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In today’s note, we discuss a number of earnings results and new developments for several of our portfolio positions, including Alcoa (AA), Brookfield Wealth Solutions (BNT), Intel (INTC) and Starbucks (SBUX).


The broad market outlook remains bullish for the rest of this year and early next year, but with the possibility for weakness to emerge heading further into 2025.

Last week I told you that we’d received a new buy signal from our intermediate-term market-timing indicator—but it didn’t last long. The market’s widespread selling on Wednesday and Thursday quickly turned it negative again.

So capital preservation is once again of primary importance—though the charts say the time is ripe for at least a modest bounce.

Today’s story is about Joe, a successful investor who has his own investing system. His system is unusual in a couple of ways.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the October 2022 issue.

As stock prices tumble under the twin pressures of rising interest rates and the likely arrival of an economic downturn, just about every new stock pick is destined to be a disappointment. How does one select stocks in such an environment? While most fresh ideas will be near-term duds, there is an important purpose to picking new ideas. And, one doesn’t need to buy full positions right away. We screen for low P/E stocks on depressed 2023 earnings, with estimates for those earnings that are increasing. These make good stocks in which to take starter positions.

We also sorted through stocks with high dividend yields and highlight two picks and two pans (with enticing yields yet have serious dividend risks).

Our feature recommendation this month is Dow (DOW). Its shares have been sold by fearful investors, but the company’s low valuation doesn’t recognize the improvements in its financial strength and cost structure since the dark days of early 2020, nor the attractive yet sustainable dividend yield.

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.

We’re now presented with an interesting situation. The broad market, which hit record highs just last week, is now sick, thanks to investors’ perception that the coronavirus will negatively affect global trade. But the marijuana sector, which has been in a correction for more than two years, has many stocks that have been building bottoms.



No one knows how this will shake out in the short term, though clearly, the long-term potential of the marijuana sector remains intact.



Nevertheless, by observing the action of individual stocks and following time-tested procedures, we will come through this in fine shape. Today’s issue includes a few partial sells as well as a handful of downgrades while we wait for the dust to settle.



Full details in the issue.

For the first time in months, stocks actually have a bit of momentum. Is it sustainable? Or another false start? Too early to tell. But it’s a good time to keep adding beaten-down names that are finally showing signs of life. This week’s new recommendation fits the bill, and has been a big winner for Carl Delfeld since he added it to his Cabot Explorer portfolio earlier this month.

Details inside.

The volatility continues but we’ve seen most of our stocks hold above previous lows (so far). The S&P 600 Small Cap Index is also holding above its lows from last week.

Despite a number of domestic and international geopolitical concerns, the market continues to act well. The S&P 500 is within a stone’s throw of its February all-time high.

This month, we add two high-growth tech names and place three additional compelling opportunities on our Watch List.

The year is poised to end on a high note, as the major indexes continue to hit new highs, with the Dow hitting a record number of new all-time highs this calendar year.

In view of the alarming number of news headlines that point to a weakening economy (at least in some quarters of it), it may seem surprising that the normally defensive consumer staple stocks are underperforming.

Normally, the staples are viewed by investors as something of a safe haven during periods of economic uncertainty, providing as they do essential goods like food and household products that are purchased even in tough times. But the present environment is proving to be an exception to that rule of thumb.

The market has been highly unpredictable over the last several years. Things are too uncertain to make bets on the current outlook. Timing the market and betting on sector rotation is a riverboat gamble. I’d rather bank on prevailing trends that will transcend short-term market gyrations.

There is a strong prevailing positive trend in the energy industry, particularly American energy.

Clean energy is the future, but not the near future. The world will continue to rely overwhelmingly on fossil fuels for at least the rest of this decade and probably much longer. But the world has underinvested in oil and gas exploration and production over the last decade and a half. Global supplies are straining to meet growing demand. The dynamic will last for some time.

Investors are realizing the value of companies and stocks in a sector that had been neglected for many years until recently. While commodity prices will go up and down based on several circumstances, energy companies should benefit over time going forward.

In this issue, I highlight the largest American oil refiner. The stock has been a stellar performer. And the company will continue to benefit from cheaper American oil and a reduced number of refineries.

Editor’s Note: Due to the Fourth of July holiday next Thursday, your July issue of Cabot Value Investor will come out next Friday, July 5. Happy 4^th!

Leveraging cyclicality is a good way to squeeze more profits out of value stocks.

That was an idea put forth by Matt Warder, the newest addition to the Cabot analyst team and the successor to Bruce Kaser in Cabot Value Investor’s “sister” value investing advisory, Cabot Turnaround Letter, on the latest edition of the Street Check podcast I host with my colleague Brad Simmerman.

U.S. markets are in a tailspin, and previously hard-charging growth stocks are leading the slide. But two asset classes that have often been overlooked in recent years are off to very good starts in 2025: value stocks and European stocks. Having just “retired” a European value stock that reached our price target in last week’s update, today we add a Dutch-based mid-cap with an almost identical profile – but at a time when undervalued European stocks are getting treated like U.S. growth stocks.

Details inside.

The overall market and most growth stocks have stabilized in recent days but there are still some yellow flags. Our 50%-plus cash position is a bit too high so we’re going to change that tonight by adding one new position and buying a bit more of another.

The good news is that it seems that the markets are back on track, although we remain cautious.

Economic statistics continue to be strong, with factory orders and consumer confidence better than analysts expected. Home prices have moderated somewhat, although interest rates and the continuing lack of inventory are not helping that market.

This month, we’re going back to what’s served us well, small business software. The company has a cloud-based software solution tailor-made for property managers. It’s growing revenue by more than 30%, has no debt, and is on track to become profitable this year. The chart is solid. And I believe the company will ultimately be sold, hopefully at a nice premium to where shares trade today.

Walgreens Boots Alliance (WBA) acknowledged disappointing quarterly results on Thursday, cutting its full-year financial guidance to a range of $2.80 a share to $2.95 a share, down from previous expectations of $3.20 a share to $3.35, and well off analyst estimates of $3.21. CEO Tim Wentworth discussed plans that could lead to the closure of thousands of its U.S. pharmacies as the company’s retail business continues to struggle. “We are at a point where the current pharmacy model is not sustainable, and the challenges in our operating environment require we approach the market differently,” Wentworth said, also noting that a quarter of the stores are not contributing to operating income. While there were positives – a well-performing international business and a growing U.S. healthcare segment for instance – future performance will heavily rely on the company’s shift toward greater efficiency.

Wells Fargo (WFC) kicked off the Cabot Turnaround Letter earnings season today, showing EPS of $1.26/share, which exceeded estimates by 17 cents. WFC also beat top-line revenue estimates by $710M, coming in at $20.86B. Despite the comfortable beats, WFC shares are essentially flat for the day.

KPMG LLP analyzed the technology sector deals and forecasts that mobile, data and analytics, security, and “the cloud” will be the primary focus of M&A deals this year. Upon review of the stocks we’ve recently been recommending in the Digests, I heartily agree with this assessment. And one area that has whetted the appetite of both private equity and public company acquirers is fintech.