What started out looking like another positive week for the market later turned into a week of little gains or losses, as economic data and Fed speak weighed on stocks on Thursday and Friday. For the week the S&P 500 and Dow fell marginally, while the Nasdaq rose just over 0.5%.

In the February issue of Cabot Early Opportunities, we continue to pursue stocks offering exposure to a diversity of end markets.

Our top pick this month is a mega-cap tech company making waves with AI investments that promise to shake up one of the largest software markets in the world.

We also take a look at a small industrial company, cover two software stocks with leadership positions in their respective markets and peak at a recovering semiconductor stock.

As always, there should be something for everyone in this month’s issue!

For the first time in the new year, the market had a bad week. The declines aren’t terribly surprising or worrisome (for now), as the recent rally had been without much of a pause.

After living through 2022, we’re certainly not going to whistle past any market graveyards, so our antennae are up when it comes to the market’s recent wobble—but instead of guessing what may come, it’s best to just go with the evidence in front of you, and so far, everything looks normal. That doesn’t necessarily mean we’d be piling in here, but we continue to lean bullish. We’ll leave our Market Monitor at a level 7 today.

This week’s list is very mixed, but with the chip sector looking peppy, our Top Pick is comes from that space and also quacks like a new growth leader. The stock is extended here, but dips of a couple of points would be enticing.

An improving stock market brings our Stock of the Week portfolio to capacity, 20 stocks, with today’s addition of a fallen growth stock whose name you will almost certainly recognize. It’s a company whose business was hampered more than most during Covid, but has now returned to pre-pandemic levels – and is on track to resume its prior growth trajectory in the years ahead. And the stock is finally playing catch-up. It’s a new addition from Cabot Growth Investor Chief Analyst Mike Cintolo.

We currently have three open positions due to expire in March, all of which are leaning towards the bearish side of things. As a result, we need to add some positive deltas to the mix, which I intend to do this week. Other than that there really isn’t much to discuss at the moment since we are relatively early in the March expiration cycle.

Expiration is upon us and our positions are shaping up nicely for some decent returns. There really isn’t much to do this week with our existing positions other than just allow them to play out through expiration. That being said, I continue to scour our Income Trader watch list for new trading opportunities to add to either the Income Wheel Portfolio or the Income Trader Portfolio. Now that earnings season is nearing an end my hope is to add several positions to the mix.

It’s a slow week for the earnings calendar as we begin to wind down earnings season. There are only a few noteworthy opportunities with our focus squarely on Cisco Systems (CSCO), Devon Energy (DVN) and Coca-Cola (KO). Admittedly, while the three companies fulfill our liquidity screen, the options premiums offered in each are less than ideal, which could ultimately be a deterrent from taking a trade this week. No worries, because some of our favorite trading opportunities come the following week in the form of Walmart (WMT) and Home Depot (HD).

Thanks to the bulls, we are seeing a nice pop in all of our portfolios.


While our passive portfolios continue to perform well, our Dogs of the Dow portfolio, particularly the Small Dogs portfolio, has shined, up 12.51% in just over a month’s worth of performance. In fact, all but one of the stocks that reside in the Small Dogs are seeing positive performances with CSCO being the laggard, down -2%.

Following a monster week of earnings, a Federal Reserve interest rate hike, and the January Jobs report, “risk on” continues to be the theme in early 2023 as the Nasdaq once again led the indexes higher.

For the first time in the new year, the market had a bad week. The declines aren’t terribly surprising or worrisome (for now), as the recent rally had been without much of a pause.

There are never any guarantees in the market, but after a very tough 2022, just about all of the top-down evidence (and our indicators are now bullish). We’re not big on labels, but we’re clearly seeing bull market behavior; while leadership usually develops over time (and we’re seeing that here), it’s best to continue stepping into the market as long as things remain in good shape.

Elsewhere in tonight’s issue, we write about some new names go through a variety of topics after that, relaying some thoughts based on various questions we’re receiving.

After a delayed rection to last week’s Fed commentary Treasury yields have shot up (though they are still very low). To put it in mortgage rate terms a 30-yr. refi has gone from around 2.875% to 3.0% over the last week.

It’s been a volatile week so far, with Monday an excellent day for risk stocks and yesterday a tough day for tech as inflation fears circulated in the market.

The market had its worse day since March yesterday. The worry de jour was the debt limit. I believe the issue will be resolved long before a default occurs one way or another.

Across almost the entire length of the yield curve, interest rates are ticking up. The benchmark 10-year Treasury yield reached 1.53% and may be headed back toward its December 2019 rate of about 1.90%. In an economy that is showing rapid growth, with inflation well above the Fed’s 2% target and likely at 6% or more if housing prices were properly factored in, a sub-2% 10-year Treasury yield doesn’t seem to make sense.

There’s a case to be made that we are in the early innings of a commodity bull market. I’m starting to see lots of articles about a looming energy shortage which will hit this winter.

The market is selling off on Tuesday after briefly recovering last week. The latest worry is the debt limit. While this issue is likely to be resolved without any disaster one way or another, it puts a negative weight on an already teetering market.

Capital market, economic, geo-political and societal changes are happening quickly.

A recent survey by the American Association of Individual Investors (AAII) showed that the percentage of investors who think stocks will rise over the next six months plunged to its lowest level in more than a year.

The big developments over the last week have been the situation with the potential failure of Evergrande (Chinese property developer) and interest rates. As of mid-morning Thursday, we appear to be moving past these potential issues.

Today, markets are rallying as much as they fell on Monday ahead of the Fed meeting this afternoon.

Monday’s market tumble to two-month lows, which was the first gap lower that also pushed the broad market beneath its 40-day moving average since mid-summer, triggered a number of our sell-stops.

Monday’s big, sharp market pullback was shocking to some investors, and scary enough to cause many to sell stocks in the fear that the correction would go deeper. It certainly might—the September/October period often brings major corrections—and maybe it should, though should is a word that I try to avoid when writing about the market.

We are initiating coverage of Organon (OGN) with a BUY rating.

This afternoon we are making four ratings changes:

This food company beat Wall Street’s earnings estimates by $0.08 last quarter. Its shares boast a current annual dividend yield of 1.98%, paid quarterly.

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%).

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.