Very impressively, the rally that started late in 2022 continued last week, as the S&P 500 gained 2.7%, the Dow rose 1.8%, and the Nasdaq tacked on another 4.5% of gains.

Very impressively, the rally that started late in 2022 continued last week, as the S&P 500 gained 2.7%, the Dow rose 1.8%, and the Nasdaq tacked on another 4.5% of gains.

The market is ending the year a lot like it began it -- by going down, led mostly by growth stocks, and that’s keeping us defensive. We do think better times are ahead, and we even saw a positive broad market divergence this week as the Nasdaq retested its lows. But as has been the case all year, we’ll refrain from any major buying until the buyers truly show up.

Tonight’s issue talks about some puke action from individual investors (a good thing) and the fact that, after this bear ends, the market is likely set to resume its advance (not a long-term top), plus we fine tune our watch list (one name broke out today) and dive into some potential leaders, too.

Last but not least, all of us here wish you and yours a happy, healthy and prosperous 2023. Cheers to better times ahead!

As we move into 2023, Explorer stocks are performing well as volatility is muted. My goal is to seek a balance between conservative and aggressive ideas so that you can select a blend that is appropriate for your circumstances and goals. I believe at some point in the first half of this year, markets will turn upward as more reasonable valuations will reignite investor interest. Today we return to a synthetic graphite idea that was a profitable trade about a year ago.

Welcome to our first annual TOP PICKS issue! For this month, I asked the Cabot analysts to give me a couple of their top picks for 2023. I think you will find they have produced a nice selection of companies in diverse sectors. And just as I did in my previous newsletter, Wall Street’s Best Stocks, I’ll keep track of their picks and let you know how they fare.

Today, I’m recommending a biotech company.

Key points:

· I expect a dividend within 15 months representing 126% of its market cap.
· Asymmetric upside potential beyond the upcoming dividend.
· High insider ownership and insider buying.

All the details are inside this month’s Issue. Enjoy!

Sure, it was a tough year for stocks. But 2022 was the worst year ever recorded for bonds.

The benchmark 10-year Treasury lost more than 15% in 2022, the worst calendar year performance ever recorded since it started being tracked in the 1920s. The 10-year + Treasury Bond Index lost 29.45% for the year, also the worst performance on record.

But the disastrous year creates an opportunity. Last year seems to have squeezed many years of poor performance into one. Now bonds actually pay decent interest again. And every negative year for bonds ever recorded has been followed by a year of positive returns.

In this issue, I highlight a long-term corporate bond fund. It allows access to some of the highest yielding investment grade bonds in the last 15 years while also providing a monthly income. The fund is very likely to have a positive total return for the year, and perhaps very positive, at a time when the stock market is highly uncertain.

The start of 2023 has been a positive for the bulls as the indexes are all higher by approximately 1.5%.

It was a solid week for the major indexes, and even better has been some notable improvement in the broad market—in late December, we saw a key positive divergence from a broad market measure for the Nasdaq, and now we’re starting to see some legit improvement elsewhere, too. Don’t get us wrong, at this point, the major trends are still pointed sideways-to-down, so we’re not going to make too much out of what we see, but it’s fair to say we’re approaching another key juncture: If the market and (importantly) individual stocks are able to build on their recent action, we could get a green light or two and have something to work with. For now, our Market Monitor remains a level 4, but our antennae are up.


This week’s list features a wide array of names, with some commodity and value names combined with a few turnaround and growth titles. Our Top Pick is a solid long-term grower that has some catalysts for this year—as usual, aim to enter on dips.

2023 has started with a bang, pushing a couple stocks in our portfolio to new all-time highs! Both of those high fliers have benefitted greatly from the return to relative normalcy in the wake of Covid, so today we add another stock that stands to get a direct bump from China’s reopening – or at least the loosening of its draconian “zero Covid” policies. The company was a pre-pandemic favorite of Cabot Top Ten Trader Chief Analyst Mike Cintolo and looks like a great value pick now as its business picks up in earnest. So, he’s recommending it again.

We sold some additional premium in Wells Fargo (WFC) late last week and I intend to sell even more as we begin 2023. Our PFE 49 puts are due to expire this week and if all goes well, I plan to buy back the puts for $0.05 and immediately sell more put premium going out to the February 17 expiration cycle.

The same goes for my GDX and KO positions. I intend to buy back our put positions in both underlying stocks and immediately sell more premium. And like PFE, I will be focusing on selling premium for the February 17 expiration cycle.

Earnings season officially starts this Friday with JPMorgan (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC) kicking it off prior to the opening bell.


Other than the big banks it’s going to be a slow week for earnings, but hey, earnings season has finally arrived, and I expect that we will have one if not two trades heading into the latter part of the week.

Today’s note includes the podcast.

