As has been the case for the past few weeks, the evidence hasn’t changed much, with an on-the-one hand, on-the-other-hand situation: The intermediate-term trend has remained stubbornly up (good), but the longer-term trend is down and no real progress has been made for a few weeks (bad). Stocks are still being mostly rejected by resistance (bad), but the selling pressures haven’t followed through in most cases (better). And many timing indicators have improved (good), but not enough to tell us the sellers have truly run out of ammo (bad). As always, we’ll take it as it comes, leaving our Market Monitor at a level 5 for now.

The good news is that we’re continuing to come up with solid-looking charts from a variety of areas. Our Top Pick this week a turnaround play in the chip equipment field, which itself is acting surprisingly well.

The last two market-driving events of 2022 arrive this week with the latest CPI data (Tuesday) and the Fed’s latest interest rate hike (Wednesday). How those numbers look versus expectations will largely determine how this week, and the rest of December, goes. To have all our bases covered, we continue to add a blend of investment types and sectors. And this week we add something we don’t currently have in the Stock of the Week portfolio: a biotech, recommended by our resident growth investing expert, Mike Cintolo.

Last week we locked in more profits in PFE. We bought back our December 16, 2022 45 puts for $0.02, thereby locking in a profit of $1.06, or 2.36%. We’ve locked in a total profit of 8.6% in PFE since introducing it to the Income Cycle portfolio back in early June—not bad considering PFE stock is slightly negative over the same timeframe.

We locked in two additional profits last week, both bear call spreads and both in SPY. The returns were 11.36% and 10.86%. And this is one week after locking in 11.36% in our IWM iron condor.


Our cumulative total return since introducing Quant Trader back in early June stands at 104.88%.

We have some exciting times ahead as our Dogs and Small Dogs portfolios will be coming on board at the beginning of 2023. I will be discussing the details of the approach, strategy, positions and potential trades in our subscriber-only webinar tomorrow so you will not want to miss the event. If you do happen to miss, no worries, if you sign up at least you can immediately receive the recording once it’s available.

We are entering what could be the slowest week of the year for the earnings calendar.

However, that can’t be said for the macro front, as it will be an eventful week headlined by the Bureau of Labor Statistics’ release of the November Consumer Price Index. Investors will not only be hyper-focused on the headline inflation index but also the FOMC announcement and subsequent press conference with Fed Chair Jerome Powell on Wednesday.

Once again, the sellers stepped in last week and at least in the short term dented the bulls’ optimism. By week’s end the S&P 500 had fallen 3.35%, the Dow had lost 2.71%, and the Nasdaq had declined by 3.57%.

Once again, the sellers stepped in last week and at least in the short term dented the bulls’ optimism. By week’s end the S&P 500 had fallen 3.35%, the Dow had lost 2.71%, and the Nasdaq had declined by 3.57%.

The good news is that it seems that the markets are back on track, although we remain cautious.

Economic statistics continue to be strong, with factory orders and consumer confidence better than analysts expected. Home prices have moderated somewhat, although interest rates and the continuing lack of inventory are not helping that market.

Starting next week, you will receive your Cabot Undervalued Stocks Advisor issues and updates on Tuesdays instead of Wednesdays. So look for next week’s update in your email inbox a day earlier, on Tuesday, December 13.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the December 2022 issue.

While we are not market or economic forecasters, we try to make sense of what is going on. As we’ve commented on in earlier notes, we may be seeing the return of the long-forgotten inventory cycle. If we’re right, this is the time to buy over-discounted and reasonably healthy cyclicals like the ones on our recommended list.

Our letter comments on Big Lots (BIG) earnings, our price target reduction to 25, and why it remains a Hold rather than a Sell.

After a negative start to the week last Monday, the market surged higher on Wednesday, following what many traders view as a “less hawkish” speech by Federal Reserve Chairman Jerome Powell.

All in all, the evidence has continued to show some marginal improvement in recent weeks among individual stocks, plus, some top-down measures (long-term trend, health of the broad market) are looking better … but not quite enough for green lights. All in all, what we’re seeing are steps in the right direction—the market and many individual stocks are doing what they have to in order to repair the damage. But we still need to see continued progress to really extend our line, as little is being sustained on the upside. We’ll again keep our Market Monitor at a level 5.

This week’s list is a hodgepodge of names from different sectors and in different positions in their charts. Our Top Pick is a biotech name that, after many stops and starts, looks to have finally broken out on the upside.

Chinese stocks were hit this week both on American exchanges and overseas as Chinese regulators ratcheted up the pressure through antitrust and regulatory steps that caught many executives and investors off guard. The Golden Dragon index of Chinese technology stocks fell by 15% in two days before rebounding after regulators tried to reassure markets.

