This week’s action has been a disappointment, with growth stocks suffering selling while defensive names have picked up steam. Still, nothing much has changed--the top-down evidence is mixed, and growth stocks, while taking on water, haven’t suffered anything abnormal to this point. Thus, given that we’re about half in cash, we’re mostly standing pat in the Model Portfolio tonight.

More than $15 trillion in assets are linked to the performance of the S&P 500 index in some way, according to S&P Dow Jones.

Apple, at about $2.4 trillion, and Microsoft, at $2.1 trillion, are so large that, taken together, the two companies would be the third-largest sector of the index, behind tech and health care. This share is trending lower as other companies rise.

We’re digging into another compelling MedTech story this month.

The company in focus is a spine specialist. It’s been grabbing market share from larger players by growing a portfolio that covers the full spectrum of spine care, from imaging and surgery planning to surgical tools and implants.

It’s a great example of how intense focus on a specific market can set one player apart from the big boys. Enjoy!

Despite the banking worries of last month, the S&P 500, Dow and Nasdaq have strung together three straight weeks of gains.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the April 2023 issue.

We comment on the price of gold and what we see as its primary drivers. Gold is now trading above $2,000/ounce. We also provide updates on our 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.

The market put on a constructive show last week, though today was a bit sloppy, as the surprise OPEC supply cut hiked oil prices brought some rotation ... and provided a reminder we’re still in a very news-driven environment. All in all the story remains mostly the same: There are positives, especially among growth titles, but the market is bifurcated and tricky, with a lot of stocks still in the doghouse. At this point we think playing things mostly halfway (good amount of cash, some nibbling on strong names) is still the best stance. We’ll leave our Market Monitor at a level 5 tonight.

This week’s list is a bit more mixed than in recent weeks, with less growth and more cyclical and cheap situations. Our Top Pick is an old friend in the cybersecurity space that has a few months of positive momentum as Wall Street anticipates big profit growth ahead.

The market is arguably the healthiest it’s been since 2021 – remarkable considering all the economic and sociopolitical hand grenades tossed at investors in the first quarter of 2023. So, this week we lean into the recent strength by adding another growth stock in the form of a small-cap semiconductor play with strong ties to Apple. It’s a stock recently recommended by Cabot Early Opportunities Chief Analyst Tyler Laundon, and one that has plenty of momentum – up 35% year to date.

Earnings season is finally near, but we still have one week of little to no trading opportunities. Constellation Brands (STZ) offers the best opportunity of the week, but liquidity could be a potential issue. Otherwise, the metrics of the trade look quite appealing.

We currently have two open positions, a bear call spread in DIA and an iron condor in IWM. Our deltas are currently skewed towards the bearish side of things, so we will need to balance out our deltas by adding a bull put spread or some other bullish leaning strategy. So the focus this week will be adding some positive deltas to the mix to bring the portfolio closer to a delta-neutral state.

We need to sell premium early this week in Wells Fargo (WFC) and Gold Miners (GDX). I plan on entering new positions on Monday or Tuesday so be on the lookout for a trade alert or two over the next few days. Additionally, I hope to add a few brand new stocks to the mix this week as I want to ramp up the number of our positions in our Income Wheel Portfolio.

Many of the underlying trends in cannabis continue to be favorable even if this is not reflected in the stock prices, which are down sharply this month.

States continue to advance legalization of recreational use. Lawmakers remind us that federal regulatory reform in banking remains on the table, and will get taken up by key Congressional committees this year. Europe should begin to advance recreational use legalization within the next several weeks, starting with Germany. Cannabis sector insiders are stepping up to buy stock. Industry consulting firms continue to affirm robust sales growth projections of 13% a year through 2027. There are tentative signs that price compression is neutralizing.

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.

After a sharp pullback in January, the market has started to snap back this week. Nonetheless, I wouldn’t be surprised in the market tests new lows in February. Usually when the market is down in January, February weakness follows.

It was fun while it lasted, but it didn’t last long… That statement certainly describes gold’s recent flight-to-safety rally (and subsequent sell-off). But it could also be considered a worthy refrain for gold’s three prior lift-off attempts since last August, each of which proved to be a false breakout.

