After years of being either ignored or sold off, value stocks are finally having a moment on Wall Street. The Vanguard S&P 500 Value Index Fund (VOOV) is up 25% in the last five months and is actually outpacing growth titles over the last month. Still, it’s a bull market, and growth stocks are king. How to compete as value investors in a growth-minded market? By seeking growth stocks at value prices.

Today, we do just that, adding a household name that’s been rejuvenated thanks to a shift in industry trends. The stock is up 18% year to date, and yet its shares remain dirt cheap by virtually every measure.

Enjoy!

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the March 2024 issue.

We discuss the similarities between poker and value investing. This past month we moved two stocks from Buy to Sell – Allison Transmission (ALSN) as it reached our price target, and Sensata Technologies (ST) as its management continues to take a path that is not shareholder friendly.

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.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the February 2024 issue.

Spin-offs should be in every value investor’s toolkit. In this issue, we are adding a spin-off, Worthington Enterprises (WOR), to our Buy recommendations roster.

We comment on recent earnings from Comcast (CMCSA) and provide updates on our other recommended stocks.

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.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the January 2024 issue.

We review the stock market’s remarkable performance in 2023 and highlight our recommendations that produced notable gains along with our clunkers. Our view on the 2024 market is that stocks will have an average year, with the Magnificent Seven producing flat/modest returns at best. Readers should keep in mind quotes from Yogi Berra and Warren Buffett when considering market forecasts. Onward to 2024.

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.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the December 2023 issue.

Artificial intelligence-inspired investors are partying like it’s 1999. We’re finding attractive value elsewhere, in discarded industrials like our new Buy recommendation, CNH Industrial (CNHI).

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the November 2023 issue.

We discuss recent earnings from our companies and move shares of Sensata Technologies (ST) from Buy to Hold given the company’s lower overall quality compared to our initial understanding.

We also include some thoughts on the current stock market and how rising interest rates and other factors have led investors to unload shares of most companies and riskier companies in particular.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the October 2023 issue.

We include brief updates from investor day presentations by Philip Morris International (PM) and Sensata (ST), as well as comments on our other recommended names. We also share a view on how streaming services are changing the sports viewing experience, along with a thought on why Comcast (CMCSA) should be fine.

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.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the September 2023 issue.

We do a deep-dive into what ails Citigroup (C) shares and remain steadfast in our conviction.

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.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the July 2023 issue.

Almost like an annual rite of passage, major banks reported their Federal Reserve stress test results last week. All major banks passed, in that their capital levels were in excess of the minimum requirements under the Doomsday Scenario conditions outlined in the test assumptions. We’re not the biggest fans of these tests, for reasons outlined in our monthly letter.

Citigroup remains a riskier bank relative to other majors, but also has a higher return-potential share valuation, plus a 4.5% dividend yield to reward patient investors.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the July 2023 issue.

Almost like an annual rite of passage, major banks reported their Federal Reserve stress test results last week. All major banks passed, in that their capital levels were in excess of the minimum requirements under the Doomsday Scenario conditions outlined in the test assumptions. We’re not the biggest fans of these tests, for reasons outlined in our monthly letter.

Citigroup remains a riskier bank relative to other majors, but also has a higher return-potential share valuation, plus a 4.5% dividend yield to reward patient investors.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the June 2023 issue.

The U.S. presidential election, “only” seventeen months away, is shaping up to follow a predictable script. Investors should keep their personal views and their investing process separate.

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.

Thank you for subscribing to the Cabot Value Investor. The new name for the former Cabot Undervalued Stocks Advisor more clearly and broadly describes our mission to serve value-oriented investors. We hope you enjoy reading the May 2023 issue.

Fitting for a value investment newsletter, your chief analyst will be making the pilgrimage to the Berkshire Hathaway Annual Shareholders Meeting this coming weekend.

In this month’s letter, we include our recent new Buy recommendation: NOV, Inc. (NOV). This high quality mid-cap company ($7.3 billion market cap) appears to be in front of an upshift in demand for sophisticated drilling equipment even as its shares trade at a modest valuation.

We also cover earnings reports and provide other relevant updates on our recommended companies.

