Issues
Ahead of the “big” Federal Reserve event this Wednesday the leading indexes all advanced last week as the S&P 500 gained 1.6%, the Dow rallied 1% and the Nasdaq rose by 2%.
The markets continued rolling along this past month, buoyed by hopes that the Trump administration’s pressure on the Fed will result in the beginning of some serious rate cuts.
About 88% of the forecasts are calling for a half-point rate reduction at the Fed’s September 17 meeting, although economists at Goldman Sachs are predicting that August inflation numbers will be higher than expected, maybe dampening that forecast.
About 88% of the forecasts are calling for a half-point rate reduction at the Fed’s September 17 meeting, although economists at Goldman Sachs are predicting that August inflation numbers will be higher than expected, maybe dampening that forecast.
“Smooth seas do not make skillful sailors.” - African Proverb
For the first time this year, this week all three major benchmarks closed at all-time highs during the same session on the hunch that a lousy job market will spur a series of interest rate cuts by the Federal Reserve.
For the first time this year, this week all three major benchmarks closed at all-time highs during the same session on the hunch that a lousy job market will spur a series of interest rate cuts by the Federal Reserve.
This market is impressively resilient. It continues to forge higher even in the historically cranky post-summer environment.
Stocks could boom for the rest of the year. After all, the optimists have been right. And the longer-term prognosis is positive for stocks. However, the near-term direction is more precarious. There is still plenty of uncertainty swirling around with the market indexes perched at lofty valuations.
The tariff issues may be fading but they’re still out there. The Fed and the economy are also wild cards. Meanwhile, the S&P 500 currently sells at a price/earnings ratio of 28.8 times. That’s the highest valuation in the last 25 years. Anything can happen.
The current situation calls for a certain kind of stock that can thrive in almost any market environment. If the market takes off, it can participate. If the market goes flat, it can generate positive returns. And if the market turns south, it can yield superior relative returns.
In this issue, I highlight an existing portfolio position that is one of the very best midstream energy companies on the market. It pays a huge 6.9% yield, deals primarily with natural gas, sells at a cheap valuation, and has a massive growth spurt ahead as new projects come online.
The growing natural gas demand from utilities and exporters will provide an unprecedented runway for growth in the years ahead that historical performance doesn’t reflect.
Stocks could boom for the rest of the year. After all, the optimists have been right. And the longer-term prognosis is positive for stocks. However, the near-term direction is more precarious. There is still plenty of uncertainty swirling around with the market indexes perched at lofty valuations.
The tariff issues may be fading but they’re still out there. The Fed and the economy are also wild cards. Meanwhile, the S&P 500 currently sells at a price/earnings ratio of 28.8 times. That’s the highest valuation in the last 25 years. Anything can happen.
The current situation calls for a certain kind of stock that can thrive in almost any market environment. If the market takes off, it can participate. If the market goes flat, it can generate positive returns. And if the market turns south, it can yield superior relative returns.
In this issue, I highlight an existing portfolio position that is one of the very best midstream energy companies on the market. It pays a huge 6.9% yield, deals primarily with natural gas, sells at a cheap valuation, and has a massive growth spurt ahead as new projects come online.
The growing natural gas demand from utilities and exporters will provide an unprecedented runway for growth in the years ahead that historical performance doesn’t reflect.
The market had another week of heavy sector and index rotation nearly every day, as hot money seemingly chased the new fad/theme based on every economic data point and earnings reaction. Yet despite the day-to-day market wiggles, by week’s end, not much ground was gained or lost as the S&P 500 gained 0.3%, the Dow lost 0.3% and the Nasdaq rose by 1.1%.
After a tough start following the long weekend, the market did find some support by week’s end, but overall, the situation remains the same: The evidence is more positive than not, but when looking at individual stocks, there are many areas that are struggling, while on a day-to-day basis, money continues to thrash around. To be clear, that action doesn’t predict doom—this is a bull market after all—but it does mean that making and holding onto money in this environment remains a challenge. We’ll stick with a Level 7 on the Market Monitor.
