Search

Current Market Outlook


Growth stocks have stabilized and the market has quieted down following the sharp Nasdaq-led selloff, allowing some stocks to bounce back nicely and other new leaders to flex their muscle. Short-term, we wouldn’t be surprised to see some follow-on selling in some of the damaged areas (we still think chip stocks, for instance, look iffy), and some year-end uncertainties (tax reform, government shutdown) could always cause some wobbles. But you know us—we go with the evidence in front of us, and with the major trends of the major indexes and most leading stocks pointed up, we remain mostly bullish. As always, you want to sell stocks that are breaking down and focus new buying on fresher leadership stocks that have shown excellent volume clues.

There are many such examples in this week’s list, which has a wide variety of good-looking charts and stories to choose from. Our Top Pick is Etsy (ETSY), a niche online retailer that’s just turning profitable and has powerfully broken out during the past week.

Stock Name	Price	Buy Range	Loss Limit
Ally Financial (ALLY)	30.44	27.5-29	24.5-26
Boise Cascade (BCC)	0.00	38-40	35-36
Charles Schwab (SCHW)	0.00	49-51.5	46-47.5
D. R. Horton (DHI)	66.55	48-50	44-45.5
Etsy (ETSY)	112.97	18.5-20	16.5-17
First Solar (FSLR)	83.74	64-68	56-59
G-III Apparel (GIII)	45.25	32-34.5	28-30
Global Blood Therapeutics (GBT)	0.00	41-44	36-38
NetApp (NTAP)	0.00	56-58	51-52.5
Roku, Inc. (ROKU)	150.46	43-47	35-37.5

Current Market Outlook


The S&P 500 and Nasdaq came into last week perched just under major resistance levels. But despite the prior run-up, weak opens on every day of the week and the poor jobs report on Friday, the market couldn’t pull back! Of course, the indexes still aren’t free and clear, and there are many uncertainties out there including the Fed’s next move and the upcoming EU vote in Britain, so we can’t rule out another retreat. But the market’s resilience thus far and the improved action from many leading stocks bodes well. We’re keeping our Market Monitor in bullish territory—a breakout on the upside (with many more stocks hitting new highs) would prompt us to lean toward a fully invested posture, while a dip of a few percent would have us paring back again.

This week’s list has many enticing selections, but we’ve selected an energy stock for our Top Pick. Continental Resources (CLR) has the acreage to crank out huge profits if oil prices creep higher, and the stock has tightened up nicely after a big run. Start with a small position and add to it as it rises.

Stock Name	Price	Buy Range	Loss Limit
Zendesk (ZEN)	82.19	24-26	23-23.5
Zillow (Z)	76.64	29-30.5	25-25.5
UnitedHealth Group Inc. (UNH)	0.00	133-136	125-126
Ulta Beauty (ULTA)	331.95	227-234	208-211
Tata Motors Limited (TTM)	0.00	32-34	29-30
Steel Dynamics (STLD)	0.00	24.5-25.5	22.5-23
Sanmina (SANM)	0.00	26-27	24-24.5
Continental Resources (CLR)	66.19	40.5-43	37-37.5
Big Lots (BIG)	43.12	50-53	46-47
Broadcom Limited (AVGO)	266.26	158-162	148-150

The first real market turbulence of 2024 has arrived. But you don’t have to fear it. Pullbacks are normal – no bull market simply goes up in perpetuity – and, in the long run, healthy. It’s best to use it as an opportunity to cleanse your portfolio of some laggards and buy good companies at better prices. We check both of those boxes in today’s issue, adding an up-and-coming retail cookie-cutter story that’s a new favorite of Cabot Growth Investor Chief Analyst Mike Cintolo. Mike loves the upside, and buying on the recent dip makes it even more attractive.

After a very sharp dip for most major indexes and especially the Nasdaq, a bounce is underway. When looking at individual stocks, we’re fairly encouraged with what we see, which is a good sign that there will be leadership to sink our teeth into once this correction finishes up. But, at this point, we can’t conclude the correction is over, with most major indexes and key measures still buried under resistance (such as 50-day lines) and with formerly strong areas (chips, etc.) still looking suspect. We’re not opposed to a nibble here or there, but we continue to think remaining patient will pay off. We’ll move our Market Monitor up to a level 5, but still think keeping plenty of cash on the sideline makes sense.

