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These are crazy times. This pandemic-riddled year isn’t done with us yet. In fact, Covid cases are rising and many states are reinstating new batches of lockdown restrictions. At the same time, we’re less than a week away from an election with a high risk of a contested result and the ensuing uncertainty.

At some point, we will get past the election and the pandemic. The economy should boom and the market will be free to rise. But things could still get awfully dicey in the weeks and months before we get to the Promised Land.



In this issue, I highlight a high-income stock that is ideal for the current situation. The business is benefitting mightily from the pandemic. It’s a defensive stock that should continue to perform well amidst the volatility. Yet, it should also be a star in the post-pandemic market.



Not only does this stock pay a high dividend, but it attracts high call premiums as well. It is one of the very few stocks that is well worth buying in the current situation.

Current Market Outlook


Three weeks ago, the major indexes were on their knees and very few stocks were in good shape. But there’s been a steady improvement in the overall evidence since then, and while it’s not 1999 out there, the picture looks pretty good—the intermediate-term trend has returned to the bullish side of the fence, while many individual stocks (growth and otherwise) show constructive action. We’ve even seen a big pickup in the number of names hitting new highs (multi-month high in NYSE new highs on Friday)! Short-term, the steady up-move in the market and many stocks could easily bring a pullback or some hesitation, but there’s no question the rubber-meets-the-road evidence has improved greatly, which is what counts most to us. We’re nudging our Market Monitor up to a level 7 in today’s issue.

This week’s list has a bunch of good-looking charts from a variety of sectors. Our Top Pick is Marvell Technology (MRVL), which is helping to lead the recent charge in chip stocks.

Stock Name	Price	Buy Range	Loss Limit
Abercrombie & Fitch (ANF)	16.55	15.5-16.5	14-14.5
Fastly (FSLY)	126.61	118-129	105-108
Marvell Technology Group (MRVL)	43.51	42-45	38-39
Paylocity (PCTY)	188.72	178-188	160-164
Penn National Gaming (PENN)	64.89	62-66	56-58
Roku, Inc. (ROKU)	221.62	215-222	194-198
Synnex Corp. (SNX)	150.56	145-152	131-135
Tesla, Inc. (TSLA)	441.83	435-448	392-400
TG Therapeutics, Inc. (TGTX)	30.49	29-31	26-27
United Rentals, Inc. (URI)	198.89	194-202	175-178

The stay-at-home paradigm has revolutionized the workforce, accelerating demands on the cloud and in telecommunications – including the rollout of next generation 5G wireless networks.

Current Market Outlook


It’s usually hardest to keep things simplest, which is why we put our main emphasis on the trends of the major indexes and action of leading stocks—and with both of those still positive, we’re sticking to a generally bullish stance. However, there’s little doubt we’re seeing some late-in-the-advance happenings (heavily-shorted stocks going to the moon, wild rotation intraday among sectors, etc.) and, chart-wise, nearly everything is sticking straight up in the air (the Nasdaq was about 1,100 points above its 50-day line this morning). We never pick tops, but we also prefer not to leave our brains at the door, and there’s little doubt that the risk/reward for most stocks here isn’t great. Thus, we’re willing to give things some wiggle room, but we’re raising stops and being selective on the buy side, focused mostly on entering on dips.

This week’s list has a wide mix of stocks, and most have been either setting up during the past few months or staging initial pullbacks after huge runs. Our Top Pick is Cleveland-Cliffs (CLF), which is finally beginning to pull in after a big run—further dips would be tempting.

Stock Name	Price	Buy Range	Loss Limit
10X Genomics (TXG)	183	175-185	157-162
1Life Healthcare (ONEM)	51	48.5-50.5	42-43
Cleveland-Cliffs (CLF)	17	15.4-16.4	13.5-14
Cronos Group (CRON)	10	9.5-10.2	8.3-8.7
Goldman Sachs Group, Inc. (GS)	283	276-284	248-253
Inseego (INSG)	21	18.5-20	15.5-16.5
Peloton (PTON)	157	152-159	133-137
Schrodinger, Inc. (SDGR)	96	88-92	77-79
Shopify (SHOP)	1206	1170-1220	1050-1080
Unity Software (U)	151	148-153	133-136

Current Market Outlook


If you’re looking at the trends of the major indexes, the price/volume action of leading stocks (both cyclical and growth) or the breadth of the overall market, it’s hard to find much to fault—the buyers are clearly in control as most stocks, sectors and indexes trend higher. About the only thing to worry about is that there’s not much to worry about; sentiment measures of all stripes (money flows, option activity, surveys) as well as some market action (huge moves in many speculative stocks) tell us that things are a bit hot and heavy right now. To be clear, that’s no reason to dramatically alter your game plan, but it’s a reminder that risk is rising, so keep your feet on the ground, look for good entry points and, once you’re in, honor your stops and book some profits (or partial profits) on the way up.

