscriminate selling in the sector. At some point, hopefully sooner, investors will realize the value that has been created by this year’s market turmoil.

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

While the stock market continues to set new record highs, oil and gas exploration and production (E&P) companies have been left behind. Yet, at current commodity prices, which we believe are sustainable, several companies have shares that trade at surprisingly high free cash flow yields, some as high as 24%. We make our case for five stocks.



Related to this, our featured recommendation is Marathon Oil Company (MRO), a mid-cap oil-focused E&P company. Its strong fundamentals, including a high-quality asset base, strong free cash flow and a solid balance sheet, make it particularly attractive.



We highlight three former Cabot Turnaround Letter winners whose shares have retreated since our exit. These now look interesting once again.
In this issue we also discuss three one-off contrarian ideas that have considerable appeal.



During the month, we had a few ratings changes: we moved Berkshire Hathaway (BRK/B) to a Hold, and moved Albertsons (ACI) and Oaktree Specialty Lending (OCSL) from Buy to Sell.



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.

Energy stocks are thriving, and some of them have risen into the stratosphere. I never recommend that people chase stocks that just rose 20% to 50% without resting. Let them rest, then jump in to catch the next run-up. On the flip side, financial stocks are just now emerging from a resting period. Many of my favorites appear ready to not only retrace their recent highs, but to surpass them as well!