The action in the second half of August was encouraging, but as has been the story of 2021, a lot of that move has been erased so far in September—and that goes for just about everything.

The S&P 500 has finally failed to make a new high every day lately and is 2% below the high-water mark! That doesn’t seem like it should be news but in this market it’s worth noting.

So far, the post-Labor Day market has been just a little bit crummy. Stocks have drifted slightly lower over the past week. While that’s nothing alarming, it is a reversal of the summer market where stocks were drifting slightly higher. It could be that the balance has been tipped toward the negative.

Here we are in September. So far, it’s not bad. But it’s not good either. For the first week after Labor Day, the market has drifted lower. It’s no big deal. But stocks have been losing a battle they were winning in the summer. The bulls were eking it out then. Now the bears are prevailing, slightly.

The market seems expensive, but the S&P 500 keeps making new all-time highs.

Fundamentally, all is well in the marijuana sector as the industry’s leaders continue to grow, both organically and by acquisition. The average rate of revenue growth for the plant-touching companies in our portfolio in the most recent quarter was an amazing 132% from the previous year.

We’re past the earnings season, so there were no companies reporting earnings this week. The next scheduled earnings report looks to be on October 8, with Lamb Weston (LW) reporting.

Despite more grumblings out there about how “we are due for a pullback,” stocks continue to hold up. In fact, many growth stocks have done far better than that and are jumping higher on almost a daily basis.

Over the summer, the strong economy prevailed over concerns about the virus. And the market drifted higher. We’ll see if the scales get tipped the other way in this historically tough month for the market.

We’re close to seeing two sell-stops triggered at the end of today and we’re moving one stock from Watch to Buy.

This week, we are rolling forward our valuation comments – generally dropping our valuation based on 2021 estimates, where appropriate, while adding commentary based on estimates for 2023. Most analysts project that all of their companies will have higher earnings in future years, so we take the 2023 estimates (which are over two years away) with a grain of salt. And, they almost certainly will be wrong – we just don’t know in which direction or by how much. However, these estimates are helpful in understanding the level and direction of consensus opinion, especially between earnings reports when there is usually little hard news or fundamental data at the company level to support estimate changes.

Despite beating sales and earnings estimates for the quarter ($6.48 billion vs. $6.41 billion and $1.60 per share, compared to the estimate of $1.40 per share), shares of this discounter fell, due to forecasted rising freight costs—a good opportunity for entry.

In the past 30 days, 10 analysts have increased their EPS forecasts for this energy company. The shares have a current annual dividend yield of 7.09%, paid quarterly.

The big news this week is that Amazon will no longer screen most job applicants for marijuana use. Plus, the giant is supporting federal marijuana legalization. That’s one more step in the right direction.

This software company beat analysts’ earnings estimates by $0.36 last quarter. It is forecasted to grow earnings at an annual pace of 17.5% over the next five years.

EPS projections for this media company have recently been raised by 8 analysts, and 5-year growth is estimated at 57.4% annually.

Earlier this month, this healthcare tech company began selling its shares to the public.

Yesterday I mentioned that I would follow up today with notes from the Thunderbird Entertainment (TBRD.CA, THBRF) earnings call. Here are a few tidbits from that call.

This REIT is beginning to recover from COVID, and looks very undervalued. The REIT has a current dividend yield of 7.21%, paid quarterly.

The top five holdings in this ETF are: Pfizer Inc (PFE, 5.43% of assets), Sanofi SA ADR (SNY.PA, 5.36%), AstraZeneca PLC ADR (AZN.L, 5.23%), AbbVie Inc (ABBV, 5.06%), and
Novo Nordisk A/S ADR (NVO, 5.06%).

Our first recommendation has a current annual dividend yield of 2,81%, paid quarterly. Its top five holdings include: The Home Depot Inc (HD, 4.58% of assets), International Business Machines Corp (IBM, 4.18%), Pfizer Inc (PFE, 4.17%), PepsiCo Inc (PEP, 4.07%), and Texas Instruments Inc (TXN , 4.01%). Our second recommendation is a sale of a previous idea after disappointing results.

The company is executing on its turnaround, led by the relatively new CEO. However, after our more detailed review of the company’s future prospects, the shares appear to fully discount a robust profit recovery and are trading at our price target. Their Investor Day was uninspiring – while the company is operating much better and has at least a temporary cyclical tailwind, the management is talking about pursuing their growth ambitions, going so far as to outline as much as $4 billion in buying power over the next several years. For perspective, $4 billion in cash flow compares to the company’s current $2.7 billion market cap.

This chemicals company beat analysts’ EPS projections by $0.42 last quarter, and five analysts have boosted their estimates for the company in the last 30 days. The shares have a current annual dividend yield of 2.26%, paid quarterly.

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.