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



One of our more productive methods for finding attractive turnaround stocks is to see what other like-minded investors are holding. We culled the list of hundreds of positions held by our evolving list of 50 or so preferred managers, as reported in the quarterly 13F filings, and discuss three of the most promising.



We also combed through the roster of stocks trading at low prices – another great source for turnaround stock ideas – and review four that have particular appeal.



Our feature recommendation this month is Warner Brothers Discovery (WBD). While most investors view this company as a “play” on streaming, we view it as an undervalued turnaround of the poorly managed WarnerMedia assets that it recently acquired from AT&T.

We note our recent ratings change of Lamb Weston Holdings (LW) from Buy to Sell.

In doing this month’s research, I was struck by the preponderance of excellent investment opportunities within the banking industry – so many that I could fairly easily create a mutual fund entirely devoted to bank stocks!

We all want to find those rare gems that are disrupting big markets with new solutions.
Today’s company may be one such opportunity. It’s relatively unknown and has a software platform that can address $45 billion in annual enterprise spending right now. That’s a big pond.
It’s a story about big data, digital transformation and business intelligence (BI). These are more than buzzwords. They’re what every company in the digital age needs. And this little guy can give it to them.

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!

We have a wonderful library of investing books here in the Cabot offices and refer to them very often. Here are some of our favorites.

Last Monday I published a column on medical insurance, health care, obesity and swimming ... and tried to wrap it all up in the mantle of “personal responsibility.” The quantity and quality of your feedback was impressive.

We’ve seen before how Trump’s shoot-from-the-hip approach to foreign policy has marked a significant departure from that of his predecessors. But clearly this latest exchange is different. Understandably, the market reacted negatively to the very mention of military conflict with North Korea.

The market is a bit of a mess, but the selloff has created opportunities to pick up shares in high-growth small- cap names at what seems like extremely attractive prices.





Today’s recommendation is one of those names. It’s a marketplace company that is revolutionizing the outdated industrial manufacturing industry.





While the stock hasn’t been immune to bouts of market volatility it has been far more stable lately than most other high-growth names. It’s up over the last three weeks! And it offers investors exposure to an industry that is seen rebounding in 2022 and 2023.





Enjoy!

This week’s leading issue is the China virus, which is impacting markets.
We will need to keep an eye on this breaking issue. Still, Virgin Galactic jumped another 14% yesterday and is up over 80% in the last month.

Our emerging market timer is clearly positive and today’s recommendation is an emerging country that is the overlooked big winner from the two recent trade deals. It is in a nice uptrend and has fuel to burn going forward, backed by several positive trends.

The S&P 500 and Explorer stocks are in an uptrend in November as investors bet that the Federal Reserve’s interest rate hikes are done for now and that inflation will moderate without a recession. In addition, with most S&P 500 companies having reported third-quarter results, more than 80% have beaten analyst expectations.

With the investing climate improving, today we add two new positions to the portfolio. Enjoy, and Happy Thanksgiving!

“The whole world is under-followed relative to the Magnificent Seven…Whether you’re looking at a place like Japan… emerging markets… commodity sectors… there’s really a ton of opportunities that people just refuse to look at.”

-Richard Bernstein, CEO and CIO, RBAdvisors

Short selling is complicated and risky, and we don’t recommend it for inexperienced investors, but those who consider it should keep the following strategies in mind.

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Centuri Holdings (CTRI), GE Aerospace (GE), Intel (INTC), Pan American Silver (PAAS) and Paramount Global (PARA).

Intel (INTC) is reportedly mulling a sales of its network and edge businesses as part of an ongoing focus on streamlining the company.

Pan American Silver (PAAS) stands to benefit from recent gold-to-silver ratio readings.

Amid all the noise, you may have missed that Microsoft (MSFT) is investing $5.4 billion over the next two years to expand its existing data center capacity in Canada. The investment is primarily aimed at strengthening Canada’s AI and cloud infrastructure in Toronto and Quebec City.

Microsoft has pledged to keep Canadian data on Canadian soil and is launching a new “Threat Intelligence Hub” in Ottawa. This hub will allow experts to work closely with the Canadian government on cybersecurity threat monitoring.

This is a big win for Canada and is likely tied to one of the country’s secret weapons: cheap, dependable hydro power. This is where we go for this week’s new recommendation.

The market remains in good health, so I continue to recommend that you be heavily invested in a diversified portfolio of the best stocks, both strong momentum stocks (we have several) and lower-risk dividend-paying slower growers. In the portfolio this week, the only change is an upgrade of Vertex Pharmaceuticals (VRTX) to buy.

As for the newest recommendation, it’s unusual in that it’s not one stock; it’s actually an ETF of a market sector that I think holds spectacular promise in the long term.

The market’s main trend remains up, but the crosscurrents are getting fierce! So today I’m selling four stocks (two for good profits and two for small losses), all in an effort to keep the portfolio full of stocks whose potential upside justifies their potential downside.
As to this week’s recommendation, I’m happy to say that it’s a company headquartered in India, which is relatively free of the political turmoil that’s gripped the U.S. recently. Furthermore, given that foreign stocks have underperformed dramatically this year, I’m optimistic about getting on board somewhere near the beginning of a renewed uptrend.

Some weak economic numbers and political uncertainty about Hong Kong roiled markets a bit but emerging and international stocks rebounded a bit today. China stocks are getting some scrutiny in Washington amidst U.S.-China rivalry. Nevertheless, our new recommendation today is from the Middle Kingdom and is centered on a high growth theme that has a lot of momentum behind it.

Markets were closed yesterday in honor of the late President Jimmy Carter.

No matter your politics, the service was well done and inspirational.

It was a solid opening this first week of 2025: new recommendation American Superconductor (AMSC) shares were up 10%, Centrus Energy (LEU) shares were up about 8%, Cloudflare (NET) shares were up 7.5%, and Dutch Bros (BROS) shares were up 7.3%.

When a company announces a secondary stock offering, it can be a huge buy signal. That was the case for these three small-cap stocks.