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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

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the November 2020 issue.

We briefly discuss the soon-to-evaporate election cloud, the merits of holding value stocks when growth/momentum stocks tumble, and highlight one of our portfolio stocks that had some earnings issues along with several others that reported strong earnings that lifted their share prices meaningfully.



Earnings season is in full swing. Six portfolio companies report later this week. We encourage subscribers to visit the reporting companies’ websites to review their earnings-related slide presentations and listen to the post-earnings conference call. These are all available to the public under the “Investor Relations” tab. Sometimes what portfolio companies actually do can seem murky – a quick visit to their website can help clarify, and (at least to me, a certified investment geek) provide some fascinating reading.



Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the 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 small MedTech company that represents a picks and shovels play on the cell and gene therapy market. It makes biopreservation media and storage solutions for cutting-edge treatments, including Kite’s (owned by Gilead) CAR T-cell therapies YESCARTA and TECARTUS.

It’s a high growth company with exposure to both clinical trial and commercial-stage therapies. Covid-19 therapies and vaccines are part of the mix too. And there is an M&A angle that’s increasingly relevant.



The stock appears to have huge upside over the coming years. And we’ll get an update from management almost immediately after you read my reports since the company reports Q3 earnings after the close today.



All the details are inside. Enjoy!

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.

Three of today’s featured companies seem most obviously ready to begin or continue run-ups in the coming days. The fourth featured company is sitting at the bottom of a steady trading range, offering attractive opportunities for growth investors, dividend investors and traders.

U.S. stock markets are rising again. At some point in the coming months, the sober reality of the country’s economic situation will impact the stock market, but for now, there’s money to be made. Energy stocks and stocks within the investment, life insurance and annuity industry look especially bullish right now.

Download the new report Cabot’s 10 Best Stocks to Buy and Hold for 2020 (subscribers only)


A stock joins the Buy Low Opportunities Portfolio today and another one rejoins the Growth Portfolio. Additionally, we say goodbye toone stock, which continues to have a slightly-improving price chart, but the 2020 earnings growth prospects are too dismal to remain in the Growth Portfolio.

Open today’s issue to read additional features and changes with three more stocks.

Today’s featured companies are benefiting from the current focus on healthcare, online commerce, dining at home and limited travel behaviors.

All of the stocks that I follow with any regularity finished falling in March, and began to rebound. I’m glad for that, and happy to be buying low. However, there’s still a dark cloud on the horizon. The longer the quarantine situation lasts in the U.S. and in foreign lands, the uglier the economic situation will become. That’s because many companies are scrambling for cash to pay their employees, rent, utilities, etc. while they’re not actually selling any products that can replenish the cash flow.



There are various stocks in today’s issue that I indicated would be good for traders. “Good for traders” bears no resemblance to “good for buy-and-hold investors”, okay? Please read my recommendations carefully. When in doubt, send me an email with your questions.



Lastly, take your time investing cash positions. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges. To that end, I’ve listed short-term upside price resistance targets on quite a few of the stocks. When the stocks rise to those targets, you’re going to tell yourself “my stock is going to keep rising!” Instead, odds are very strong that your stock will turn down. This will be a trader’s market for much of 2020. If you’ve ever toyed with the idea of buying and selling within a stock’s trading range, this is the year to do it! Best of luck to you!

The market remains in good health and trending higher, though the rotation out of the leading Nasdaq glamour stocks may have further to go—or may be just a false alarm.



In any case, it’s the stocks YOU own that matter, and if you’ve been choosing from our portfolio, you’ve been doing pretty well!



Today’s recommendation is a well-known and well-run company in the apparel business that should benefit from the trend toward more casual clothing. And according to our Cabot expert, it’s undervalued!



As for the current portfolio, there are two changes, a sell recommendation for Beyond Meat (BYND), which has lost momentum and a move to hold for Big Lots (BIG).



Full details in the issue.

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.

Three of today’s featured companies seem most obviously ready to begin or continue run-ups in the coming days Yesterday’s earnings report made it clear that a fourth’s dividend is safe, with a current yield of 8.4%. Plus, energy stocks are acting well recently.

Current Market Outlook


From a top-down perspective, there’s not much to complain about when it comes to the current market—the intermediate-term trend of the major indexes is firmly pointed up, and the broad market has come alive in a big way, with two major blastoff indicators turning green in the past two weeks. Thus, for the overall market, the outlook is mostly sunny, though there’s always the chance of a passing shower. However, leading growth stocks are now on the run a little bit; it’s been two weeks of on-and-off selling, and many are beginning to approach key support areas. As we’ve written lately, the good news is that breakdowns have been few and far between; the pullbacks have been normal thus far, but the next few days should be telling to see if growth names are in for a deeper retreat or whether everything can get in gear with the broad market on the upside.

As you’d expect, this week’s list is heavier in names that have more recently come to life, including a few cyclical-related names. Our Top Pick is Autodesk (ADSK), a growth-y name that should also get a boost from the economic recovery, and the stock has leapt nicely to new highs.

Stock Name	Price	Buy Range	Loss Limit
ASML Holding (ASML)	350.01	330-340	300-305
Autodesk (ADSK)	229.00	220-230	198-203
Carrier Global Corporation (CARR)	26.23	21.5-23	18.5-19.5
Datadog (DDOG)	81.52	72.5-77	62-64.5
Elastic (ESTC)	86.17	78.5-82.5	70.5-72.5
Marvell Technology Group (MRVL)	36.88	32.5-34	28.5-29.5
Square, Inc. (SQ)	91.04	85-89	74-76
Thor Industries (THO)	104.76	101-106	89-92
Trade Desk (TTD)	468.02	338-358	298-308
Trex Company (TREX)	117.56	117-122	103-105

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


The market continues to look fine, with both primary (trend) and secondary (new lows, etc.) evidence boding well—not to mention many of the longer-term signposts like blastoff indicators telling us this is a bull market. But for leading growth stocks, it’s tricky out there; while there haven’t been a rash of breakdowns, there’s plenty of iffy action, with low volume rallies, selling on strength and relatively few stocks hitting new highs. (While the Nasdaq tested new-high ground today, the number of stocks doing so was half of what we saw a week and a half ago.) We certainly don’t think you should be holed up in your bunker, and we’re staying flexible, but given the prolonged run and the recent sloppiness, we think moving closer to shore makes sense, especially if you own some sluggish performers.

Interestingly, while the leaders of the April-July move rest, we’re seeing other names (both growth and cyclical) perk up. This week’s list has plenty of both, and our Top Pick is Quanta Services (PWR), which has decisively broken out on the upside.

Stock Name	Price	Buy Range	Loss Limit
Berry Global (BERY)	64.22	51.5-53.5	47-48
Builders FirstSource (BLDR)	44.12	28-29.5	24.5-25.5
Cerence (CRNC)	107.77	53.5-56.5	46-47
First Solar (FSLR)	83.74	69-72	62-64
HubSpot (HUBS)	582.89	267-277	240-246
Innovative Industrial Properties (IIPR)	214.38	116-121	103-105
iRhythm Technologies (IRTC)	51.15	168-174	149-152
L Brands (LB)	79.48	26-28	22.5-23.5
Quanta Services (PWR)	91.45	48.5-51.5	42.5-44
Shift4 Payments (FOUR)	89.97	47.5-49.5	42-44

In this month’s issue of Cabot Early Opportunities we serve up a diverse group of stocks with exposure to vastly different areas of the economy.

There’s some software and biotech, and plenty of IPOs, but also a few ways to play rising strength in cyclical stocks.

Enjoy!

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.