Search

Part of what makes turnaround mutual funds an inefficient and therefore profitable investing niche is that most investors avoid these securities. Managers of this small group of funds are comfortable with the contrarian approach of owning stocks that are avoided by more conventional mutual fund managers.

In this issue, we highlight seven of these turnaround-oriented mutual funds we’ve watched over the years.

While it may seem that all the stocks in the Dow Jones Industrial Average may move together, there are always those laggards that can’t catch up. This creates opportunity for the turnaround investor.

In this issue, we provide our thoughts on the laggards, highlighting those with promising appeal as well as some that might best be left alone for now.

Like many consumer goods producers, companies that make apparel and related products have experienced sharply lower sales and profits with the stay-at-home restrictions during the pandemic. But, for companies that make everyday apparel, particularly those with enduring brands or an outdoor/active lifestyle focus, demand should eventually return to healthy levels.

In this issue, we list seven companies that we believe offer interesting recovery potential.

The long-awaited market correction has arrived, but whether it will be brief or long, shallow or deep, remains to be seen. The one thing I am sure of is that it won’t be like the previous one! In the meantime, it’s important to treat each stock on its own merits, and today that means selling our weakest, Chegg (CHGG).

As for today’s recommendation, it’s a small company thriving in the homebuilding sector, dominant in its own sub-sector. I think you’ll like it.

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.

This month and early November will be jammed with possibly market-moving events: earnings season, presidential (and now importantly, vice presidential) debates, the actual elections, a likely new federal stimulus package, possible change (in either direction) in the pandemic’s course, and perhaps news about a vaccine solution.

But for now, we’re stuck in Limbo-Land, with the worst (hopefully) of the pandemic behind us, yet so many unknowns just ahead. We outline some basic suggestions that we follow when in this type of market.

The recent August expiration cycle was our second disappointing month in a row. And while 18 wildly successful months of trading out of 20 is a truly spectacular track record, when trades go wrong there is little doubt it’s painful in the moment. However, trading/investing isn’t about being a prisoner of the moment. It’s about building wealth over time, which the Cabot Profit Booster has been very successful at since its inception in early 2020.

Current Market Outlook


Most of the issues the market had been suffering from are still out there—even after today’s rally, the intermediate-term trend of the major indexes is questionable at best (still technically down), while relatively few stocks are really moving ahead (the number of new highs remains tame). That said, we have begun to see support show up in the market, partially in the indexes but more so among leading (and potential leading) stocks; we’re seeing many show resilience and a bunch begin to set up in legitimate launching pads. That doesn’t mean these stocks are guaranteed to get going, but it’s a first step to keep an eye on going forward.

This week’s list contains a group of names that’s attracting money, including a few that have popped on news. Our Top Pick is CrowdStrike (CRWD), which is one of the few growth-oriented stocks that’s actually been slowly pushing higher in recent weeks as the market has come in.

Stock Name	Price	Buy Range	Loss Limit
Blueprint Medicines (BPMC)	88.88	84.5-87.5	77.5-79.5
CrowdStrike (CRWD)	137.38	133-138	117-120
Digital Turbine (APPS)	30.98	28-30	24.5-25.5
DraftKings Inc. (DKNG)	56.91	54-58	45-47
Generac Holdings (GNRC)	190.24	180-185	165-168
JinkoSolar Holding (JKS)	37.78	34.5-36.5	29.5-31
Owens & Minor (OMI)	21.67	19.5-20.5	17-18
QUALCOMM Incorporated (QCOM)	118.47	115-119	105-107
Sea Limited (SE)	160.00	156-161	138-141
Square, Inc. (SQ)	160.79	157-162	140-143

Texas is booming and has the nation’s second-largest economy behind California would be the world’s tenth largest if it were a stand-alone country. Yet not every company in the Lone Star State is doing well.

In this issue, we cover seven companies there that we believe have appealing turnaround potential.

While our focus is on long-term business fundamentals and underlying valuations, even we can be tempted to briefly set this aside for shorter-term bargains. And this time of year these bargains can appear, driven by artificial selling pressure.

In this issue, we look at six stocks that are promising candidates for a bounce.

Current Market Outlook


The selling in growth stocks spread to the rest of the market last week, with most major indexes finishing lower, led again by growth-y indexes and funds. The good news is that, for now, the worst-case scenario has been avoided—many growth stocks tested key support in recent days (50-day lines, etc.) and almost all held up, with Friday and today seeing some solid bounces. Cyclical stocks have done a similar dance, with many pulling in, but few really cracking, and now the bounce is underway. Ideally, this rebound will develop some power—strong bounces off support often provide low-risk entry points—but, while we won’t wait weeks to see how it plays out, it’s too soon to conclude the recent selling wave is over. We remain more optimistic than not, and the past couple of days are certainly encouraging, but let’s see if some new and potential leaders lift off in classic fashion.

This week’s list is a mix of various different stocks, including a number of names we haven’t written up before. Our Top Pick is Chart Industries (GTLS), an under-the-radar name that’s set to see earnings soar as demand for its various energy infrastructure items (including many that play into the clean energy space) takes off.