Interestingly, this week’s list does have a bit more of a growth flavor, though it’s not all AI, as other areas are seeing a bit of leadership emerge. Our Top Pick has been a clear mid-cap leader of the advance and is now exhaling to its 10-week line.
Interestingly, this week’s list does have a bit more of a growth flavor, though it’s not all AI, as other areas are seeing a bit of leadership emerge. Our Top Pick has been a clear mid-cap leader of the advance and is now exhaling to its 10-week line.
So far, so good in September, as there’s no market correction in sight. The increasing likelihood of a Fed rate cut later this month is helping to counteract the negative effects of seasonality during the traditional “spooky season.” Let’s hope the Fed doesn’t disappoint when they convene next week. In the meantime, the investing waters are warm, so let’s take a bigger swing this week by adding one of the world’s greatest and highest-profile growth companies to our portfolio. It’s a recent recommendation from Carl Delfeld to his Cabot Explorer audience. And it’s a former market darling that, after a rough couple years, is starting to gain traction with investors again.
Details inside.
Details inside.
The market had another week of heavy sector and index rotation nearly every day, as hot money seemingly is chasing the new fad/theme based on every economic data point and earnings reaction. Yet despite the day-to-day market wiggles, by week’s end not much ground was made or lost as the S&P 500 gained 0.3%, the Dow lost 0.3% and the Nasdaq rose by 1.1%.
The market had another week of heavy sector and index rotation nearly every day, as hot money seemingly is chasing the new fad/theme based on every economic data point and earnings reaction. Yet despite the day-to-day market wiggles, by week’s end not much ground was made or lost as the S&P 500 gained 0.3%, the Dow lost 0.3% and the Nasdaq rose by 1.1%.
The bull market is alive and well, but the growth stock environment remains tricky at best, with more names either testing or cracking intermediate-term support during the past couple of weeks. Eventually, there will be another run in growth, possibly soon given the many stocks that have built launching pads during the past two-plus months; we do have an expanding watch list of solid setups. But for now, we’re playing things cautiously, trying to give our positions a chance but also holding a good chunk of cash until the meat-grinder environment shifts.
Rumors of the global economy’s imminent demise have been greatly exaggerated – at least so far. Indeed, the IMF estimates that worldwide GDP will expand by more than 3% both this year and next, which is in line with the normal GDP growth rate since the Great Recession. And yet, certain stocks are being treated like it’s 2009 out there. That includes this month’s addition to our Growth & Income Portfolio. It’s a big-cap, big-name company whose shares are nearly 30% off their highs, but the firm is on track for its best year in terms of sales and earnings outside of a Covid-era anomaly. It’s a company that flourishes when the global economy is healthy. And the stock is on sale, having not fully recovered from the spring tariff worries.
Details inside.
Details inside.
Today we’ll take a half-sized position in a small-cap company that’s like the Amazon of manufacturing. Its marketplace is revolutionizing this outdated industry and bringing it into the digital age.
Despite several years of depressed manufacturing in the U.S., the company is growing. That’s a testament to its platform. And there’s also a potential growth kicker … Trump’s tariff policies and desire to kick off an onshoring boom.
All the details are inside the September Issue of Cabot Small Cap Confidential.
Despite several years of depressed manufacturing in the U.S., the company is growing. That’s a testament to its platform. And there’s also a potential growth kicker … Trump’s tariff policies and desire to kick off an onshoring boom.
All the details are inside the September Issue of Cabot Small Cap Confidential.
Updates
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Centuri Holdings (CTRI), GE Aerospace (GE), Intel (INTC), Pan American Silver (PAAS) and Paramount Global (PARA).
Intel (INTC) is reportedly mulling a sales of its network and edge businesses as part of an ongoing focus on streamlining the company.
Pan American Silver (PAAS) stands to benefit from recent gold-to-silver ratio readings.
Intel (INTC) is reportedly mulling a sales of its network and edge businesses as part of an ongoing focus on streamlining the company.
Pan American Silver (PAAS) stands to benefit from recent gold-to-silver ratio readings.
