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.

This month we are dialing up the risk a little with a small software company that has a potentially disruptive platform that streamlines back-office processes for small and mid-sized businesses.

There are risks. The economy isn’t super strong, and this is a competitive market. But this company has a truly innovative set of solutions, is in one of the market’s most beat-up sectors and has new products and a low-cost customer acquisition strategy.

It’s also profitable and generates positive free cash flow, two attributes that make it an attractive acquisition target.

Enjoy!

This week could be a doozy for the market as traders are eagerly awaiting the “big” Federal Reserve announcement on Wednesday, as well as a monster week of earnings reports, and the January Jobs Report on Friday. Buckle up!

If you’ve been expecting a straight-up advance with dozens of leaders lifting off, the past couple of weeks have been disappointing—but after the damage seen last year, we’re not going to make the perfect the enemy of the good: At this point, the intermediate-term trend is still sideways but a couple of good days could change that, and the broad market remains in fine shape despite some potholes of late (including today). Obviously, things can change, but with the evidence continuing to crawl in the right direction, we’re nudging our Market Monitor up to a level 6 today.

This week’s list does have a few growth-ier ideas, but the majority remain cyclicals and recent earnings plays. Our Top Pick is a turnaround in the retail space that’s cheap-ish, has a long-term growth story and popped on earnings last week. Aim for dips.

It’s been an encouraging start to the year for stocks, but another Fed rate hike – and whatever choice words Jerome Powell has to say – could throw the brakes on the rally this week, at least temporarily. To prepare for another potential pullback, today we’re adding some protection in the form of a high-yield dividend payer from the healthcare industry. It’s a stock with some real momentum – up 18% in the last five weeks – but still trades at about half of where it was a year ago. And Tom Hutchinson just upgraded it to Buy in Cabot Dividend Investor.

As the February 17, 2023 expiration cycle nears we are in good shape to make some decent profits from our current positions. In fact, there is a good chance that we will have an opportunity to buy back a few of our positions this week and immediately sell more premium. Moreover, I intend on adding one to two new trades to the mix this week; of course, as always, Mr. Market will help to dictate our path.

I wanted to start adding a few March positions last week, but decided to push them off towards the beginning of this week. I intend on adding at least two, if not three, March expiration trades this week as we are only 46 days away from the March 17, 2023 expiration cycle.

We’ve had a good start to earnings season with three out of three successful trades. We hope to extend our winning streak this week using two or three of the stocks mentioned below.

Ahead of the “big” Federal Reserve announcement on Wednesday, the market surged higher last week.

Ahead of the “big” Federal Reserve announcement on Wednesday, the market surged higher last week.

Nobody is going to argue that there aren’t still issues when looking at the market’s evidence. The long-term trend, which by our measures has been down for a full year at this point, is still bearish. The intermediate-term trend remains effectively neutral, with most indexes stuck within two-month ranges. And growth stocks are hit or miss, especially ones that have held up well—while some names that were crushed last year are bouncing, many near their highs are having trouble finding buyers.

Tesla doesn’t look sick to me. Last night it reported Q4 net income of $3.69 billion and revenue of $24.3 billion, up 59% and 37%, respectively, from a year earlier. Tesla sold 405,278 vehicles, up 31% from a year earlier and stated it knows it needs to produce cheaper EVs to become a bigger automaker. With EVs on the brain, this week we go to Sweden for an under-the-radar electric vehicle maker that is gaining momentum based on performance and styling.

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.

One of the biggest questions that metals investors are asking right now is, “Why hasn’t gold had a meaningful rally this summer?” After all, there are a number of legitimate catalysts for gold to respond to, including widespread worries over the spreading coronavirus variants and the growing threat of inflation. So why hasn’t gold—the ultimate “fear barometer”—taken flight in response to these fears?

Today’s note includes earnings updates on Duluth Holdings (DLTH) and Signet Jewelers (SIG), the podcast and the Catalyst Report.

Stocks are higher as we write this but, after a strong recent run, the gains are fading and individual stocks are mixed. As of 3 pm, the Dow is up 70 points but the Nasdaq is up just 2 points. It’s nothing dramatic or all at once, but we continue to see steady improvement in the market. From a top-down perspective, the Nasdaq is actually extended to the upside (pullbacks are possible), but growth-oriented indexes and funds are finally showing a little oomph on the upside. More important to us, an increasing number of individual growth titles are acting well, with some upside follow-through emerging; indeed, the number of new highs on the Nasdaq seems to finally be turning up after months of sloughing off.

Although it went by way too fast, it’s been a glorious summer in the market. The S&P 500 is up 8% since Memorial Day. And the index is now up over 20% so far in 2021.

The market still looks strong. The S&P 500 is on pace for a 3% gain in the month of August, which would be the seventh straight monthly gain. The index is already up 20% for the year.

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

The concept of “temporary inflation,” which many investors and analysts embraced earlier this summer, has given way to concerns that rising prices will likely persist a lot longer than formerly expected.

This gaming company posted a loss last quarter, but revenues were up by triple-digits, and analysts are piling into the stock.

This mortgage REIT invests primarily in agency mortgage-backed securities, including the Government National Mortgage Association, or Ginnie Mae; the Federal National Mortgage Association, or Fannie Mae (FNMA); and the Federal Home Loan Mortgage Corporation, or Freddie Mac (FMCC).

This may just go down on record as one of the worst earnings seasons ever for growth stocks. Two weeks ago, things were “fine.” Since May began, not. Inflation is the bogeyman spooking investors and his shadow has crept out from below desks and up the walls of those with growth-heavy portfolios. The sell orders picked up steam early this week, and while the last two days have been far better, the divergent action between growth stocks (cloud, MedTech, Internet, etc.) and other areas of the market is crystal clear.

BioLife Solutions (BLFS) reported yesterday afternoon and Q1 results beat expectations. Revenue was up 38.6% to $16.9 million (beating by $800K) while adjusted EPS of $0.01 beat by a penny. Management also bumped up full-year guidance, with revenue now expected in the $106 to $115 million range.

Five analysts have increased their EPS estimates for this aviation-supply business in the past 30 days.

Coverage of the shares of this motorcycle manufacturer have been initiated and upgraded by three brokerage houses.

The company’s turnaround from its modest difficulties yet overly-depressed stock appears complete

Recent days have seen substantial selling pressures in the broad market, with growth stocks being particularly hard hit. But the good news is that stocks in the marijuana sector, which had previously corrected 50% from their February peak to their bottom in late March or early April, are not seeing the same selling pressures.

The market remains in the dumps, and while some beaten-down growth names have found support, many are still getting hit on earnings and we’re even seeing selling spread to the broad market.

The shares of this chemical company were just upgraded to ‘Strong Buy’ at Zacks, due to rising earnings estimates.

EVBG, KRNT and CRNC Report. Sell GSHD and CDLX

Although, as expected, this cruise line lost money last quarter, it still beat analysts’ estimates on the top and bottom line.

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.