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As I mentioned here last week, every July the Dick Davis Digests publish updates on our contributors’ Top Picks for the year (which were first recommended in January). As promised, today I’m highlighting some of those picks that have performed best over the last six months. The first half of 2011...

Why this question doesn’t matter when investing in the stock market.

Today I want to review the expansion and subsequent shrinking of the Internet stock universe, and then relate that to the growth of today’s alternative energy stocks. The best time to invest in a sector, such as Alternative Energy, is when it is uncategorized and indistinct.

Leading stocks have been breaking out to new highs and recently begun uptrends are looking more and more sustainable, indicating that the worst is most likely behind us.

The market continued its strong rebound from its early April lows as the indexes rose all five days last week. The S&P 500 gained 2.9%, the Dow rallied 3% and the Nasdaq advanced by 3.4%.

The market continued its strong rebound from its early April lows as the indexes rose all five days last week. The S&P 500 gained 2.9%, the Dow rallied 3% and the Nasdaq advanced by 3.4%.

“You must dare to be independent. Contrarian impulses are usually better. They are always better in major bubbles and busts.” -Jeremy Grantham

To begin, please note that since it is down about 20% over the last month, I’m moving Grayscale Bitcoin Trust (GBTC) to Sell. This could bounce back but the selling pressure is steady.

Let’s begin in Davos, Switzerland where the world’s financial and political bigwigs are gathering at the World Economic Forum to do deals and await the fate of Greenland. Markets rebounded yesterday as President Trump softened his position on Greenland a bit, thus raising hopes of reaching an amicable agreement.

Gold was a hot topic as investors continue to seek a hedge on uncertainty. Central banks have been significant net buyers of gold every year since 2011.

We are mostly through the bulk of earnings season and it has been enlightening, particularly as we learn about the pandemic’s effects on profits. Earnings season should be a period when company results can be clearly measured, especially since we are dealing with numbers.

While pulling back a bit from the sharp jump on Monday, November 9th, the market rebounded on additional encouraging Covid vaccine results this week.

When looking at an investment idea, investors may want to replicate this intake process, tweaked of course for a clearly different (and less urgent) task. By using a consistent process, regardless of whether the idea comes from a friend, that off-beat relative, an investment broker or a newsletter, you can better categorize and screen incoming ideas.

Current Market Outlook


After an impressive four-month rebound, many investors are nervously expecting the return of volatility during earnings season. But despite some recent choppiness among the leading stocks, the market remains largely unperturbed. Growth stocks are holding up well, while the major indices remain above their key trend lines. And while there are signs lately of increased demand in defensive areas of the market (like consumer staples and precious metals mining), the more aggressive segments remain strong. Finally, a healthy number of stocks are still making new 52-week highs on both major exchanges (especially the NYSE), while new lows have been remarkably sparse. All of this tells us that the intermediate-term trend still favors the bulls. While volatility may yet rear its head, we’ll continue to follow the weight of evidence.

This week’s list contains a nice mix of some of today’s leading themes: healthcare, internet, real estate/home improvement and education. Our Top Pick is Owens & Minor (OMI), which has a solid story and has broken out of an extended base on more than 10 times normal volume.

Stock Name	Price	Buy Range	Loss Limit
Farfetch (FTCH)	26.23	21-22.75	19.5-20
Floor & Décor (FND)	68.03	69-72	62.5-63
GSX Techedu (GSX)	97.59	85-88	74-75
Invitae (NVTA)	32.06	30-32.5	27-27.5
Meritage Homes (MTH)	102.20	92-98	84-85
Owens & Minor (OMI)	17.01	15-16	13-13.5
SailPoint Technologies (SAIL)	31.60	30-32	28.5-29
Sea Limited (SE)	132.86	110-116	99.5-100
Watsco (WSO)	237.50	220-230	210-212
Wix.com (WIX)	302.53	262-275	248-250

Current Market Outlook


Just over a week ago, it looked like the market’s intermediate-term trend was going up in smoke as cyclicals cracked and growth stocks remained hit or miss. But, frankly, last week’s action was one of the more impressive few days we’ve seen in a while—most indexes roared back, we saw more stocks (growth and otherwise) pop on excellent volume and even some hard-hit areas rebounded nicely. To be clear, we don’t think the market is out of the woods; many cyclical names still look iffy, and it’s not like there are dozens of great-looking breakouts to sink your teeth into (yet). Thus, we still think picking your spots is important, but it’s also true that we’re seeing more good-looking patterns than we have in a while. We’re nudging up our Market Monitor to a level 7.

This week’s list features many of the names that have seen some persistency and power of late. Our Top Pick is Dynatrace (DT), which appears to be emerging from a big-picture, year-long consolidation.