WHAT TO DO NOW: The market has pulled back a bit this week after a big recent run, but most things have taken the selling in stride. Further weakness can’t be ruled out, especially in the near-term but with the market digesting well and our intermediate-term indicators looking good, we have a few moves tonight. First, we’re going to sell our small position in Flutter (FLUT), but we’re also adding half-sized positions in Axon Enterprise (AXON) and ProShares S&P 500 Fund (SSO), the latter of which we’re averaging up in. We’re also placing Take-Two Interactive (TTWO) on Hold. Our cash position will still be around 47% after these moves.
The news cycle moves fast these days, as does the market’s reaction.
Last week, the big news was the 90-day ceasefire in the U.S. vs. China trade war. This week, it’s the passing of the reconciliation bill in the House and concerns over the deficit (the two are not unrelated).
Last week, the big news was the 90-day ceasefire in the U.S. vs. China trade war. This week, it’s the passing of the reconciliation bill in the House and concerns over the deficit (the two are not unrelated).
Retail stocks are having a rough year.
The S&P SPDR Retail ETF (XRT) is down 3.8% year to date, and consumer discretionary as a whole has been the worst performing of the 11 major S&P sectors. It makes sense. Tariffs threaten to hit U.S. retailers hardest, including the many companies that sell products like toys, child car seats, and sports apparel (such as our own Dick’s Sporting Goods (DKS)), most of which are made in places like China, Indonesia, Japan and Thailand – the places with the highest potential tariff rates. Combine that with escalating fears of a U.S. recession – also brought on by tariffs – and it could be a double whammy for retailers who don’t sell the essential everyday items that consumers buy regardless of the economic environment.
The S&P SPDR Retail ETF (XRT) is down 3.8% year to date, and consumer discretionary as a whole has been the worst performing of the 11 major S&P sectors. It makes sense. Tariffs threaten to hit U.S. retailers hardest, including the many companies that sell products like toys, child car seats, and sports apparel (such as our own Dick’s Sporting Goods (DKS)), most of which are made in places like China, Indonesia, Japan and Thailand – the places with the highest potential tariff rates. Combine that with escalating fears of a U.S. recession – also brought on by tariffs – and it could be a double whammy for retailers who don’t sell the essential everyday items that consumers buy regardless of the economic environment.
Last week was another up week for the S&P 500. The index has made up all the tariff Armageddon losses, it’s in positive territory YTD and is within 3% of the all-time high.
The market is flat so far this week. But after the big surge higher, it’s encouraging that the index isn’t pulling back. Perhaps stocks are consolidating a bit ahead of another move higher.
The market is flat so far this week. But after the big surge higher, it’s encouraging that the index isn’t pulling back. Perhaps stocks are consolidating a bit ahead of another move higher.
Last week was another up week for the S&P 500. The index has made up all the losses since April and is now in positive territory for the year.
After a multi-month barrage of relentlessly negative headlines, the S&P is within 3% of the all-time high. Seven of the eleven market sectors are higher YTD, and two of the negative sectors are down less than 1% for the year so far.
After a multi-month barrage of relentlessly negative headlines, the S&P is within 3% of the all-time high. Seven of the eleven market sectors are higher YTD, and two of the negative sectors are down less than 1% for the year so far.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Alcoa (AA), Centuri Holdings (CTRI), Dollar Tree (DLTR), GE Aerospace (GE), Intel (INTC), Pan American Silver (PAAS) and Toast Inc. (TOST).
Intel’s prospects hinge on the success of its 18A process node, which has the potential to be a major catalyst for its turnaround.
Intel’s prospects hinge on the success of its 18A process node, which has the potential to be a major catalyst for its turnaround.
The S&P 600 Small Cap Index rallied back to its March 25 levels early this week following weekend talks between China and the U.S. in Geneva, Switzerland. Those talks led to a 90-day ceasefire in the insane trade war between the two countries.
The latest news on trade is also positive, with supposed progress on talks between the U.S. and India, Korea and the EU. The market is a lot happier now that President Trump appears to be working to generate trade deals rather than destroy them.
