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This is a short week, with my last update just a few days ago, but our Explorer portfolio is doing well. In the last few days, Sea (SE), NovoCure (NVCR) and Alibaba (BABA) are each up 10 points and ElectraMeccanica (SOLO) has increased 20%. As the clouds lift with the flurry of positive vaccine announcements and election uncertainty gone, markets will go into December with more confidence but with lingering doubts about the strength of the economy. Our new recommendation is a leader in critical cancer diagnostics highlighting the benefits of a sharp focus on one market.

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

With the year-end approaching, investors often sell for reasons unrelated to a stock’s outlook. This month we describe some of these reasons, including tax-loss selling, window-dressing, performance bonus protection and the desire for a fresh start in the new year. We discuss seven stocks that look vulnerable to this type of selling yet seem likely to bounce once the selling pressure relents.



We also look at the airline industry – now in the throes of a near-term depression. We believe the outlook for a recovery is improving despite the recent “third wave” of rising Covid case counts. Clearly these stocks carry risks, most prominently that passengers don’t return to flying as much, even after a vaccine and other safety protocols should make flying safe again. Our discussion delves into some of the industry’s arcane metrics, as these help clarify (at least for those with a wonkish interest, like me) the drivers of the downturn and a likely recovery. We highlight five promising discount airline stocks.



Our feature recommendation is the office equipment company Xerox Holdings Corporation (XRX). The market tends to dismiss this company, but its robust cash flow, cash-heavy balance sheet, low valuation and 4.6% dividend yield offer strong value.



The letter also includes a summary of our recent sales of Peabody Energy (BTU), Weyerhaeuser (WY) and Barrick Gold (GOLD), our price target increase for Freeport-McMoran (FCX) and the full roster of our current recommendations.



Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your 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.

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

We briefly share our thoughts on the surging stock market and run through some valuation math that looks out a few years. Our conclusion: the market’s earnings growth, even side-stepping the pandemic’s effects, doesn’t look that impressive, while the market’s valuation is on the high side of average. It is starting to look like a good time to be pickier about which stocks to own.



With this thought in mind, we are moving Broadcom (AVGO) from a Hold to a Sell, as the shares have essentially reached our price target.



It’s been a fairly active month for a value-oriented newsletter, adding three new names and selling six, including Broadcom. This leaves the holdings list at 12 names. We anticipate expanding this roster over the next month or two, as there are many interesting value ideas out there.



We also tweaked the descriptions under the portfolio titles to more accurately reflect what types of stocks we look for. This should also help add some clarity to the differences between the two categories.



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 company that specializes in precision medicine for cancer.



It has developed a sequencing platform that is able to analyze over 20,000 genes, far more than most competitor solutions. Even better, this platform allows analysis of both tissue biopsies and liquid biopsies.



Ultimately, the company is going after a roughly $40 billion market. Yet its market cap is a mere $1 billion today.



This company is still unknown, but that’s likely to change as it brings new products to market and continues to transform the market for personalized cancer vaccines and next-gen cancer immunotherapies.



All the details are inside. Enjoy!

Current Market Outlook


We could pretty much cut our intro from the past couple of weeks and paste it in this week—the primary evidence (trends and overall action of the market and leading stocks, fresh breakouts, blastoff-type green lights from mid November) remains very encouraging, with most of the major potholes seen lately coming from very speculative situations. The main worry is that few investors are worried (in stark contrast to earlier this year, when the market was kiting higher but few believed it), which tells us that risk is rising. Thus, we remain bullish and think putting money to work is the best course of action, but it’s also important to keep your feet on the ground and focus on the best-looking stocks while trailing stops higher and taking partial profits as things stretch higher.

This week’s list is relatively split between growth situations and those benefiting from cyclical/turnaround buying. Our Top Pick is Axon Enterprise (AAXN), which continues to gain sponsorship and has just tightened up nicely for five weeks.

Stock Name	Price	Buy Range	Loss Limit
Adient (ADNT)	34.99	32.5-34.5	28.5-30
Align Technology (ALGN)	504.11	485-515	430-445
Ambarella (AMBA)	90.94	84-88	74-76
AAXN (AAXN)	127.31	124-129	111-114
Baker Hughes Company (BKR)	21.72	20.8-21.8	18-18.7
fuboTV Inc. (FUBO)	27.15	24.5-26.5	20.5-21.5
The Michaels Companies (MIK)	11.68	10.9-11.8	9.4-9.8
Micron Technology, Inc. (MU)	71.54	66-69	60-62
PagerDuty (PD)	44.18	41.5-43.5	36.5-37.5
Stitch Fix (SFIX)	64.06	57-61	48-50

As 2020 winds to a close, and as the market races to all-time highs, our six open covered call positions are all doing very well ... especially our December positions set to expire next Friday, December 18.

Note: This is our final issue of Cabot Stock of the Week this year. Next week we get a little “vacation.”

But rest assured we’ll be keeping an eye on the market, where market trends remain very positive as we head toward the end of the year.



Today’s recommendation is a low-risk water company in a foreign country, so it may be the perfect diversification move if you’ve got a lot of U.S. growth stocks.



But to fit it into the portfolio, we’ve got to sell something, and the victim this week is Eli Lilly (LLY), which has brought us a decent profit in a fairly short time.



Full details in the issue.

The bull market remains alive and well, and I continue to recommend that you be heavily invested in a diversified portfolio of stocks.

This week’s recommendation is a very small medical technology company focused on the business of processing and testing cells, as accurately and efficiently as possible. Long-term potential is big.



But to make room for it in the portfolio, something has to go, and this week it’s Digital Realty (DLR), which never really got going for us.



Full details in the issue.

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

In November’s Issue of Cabot Early Opportunities we discuss the supposed rotation from growth stocks into value stocks and the underlying reasons, which we think could drive erratic market action in the coming weeks. Despite the somewhat conflicting trends out there, we serve up a menu of compelling opportunities spanning Medtech, manufacturing, software and even health and beauty products, which we can all use a little of these days!

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.

Current Market Outlook


The Nasdaq and leading stocks had a huge reversal today, with many names that had gone vertical suffering some heavy-volume selling, representing another shot across the bow. Still, as we’ve written before, one day does not a trend make; the trend of the Nasdaq and growth stocks remain up, while the broader indexes and cyclical sectors are positive but mostly range-bound. As has been the case earlier in the rally, what happens from here will be key--continued distribution would be a sign that the current run could be ending, likely followed by a well-deserved digestion phase, but strong support in the near future would likely tell us this was just another brief stumble on the way to higher prices. Stepping back, most of the evidence remains positive, so we’re still bullish, but the next few days will be key.

As opposed to the last two weeks, this week’s list is back to having a leadership, growth-ier feel to it. Our Top Pick is Alibaba (BABA), which has always had the makings of a liquid leader, and is helping to lead the group rally in Chinese stocks as it lifts out of a two-year rest.

Stock Name	Price	Buy Range	Loss Limit
Alibaba (BABA)	254.81	244-254	220-225
Bill.com Holdings (BILL)	88.76	81-85	73-75
Kinross Gold (KGC)	8.19	7.2-7.6	6.5-6.7
Marvell Technology Group (MRVL)	36.88	35-37	31.5-32.5
Pacira Biosiences (PCRX)	54.85	54-56	47.5-49
Redfin (RDFN)	40.40	34.5-36.5	30-31.5
Roku, Inc. (ROKU)	150.46	147-154	128-132
Splunk (SPLK)	207.67	192-198	175-178
Sunrun (RUN)	38.40	27.5-29.5	23.5-24.5
XP Inc. (XP)	44.59	43-46	38-39.5

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.

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.

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.