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Welcome to our TOP PICKS issue! For this issue, I asked the Cabot analysts to give me a couple of their top picks for 2024. I hope you will be pleased with the diversity—market-cap and sector-wise—that the analysts have offered.

But first, let’s talk about the market.

One common market saying is that rotation is the lifeblood of a bull market, but that’s only partly true: If the rotation sees leaders pull in normally while buying pressures broaden out, that is a good thing, giving the market a stronger foundation for future gains. But if the leaders crack intermediate-term support while money chases beaten-down titles, that can lead to trouble as the market (and those laggards) often end up following the leaders lower. Happily, so far, the rotation that began in late June and has carried on since has been more in the former camp. While we’ve pulled in our horns a bit, we remain overall bullish. We’ll move our Market Monitor to a level 7 and see how things go from here.

This week’s list definitely has a value and turnaround flavor, following along with some of the rotation seen in recent weeks. Our Top Pick reacted well to earnings last week (heaviest daily volume since 2020!) after management reinstated bullish guidance. Start small and add on the way up.

This month we’re wading deeper into the MedTech space with a life sciences company that’s commercializing a disruptive technology that could diagnose disease in seemingly healthy people.
It’s an exciting story of a young company that appears to be in the early innings of its growth curve, but has made it far enough with respect to technology development, customers and strategic partnerships to attract attention from larger investors.
Revenue was up 60% in 2018, and is projected to keep growing at a rapid rate. All the details are inside this month’s Issue.

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



One of the enduring features of the stock market is that near-term share prices are driven by momentum and narratives. While this may yield huge money-making stocks on the way up, losses can be devastating on the way down. Fortunately for value investors, downturns driven by negative momentum and unfavorable narratives can create impressively attractive opportunities.



We discuss two groups of stocks that fit this bill: homebuilders and stocks with valuations below 5x EV/EBITDA. Our featured recommendation this month is homebuilder M/I Homes (MHO), which trades at a large discount to its liquidation value despite what may be a reasonably steady industry over the next several years.



We note our recent move of Vistra Energy (VST) from a Buy to a Sell.

Today’s featured stocks are those that I sense are most likely to rise this month. We’ll probably see near-term strength in energy companies, alongside rising oil prices; and insurance companies, as their fourth quarter results include capital gains from investment portfolio performance. Earnings season kicks off this month with banks reporting fourth quarter results. It’s not too late to sell the worst stock in your portfolio and replace it with shares of a high quality, growing company that has a bullish price chart.

This month we review how the capital markets performed in 2020 and provide our outlook for 2021. We look at the broad equity market and trends below the surface, including growth/value, large/small and sector returns. We also briefly discuss the global equity and commodity markets as well as the U.S. fixed income markets. Our outlook starts with a review of how our 2020 outlook turned out, then dives into what we see for 2021 for the S&P 500, touches upon the rising influence of the two “Easts” and our wariness about speculation, and concludes with some timeless perspective about investing.

The issue also reviews the high yield bond market. We follow the high yield bond market as it provides a different perspective on equity markets. Importantly, there is considerable overlap among high yield bond investors, turnaround investors and private equity investors who may acquire undervalued companies.



Each January, we highlight our “Top Five” stocks for the coming year, based on a combination of favorable risk/return and timeliness. For 2021, our Top Five includes Conduent (CNDT), Meredith Publishing (MDP), Newell Brands (NWL), Signet Jewelers (SIG) and Wells Fargo (WFC).



Our feature recommendation is Ironwood Pharmaceuticals (IRWD). The market views Ironwood as a failed pharmaceutical company but its low share valuation, steady/rising profits and the presence of an effective activist investor make the stock a stand-out value, in our view.



The letter also includes a summary of our recent sales of GameStop (GME) and Freeport-McMoran (FCX), our price target increases for Trinity Industries (TRN), Adient (ADNT), DuPont (DD) and General Motors (GM) as well as 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 Turnaround Letter. We hope you enjoy reading the July 2021 issue.

This month we look into major pharmaceutical stocks, which are selling at their widest discount to the market in decades. We discuss some reasons behind the market’s pessimism and why, for value investors with patience, the shares of five companies offer considerable appeal.



We also include our mid-year stock market update and mid-year bankruptcy review. Stocks have been remarkably strong so far this year and appear poised for more gains, yet we encourage value investors to remain selective and patient amidst the exuberance while keeping the long-term horizon in view.



Easy financial market conditions have helped shrink the number and size of bankruptcies to a fraction of their long-term average. We discuss this phenomenon and why investors in distressed securities should wait for conditions to become favorable again.



Our feature Buy recommendation, Organon & Company (OGN), is a recent spin-off from Merck. Investors have discarded the shares due to revenue concerns, but the bargain valuation and our more optimistic outlook make the shares appealing.