We update earnings from six recommended companies, summarize our ideas from the February Cabot Turnaround Letter, and provide comments on news from other recommended stocks. Also, check out this month’s Catalyst Report which lists important and potentially value-creating changes at undervalued companies.

Anybody that’s done a drive with kids has faced this question more times than they’d like to recall. We’re facing the same question now with respect to the market’s retreat as we look for some stability.

Stocks hopefully have settled down after facing a rough market in recent weeks fed by expectations that the Fed soon will embark on raising interest rates. This has led to sharp pullbacks for growth stocks with high valuations and no earnings. Quality and value are beating risk right now.

After a wild couple of weeks where technology stocks corrected, down 10% or more from the high, and the S&P 500 fell 10% on an intraday basis, investors nervously await the Fed this afternoon. The chairman will show us the way. He knows everything.

By some measures, Greentech looks more bearish than it has since March last year, with our benchmark Wilderhill Clean Energy Index breaking below support around 70-68.

The Fed is facing a fascinating dilemma. It needs to raise interest rates to address high inflation that seems to be persistent – especially as sharply higher housing prices (about 40% of the Consumer Price Index) work their way into the official inflation numbers. Yet, if the Fed raises rates too high or too fast, it risks a sharp decline in the stock market, a recession and higher financing costs for the federal government.

Last week, we talked about the pullback in growth stocks. This week, the pullback has expanded to all stocks. The S&P 500 has pulled back ~9% and is on the verge of a correction (defined as a 10% pullback from its recent high).

We comment on recent earnings reports and other company-specific news about our recommended stocks, and include some thoughts on cryptocurrencies and the current burndown in momentum stocks.

The real short version of what’s going on out there is … we’re officially in a bear market in growth. And it’s been particularly tough going in the super-fast-growing small-cap stock arena.

Stocks started off on a positive note today, but once again sold off sharply into the close. At day’s end, the Dow was down another 313 points, and the Nasdaq was off 186 points.

These preferred shares are issued by a global financial company.

Nickel futures are back to a 7-year high and recently hit $19,000 a ton in a resurgence from last month’s pullback. Nickel prices are being supported by strong battery-related demand from electric vehicle (EV) makers.

Analysts are increasing their EPS estimates for this electronics company. The company’s earnings are expected to grow at an annual rate of 30% over the next five years.

We’ve been enjoying a crazy-strong market in many growth stocks lately, which has padded our paper gains in many of those positions. Today we’re going to step off the gas a little, book a few modest profits and step aside from some positions that haven’t done a lot lately.

The major indexes finished mixed yesterday, with the Dow off 269 points while the Nasdaq was up 11 points, though growth stocks were actually hit fairly hard, with a few more names showing potholes.

This telecom company is forecasted to grow earnings by 40.25% annually over the next five years.

The trend is clearly up in this hospitality stock, with institutional investors like mutual funds, jumping back into the shares after the breakdown due to COVID.

In JOANN’s second quarter as a public company, management has dealt with the Delta variant complicating social sewing events and supply chain challenges driving up costs. The net effect in Q2 was that revenue of $496.9 million missed by almost $36 million and adjusted EPS of -$0.20 missed by $0.06.

The quarter was just what we wanted see. Revenue grew by 87.9% to $29.5 million, slightly ahead of consensus for $29.1 million (which was based on S-1 filling guidance). Operating margin was roughly a percentage point above expectations (-6.8%). Full-year 2021 guidance of $103.5 - $104.3 million is ahead of consensus of $100 million and implies growth of 51% to 52% versus the 46% rate embedded in prior consensus. Given the trends, wise management team and status as a new IPO we should view this guidance as conservative.

The top five holdings in this fund are: Roper Technologies Inc (ROP, 10.71% of assets); Pentair PLC (PNR, 7.90%); Xylem Inc (XYL, 6.80%); Tetra Tech Inc (TTEK, 5.63%); and Rexnord Corp (RXN, 5.45%).

In the past 30 days, 10 analysts have increased their EPS estimates for this BDC. The shares have a current dividend yield of 8.42%, paid quarterly.

Since hitting a low in August, silver is trying to establish an intermediate-term low and could be on the cusp of another meaningful rally—especially if the market fears that inflation is truly becoming an entrenched reality (as opposed to a temporary phenomenon).

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 Top Ten 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 Top Ten features.