Stock Name	Price	Buy Range	Loss Limit
Axon Enterprise, Inc. (AXON)	187	183-188	168-171
Builders FirstSource (BLDR)	50	49-51	44-45.5
Chart Industries (GTLS)	178	173-178	154-157
Elastic (ESTC)	157	153-158	135-138
PKI (PKI)	182	178-183	161-164
Rapid7 (RPD)	113	109-113	99-102
Regeneron Pharmaceuticals (REGN)	667	630-650	575-585
UPST (UPST)	203	185-195	157-162
WK (WK)	137	130-134	117-119
Zscaler (ZS)	251	240-247	220-225

The market is looking a little healthier, but it’s too early to call the all-clear yet. Still, many of our stocks are looking better, with several hitting new highs in recent days.
This week’s recommendation is an oil-patch giant that pays a good dividend, is undervalued, and is going up—what’s not to like?

Current Market Outlook


Last Friday’s surge higher by the broad market was a powerful sign that the lack of progress by growth stocks in recent months might be over, and for that reason alone, we are raising our market gauge one notch above neutral to the 6 level. But until we see true follow-through, and numerous growth stocks hitting new highs, we can’t be sure. In the meantime, however, there are still plenty of individual stocks acting well, with the potential to make big moves if the broad market cooperates.

Our Top Pick this week is the world leader in electronic signature technology, DocuSign (DOCU), which is making it easier to do business securely as the world turns increasingly digital.

Stock Name	Price	Buy Range	Loss Limit
Aaron’s (AAN)	74.35	66-69	59-61
ASML Holding (ASML)	350.01	253-260	228-232
Chipotle Mexican Grill (CMG)	773.32	795-825	730-745
Crocs (CROX)	0.00	29.5-32.3	25-26
DocuSign (DOCU)	107.98	64-66.5	56-57.5
Lululemon Athletica (LULU)	304.69	200-202	190-192
Quanta Services (PWR)	91.45	37-39	34-35
Saia Inc. (SAIA)	129.19	93-97	85-87
SolarEdge Technologies Inc. (SEDG)	124.37	87-89.5	78-80
Trex Company (TREX)	117.56	87-90	79-81

Current Market Outlook


Impeachment talk stole the headlines last week, and China trade issues remain one of the chief economic concerns, but overall, the market remains healthy, with all major indexes in uptrends and most just a couple of weeks off their recent highs. Nevertheless, making money remains difficult, as the forces of rotation have been sending old leaders to the locker room and trotting out fresher new leaders to take their place. This is actually good for the health of the bull market, but it does make investing more difficult, so you should continue to tread carefully, in particular by choosing low-risk entry points and being ruthless at cutting loose your worst performers. As for the market monitor, we’ll stand pat this week, as the flurry of selling late last week has created some decent entry points.

This week’s list includes a great variety of stocks, and our Top Pick is a lower-risk insurance stock, Arthur J. Gallagher (AJG), which has been building a base over the past couple of months and looking ripe to resume its uptrend.

Stock Name	Price	Buy Range	Loss Limit
Arthur J. Gallagher (AJG)	89.27	87-91	84-86
Chubb Group (CB)	153.34	156-164	150-152
Entegris (ENTG)	48.08	46-48	41-42
Garmin (GRMN)	97.45	81-87	77-78
Insulet (PODD)	175.69	154-168	145-147
Jabil Inc. (JBL)	41.50	34-36	31-32
MasTec, Inc. (MTZ)	66.65	62-65	59-61
Synnex Corp. (SNX)	129.70	110-113	105-108
Taylor Morrison Home (TMHC)	27.51	24-26	22-23
Weight Watchers International, Inc. (WW)	35.33	35-38	30-32

There are five growth stocks in our Cabot Undervalued Stocks Advisor portfolios that offer dividend yields in excess of 5%. That’s crazy! Stocks with rising profits in combination with very large dividend yields are generally uncommon, and can indicate an extreme undervaluation of those companies’ share prices. Dividends can tell you a lot about a company, or about the broader stock market. I cover the dividend topic in more detail in today’s issue.

Current Market Outlook


The major indexes found some decent support last week, rallying back to the top of their ranges, but overall they’re still thrashing around in the same range they’ve occupied since early August, keeping the intermediate-term trend sideways-to-down. The one thing that did change late last week was a bout of rotation, with money flowing into the beaten-down areas (financials, transports, energy, etc.); it’s something to keep an eye on, but we can’t say it’s a new trend quite yet. All in all, the market is showing us a lot of movement, but little net progress—and thus, our overall advice hasn’t changed. We’re keeping our Market Monitor at a level 5, meaning you should be choosy and keep things small on the buy side, while holding some cash and honoring stops and loss limits with your weaker performers.

The good news, as it has been all year, is that there remain many stocks that looks ready to enjoy meaningful upmoves if the market can get its act together. Our Top Pick is New Oriental Education (EDU), a rare China-related stock that’s making new highs on good volume.

Stock Name	Price	Buy Range	Loss Limit
Burlington Stores (BURL)	193.95	195-198	179-182
Jacobs Engineering Group (JEC)	89.83	86-88	79.5-81
Meritage Homes (MTH)	102.20	63-66	57.5-59
Neurocrine Biosciences (NBIX)	123.40	95.5-98.5	88-90
New Oriental Education (EDU)	113.97	106-108	98-100
Take-Two Interactive (TTWO)	123.32	129-133	120-122
Tandem Diabetes (TNDM)	74.77	67-70	60-62
Trex Company (TREX)	117.56	80-83	74-76
Twitter (TWTR)	40.37	40.5-42.5	37-38
Wheaton Precious Metals (WPM)	34.43	28-29	25.5-26.5