It was a busy month in the portfolio. We raised our price targets on Signet Jewelers (SIG), Molson Coors Beverage Company (TAP) and General Motors (GM), and moved four stocks to Sell: Biogen (BIIB), BorgWarner (BWA), The Mosaic Company (MOS) and Jeld-Wen Holdings (JELD).



Please join us for the our 9th Annual Smarter Investing, Greater Profits Online Conference, held on Tuesday, August 17 through Thursday, August 19. You can see presentations by all of our analysts, which will include updates in their areas of expertise and discussions of their best picks.



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.

We’ve written about inflation in the past two letters and promise that we’ll stop with this letter, unless some major news on this front emerges. Yet, what keeps us on the topic is commentary from brokerage firms and media outlets saying that the market is fully discounting the arrival of inflation. If inflation is here to stay, at perhaps a rate greater than, say, 3-4%, then the market is not discounting its arrival.

Carl Delfeld, chief analyst of Cabot Explorer, covers clean energy including electric vehicles, semiconductors, strategic resources, and fintech.
Learn how to identify high growth power sectors and then the best power stocks.

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



When considering turnaround situations, our most-preferred catalyst is a chief executive officer change. When a business is sliding backwards, this could be exactly the change needed to restore its prosperity. For frustrated shareholders, the change can bring immense potential. We discuss six new CEO situations that look appealing.
Long ago, astute investors noticed that the stocks with the highest dividend yields in the Dow Jones Industrial Average tended to become the index’ best performers in future years. Following the recent market sell-off, we re-visited this group to look for interesting opportunities. We review six of the highest dividend yielding Dow stocks, and leave out three that have immense strategic and profit pressures.
Our feature recommendation this month is Volkswagen AG (VWAGY). The shares have plummeted after our timely sale last year for a 182% total return and we take this opportunity to repurchase them at the current low price. The financially sturdy company has a new CEO and another possible catalyst from a Porsche initial public offering.



We note our recent ratings change of Credit Suisse (CS) from Buy to a Sell.

In American football, most quarterbacks are right-handed. So, when they drop back to pass, they typically turn their backs to the left side of the line of scrimmage. They are essentially blind to what happens behind them. If the offensive line is weak, the quarterback is vulnerable to a potentially devastating hit, risking not only that particular play but also possession of the ball and possibly serious injury.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the April 2023 issue.

This issue focuses exclusively on the banking industry. Given the recent turmoil and the second- and third-largest bank failures in U.S. history, we examine the question on the minds of value and contrarian investors: is it time to jump back into bank stocks?

Our feature recommendation this month is First Horizon Corp (FHN), a relatively plain mid-sized regional bank that provides an appealing way to exploit the bank sell-off: merger arbitrage. Due to regulatory delays, the bank’s shares trade at a 33% discount to the $25/share all-cash offer from TD Bank Group, a large and well-capitalized Canadian bank. We believe that the deal will close at the $25 price, providing an attractive return, even as the shares’ discounted valuation offers considerable downside protection.

All in all, the evidence has continued to show some marginal improvement in recent weeks among individual stocks, plus, some top-down measures (long-term trend, health of the broad market) are looking better … but not quite enough for green lights. All in all, what we’re seeing are steps in the right direction—the market and many individual stocks are doing what they have to in order to repair the damage. But we still need to see continued progress to really extend our line, as little is being sustained on the upside. We’ll again keep our Market Monitor at a level 5.

This week’s list is a hodgepodge of names from different sectors and in different positions in their charts. Our Top Pick is a biotech name that, after many stops and starts, looks to have finally broken out on the upside.

NanoString (NSTG), Aerohive (HIVE) and Q2 Holdings (QTWO) reported earnings.

A difficult stretch causes us to sell two underperformers this week but we move forward today with a high-quality Japanese company at the heart of an unstoppable trend and a high-quality stock on sale.

Back on October 13, I penned a CWA titled “Finding Your System” where I wrote about finding a system that fits you. It’s a topic that’s frequently on my mind - money management-type topics are always worth some thought - and I was reminded of it just a few days ago when I was re-reading parts of Reminiscences of a Stock Operator, the fictional biography of Jesse Livermore, and one of the best investment books ever written.

I think the 0.25% raise by the Fed yesterday will be followed by a pause. Won’t it be nice when stocks fluctuate primarily around company performance rather than actions by the Fed? Elsewhere, Xi and Putin meet in Moscow in a sign of solidarity and challenge to the U.S. and the West. Novo Nordisk (NVO) is up 10 points this week while today we have a new emerging market recommendation from a country with one of the strongest currencies of 2023.