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Something called DeepSeek out of China helped bring the rally in U.S. stocks to a screeching halt to start the week. Artificial intelligence stocks, in particular, are taking it on the chin, as it appears the Chinese firm may have found a cheaper, just-as-advanced alternative that’s rattling the likes of even Nvidia (NVDA). Chances are, the selling is overdone. But it’s a good time to look for overseas alternatives. And today, we add a Dutch company that plays an essential role in global travel – and one that’s taking advantage of the many missteps of its larger U.S. rival. It’s a stock that was first recommended by Carl Delfeld in Cabot Explorer.

Details inside.

These are uncertain times with the election coming up and Covid still hanging around. But instead of trying to navigate the unpredictable twists and turns in the near term, let’s focus on things that are sure to last beyond the current headlines. This is a great time to focus on issues that will drive business and the markets long beyond 2020 while no one else is looking and bargains can be had.

One issue that is certain to remain is the aging of the population. The U.S. and global populations are older now than ever before and getting older still at a break-neck pace. The trend is even more pronounced in other parts of the world.



Regardless of who is elected president, the population will get older. No matter what course the virus takes, the population will continue to age. You can take that to the bank. In this issue, I identify two of the very best health care companies in the world that are perfectly positioned to benefit from the aging trend.

Risk has been rising for a while, and this week, we’ve seen some wild action along with some abnormal selling. That said, we haven’t seen a rash of breakdowns, either, so we’re moving gradually--we pared back some earlier this week, leaving us with 27% in cash, but we’re also willing to give our stocks a bit of rope as we wait to see how this plays out. As always, we’re flexible when looking ahead, and are willing to put money to work if this morphs into yet another shakeout, or pare back further if the sellers stay at it.

In tonight’s issue, we go over all our stocks in depth, write a piece about the marijuana industry and talk about a couple of intriguing individual stocks that have been setting up for months and could be ready to go if the market can find support.

Rich Howe, Chief Analyst of Cabot Micro-Cap Insider, has been researching micro-cap stocks for over 20 years and right now he sees a prime opportunity to invest.

In this webinar, he discusses historic returns of micro-caps, why now is such a good time to invest in them, and what to look for to pick the stocks that have the highest wealth-building potential

Crista Huff, Chief Analyst of Cabot Undervalued Stocks Advisor, shared 7 Undervalued Growth Stocks with Rising Dividends for This Market. You can download the slides here.

Bruce Kaser, Chief Analyst of Cabot Undervalued Stocks Advisor and Cabot Turnaround Letter talks about Turnaround Investing. Among the topics he covers:
* Why turnaround stocks can be successful investments
* Criteria we use to pick turnaround stocks
* How catalysts can restore prosperity to struggling companies
* What to avoid when selecting turnaround stocks
PLUS—Bruce shares the details of three turnaround stocks that are attractive to buy now!

Finding the best cryptocurrency means identifying assets poised to perform over the long term and valuing adoption over price momentum.

The last couple of years haven’t exactly been kind on food, beverage and restaurant stocks. Generally speaking, the companies in the food and drinks category underperformed the S&P 500 last year, while in the case of restaurants, 2025 was a particularly bad one.

The market and many leaders bolted ahead last week, which is just what we wanted to see as the big investors came back from the beach; it’s clear the buyers are in control. That said, despite some heady gains, we wouldn’t call this a runaway bull market—we’re seeing some under-the-surface rotation every few days, with money cycling out of some stocks and sectors and into others. That is totally orderly and, over time, healthy, but it does mean you get some periodic weakness in favored names. Thus, keep your feet on the ground, and look to use pullbacks as buying opportunities in the best stocks. As for winners, you should generally hold on to your best performers, though taking partial profits here and there (hopefully on the way up) is a good idea.

This week’s list is another potpourri of stocks and sectors, most of which have unique catalysts for higher prices. Our favorite of the group is Urban Outfitters (URBN), part of the very strong retail group. The stock is following through beautifully from a huge earnings gap a couple of weeks ago. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Affiliated Managers Group, Inc. (AMG)	0.00	118-122	-
eBay Inc. (EBAY)	0.00	47-48.5	-
Fortune Brands Home & Security (FBHS)	81.02	25.5-26.5	-
GHL (GHL)	0.00	46-48	-
IPG Photonics (IPGP)	0.00	59-62	-
Men’s Wearhouse (MW)	0.00	36-37	-
ServiceNow (NOW)	341.86	33-35	-
Tesoro (TSO)	0.00	38-41	-
Urban Outfitters (URBN)	0.00	37-38.5	-
Valero Energy (VLO)	97.40	30-31.5	-

U.S. stock markets continue to suffer, wiping out year-to-date gains that had previously culminated in all-time-high prices on the S&P 500, Dow Jones Industrial Average and NASDAQ indexes. If you’re looking for “the bright side” of this dour news, take heart that none of these market indexes have retraced their early-2018 lows.

