Ahead of a big week for the market, the S&P 500, Dow and Nasdaq all rose marginally last week.

Ahead of a big week for the market, the S&P 500, Dow and Nasdaq all rose marginally last week.

The markets traded sideways through most of April. But since then, the choppiness has returned—along with worries about the uncertainty regarding the debt ceiling, the expiration of the immigration-limiting legislation, and ongoing debate about the possibility of a recession.

Yet, economically speaking, the trends are still healthy. Manufacturing has held up, employment continues to rise, and job openings are still underutilized (as you can tell if you’ve been in a restaurant lately!).

For the first time in weeks, and maybe even months, the market’s advance felt broader as more and more stocks participated in the market rally. That, as well as the VIX getting clobbered, has me encouraged … for now.

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.

The market finished solidly in the black thanks to a strong end to last week; interestingly, while the intermediate-term trend is still neutral overall, a couple of broad up days from here could kick it into the green. Even better is the action of leading stocks, with more names emerging and, importantly, more names holding their recent upmoves. To be clear, there’s still a lot of proving to do, but overall, we think the evidence has taken another step in the right direction—we’ll move up our Market Monitor to a level 6 and see what comes from here.

This week’s list has a ton of strong names and other good setups that could lift should the market continue to improve. Our Top Pick looks like the leader of the improving cybersecurity group, having lifted out of a long consolidation. Dips should be buyable.

Stocks are the highest they’ve been since last summer, and with the debt ceiling in the rear-view mirror and the Fed sounding less hawkish these days, it’s possible they could keep rising as we enter Summer 2023. One sector that’s been unstoppable of late is artificial intelligence, so today we add some more AI exposure, which has already served us well with the performance of Microsoft (MSFT). The new addition is a lesser-known name but is equally red-hot. Mike Cintolo recently recommended it to his Cabot Top Ten Trader audience.

The market continued to rally this week and as a result, the probability of success on our positions moved slightly lower. That being said, both of our open trades still have a favorable probability of success. Our IWM iron condor sits at approximately 76% (tested side) and our QQQ bear call currently stands at a probability of success of better than 81%. Of course, anything can happen with 47 days left until our positions are due to expire on July 21.

The June 16, 2023 expiration cycle is nearing and we have several positions due to expire. While I intend, as always, to stay mechanical and allow our KO and GDX puts positions to play out, I do plan on buying back our PFE 40 calls this week and immediately selling more call premium.

We are firmly in the doldrums of earnings season for the next few weeks, but that doesn’t mean we will not be presented with an opportunity or two each week. While last week was slow, this week picks up, slightly with a potential opportunity in DocuSign (DOCU).


While I could really care less about the fundamental aspects of the company and the upcoming earnings announcement, the high implied volatility (IV) piques my interest. Though I am not a fan of chasing high IV stocks, I am a fan of highly liquid stocks that have highly inflated premium around earnings.

For the first time in weeks, and maybe even months, the markets advance felt broader, as more and more stocks participated in the market rally. That, as well as the VIX getting clobbered, has me encouraged … for now.

For the first time in weeks, and maybe even months, the markets advance felt broader, as more and more stocks participated in the market rally. That, as well as the VIX getting clobbered, has me encouraged … for now.

Stocks had their second straight bad day today to close out the quarter. At day’s end, the Dow had sunk 550 points, the Nasdaq dropped 222 points and many growth stocks got hit hard.

There’s been a lot of talk lately about a potential yield curve inversion (happened briefly on Tuesday), so I did some work earlier in the week to see what the data says about small- and large-cap stock performance around inversions.

What a rally off the bottom! After flirting with a severe correction and possibly a bear market, stocks have soared over the past two weeks. The S&P 500 is now down less than 3% YTD. What happened?

Panic waned and investors realized that the economy is still strong, interest rates are still low, and money has no place else to go but stocks to fetch a decent return. The initial panic from the Russia/Ukraine war subsided. Then the Fed hiked rates by a measly 0.25% and pleased short-sighted investors.