The latest news on trade is also positive, with supposed progress on talks between the U.S. and India, Korea and the EU. The market is a lot happier now that President Trump appears to be working to generate trade deals rather than destroy them.
As the United States and China reached a 90-day trade conflict ceasefire, markets have responded positively though the deal is not binding and lacks much detail. The S&P 500 edged into positive territory for 2025. A number of Explorer stocks are having very good years.
Stocks are back in business!
Yes, a little more than a month after some of the worst investor sentiment readings in years, soaring volatility, and a 19% decline in the S&P 500 – not to mention both the Nasdaq and the Russell 2000 swinging to bear market territory – stocks are suddenly on a roll, recession fears are abating, and, perhaps most importantly, tariff deals have been struck. The 90-day pause on most reciprocal tariffs initiated by President Trump on April 9 – one week after the deeply unpopular “Liberation Day” was announced – triggered one of the biggest one-day rallies in stock market history. Indexes flirted with their early-April lows two weeks later but eventually stabilized, and May has brought a wave of positive tariff news – first, a deal with the United Kingdom, in which key imports like cars were reduced to 10% and steel and aluminum tariffs were eliminated; then, last weekend came a 90-day truce with China. That sent stocks soaring more than 3% on Monday, and they haven’t looked back.
Yes, a little more than a month after some of the worst investor sentiment readings in years, soaring volatility, and a 19% decline in the S&P 500 – not to mention both the Nasdaq and the Russell 2000 swinging to bear market territory – stocks are suddenly on a roll, recession fears are abating, and, perhaps most importantly, tariff deals have been struck. The 90-day pause on most reciprocal tariffs initiated by President Trump on April 9 – one week after the deeply unpopular “Liberation Day” was announced – triggered one of the biggest one-day rallies in stock market history. Indexes flirted with their early-April lows two weeks later but eventually stabilized, and May has brought a wave of positive tariff news – first, a deal with the United Kingdom, in which key imports like cars were reduced to 10% and steel and aluminum tariffs were eliminated; then, last weekend came a 90-day truce with China. That sent stocks soaring more than 3% on Monday, and they haven’t looked back.
It’s cannabis company earnings season once again. Below, I summarize the highlights from our portfolio companies. But first, here are the major sector trends that emerged from the calls.
The market is booming. The worst appears to be over, and sustained upside from here is entirely possible.
The S&P 500 closed on Friday up about 17% over the last month. The index also moved to within 8% of the all-time high. And that was before the huge rally on Monday.
The Trump administration announced huge progress with China in trade talks over the weekend. The two sides reportedly agreed to a 90-day pause on tariffs, with duties set to drop 115% on both sides by Wednesday. President Trump and the Chinese president are likely to talk in the coming days. This follows the announcement of a comprehensive deal with the U.K. last week.
The S&P 500 closed on Friday up about 17% over the last month. The index also moved to within 8% of the all-time high. And that was before the huge rally on Monday.
The Trump administration announced huge progress with China in trade talks over the weekend. The two sides reportedly agreed to a 90-day pause on tariffs, with duties set to drop 115% on both sides by Wednesday. President Trump and the Chinese president are likely to talk in the coming days. This follows the announcement of a comprehensive deal with the U.K. last week.
Alerts
WHAT TO DO NOW: We’re paring back further today, not because of any major change in the top-down evidence, but simply taking our cues from individual stocks. Today we’re going to sell our stake in Samsara (IOT), which pulled back normally after earnings last week, but the follow-on selling prompts us to cut bait. That sell will boost our cash position to the upper 30% range, which we’ll hold on to for now. Details below.
WHAT TO DO NOW: Growth stocks are finally hitting air pockets today after massive runs, and while many look fine from an intermediate-term point of view, some appear iffy after massive runs. Thus, we’re paring back today: We’re going to take more partial profits in AppLovin (after already booking some profit this morning), as well as selling one-third of Axon (AXON), which isn’t as extreme as some others but is coming under pressure. Details below.