Statistics are like mushrooms; you’d better be pretty darned careful which ones you swallow. Specifically, I have in mind the statistic that shows that September is the worst month of the year in which to invest.

The past month has been very profitable for investors in the sector, as stocks rallied off their December lows and climbed strongly through January, with several hitting new highs as I write. In general, I recommend that you enjoy the trend; the long-term prospects remain bright.

But short-term, there are opportunities for fine-tuning and risk reduction, and thus I have a few recommended changes in today’s issue, as well as one new addition, a company thriving in the booming CBD market.

Today’s note includes earnings updates on Macy’s (M) and the podcast. There were no ratings changes this past week. Also, a few scheduling changes as the CTL is on vacation next week.

Certain businesses are struggling in this high-priced environment. If you own a business, here are a few inflation-fighting strategies.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the December 2021 issue.

The emergence of the Covid Omicron variant has temporarily upended the market’s emerging post-Covid view of the economy. We share our thoughts on this, as well as on Fed Chair Powell’s testimony this week about accelerating the bond-buying taper. We also comment on how artificial selling pressure as the calendar year-end approaches can drive already-weak stocks to steeply undervalued levels.

Current Market Outlook


After last Monday’s plunge, the initial rebound was very encouraging, and the fact that the major indexes are still doing their best to hang in there is a plus. But, while many individual stocks are in decent shape, the wild rotation that has been a hallmark of 2021 has returned, with money racing into cyclical areas and out of growth stocks the past couple of days. We’re still sticking with a stock-by-stock approach, and most names, despite their wobbles, remain in fine shape, simply pulling in after big runs; others, however, look worse and should be pared back or sold. To be fair, such action isn’t totally surprising—big breaks like last Monday’s usually have some reverberations, so we wouldn’t say the action is negative as much as it’s a sign we’re still in the tricky, choppy environment that has existed for some time. We’re going to leave the Market Monitor at a level 5 and see how things play out in the days ahead.

The good news is that this week’s list is full of names that have enjoyed outsized accumulation of late. Our Top Pick is Devon Energy (DVN), which looks like a leader of a fresh breakout in energy stocks (and cyclical stocks more broadly). We suggest aiming for dips as these names usually pull in after powerful rallies.

Stock Name	Price	Buy Range	Loss Limit
Apache (APA)	23	22-23.5	19.5-20
Biohaven Pharmaceutical Holding (BHVN)	133	130-134	116-119
Brooks Automation, Inc. (BRKS)	109	102-106	93-95
Cimarex Energy (XEC)	88	82-85	72.5-74.5
Devon Energy (DVN)	35	32-34	28.5-29.5
DoorDash (DASH)	217	206-212	185-189
SeaWorld Entertainment Inc. (SEAS)	58	56.5-58.5	51.5-52.5
Signet Jewelers (SIG)	84	82-85	73-75
Snap Inc. (SNAP)	80	78-81	69-71
SVB Financial Group (SIVB)	674	655-675	600-610

Current Market Outlook


After one of the wildest weeks in months, you’ve probably seen countless articles talking about the action and the reasons for it. To us, though, it’s what happens during the next few trading sessions that will count most—right now, the intermediate-term trend of the major indexes is up, though it’s more of a mixed bag for leading stocks (both growth and cyclical). In our view, there’s been enough iffy action to warrant some action; we’re moving our Market Monitor down to a level 6 in today’s issue and have a fair number of sells. But what comes next will count most, with a strong, broad rebound (including some positive earnings reactions) likely boding well, while an inability to bounce/further selling possibly putting a nail in the coffin of the post-November advance. For now, we’re paring back and tightening stops but still giving most of our winners a chance to hold support and resume their advances.

This week’s list has a surprising number of solid charts given the recent turmoil, though we generally still favor buying on dips or some tightening action. Our Top Pick is PagerDuty (PD), which is refusing to budge.

Stock Name	Price	Buy Range	Loss Limit
Affiliated Managers Group, Inc. (AMG)	114	108.5-111.5	98-99.5
Aphria Inc. (APHA)	13	11.5-12.5	10-10.5
Axon Enterprise, Inc. (AXON)	166	157-163	140-143
Marvell Technology Group (MRVL)	53	50.5-53	45.5-47
Matador Resources Company (MTDR)	16	15-16	12.8-13.3
The Michaels Companies (MIK)	15	14.5-15.2	12.8-13.2
Novavax, Inc. (NVAX)	269	225-245	185-200
PagerDuty (PD)	51	47-50	41-42.5
Penn National Gaming (PENN)	104	97-104	85-88
Redfin (RDFN)	75	72-76	64-66

A sure-fire method to find strong stocks is to ferret out high-quality stocks with low PEGnD ratio.