Before we dive into this week’s covered call idea I wanted to address several positions that expired last Friday, and how we will manage those trades …

In the middle of an earnings recession and a slowing economy, defensive stocks are probably the best places to be. These companies can maintain earnings growth while most companies are sliding and remain consistent even as the economy deteriorates further.

Defense is king right now. But defensive stocks are even better when they offer growth as well. In such uncertain times, it makes sense to bank on things that are more certain. Stocks poised in front of a megatrend are the best bet. A megatrend acts as a powerful tailwind for a stock that can make a mediocre pick very good and a good pick great.

In this issue, I highlight a defensive stock that is also one of the world’s largest producers of alternative energy. At the same time, it is also one of the best traditional regulated utilities in the country. It offers defense as well as growth and can thrive in any kind of market.

Last week was quiet, which keeps the overall evidence mostly unchanged—the indexes are hanging in there despite a rash of worrisome news, but there remain plenty of potholes and news- (and rumor-) driven action, including continued selling on strength. The question is whether Q1 reports will bring buyers out of their slumber and launch of bunch of fresh leaders higher. If so (given the hugely bearish sentiment out there), there could be tons of opportunities—but until it happens, it’s best to remain cautious. Once again we’ll leave our Market Monitor at a level 5.

This week’s list has does have a couple of recent earnings winners, and our Top Pick is one of them, gapping to new highs last week and leading what looks like a group move higher.

Stocks are doing a nice job weathering a very choppy earnings season, with mixed – though perhaps better than expected – results coming in from mega caps and the banks thus far. Today, we sidestep U.S. earnings landmines by venturing overseas to add an electric vehicle company that’s a household name in China, but perhaps less well-known here in the States. And it’s starting to give Tesla a run for its money. It’s a recent recommendation from Cabot Explorer Chief Analyst Carl Delfeld.

We locked in two winning trades this past week bringing our overall win ratio to 86.7% since introducing the service back in late May of last year.

On Wednesday I decided to go ahead and lock in a 13.64% return in our May 19, 2023, IWM iron condor. We were able to lock in over 75% of the original premium sold and with roughly 30 days left until expiration, it just didn’t make sense to hold on to the trade and the associated risk when we could simply lock in a profit and move on to the next opportunity. We were in the trade for 26 days.

We are 26 days away from the May 19, 2023, expiration cycle coming to a close and all five of our positions are in good standing. Moreover, time decay should really start to accelerate over the next two weeks, which should start to give us an opportunity to roll our positions in an attempt to collect more premium. Also, as stated in our webinar last week, I intend on adding two to three new positions over the next two weeks as we work through the heart of earnings season.

*Since we started the Income Trader service back in early June 2022, we’ve brought in a total of 68.37% in income. My hope is that we can step up our gains even further by adding as we progress through 2023.

Forty-two percent of companies that reside in the S&P 500 are due to announce this week. What does this mean for us? Well, trades, trades and more trades.


As we discussed, in great detail, in the trading platform on last Friday’s call, my plan is to focus on MSFT, V, and CAT this week. Of course, as most of us know, things can change quickly. So, as much as I am focused on the three aforementioned stocks heading into the week, there is a chance I might go with a few others or simply add to the already established list for the week. Either way, I expect it to be a fairly busy week of trading, with the possibility of having multiple trades per day.

The market was super slow yet again last week as the indexes were extremely rangebound. The S&P 500 lost 0.05%, the Dow fell 0.3% and the Nasdaq declined by 0.5%. This week earnings season really gets in gear as 44% of the S&P 500 market cap reports.

The market was super slow yet again last week as the indexes were extremely rangebound. The S&P 500 lost 0.05%, the Dow fell 0.3% and the Nasdaq declined by 0.5%. This week earnings season really gets in gear as 44% of the S&P 500 market cap reports.

The market continues to show many small positives, but we’re really looking for a BIG positive to change the market’s character and kick individual growth stocks (many of which are set up well) higher. Until then, many names are subject to potholes, as we saw this week; we trimmed our Shift4 position further and are placing Allegro on Hold.

That said, our general outlook is unchanged--the odds favor the next big move is likely up, but until that happens, we’re playing things cautiously, holding some resilient names, small positions and plenty of cash. Tonight’s issue goes into detail into all our stocks, discusses one reason why the market is so choppy and talks about the hugely negative sentiment out there that could propel the market down the road.