Stock Name	Price	Buy Range	Loss Limit
Alnylam Pharmaceuticals (ALNY)	166	162.5-167.5	149-152
American Eagle (AEO)	37	35.5-37.5	32-33
CommScope (COMM)	21	20.5-21.5	18.5-19
Deckers Outdoor Corp. (DECK)	382	370-385	340-345
Dynatrace (DT)	60	57-59	51.5-52.5
Natera (NTRA)	117	113-116	102-104
Nutanix (NTNX)	39	37-38.5	32.5-33.5
Shopify (SHOP)	1495	1450-1500	1310-1340
Upwork (UPWK)	57	53.5-56	47-48.5
Vista Outdoor Inc. (VSTO)	45	42-44	37.5-38.5

With mortgage rates leveling off and housing prices still elevated, here’s everything you need to know to confidently buy a new home in less-than-ideal conditions.

2018 banking regulatory reform will lead to 2019 earnings boosts, benefiting four of our stocks.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the March 2021 issue.

As value investors, we follow the goings-on at Berkshire Hathaway, and comment briefly on its earnings and Warren Buffett’s annual shareholder letter, released this past Saturday. Your chief analyst owns some Berkshire shares (the lower-priced Class B shares), but isn’t a full-fledged Berkshire “groupie.”



We also discuss our new Buy recommendation – British insurance company Aviva, Plc (AVVIY). This company is emerging from a period of global sprawl and weak leadership, led by a new and impressive CEO.



Currently-recommended Dow (DOW) is a strong beneficiary of the global economic re-opening, with higher earnings likely ahead, so we are raising our price target to reflect this still-undervalued stock’s potential.



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.



Thanks!

Cabot Small-Cap Confidential is a limited-circulation advisory for investors seeking profit opportunities in high-potential small company stocks.

Here is the August 2020 issue of Cabot Undervalued Stocks Advisor.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. It’s earnings season, and in this issue we review fresh reports from MKS Instruments (MKSI), Tyson Foods (TSN), Columbia Sportswear (COLM), Amazon.com (AMZN) and Marathon Petroleum (MPC). Marathon also announced a deal to sell their Speedway retail gas station business for $21 billion in an all-cash deal, which we discuss.



As a newsletter looking for undervalued stocks in a market full of enthusiasm for only a select few mega-sized tech companies, we almost feel a moral obligation to highlight contrarian ideas. In this issue, we recommend a stable but meaningfully out-of-favor company that has the potential to provide solid long-term returns. “Out-of-favor” implies that it doesn’t have the immediate profit potential of a “digital economy” stock, but that lack of zest produces the opportunity. With low expectations comes upside surprises. We believe global beverage company Molson Coors (TAP) fits the bill.



You may notice that we are tweaking some of the components of the Cabot Undervalued Stocks Advisor letter. For example, we’re bringing back the portfolio tables to every weekly and monthly issue. A “Hold” rating means that we believe the stock is fine to hold in the portfolio, but that the risk/return trade-off isn’t compelling enough to warrant a “Buy” nor unfavorable enough to warrant a “Sell.” Also, for the monthly issue, we may not always have a “Feature” stock in each portfolio – that doesn’t mean we don’t like any of the names, it probably just means that we featured it recently and want to avoid being repetitive to save you time and effort.



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.

Current Market Outlook


During the last couple of weeks of August, more stocks, sectors and indexes were getting in gear, which was a change from the past few months of whippy crosscurrents. But as September has progressed, it looks like we’re still in the same overall environment—growth stocks, indexes and funds have again taken hits while some cyclical/value areas have perked up. That’s not necessarily a negative (at least to this point); as we wrote last week, some retrenchment among extended growth stocks was half-expected, and even if it wasn’t, the action is more a confirmation that the choppy environment is still intact, not that the sellers are truly taking control. Long story short, we’re still sticking with the same game plan as the evidence remains unchanged—we’re more bullish than not, but booking partial profits into strength, raising stops as things head higher and aiming to enter on dips is the right way to go.

This week’s list is lighter on growth stocks than in recent weeks, reflecting some of the dents they’re taking, but there are many other names that look to be resuming their advances. Our Top Pick is Antero Resources (AR), which looks like the best play in the natural gas space. Aim to enter on dips.

Stock Name	Price	Buy Range	Loss Limit
Antero Resources (AR)	17	15.4-16.1	13.8-14.2
Celsius Holdings (CELH)	87	84-88	73.5-75.5
DOCN (DOCN)	76	69-73	58-60
ICU Medical (ICUI)	240	233-243	215-220
Innovative Industrial Properties (IIPR)	228	222-230	209-212
MongoDB (MDB)	485	460-475	408-420
Pure Storage (PSTG)	26	25-26	22.5-23
SBLK (SBLK)	24	23-24.5	19.5-20.5
Teck Resources Limited (TECK)	25	23.5-24.5	21.5-22
Varonis Systems (VRNS)	68	65.5-68	59-60