WHAT TO DO NOW: Remain bullish, but continue to manage your positions. In the Model Portfolio, we’re going to again take partial profits in AppLovin (APP), selling one-third of what we have left. That will boost our cash position to around 22%. Details below.
I’m recommending that we sell a quarter of our position in American Airlines (AAL).
We’re doing things a little differently this month since there’s potential for a stock-moving announcement tomorrow that could impact this month’s new addition, which is a speculative mining stock.
I’m recommending that we sell a quarter of our position in Super Hi International Holding (HDL).
WHAT TO DO NOW: Last week’s market action was disappointing, though it didn’t change any of our key indicators. Even so, we’re seeing some selling on strength appear, so we’re focused on managing our portfolio. Today we’re going to sell one-third of our solid profit in Palantir (PLTR), leaving us with 23% in cash.
Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
We continue to get positive signals out of Washington, D.C. for cannabis companies.
Portfolios
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
| Transaction Date | Poor Man’s Covered Calls | Original Price | Current Price | LEAPS Price | LEAPS Price | LEAPS Price | Premium Sold | Closing Price | Total Premium | Total Return | Position Delta |
| SPDR Gold Shares ETF (GLD) | $172.46 | $166.79 | (open) | (current) | (closed) | (current) | ($5.67) | ||||
| 6/3/2022 | LEAPS January 19, 2024 145 call | $37.00 | $30.20 | ($6.80) | 80 | ||||||
| 6/3/2022 | July 15, 2022 181 call | $1.00 | $0.12 | $0.88 | |||||||
| 6/30/2022 | August 19, 2022 175 call | $1.91 | $0.21 | $1.70 | |||||||
| 7/28/2022 | September 16, 2022 169 call | $1.90 | $0.07 | $1.83 | |||||||
| 9/1/2022 | October 21, 2022 165 call | $1.45 | $0.03 | $1.42 | |||||||
| 10/14/2022 | November 18, 2022 159 call | $1.48 | $4.45 | ($2.97) | |||||||
| 11/10/2022 | December 16, 2022 169 call | $1.40 | $1.02 | $0.38 | |||||||
| 12/13/2022 | January 20, 2023 172 call | $1.96 | $1.12 | $1.96 | -27 | ||||||
| Totals | $11.10 | $35.40 | 53 | ||||||||
| Transaction Date | Poor Man’s Covered Calls | Original Price | Current Price | LEAPS Price | LEAPS Price | LEAPS Price | Premium Sold | Closing Price | Total Premium | Total Return | Position Delta |
| Invesco DB Commodity Index Tracking Fund (DBC) | $30.45 | $24.16 | (open) | (current) | (closed) | (current) | ($6.29) | ||||
| 6/8/2022 | LEAPS January 19, 2024 22 call | $10.50 | $4.00 | ($6.50) | 70 | ||||||
| 6/8/2022 | July 15, 2022 32 call | $0.55 | $0.05 | $0.50 | |||||||
| 6/30/2022 | August 19, 2022 29 call | $0.50 | $0.05 | $0.45 | |||||||
| 7/28/2022 | September 16, 2022 27 call | $0.55 | $0.10 | $0.45 | |||||||
| 9/7/2022 | October 21, 2022 26 call | $0.50 | $0.00 | $0.50 | |||||||
| 10/25/2022 | December 16, 2022 27 call | $0.45 | $0.05 | $0.40 | |||||||
| 12/13/2022 | January 20, 2023 25 call | $0.45 | $0.35 | $0.45 | -33 | ||||||
| Totals | $3.00 | $6.75 | 37 | ||||||||