Foreign automakers, including electric vehicle (EV) makers, are losing market share in China as the country doubles down on the EV supply chain.

China makes almost all of EV electric motors and refines most of the chemicals used for lithium batteries. China even leads in developing what could be the next generation of technology, sodium batteries.

In the April issue of Cabot Early Opportunities, we take a quick look at what to expect from portfolio positions set to report in the coming weeks and dive into fresh opportunities that are shaping up nicely now.

At the top of the buy list is a software name we just added to our Watch List last month. We also take a position in a cosmetics stock that looks superb, pull back the curtain on a rising biotech star, tour an enterprise software name based in Canada and revisit a MedTech stock that’s finally getting some respect from the Centers for Medicare and Medicaid Services (CMS).

Enjoy!

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.

The chances of a recession in the foreseeable future seems exceptionally unlikely. The domestic economy is booming: following last year’s estimated 5.2% growth, the economy is estimated to grow at a 3.3% pace this year. Any further Omicron-related deceleration appears more likely to be a temporary slowing rather than anything more ominous. Bolstering this view: future-watchers expect growth to continue at around a 3% pace in 2023. No recession in sight from their perspective.

As we get towards the end of January, the biggest thing on my mind is the pullback in growth stock. It has been remarkable. According to J.P. Morgan and Bloomberg, the software index is down ~22% from its peak.

The indexes plummeted on rising rate worries and disappointing Goldman Sachs (GS) earnings. The benchmark 10-year Treasury rate soared to 1.85 on Tuesday. That’s the highest level since the pandemic began and up from 1.34% as recently as last month.

Inflation is going on. And it’s starting to sink in. Oil prices are soaring. Interest rates are rising. And the Fed is going to have to be more aggressive than previously anticipated about raising rates and reducing stimulus.

Last year was a stellar one for commodities in general and for industrial metals in particular. Copper, steel, aluminum, nickel and lithium all had stellar gains. There were some declines along the way, but the overall trajectory for the majority of base and semi-precious metals was up.

This week’s Friday Update includes our comments on earnings from Wells Fargo & Company (WFC). We had no price target or ratings changes this week, although we are reviewing Wells Fargo shares as they trade above our price target.

It continues to be a very bumpy ride for small-cap growth stocks, while those names with a slightly more value-oriented profile are providing a somewhat smoother ride. Big picture, there is no doubt the risk-off environment continues. The good news for more aggressive investors is that valuations have come down significantly, as have analyst price targets. That latter point often seems to be one signal that the worst of the selling is in the rearview mirror. Though, clearly, there are many factors in play.

This logistics company beat Wall Street’s estimates by $0.63 last quarter, and 12 analysts have recently boosted their EPS projections for the company.

This industrial company beat analysts’ EPS estimates by $0.22 last quarter.

Greystone Logistics (GLGI) filed its 10-K recently, and I was surprised that sales declined in the 4th quarter by 5%.

I recently downgraded Donnelley Financial (DFIN) to Hold as I had concerns that the company was overearning given buoyant capital market activities which tend to be cyclical.

The top five holdings in this fund are Tesla Inc (TSLA, 11.96% of assets); Honeywell International Inc (HON, 7.71%); Danaher Corp (DHR, 5.14%); Eaton Corp PLC (ETN, 4.44%); and 3M Co (MMM, 4.34%).

This Latin American McDonald’s franchisee is forecasted to grow earnings by 101.5% this year.

Today is the expiration of five of our covered call positions, and I’m not going to sugar coat it, it was a choppy month for the market, and our trades. Importantly, we are going to exit several positions today.

In the past 30 days, four analysts have boosted EPS forecasts for this construction and manufacturing supplier.

The top five holdings in this ETF are: The Estee Lauder Companies Inc Class A (EL, 3.38% of assets); Costco Wholesale Corp (COST, 3.30%); Kimberly-Clark Corp (KMB, 3.29%); Clorox Co (CLX, 3.25%); and Church & Dwight Co Inc (CHD, 3.21%).

With a new batch of stocks being added to our portfolio tomorrow and a few of our current names looking just OK we’re going to sell three stocks today.

This bank is innovating with the help of its Laurel Road digital banking platform. It has a current dividend yield of 3.58%, paid quarterly.

**NOTE: Due to time constraints from the Cabot Wealth Summit, the Cabot Early Opportunities issue scheduled for Wednesday, August 18, 2021 will instead be published on Thursday August 19.**

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.