This week’s list is chock-full of names that are acting great, most of which have recently shown big-volume strength after earnings, though we prefer to aim for dips in many cases. Our Top Pick is a familiar name that staged a classic earnings-induced breakout last week.

Current Market Outlook


The big-cap indexes started strong today on news of a new NAFTA deal, but under the surface, we’re seeing continued rotation and signs of degradation. Small- and mid-cap indexes took hits today and remain below their 50-day lines, while most growth stocks continue to act iffy. To be fair, the start of a new quarter often sees many crosscurrents, and most leading stocks, while choppy, remain in uptrends. But we’ve now seen funky action and lots of rotation for over a month, which has our antennae up. We’re moving our Market Monitor to a level 6 and feel the next few days will be telling—if leaders are OK, we expect to see support show up, but if not, the odds of a longer pullback will increase.

As for our screens, we’re still finding a good number of good charts, albeit in a variety of sectors. Our Top Pick today is Allegheny Technologies (ATI), a specialty metals firm that is showing signs of getting going after months of base-building.

Stock Name	Price	Buy Range	Loss Limit
Alarm.com (ALRM)	71.33	55.5-57	51-52
Allegheny Technologies (ATI)	27.78	28.5-30	26-27
Ecopetrol (EC)	22.17	25.5-27	22.5-23.5
Intelsat (I)	25.46	27-29	24-25
Paycom Software (PAYC)	0.00	145-150	136-139
PetIQ (PETQ)	30.82	36-38	33-34
Teladoc, Inc. (TDOC)	127.95	79-83	70-73
Vale S.A. (VALE)	15.40	14.5-15	13.2-13.6
WPX Energy (WPX)	0.00	19.3-20.2	17.4-17.9
Zendesk (ZEN)	82.19	67-70	61.5-63.5

Current Market Outlook


After trading in a tight range for nearly two months, the major indexes were clobbered last Friday; most fell below their 50-day lines and a couple hit their lowest levels since Brexit. The action should certainly be respected—we’re knocking our Market Monitor down a couple of notches—but it’s important to look at all the evidence. While the intermediate-term trends are mostly sideways at this point, the longer-term trend is still up, the broad market isn’t falling apart as it would at major tops, and many individual stocks are pulling back normally so far. Overall, you should take things on a stock-by-stock basis, selling stocks that crack but giving others a chance to hold support and resume their advance. Overall, we remain optimistic, but picking your spots is important, and the next few days should be telling.



This week’s list includes many resilient stocks from a variety of sectors, which is a positive sign. Our Top Pick is Las Vegas Sands (LVS), a big-cap turnaround stock that has just lifted off following a huge bottoming effort.

Stock Name	Price	Buy Range	Loss Limit
Urban Outfitters (URBN)	0.00	35-36.5	32-33
Twilio (TWLO)	183.39	54-57	47.5-49
Tempur Sealy (TPX)	85.53	78-80	70-71
PDC Energy (PDCE)	0.00	64-66	59-60
MercadoLibre, Inc. (MELI)	980.83	174-178	160-161
Las Vegas Sands Corp. (LVS)	0.00	55-57	50-51
GrubHub (GRUB)	140.03	38.5-40.5	35-36
Callon Petroleum (CPE)	0.00	14-15	12.5-13
Burlington Stores (BURL)	193.95	80-82.5	74-75
Alibaba (BABA)	254.81	95-100	89-90

The market has hit a little turbulence as we wade into the early innings of the Q3 earnings season. But despite the bumps, there are more than enough stocks acting well enough to fill the pages of the October Issue.

This month, I continue to spread things around, exploring new ideas from the Fintech, software and coal (yes, coal!) industries while plucking two steady performers from our Watch List to add to the portfolio.

Enjoy!

One of the hardest concepts for individual investors to grasp is the idea that the stock does not represent the company. In fact, the stock represents investors’ PERCEPTIONS of the company. If investors think a company’s future is bright, even though it is not yet a big success, they’ll pay a premium for their expectations--pushing the stock up in the process. Contrarily, if investors perceive that a company is becoming less successful, or simply growing less rapidly, its premium will shrink. In the worst cases, the stock will decline, even though the company is still growing!