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.

The market is getting a little frothy.

The S&P 500 is up 5.5% in the five weeks since election day, though that’s a historically normal bump following an election. The bull/bear ratio topped 3.9 last week – just shy of the 4.0 “danger zone” that often precedes pullbacks, though it’s not the first time it’s been this high in recent months. And Bitcoin, an asset that thrives in bull markets and typically tops right before a major pullback, just crossed the $100,000 threshold for the first time and has more than doubled in the last three months.

Tesla (TSLA) is getting lots of headlines these days, and for good reason.

Their CEO and founder, Elon Musk, was tabbed by President-elect Donald Trump to head up something called the Department of Government Efficiency (along with Vivek Ramaswamy); their stock price is up 57% in the last month; and the company is coming off its first truly encouraging quarterly earnings report in a year. Anyone who invested in TSLA a year ago, five years ago, or 13 years ago, when our Mike Cintolo first recommended the stock in his Cabot Top Ten Trader advisory, has made a LOT of money.

But another company has surpassed Tesla as the biggest EV seller in the world. And today, we add it to the Cabot Value Investor portfolio.

The honeymoon phase for a second Trump term continues on Wall Street. Stocks are up 3.5% in the week since Trump won the election, with all three of the major indexes advancing to new all-time highs. The reaction is being framed as specific to Donald Trump and his potential influence on stock prices – the so-called “Trump Trade” – but in reality, this is nothing new.

In recent years, there’s always been a honeymoon phase for stocks after a presidential election – regardless of which party or candidate won. And it typically lasts until the newly elected president’s inauguration in late January.

As you read this, I am likely fortifying my house in preparation for the 400-500 Trick-or-Treaters that are sure to descend on our place in Vermont in a few hours. That’s no exaggeration – we live on a crowded street that draws kids from all over town, and even adjoining towns, trying to maximize their Halloween hauls. The 1,000 pieces of candy I buy every year and the countless ghouls, skeletons, smoke-emitting jack-o’-lanterns and giant spiders I’ve accrued the last few years to adorn our lawn are almost like an annual tax.

Living in such a bustling Halloween hotbed is fun, and it’s certainly a blast for our two kids. But it’s a lot of work, and we’re always happy when the calendar flips to November. And in that way, it reminds me a bit of the market every October.

October hasn’t been accompanied by the type of stock selling we’ve witnessed the last two years, when U.S. markets fell sharply in October and reached a second-half-of-the-year bottom both times. Instead, this October has wrought a more subtle disappointment: rising interest rates.

Indeed, despite the Fed’s 50-basis point cut to the federal funds rate in mid-September ringing in a new era of rate slashing, 10-year Treasury yields have risen steadily since the calendar flipped to October, going from 3.80% to 4.24% – their highest level since July. In fact, Treasury yields are up 15% since September 18, the day the Fed cut rates for the first time in four and a half years.

We spend the vast majority of our time focused on U.S. stocks, and rightly so.

After all, although America has just 4% of the world’s population and generates 23% of the global GDP, 72% of worldwide investment capital is spent on U.S. stocks. That’s a stat our global investing expert, Carl Delfeld, relayed to me and my colleague Brad Simmerman on our latest Street Check podcast (click here to listen to the entire conversation). I knew the global investment axis tilted toward the U.S. – just maybe not that much.

Stocks have barely budged for three months.

The S&P 500 is a mere 1.5% above its mid-July highs, while the Nasdaq is actually down 2.5% since its July 10 peak. The Dow has made the most headway, up 2.1% since its July 17 apex. This type of multi-month lethargy is nothing new for an election year.

Value stocks are starting to play catch-up.

The Vanguard Value Index Fund ETF (VTV), a good proxy for value stocks, is up 9% since the first week of August, more than half its year-to-date gain of 16.6%. While value stocks still trail the S&P 500 (+20.9% YTD) and growth stocks (the Nasdaq is +22.4% YTD), the gap is narrowing. Now that the Fed is finally cutting interest rates from multi-decade highs, perhaps this “in name only” bull market will spread to more corners of the market beyond just the Magnificent Seven, artificial intelligence stocks, and the other mostly tech-related plays that have carried this 23-month rally.

