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In my own work, I apply six yardsticks, or price multiples, to help me find which companies are undervalued.

The cannabis sector remains in a correction, weighed down in part by fears of vaping illness, but many stocks are doing considerably better than the sector and our challenge is to own the right ones—so that we can succeed both short-term and long-term.

Explorer stocks were all up this past week with the exception of Ford (F) as inflation numbers out this morning are expected to show consumer-price inflation picked up again in January, to an annual pace of 7.2%.

Earnings season is getting hot and heavy. Results have been good so far, and continued positive earnings reports could ignite a bullish trend.

Several big tech companies report on earnings this week. The results could determine if the technology sector, and consequently the market indexes, move higher. It’s been a huge year so far for cyclical sectors, including energy, materials, industrials, and consumer stocks. The rally has broadened while technology has sputtered.

Successful investing is not about being wrong or being right, it’s about making money. And the best way for a growth stock investor to make money is to watch the market very carefully, to understand what its actions reveal about the thinking of the big institutional investors who move the market, and then to act accordingly.

Today I start with a review of the high points of the XM Radio/Sirius Radio saga, which has important lessons for all of us.

This week, we comment on earnings from Walgreens Boots Alliance (WBA).


We also include the Catalyst Report and a summary of the April edition of the Cabot Turnaround Letter, which was published on Wednesday. We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.

In today’s note, we discuss the recent earnings reports from Duluth Holdings (DLTH) and Kohl’s (KSS). Our note also includes the monthly Catalyst Report and a summary of the December edition of the Cabot Turnaround Letter, which was published on Wednesday.

Energy stocks are in the news right now, partly because some of them have begun their price rebounds from recent pullbacks, and partly due to a focus on oil prices during the current Middle East conflict. Here’s a quick assessment and comparison of our four energy stocks.

It’s been seven weeks since the marijuana sector topped, and every day the picture of this correction gets clearer. For example, today saw a rally across the board in the sector, but if you look at the charts, you see it’s really just an inconsequential blip.

Thus, defense remains the watchword for now. In fact, I am selling one stock in this issue, taking profits and freeing up a little more cash.



Long term, however, prospects for the sector remain very bright, as was made clear by our companies’ latest quarterly reports. And of course, we will always hold the leaders of the sector.



Full details in the issue.

The market remains mostly weak and very news-driven, and because we’re not ones to catch falling knives, we continue to advise a cautious stance. The one meaningful ray of light we’re seeing is the resilience of big-cap indexes in general and many growth stocks in particular, including a bunch of recent Top Ten names—lots of growth titles are holding up in fine fashion, which isn’t normally something you see at the front-end of a sustained decline. That’s encouraging, though it doesn’t outweigh the other factors mentioned: All in all, we’ll keep our Market Monitor at a level 5, holding a good chunk of cash while we look for signs the buyers are stepping up.

As you’d expect, this week’s list is heavy on the growth side of the equation, though it also has some interest-rate sensitive names as well. Our Top Pick is a well-situated cybersecurity play that’s trading tightly despite the market’s shenanigans.

Current Market Outlook


May and June were generally great for leading stocks, but some yellow flags began to appear during the past couple of weeks—the major indexes were showing widening divergences, sentiment reached giddy levels and some stocks (like many recent IPOs) went vertical. Some sort of retreat was likely, but the severity of the selling in recent days looks abnormal; many stocks are pulling back after big runs, but a bunch of others are cracking, and the lagging indexes look sick—the NYSE Composite is below its 200-day line! We don’t advise hitting the panic button, as most indexes and stocks are still above intermediate-term support, so you can hold your strong, profitable stocks. But given the evidence, it’s smart to pare back—honor your stops and loss limits, and on the buy side, keep new positions small until support appears.

This week’s list has stocks that have been yanked down recently, but the action looks normal after strong prior advances. Our Top Pick is Carvana (CVNA), which is early stage and holding up well after a big run. Again, keep new positions small and try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Carvana (CVNA)	82.90	36-39	32-34
Cheniere Energy (LNG)	63.82	64-67	59.5-61.5
Darden Restaurants (DRI)	106.63	104-107	96-98
Heron Therapeutics (HRTX)	35.25	38-40	33-34.5
Illumina Inc. (ILMN)	289.74	271-276	255-258
Spotify (SPOT)	272.82	166-171	154-157
Stitch Fix (SFIX)	36.79	26-27.5	23-24
Trade Desk (TTD)	468.02	86-90	78-81
Turtle Beach (HEAR)	26.70	19.5-21.5	15.5-17
Wix.com (WIX)	302.53	96-99	87-89

We’ve seen signs of it everywhere. Retail prices for homes, apartments, food, gasoline, cars and everyday services are higher than they were a year or two ago and are going higher. Upstream from these consumer-facing prices, input prices for raw materials, semiconductors, crops, wages, energy and transportation are going up. Inflation is no longer around the corner – it is here.

I bank at one of the larger banking institutions in this country and have kept my account there for a number of years. My loyalty has been tested lately, though, on more than one occasion. My problems, though, are minor compared to bank customers who have over-borrowed and cannot keep up with the required payments on their credit cards, loans, or mortgages. And therein lies the crux of the entire problem. For the past 25 years, consumers have been borrowing too much so they can enjoy the good life. State and local governments have been borrowing too much so they can provide more and more services. And now the U.S. Government is running huge deficits to help prop up a troubled banking system and a sinking economy.