After adding IEA to the portfolio after last week’s ratings change, we’re fully invested in our Real Money Portfolio. It’s designed to be 12 holdings of equal initial size. We’re up 4% on the total portfolio we hold now, based on market prices entering today (higher if we tally dividends and trust value of the portfolio’s two SPACs). That puts us in a good spot if Greentech remains on the upswing, since being fully invested in the early stages in a bull move allows us to capture more of the upside. There is resistance ahead, with charts suggesting a move 5% higher and then 12% above current levels will bring in sellers. However, the general stance remains bullish, with our benchmark Wilderhill Clean Energy Index above its uptrending 20-day and 40-day moving averages and little pushback by bears since a high-volume, strong price move earlier this month.

Almost everywhere in the mainstream media and across most Wall Street research firms, there is a common implication that a recession will bring a bear market for stocks.

We’ve been delivered. In just two short weeks the market has gone from a toxic 2022 market sliding toward bear territory to a huge rally that brings back the hope of a mediocre year. Enjoy the high country.

It was ugly two weeks ago. The Russia/Ukraine war was unpredictable and sending ripples through the global economy with soaring food and energy prices. The Fed was a million miles behind the curve in fighting this persistent high inflation.

For more than a year, gold remained stuck in a holding pattern while other metals roared higher in response to global manufacturing demand and supply shortages. All the while, the global economic and geopolitical situation was becoming increasingly tenuous, prompting us to repeatedly wonder when a flight to the safety of gold would transpire.

As market conditions continue to shift, with large-cap U.S. stocks resuming an uptrend in the past two weeks, we are once again making some changes within the tactical Undiscovered Portfolio.

This week’s Friday Update includes our price target increase for one of our energy companies, as well as updates on several recommended companies. We’re not macro-driven, but we are macro-aware, and are thinking about the reserve status of the U.S. dollar. Also, we bid farewell to Ned Johnson, legendary former CEO of Fidelity.

Brazil-based StoneCo (STNE) surged in its first week as an Explorer recommendation, recovering from a sharp sell-off and spurred along by stellar fourth-quarter 2021 financials in which revenue grew by 87% compared to the last quarter of 2020 and the company reported 1.8 million active customers – 2.3 times more than in 2020.

As NATO leaders meet in Brussels and the Russian stock market opens, the Ukraine-Russia conflict continues to send energy and commodities up (see graphic below, courtesy of Bloomberg, as to why). The Euro Stoxx 50 is down 8.7% this year, versus -5.3% for the S&P 500.

The market is looking a lot better than it did a couple of weeks ago even though the Russia-Ukraine conflict continues and the Fed has become more vocal about the need to hike interest rates in order to battle inflation.

This Israeli-based baby food company is spreading its wings with its toddler and kid shakes moving into Walmart stores. Please note, these shares are speculative, so please don’t load up on them.

The shares of this utility company were recently upgraded at Wells Fargo to ‘Overweight.’ The shares have a current dividend yield of 5.49%, paid quarterly.

This company stands to gain market share by applying its systems to the current shipping logjams. Descartes is expected to grow at an annual rate of 39.8% over the next five years.

This preferred stock is backed by a giant financial company.

This household name consumer products company beat analysts’ earnings estimates by $0.07 last quarter. The shares are trading at a discounted level, and have an annual current dividend yield of 3.53%, paid quarterly.

Today is the expiration of October options and three of our positions will likely expire for profits. The details are below, but the headline is we are simply going to let these situations play themselves out today, and then will revisit where we stand Monday/Tuesday of next week.

Analysts expect this off-price retailer to grow by triple-digits over the next five years.

As we alluded to in this week’s report, the major industrial metals are improving with copper showing the greatest relative strength. We have added some new positions to the portfolio in light of this strength, and here we’ll highlight the latest ones.

Our first idea is a software company who beat EPS estimates by $0.12 in the last quarter. Our sale recommendation is a company whose earnings forecasts are dimming.

The good news is that the marijuana industry is growing rapidly, with the leading companies continuing with their programs of store openings and acquisitions.

The top five holdings of this fund are: Microsoft Corp (MSFT, 11.29% of assets); Tesla Inc (TSLA, 8.41%), Danaher Corp (DHR, 6.09%); Honeywell International Inc (HON, 5.60%); and Cisco Systems Inc (CSCO, 5.29%).

This biopharma has a promising Alzheimer’s drug in the pipeline. But please note that these shares are speculative, so please don’t overload your portfolio with them.

A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.

A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.

Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.

Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.

Our Cabot Momentum Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Momentum Trader features.