FANG stocks - Facebook, Amazon, Netflix, Google - have been stuck in the mud for five months. It’s no coincidence that the market hasn’t budged either.

Want to buy Netflix (NFLX) or Amazon (AMZN) or other stocks at a discount after an earnings miss? Adhere to the Three-Day Rule.

Well, we’re in the thick of it. New citywide, statewide and national mandates are being pronounced daily, the stock market fell dramatically, my two daughters were sent home from college, three close relatives lost jobs/projects, and one close relative is a basket case over potentially losing his business.

The market continues to show some overall improvement in tone, but last Friday’s jobs-induced decline and today’s low-volume dip makes it clear that not all investors are rowing in the same direction. Thus, we’ll leave our Market Monitor in the neutral column until we see definitive signs of buying. The good news is that, with earnings season beginning this week (and a deluge of reports starting next week), we’ll likely get an answer relatively soon as to whether this rally is the real McCoy. For now, we’re still leaning optimistic, so it’s fine to own a few resilient names, but we advise waiting until you begin to make some real money before you become more aggressive.

This week’s list has a few newer names to consider; in fact, there are only a couple of early-year leaders featured today. Our favorite of the week is Nationstar Mortgage (NSM), which is set to become the leading non-bank mortgage servicer in the country. The stock is extended, so try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
CF Industries (CF)	45.23	185-195	-
GNC Holdings (GNC)	0.00	40-41.5	-
Lions Gate Entertainment Corp. (LGF)	0.00	14-15	-
Meritage Homes (MTH)	102.20	32.5-34.5	-
Nationstar Mortgage (NSM)	0.00	22.5-24	-
Spectrum Pharmaceuticals (SPPI)	19.31	15.5-16.5	-
Stratasys (SSYS)	0.00	50-52	-
SYNC (SYNC)	0.00	14.5-16.5	-
TFM (TFM)	0.00	53.5-56	-
Web.com (WWWW)	0.00	17-18	-

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the November 2020 issue.

We briefly discuss the soon-to-evaporate election cloud, the merits of holding value stocks when growth/momentum stocks tumble, and highlight one of our portfolio stocks that had some earnings issues along with several others that reported strong earnings that lifted their share prices meaningfully.



Earnings season is in full swing. Six portfolio companies report later this week. We encourage subscribers to visit the reporting companies’ websites to review their earnings-related slide presentations and listen to the post-earnings conference call. These are all available to the public under the “Investor Relations” tab. Sometimes what portfolio companies actually do can seem murky – a quick visit to their website can help clarify, and (at least to me, a certified investment geek) provide some fascinating reading.



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.

Large-cap indexes like the S&P 500 continue to hang in there, but under the market’s hood, the selling in leading stocks that began three weeks ago has intensified, with many now showing abnormal action. Most fast-moving stocks are in a correction, and that’s enough for us to switch our Market Monitor to neutral, meaning you should limit new buying and raise some cash. That said, we’re not making any bold predictions; we’ve seen these rotations out of growth stocks before, and they often reverse themselves quickly. But right now, it’s best to pull in your horns and wait for leading stocks to find support.

Despite the carnage in certain sectors, we’re encouraged by this week’s list—there are many solid stories here, not just defensive or mega-cap names. Our Top Pick is Nabors Industries (NBR), one of a few energy stocks that are acting well.

Stock Name	Price	Buy Range	Loss Limit
Zulily (ZU)	0.00	52-56	45-48
Zillow (Z)	76.64	92-95	85-86
WhiteWave Foods (WWAV)	0.00	27-28.5	25-26
SanDisk Corp. (SNDK)	0.00	78-80	73-74
Nabors Industries (NBR)	0.00	22.5-23.5	20-20.5
Kate Spade & Company (KATE)	0.00	37-39	33-34
First Solar (FSLR)	83.74	68-72	60-62
Finisar (FNSR)	0.00	26-27.5	23.5-24
E-Commerce China Dangdang (DANG)	0.00	14-15.5	12-12.5
Activision Blizzard, Inc. (ATVI)	0.00	20-21	18-18.5

Stocks cooled off this past week, though they mostly held their gains, which is not a bad way to close out an unusually productive September. Investors can likely thank the Fed for that. But many potential landmines (presidential election, escalating tensions in the Middle East, another jobs report this week) loom, so we’ll see how things go as we enter an uncertain October.

