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Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the September 30th issue.

This month we look at stocks that might benefit from the (eventual) arrival of a post-Covid world. Currently, the news seems uninspiring – new cases are accelerating in some regions that may foreshadow a return of economically-crippling lockdowns, and hopes are dimming for a vaccine in the near future.



Many stocks have surged already in anticipation of this yearned-for world, but many remain moribund. Some laggards are likely to be zombies – still alive but burdened with overwhelming debt loads. We avoided these, and instead found several that should prosper with the return of a fully-opened economy and also have more resilient capital structures to help them endure while we all wait.



We also looked at publicly-traded chicken processors and found that the sky is not actually falling, even if the shares seem to imply an atmospheric tumbling. Near-term wholesale chicken prices have become meaningfully but temporarily depressed, in our view. We highlight three stocks and discuss their risk/return nuances, along with a fourth intriguing commodity food company.



Our feature recommendation, Western Digital (WDC), trades at a depressed valuation but has major strategic changes underway.



The letter also includes a summary of our recent sale of Gilead Sciences (GILD) 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 and 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.



Thanks!

Our emerging market signal stays in positive territory. With our new global mandate in place, we move beyond emerging markets to a European quality play on technology. We also explore what the new Fortune Global 500 rankings can tell us about the changing landscape of investment opportunities.

The good news today is that both our intermediate-term market timing tool, Cabot Tides, and our emerging markets timing tool, Cabot Emerging Markets Timer, have both flashed buy signals, telling us that we should work to get more heavily invested, by buying attractive stocks at sensible entry points.

The broad market remains (ahem) challenging, but there are still broad pockets of strength, and if you care to mine them (we have mining on our minds, for obvious reasons), and you watch your stocks carefully, you can still make money in this market. Coal, oil and fertilizer remain strong, but we’re now seeing more action in stocks of supporting industries, like the companies that help the drillers, or the companies that sell and service the tractors that roam the fields. This extension of strength into supporting industries is normal; we well remember when layers of technology stocks went through the process in the 80s and 90s. So don’t fear it and don’t fight it; embrace it and prosper. Our Editor’s Choice in this issue is one of these stocks, Titan Machinery. Making its first appearance in Cabot Top Ten Report, and hopefully not its last, it boasts good management, a great industry rolling in cash, and excellent expansion opportunities. Plus, it’s a young stock, and the buyers are in total control.

Stock Name	Price	Buy Range	Loss Limit
AGU (AGU)	0.00	96-102	-
AUXL (AUXL)	0.00	33-36	-
BUCY (BUCY)	0.00	69-73	-
CPX (CPX)	0.00	29-31	-
CRM (CRM)	0.00	69-74	-
GDP (GDP)	0.00	52-57	-
MOS (MOS)	0.00	143-150	-
ROST (ROST)	0.00	31-36	-
STLD (STLD)	0.00	36-40	-
TITN (TITN)	0.00	30-32	-

The market has begun 2019 with a bang, and it well could go on longer—though prediction is a fool’s game. It’s far better to simply follow proven systems of investing, whether growth or value or hybrid, and continually work to maintain a portfolio of high-potential stocks.
This week’s recommendation, for example, is a solid grower, nothing fancy. But the stock withstood the selling of December and is now at an attractive entry point, primed to break out to new highs in the weeks or months ahead.

I’m really trying to avoid buying high—so today’s selection is an undervalued stock that recently had a great correction and is now working its way back up.

After a nine-month-long and very deep correction, during which the Global Cannabis Index fell 54% and many stocks fell farther, there was strong buying in the sector on Friday and Monday, signaling that the correction in the sector is likely over.

Warner Bros. shareholders have enjoyed double-digit gains in December following buyout offers from Netflix and Paramount. Here’s how to play it.

The market seems to be a bit complacent given the risks of the virus spreading rapidly in China and elsewhere but we need to remain a bit cautious. There is some suspicion that China is downplaying the numbers.

Even though stocks have been wobbly today the last week has been very constructive for our portfolio. As of mid-day today, our portfolio is up an average of 4% from last Thursday’s close, and only two positions are down (neither by more than 2%).

Small and large cap indices are up around 2.4% from Friday’s close and the portfolio is up almost 5%.

The earlier people retire, the sooner their cognitive functions begin to decline.

Individual stocks continue to move around based on earnings reports and, for the most part, things appear to be quite good. Many management teams aren’t yet sticking their necks out and issuing rosy guidance for 2020, and that’s causing a few dips here and there.

There’s no doubt things are looking a little better out there as many software, MedTech and other growth stocks retested their March lows late last week then turned north. The timing of that short-term reversal, coinciding with the end of the first quarter, most definitely has me feeling better about the state of things right now.

The market’s trends were looking pretty iffy until better-than-feared inflation data came out on Tuesday (PPI) and Wednesday (CPI).

Those data releases finally gave Treasuries a boost and knocked the 10-year yield down from last week’s level of 4.8%, which was the highest since November of 2023 (the 10-year yield hit 4.74% last April, which was close, but not quite as high as last week).

WHAT TO DO NOW: Remain defensive, but keep your eyes open. Yesterday’s rally was noteworthy and may have started (or will soon start) a process of repairing the damage from the recent selling. That said, the market’s trends are still down and few stocks are in great shape, so the odds favor the repair process taking some time. Of course, we’re flexible, so if the buyers go wild, we’ll act, but tonight we’re again standing pat and seeing how this bounce plays out. Our cash position remains near 87%.

Cabot’s market timing disciplines give clear signals for when to trust the bull and how to get out of the way of the bear.

There has been a flurry of reverse stock splits of late. Are they good for investors? Traditionally no. But there are exceptions.

Chloe Lutts recommends Ecana Corp. (ECA) and Cheniere Energy Partners LP (CQP).