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We are so accustomed to looking at stocks and markets day by day that we sometimes miss the big trends as well as opportunities.

I haven’t added any new stocks for a while because we’ve already got 30 stocks in the portfolios. Our current stocks have mostly been rising: the good, the bad and the ugly. However, I always have a good list of stocks that are waiting in the wings, so I really should rotate into some of them.

One stock moves from Buy to Hold, another moves from Strong Buy to Buy, and a third joins the Growth Portfolio as a Strong Buy.

The iShares EM Fund (EEM) has been through a bad week, pulling it decisively below its 25- and 50-day moving averages. It’s a clear red light, and we’re taking action to reduce our exposure while we await both quarterly earnings reports from our holdings and a return of the buyers to emerging market stocks.

The market was crushed yesterday as fears of a trade war with China picked up. At the close, the Dow had lost 724 points while the Nasdaq had fallen 179 points.

Our Emerging Markets Timer has turned negative, but its action of the past two months looks more like a trading range than a downtrend. Overall we continue to take things on a stock-by-stock basis; we have several stocks that are teetering on the edge of being kicked out of the portfolio, but we’re inclined to be patient unless a stock’s decline forces our hand.

The iShares EM Fund (EEM) gapped up to top its 25- and 50-day moving averages, which returns the Emerging Markets Timer to a positive reading. We are returning our half positions in two stocks and our full position in one stock to Buy ratings and initiating a new position.

Trim your sails. The market’s recent slide has cracked the intermediate-term uptrend, and while the overall bull market is still intact, chances are the market is going to need some time to correct and consolidate going forward.

The Boards of Directors of AXA and XL Group (XL) have unanimously agreed that AXA will purchase property & casualty insurer and reinsurer XL Group for $57.60 cash per share, a 33% premium to the March 2 closing price and a 59% premium to the XL share price when it joined the Buy Low Opportunities Portfolio on December 6, 2016.

If you dug into any financial news this weekend, you were likely inundated by tons of bearishness that have arisen due to so many uncertainties, but when it comes to the market, it’s best to just keep it simple and focus on the action itself: The intermediate-term trend of the indexes and vast majority of stocks remains down, with only a few special situation names and some commodity-related titles able to buck the trend. We would say that, just in the past week, far fewer stocks joined the indexes at new correction lows, but we need to see such rays of light lead to real, sustained buying pressures to take action on them. We advise remaining defensive.


Not surprisingly, this week’s list doesn’t have many stocks near new high ground, but we are seeing many that reacted well to earnings and have shown some positive volume clues. Our Top Pick is one of them, a new name in the resilient shipping group.

Last week brought some true extremes when looking at sentiment and oversold conditions, telling us some type of bounce was likely. That’s what we saw starting Thursday afternoon, and we’re optimistic we may have hit a workable low—“workable” in this case meaning the market can work higher for more than just a couple of days. That said, we’ll just see how it goes: While there are a few stocks acting well and set up decently, the vast majority of evidence remains negative, so we still favor defense and patience as the market tries to etch a bottom.
Encouragingly, though, this week’s list does have a few names that have shown outsized support during the past couple of weeks, often after earnings, and our Top Pick is one of them as it attempts to round out its launching pad.

Welcome to the Inaugural Issue of Cabot Money Club Stock of The Month

Each month, in this advisory, we will be spotlighting a new recommendation from one of our Cabot experts. We will include an interview with the analyst and bring you his or her latest thoughts on the stock we pick as well as a summary of the analyst’s expertise and experience.

We will also include a brief market update, and a longer piece highlighting the macro industry—the pros and the cons—in which our stock pick resides.

And as is usual with our Cabot advisories, we will maintain a portfolio of our stock picks, to give you a one-shot picture of our holdings.

Welcome!

With the bulls and bears continuing to fight it out in the growth arena, we’re moving into a more cyclical industry with today’s addition.

The company is a leading maker of semiconductor manufacturing equipment. This industry is growing rapidly as the current innovation wave requires smaller, faster and more durable chips.



Making those chips at scale can only be done with specialized measurement and process control equipment. Which is exactly what this company specializes in.



Enjoy!

The world has clearly changed in the past two weeks. We see an exceptionally wide range of possible outcomes, which makes predictions about the future (already a low success rate endeavor) basically futile. We offer our timeless investing advice that can be readily applied in such situations.

In the letter, we also provide updates on all of our Recommended Stocks.

The market situation is changing. Amidst persistent high inflation and concerns about future economic and earnings growth, investors are adjusting. Energy is up nearly 40% YTD as that sector benefits from inflation. Utilities and Consumer Staples are also thriving as investors focus on value, defense, and income in the market uncertainty.
Many stocks in the CDI portfolio have performed well and are likely to continue doing so. But because of the high prices they are rated a HOLD. However, there are two standout positions. In this month’s issue, I highlight two stocks that have what it takes in this market. They both benefit in the current environment, sell at reasonable valuations, and pay sky-high yields.


The market situation is changing for the worse overall. But there are still great opportunities if you know where to look.

The market’s downtrend remains in place, with the trends of the major indexes and growth stocks still solidly down, and just as important, we’re still seeing many blowups among individual names, with retail stocks like Target and Walmart going over the falls this week. Thus, we remain defensive, with north of 80% in cash.
That said, we’re not joining the growing chorus of super-bears out there--there are tons of extremes when it comes to the selling and sentiment that a low could come at any time. We’re not predicting that, but we are spending most of our time hunting for new leaders--and interestingly, we’re seeing a few candidates even after the recent down move, writing about most of them in this issue.

As Mike Cintolo, Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader always says, “you shouldn’t fight the tape.” The markets are battling it out these days, trying to find a bottom. The constant news cycle of Russia-Ukraine, rising rates (up 0.5% last week) and increasing inflation are causing a severe case of market indigestion and volatility.



What’s an investor to do? As I’ve been saying for the past 6 or so months, judicious investing is the key. While most sectors (except Energy and Utilities) and the majority of equities, are down for 2022, there are still pockets of ideas worth investigating, including some defensive moves.



With that being said, I think investors should be keeping some cash on the sidelines, as when this market shows signs of a long-term turn, there will be plentiful bargains to be had.

See-sawing—that’s what these markets bring to mind. And I think we can expect more of the same, due to three factors:

1. The war in Ukraine2. Rising inflation—up about 8.4% last month3. Increasing interest rates. Economists now expect the Federal Reserve to raise rates by one-half a percent, in both May and June

Remain bullish. There are some cracks in the market’s armor, with some major indexes softening and the broad market under more and more pressure. However, our two trend-following indicators are positive and most leading growth stocks are acting fine. While we’re keeping a close eye on our stocks and will take action if necessary, we’re not making any major moves tonight.