Given all the uncertainty, today we add a large-cap value stock that I recently recommended in my Cabot Value Investor portfolio. It’s one of the largest banks in America, and it’s potentially on the cusp of getting much bigger. Last year, it caught the attention of Warren Buffett. And so far, his bet on it appears to be paying off – with more upside ahead.

Details inside.

Welcome to our TOP PICKS issue! For this issue, I asked the Cabot analysts to give me a couple of their top picks for 2024. I hope you will be pleased with the diversity—market-cap and sector-wise—that the analysts have offered.

But first, let’s talk about the market.

Current Market Outlook


The first week of the year was historically bad, with all the major indexes breaking lower and most individual stocks going along for the ride. With such dramatic action, we’re sure you’ll hear and read a variety of predictions, but we urge you to ignore the noise and focus on the facts—and the facts today are that the trends are down, so you should remain in a defensive posture, meaning lots of cash, little if any new buying, with the focus on building a watch list of future winners. Obviously, short-term, a bounce is overdue, and when it comes, it could be a great one. But the fact that the market has had trouble rallying even in the face of “oversold” conditions isn’t a good sign. It’s best to stay defensive until we see some sustained buying emerge.

This week’s list contains special situations, income securities, precious metals and even a couple of resilient growth stocks. Our Top Pick is Rovi Corp. (ROVI), a cheap technology stock that just exploded higher following two major license renewals. Nibbling on dips could work out.

Stock Name	Price	Buy Range	Loss Limit
58.com (WUBA)	0.00	58-61	54-55
Ulta Beauty (ULTA)	331.95	176-182	163-165
Rovi Corp. (ROVI)	0.00	16-17.5	14-15
Children’s Place (PLCE)	0.00	59-62	53-54
National Storage (NSA)	0.00	16-17.5	15-15.5
FLSR (FLSR)	0.00	62-65	56-58
Equinix, Inc. (EQIX)	547.73	300-308	278-282
Athenahealth (ATHN)	0.00	150-155	140-142
Abercrombie & Fitch (ANF)	15.37	24-25.5	22-23
Agnico Eagle Mines (AEM)	79.05	28-29.5	25.5-26

Current Market Outlook


The first week of the year was historically bad, with all the major indexes breaking lower and most individual stocks going along for the ride. With such dramatic action, we’re sure you’ll hear and read a variety of predictions, but we urge you to ignore the noise and focus on the facts—and the facts today are that the trends are down, so you should remain in a defensive posture, meaning lots of cash, little if any new buying, with the focus on building a watch list of future winners. Obviously, short-term, a bounce is overdue, and when it comes, it could be a great one. But the fact that the market has had trouble rallying even in the face of “oversold” conditions isn’t a good sign. It’s best to stay defensive until we see some sustained buying emerge.

This week’s list contains special situations, income securities, precious metals and even a couple of resilient growth stocks. Our Top Pick is Rovi Corp. (ROVI), a cheap technology stock that just exploded higher following two major license renewals. Nibbling on dips could work out.

Stock Name	Price	Buy Range	Loss Limit
58.com (WUBA)	0.00	58-61	54-55
Ulta Beauty (ULTA)	331.95	176-182	163-165
Rovi Corp. (ROVI)	0.00	16-17.5	14-15
Children’s Place (PLCE)	0.00	59-62	53-54
National Storage (NSA)	0.00	16-17.5	15-15.5
FLSR (FLSR)	0.00	62-65	56-58
Equinix, Inc. (EQIX)	547.73	300-308	278-282
Athenahealth (ATHN)	0.00	150-155	140-142
Abercrombie & Fitch (ANF)	15.37	24-25.5	22-23
Agnico Eagle Mines (AEM)	79.05	28-29.5	25.5-26