The Fed went big!

Everyone knew Jerome Powell and company were going to (finally) cut the federal funds rate for the first time in four and a half years on Wednesday. The question was by how much – 50 basis points (0.50%) or 25 basis points (0.25%)? To my mild surprise (but not to Wall Street’s – the options market had swung to a 59% probability that it would be 50 bps prior to the announcement), the Fed opted for the larger cut, slashing rates from 5.25-5.5% to a 4.75-5.25% range. So far, the market seems unsure how to take the hefty cut – all three major indexes were up more than half a percent immediately following yesterday’s 2 p.m. ET announcement, but then were narrowly in the red by day’s end.

The Magnificent Seven have run into a brick wall in the second half of 2024.

After carrying the market in the first half of the year, and through much of 2023, the seven largest mega-cap tech stocks – Amazon (AMZN), Apple (AAPL), Google (GOOG), Meta (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) – have all seen the air let out of their balloons in the last two and a half months, or longer in some cases. On average, those seven stocks, which comprise roughly 30% of the S&P 500, are down 3.7% since the beginning of July. Not coincidentally, the S&P 500 as a whole is flat, after being up about 15% in the first six months of the year, during which six of the Mag. 7 (TSLA was down) performed even better.

It is a late-summer/early-fall rite of passage on Wall Street: After Labor Day, the institutional investors and hedge fund types return from their summer vacation homes in the Hamptons and immediately start selling. They sell out of their weakest positions that have been neglected and left to rot during the summer months, in the hopes of beefing up their quarterly returns before October brings a new quarter. The result is that September is, far and away, the worst month for stocks, with an average decline of -1.17% in the S&P 500 dating all the way back to 1928. The next-worst month is February, with a mere -0.14% decline.

That’s the bad news as we enter September. Here’s the good news.

The success of headliners Walmart and Target in the last week has helped drive consumer staples stocks as a group up nearly 5% in August. No other S&P 500 sector has performed better this month. And yet, consumer staples are “only” up 14% year to date, trailing the gains in the S&P 500 (17.3%).

Thus, the sector as a whole is still undervalued. That spells opportunity.

We’re selling this portfolio stock with a 54% profit since its December 2019 recommendation.

Chart is an interesting company, for sure, and we would be happy to buy again at much lower prices.

Yesterday, after the market closed, rumors emerged that this portfolio stock is once again in talks to sell their gas stations.

This portfolio stock reported good second-quarter results and moves from Hold to Buy.

The S&P 500 has had a tremendous run-up. It’s due for a correction, although it’s not yet indicating that the correction is imminent. Be cautious. Use stop-loss orders and/or pare back positions on stocks that have retraced early 2020 highs.

Crista updates three portfolio stocks and has one rating change.

The S&P 500 and Dow Jones stock indexes appear to have tentatively begun rising above a trading range that lasted for six weeks.

Crista updates us on two stocks, one in the portfolio and one that she has recommended in the past year.

Two portfolio stocks reported earnings and have rating changes.

Five portfolio stocks reported earnings and one moves to Strong Buy.

Three portfolio stocks recently reported earnings and one moves to Strong Buy.

Several portfolio stocks recently reported earnings and move to Strong Buy.

I want to point out a problem that I foresee, potentially on the scale of the technology bubble in 2001 and the housing bubble in 2007. I think we’re going to have an “inverse ETF bubble.”

My stock-picking strategy has been refined over the course of 28 years, and has been quite stable for the last six years. My investment goals are (1) minimize stock market risk, (2) achieve capital gains, with dividends as a welcome addition to total return and (3) outperform the U.S. stock markets.

Our instincts warn us that stocks reaching all-time highs are invariably overdue to fall. Sometimes yes, sometimes no. We examine two common scenarios involving stocks that are about to rise—or fall—from new high prices.

If professional investment companies are not making their decisions based on the price of the stock, neither should you.

I was talking with an investor recently about the latest stock market downturn. He was puzzled; if General Motors (GM) is supposedly such a great stock and vastly favored among portfolio managers, why would it fall 30% during a market correction?