| Transaction Date | Poor Man’s Covered Calls | Original Price | Current Price | LEAPS Price | LEAPS Price | LEAPS Price | Premium Sold | Closing Price | Total Premium | Total Return | Position Delta |
| iShares Trust 7-10 Year Treasury Bond ETF (IEF) | $101.93 | $98.61 | (open) | (current) | (closed) | ||||||
| 6/8/2022 | LEAPS January 19, 2024 85 call | $19.00 | $16.25 | ($2.75) | 81 | ||||||
| 6/8/2022 | July 15, 2022 103 call | $0.70 | $0.19 | $0.51 | |||||||
| 7/14/2022 | August 19, 2022 105 call | $0.58 | $0.12 | $0.46 | |||||||
| 8/11/2022 | October 21, 2022 105 call | $1.20 | $0.04 | $1.16 | |||||||
| 9/22/2022 | October 21, 2022 98.5 call | $0.55 | $0.05 | $0.50 | |||||||
| 10/12/2022 | November 25, 2022 97 call | $0.92 | $0.18 | $0.74 | |||||||
| 11/17/2022 | December 16, 2022 98 call | $0.50 | $0.86 | ($0.36) | |||||||
| 12/13/2022 | January 20, 2023 100 call | $0.88 | $0.74 | $0.88 | -35 | ||||||
| Totals | $5.33 | $20.14 | 46 | ||||||||
| Transaction Date | Poor Man’s Covered Calls | Original Price | Current Price | LEAPS Price | LEAPS Price | LEAPS Price | Premium Sold | Closing Price | Total Premium | Total Return | Position Delta |
| Vanguard Total Stock Market ETF (VTI) | $189.65 | $192.69 | (open) | (current) | (closed) | ||||||
| 6/15/2022 | LEAPS January 19, 2024 145 call | $54.50 | $56.60 | $2.10 | 85 | ||||||
| 6/15/2022 | July 15, 2022 198 call | $2.50 | $0.03 | $2.47 | |||||||
| 7/14/2022 | August 19, 2022 193 call | $3.20 | $11.00 | ($7.80) | |||||||
| 7/28/2022 | September 16, 2022 210 call | $2.95 | $0.30 | $2.65 | |||||||
| 9/1/2022 | October 21, 2022 205 call | $3.00 | $0.55 | $2.45 | |||||||
| 9/22/2022 | October 21, 2022 197 call | $2.10 | $0.15 | $1.95 | |||||||
| 10/12/2022 | November 18, 2022 190 call | $3.10 | $7.45 | ($4.35) | |||||||
| 11/10/2022 | December 16, 2022 205 call | $2.65 | $0.05 | $2.60 | |||||||
| 12/15/2022 | January 20, 2023 200 call | $3.10 | $1.85 | $3.10 | -28 | ||||||
| Totals | $19.50 | $59.67 | 57 | ||||||||
| Transaction Date | Poor Man’s Covered Calls | Original Price | Current Price | LEAPS Price | LEAPS Price | LEAPS Price | Premium Sold | Closing Price | Total Premium | Total Return | Position Delta |
| iShares 20+ Year Treasury Bond ETF (TLT) | $110.56 | $107.11 | (open) | (current) | (closed) | ||||||
| 6/13/2022 | LEAPS January 19, 2024 85 call | $29.10 | $25.70 | ($3.40) | 80 | ||||||
| 6/13/2022 | July 15, 2022 114 call | $1.65 | $2.58 | ($0.93) | |||||||
| 6/30/2022 | August 19, 2022 119 call | $1.95 | $0.23 | $1.72 | |||||||
| 8/11/2022 | September 16, 2022 119 call | $1.16 | $0.10 | $1.06 | |||||||
| 9/1/2022 | October 21, 2022 115 call | $1.42 | $0.23 | $1.19 | |||||||
| 9/22/2022 | October 21, 2022 110.5 call | $0.73 | $0.03 | $0.70 | |||||||
| 10/12/2022 | November 25, 2022 104.5 call | $1.66 | $0.10 | $1.56 | |||||||
| 11/10/2022 | December 16, 2022 100 call | $1.46 | $2.90 | ($1.44) | |||||||
| 11/22/2022 | December 16, 2022 103.5 call | $1.30 | $3.15 | ($1.85) | |||||||
| 12/2/2022 | January 20, 2023 109 call | $1.82 | $2.02 | $1.82 | -41 | ||||||
| Totals | $13.15 | $29.53 | 39 |
Strategy
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.