A crazy earnings season meets a sideways market. Investors have been looking for a narrative that gains traction. Maybe earnings will provide it.

We remain largely in cash and continue to believe patience and smart entries into new positions will benefit the portfolio in the weeks ahead.

The stock market reached yet another record high on Monday, but it just doesn’t seem the same as earlier records. Investors (and everyone else) is starting to wonder if Covid is now endemic – an inherent component of everyday life. Will cases surge in the winter months and just after holidays instead of going away with a single vaccine cycle? We won’t likely be going back to widespread lockdowns, but previously unfettered socializing and traveling could be restrained, thus suppressing earnings and valuations for many companies.

Investing in micro-caps is fun because you can invest in growth companies at value prices. When investing in pure “value” stocks, your goal is to buy a dollar for 50 cents. The problem is that the dollar of value can shrink over time to 80 cents or 60 cents, especially if the business is facing secular headwinds. The benefit of investing in “growth” companies is the value of your investment can grow over time.

Today’s note includes an update on earnings from Baker Hughes (BKR) and a preliminary trading report from Vodafone (VOD). There were no ratings changes.

The market is mixed so far today—as of 1145 am, the Dow is off 44 points and the Nasdaq is up 25 points, though many growth stocks are again acting well. In recent issues and updates we’ve written repeatedly about the market’s on-again, off-again, tricky and challenging environment, while at the same time seeing a lot of potential multi-month setups among growth stocks. Oftentimes, what such an environment “needs” is a shakeout on some scary headline news to clear the decks.

The market got off to a horrible week as stocks sold off Monday, but things have been a lot better since and the S&P 600 Small Cap Index is now back above where it closed last Wednesday (6% below all-time highs). Stepping back, we see that the broad small-cap index has been bouncing around since March without making any net new progress. But drilling down deeper we see many stocks (including several in our portfolio) acting well.

The bears sure enjoyed a rare day in the sun on Monday. The Dow had its worst day of the year, down more than 3%. Pessimists haven’t loved life like that since March of 2020.

Last week, we wrote about how the damp Boston-area weather matched the soggy stock market. Pressing our literary luck today, the market is following another New England weather meme: “if you don’t like the weather, wait a few minutes.”

Pullbacks in the market are never fun. It’s way more fun when we are all making money together and stocks are going up. But it’s important to keep the recent market action in perspective. LPL Strategist Ryan Detrick recently shared a couple charts that helped put the recent volatility in perspective.

The market hasn’t seen ugliness on this scale since October. Indexes had been somewhat flat and bouncing around near the highs as investors weighed the booming economy against inflation fears, a falling 10-year rate and growth concerns after the pandemic recovery.

Goosehead Insurance (GSHD) reported after the close yesterday that Q1 revenue rose by 53% to $31.2 million (beating by $2.5 million) and adjusted EPS rose to $0.03 from $0.01 in the year-ago quarter (missing by $0.03). That pace of revenue growth was up from 48% in the quarter ended December 31, and well above the 13% revenue growth rate reported in the year-ago quarter.

This closed-end fund has a current annual dividend yield of 5.46%, paid quarterly.

Our first idea is an automotive component company that is forecasted to grow at a 20% annual rate over the next five years, and has a current annual dividend yield of 2.04%, paid quarterly. Our second recommendation is a sale of a previous pick.

This dynamic company has changed the way that sound is amplified in our homes and automobiles. Analysts expect it to grow earnings at an annual rate of 26.6% over the next five years.

Our first idea is an industrial company that makes a wide range of consumer, commercial, and industrial products and has a current annual dividend yield of 2.93%, paid quarterly. Our second recommendation is some profit-taking on a previous pick.

This furniture maker had a great quarter, beating analysts’ EPS estimates of $0.58, and bringing home earnings of $1.37 per share. Revenues were up 40.7%, coming in at $129.7 million, handily surpassing estimates of $116.1 million.

This healthcare IT company beat analysts’ estimates by $0.04 last quarter.

Today, for a change, I’ll cover the news first, and the investing advice second. In Illinois, marijuana taxes exceeded alcohol taxes in the first three months of 2021. Marijuana tax revenue amounted to $86,537,000 while alcohol taxes brought in $72,281,000. I expect the gap to widen from here and there’s no question other states have taken note.

This financial company beat analysts’ earnings by $0.03 last quarter.

It is a stink fest out there in the market today and Fisker (FSR) has looked like a hot pile of garbage for weeks. But today we see another big bank jumping in with a buy rating. Bank of America says FSR is worth 30.

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.