This week’s list features a wide mix of stocks, including many that have recently staged longer-term breakouts. One of those is our Top Pick: Applied Materials (AMAT) sports accelerating growth and a beautiful chart, and while short-term dips are possible, a major advance looks to be underway.

Stock Name	Price	Buy Range	Loss Limit
Applied Materials (AMAT)	89.25	85-90	75-78
Cleveland-Cliffs (CLF)	12.62	11.5-12.3	9.8-10.3
Pinduoduo (PDD)	146.82	140-147	119-123
Qorvo (QRVO)	167.01	158-163	143-146
Snowflake (SNOW)	388.38	360-380	313-323
Tapestry, Inc. (TPR)	29.75	27-28.5	24-25
Uber (UBER)	53.80	51.5-54	45-47
Vale S.A. (VALE)	16.29	14.7-15.7	12.8-13.3
United States Steel Corporation (X)	17.20	15.3-16.3	12.7-13.2
Zscaler (ZS)	178.17	174-180	154-158

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

With the year-end approaching, investors often sell for reasons unrelated to a stock’s outlook. This month we describe some of these reasons, including tax-loss selling, window-dressing, performance bonus protection and the desire for a fresh start in the new year. We discuss seven stocks that look vulnerable to this type of selling yet seem likely to bounce once the selling pressure relents.



We also look at the airline industry – now in the throes of a near-term depression. We believe the outlook for a recovery is improving despite the recent “third wave” of rising Covid case counts. Clearly these stocks carry risks, most prominently that passengers don’t return to flying as much, even after a vaccine and other safety protocols should make flying safe again. Our discussion delves into some of the industry’s arcane metrics, as these help clarify (at least for those with a wonkish interest, like me) the drivers of the downturn and a likely recovery. We highlight five promising discount airline stocks.



Our feature recommendation is the office equipment company Xerox Holdings Corporation (XRX). The market tends to dismiss this company, but its robust cash flow, cash-heavy balance sheet, low valuation and 4.6% dividend yield offer strong value.



The letter also includes a summary of our recent sales of Peabody Energy (BTU), Weyerhaeuser (WY) and Barrick Gold (GOLD), our price target increase for Freeport-McMoran (FCX) and the full roster of our current recommendations.



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.

This month we’re jumping into a company that specializes in precision medicine for cancer.



It has developed a sequencing platform that is able to analyze over 20,000 genes, far more than most competitor solutions. Even better, this platform allows analysis of both tissue biopsies and liquid biopsies.



Ultimately, the company is going after a roughly $40 billion market. Yet its market cap is a mere $1 billion today.



This company is still unknown, but that’s likely to change as it brings new products to market and continues to transform the market for personalized cancer vaccines and next-gen cancer immunotherapies.



All the details are inside. Enjoy!

Market trends remain very positive as we head toward the end of the year, so I continue to recommend that you remain heavily invested—but with one eye on the exit door. The fact is, sentiment is very high, which means risk is growing—but I can’t argue with trends.

Today’s recommendation is a fast-growing cybersecurity stock with a special focus on the cloud, and great upside potential. Aggressive investors should like it.



But to fit it into the portfolio, I’ve got to sell something, and the victim is another hot growth stock, recommended just five weeks ago and now being sold for a quick 39% profit.



Full details in the issue.

Current Market Outlook


We could pretty much cut our intro from the past couple of weeks and paste it in this week—the primary evidence (trends and overall action of the market and leading stocks, fresh breakouts, blastoff-type green lights from mid November) remains very encouraging, with most of the major potholes seen lately coming from very speculative situations. The main worry is that few investors are worried (in stark contrast to earlier this year, when the market was kiting higher but few believed it), which tells us that risk is rising. Thus, we remain bullish and think putting money to work is the best course of action, but it’s also important to keep your feet on the ground and focus on the best-looking stocks while trailing stops higher and taking partial profits as things stretch higher.

This week’s list is relatively split between growth situations and those benefiting from cyclical/turnaround buying. Our Top Pick is Axon Enterprise (AAXN), which continues to gain sponsorship and has just tightened up nicely for five weeks.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	34.99	32.5-34.5	28.5-30
Align Technology (ALGN)	504.11	485-515	430-445
Ambarella (AMBA)	90.94	84-88	74-76
AAXN (AAXN)	127.31	124-129	111-114
Baker Hughes Company (BKR)	21.72	20.8-21.8	18-18.7
fuboTV Inc. (FUBO)	27.15	24.5-26.5	20.5-21.5
The Michaels Companies (MIK)	11.68	10.9-11.8	9.4-9.8
Micron Technology, Inc. (MU)	71.54	66-69	60-62
PagerDuty (PD)	44.18	41.5-43.5	36.5-37.5
Stitch Fix (SFIX)	64.06	57-61	48-50

Note: This is our final issue of Cabot Stock of the Week this year. Next week we get a little “vacation.”

But rest assured we’ll be keeping an eye on the market, where market trends remain very positive as we head toward the end of the year.



Today’s recommendation is a low-risk water company in a foreign country, so it may be the perfect diversification move if you’ve got a lot of U.S. growth stocks.



But to fit it into the portfolio, we’ve got to sell something, and the victim this week is Eli Lilly (LLY), which has brought us a decent profit in a fairly short time.



Full details in the issue.

The bull market remains alive and well, and I continue to recommend that you be heavily invested in a diversified portfolio of stocks.

This week’s recommendation is a very small medical technology company focused on the business of processing and testing cells, as accurately and efficiently as possible. Long-term potential is big.



But to make room for it in the portfolio, something has to go, and this week it’s Digital Realty (DLR), which never really got going for us.



Full details in the issue.

Growth stocks continue to slowly repair the damage, with the evidence rounding into form. However, the trick of actually making (and keeping) much money remains very tough — few stocks are showing persistent moves, and those that rally for two to three weeks tend to back off. Maybe that will change—today was certainly a plus for growth stocks — but the point is the environment remains tricky and challenging.

In the Model Portfolio, we’ve been riding things up and down of late, but tonight are holding what we have. There are a couple of names we’re watching that we would like to own, but again, these have ramped up in recent days so we’ll wait for a little shaking and baking. Open up for all of our latest thoughts.

Current Market Outlook


To us, the major (and most disappointing) theme of the past few weeks has been the selling in stocks as they approach their old highs—selling on strength has been seen in growth stocks for a couple of months but it’s even seeping into many cyclical-type names, too. In other words, while selling pressures are controlled (the intermediate-term trend remains up), buyers aren’t exactly stepping up in a major way. Of course, the real question is whether earnings seasons causes the bulls to flex their muscles; so far, that hasn’t happened, but there are a ton of reports coming this week and next, so we’ll see how it goes. Not to sound like a broken record, but we continue to think keeping some cash on the sideline and aiming to enter mostly on pullbacks remains the best play. We’re again leaving our Market Monitor at a level 6.

This week’s list has a hodgepodge of names, many of which have reacted well to earnings, so if you’re going to buy strength, these are some top candidates. Our Top Pick is Crocs (CROX), one of the few growth-oriented names that has shown great power of late.

Stock Name	Price	Buy Range	Loss Limit
Academy Sports and Outdoors (ASO)	31	30-31.5	27-28
Bloomin’ Brands (BLMN)	31	29.5-31	26.5-27.5
Capital One Financial (COF)	150	141-146	128-131
Chart Industries (GTLS)	154	149-155	137-140
Crocs (CROX)	98	95-100	84-87
Fortinet Inc. (FTNT)	203	197-204	181-184
Matador Resources Company (MTDR)	26	25-27	22-23
Robert Half (RHI)	88	86-88	78-80
Scientific Games (SGMS)	58	54-56	48-49
United Parcel Service (UPS)	212	203-209	184-188

This is a short week, with my last update just a few days ago, but our Explorer portfolio is doing well. In the last few days, Sea (SE), NovoCure (NVCR) and Alibaba (BABA) are each up 10 points and ElectraMeccanica (SOLO) has increased 20%. As the clouds lift with the flurry of positive vaccine announcements and election uncertainty gone, markets will go into December with more confidence but with lingering doubts about the strength of the economy. Our new recommendation is a leader in critical cancer diagnostics highlighting the benefits of a sharp focus on one market.

Current Market Outlook


If you look at the weekly charts, the trends of the major indexes and most stocks are pointed up—i.e., this is still a bull market, and the trends and other factors (such as the unusual strength seen two weeks ago) portend higher prices down the road. That said, there’s no question the environment remains extremely news-driven (mostly with vaccine news, but also economic reports and government policy outlooks), with plenty of crosscurrents depending on the day. Encouragingly, today’s vaccine news didn’t dent the growth leaders like it did a week ago, which is a step in the right direction. Net-net, we remain optimistic, but the details remain vital; getting decent entry points and position sizing correctly (not too big so you can handle the swings) is key, as is focusing on stocks (cyclical or growth) that have shown good-volume support of late.

This week’s list has something for everyone, including stocks with fresh growth stories as well as some stodgy, cyclical names. Our Top Pick is Lam Research (LRCX), which looks like a leader in the resilient chip equipment sectors.

Stock Name	Price	Buy Range	Loss Limit
Albemarle Corporation (ALB)	128.90	121-126	106-109
Canopy Growth (CGC)	24.77	23.5-25	19-20
Lam Research (LRCX)	439.40	415-435	375-385
Marvell Technology Group (MRVL)	43.29	41.5-43.5	37.5-38.5
Norfolk Southern (NSC)	247.09	235-245	215-220
ShockWave Medical, Inc. (SWAV)	94.95	87.5-91	75.5-78
Snap Inc. (SNAP)	39.08	37.5-39.5	31.5-33
STAAR Surgical (STAA)	79.31	76-79.5	67-69
The Timken Company (TKR)	73.04	69-72	61-62.5
Upwork (UPWK)	33.08	29.5-31	24-25