Ahead of a big week for the market, the S&P 500, Dow and Nasdaq all rose marginally last week.

The markets traded sideways through most of April. But since then, the choppiness has returned—along with worries about the uncertainty regarding the debt ceiling, the expiration of the immigration-limiting legislation, and ongoing debate about the possibility of a recession.

Yet, economically speaking, the trends are still healthy. Manufacturing has held up, employment continues to rise, and job openings are still underutilized (as you can tell if you’ve been in a restaurant lately!).

For the first time in weeks, and maybe even months, the market’s advance felt broader as more and more stocks participated in the market rally. That, as well as the VIX getting clobbered, has me encouraged … for now.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the June 2023 issue.

The U.S. presidential election, “only” seventeen months away, is shaping up to follow a predictable script. Investors should keep their personal views and their investing process separate.

Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.

The market finished solidly in the black thanks to a strong end to last week; interestingly, while the intermediate-term trend is still neutral overall, a couple of broad up days from here could kick it into the green. Even better is the action of leading stocks, with more names emerging and, importantly, more names holding their recent upmoves. To be clear, there’s still a lot of proving to do, but overall, we think the evidence has taken another step in the right direction—we’ll move up our Market Monitor to a level 6 and see what comes from here.

This week’s list has a ton of strong names and other good setups that could lift should the market continue to improve. Our Top Pick looks like the leader of the improving cybersecurity group, having lifted out of a long consolidation. Dips should be buyable.

Stocks are the highest they’ve been since last summer, and with the debt ceiling in the rear-view mirror and the Fed sounding less hawkish these days, it’s possible they could keep rising as we enter Summer 2023. One sector that’s been unstoppable of late is artificial intelligence, so today we add some more AI exposure, which has already served us well with the performance of Microsoft (MSFT). The new addition is a lesser-known name but is equally red-hot. Mike Cintolo recently recommended it to his Cabot Top Ten Trader audience.

The market continued to rally this week and as a result, the probability of success on our positions moved slightly lower. That being said, both of our open trades still have a favorable probability of success. Our IWM iron condor sits at approximately 76% (tested side) and our QQQ bear call currently stands at a probability of success of better than 81%. Of course, anything can happen with 47 days left until our positions are due to expire on July 21.

The June 16, 2023 expiration cycle is nearing and we have several positions due to expire. While I intend, as always, to stay mechanical and allow our KO and GDX puts positions to play out, I do plan on buying back our PFE 40 calls this week and immediately selling more call premium.

We are firmly in the doldrums of earnings season for the next few weeks, but that doesn’t mean we will not be presented with an opportunity or two each week. While last week was slow, this week picks up, slightly with a potential opportunity in DocuSign (DOCU).


While I could really care less about the fundamental aspects of the company and the upcoming earnings announcement, the high implied volatility (IV) piques my interest. Though I am not a fan of chasing high IV stocks, I am a fan of highly liquid stocks that have highly inflated premium around earnings.

For the first time in weeks, and maybe even months, the markets advance felt broader, as more and more stocks participated in the market rally. That, as well as the VIX getting clobbered, has me encouraged … for now.

For the first time in weeks, and maybe even months, the markets advance felt broader, as more and more stocks participated in the market rally. That, as well as the VIX getting clobbered, has me encouraged … for now.

This month I’m featuring an innovative software company with an AI angle.

While AI is all the rage, bordering on hype, this company’s learning platform has been harnessing the technology for a few years. The latest iterations of AI are likely to help make its product better and open new monetization opportunities.

It’s a neat story and the company has terrific products that are loved by users. Because of the recent run in tech stocks, we’ll start with a half-sized position. Enjoy!

It’s not a surprise for those following the market lately: it’s a bear market in Greentech. The past week, only 5% of the Greentech universe is trading higher and every subsector – water, wind, solar and nuclear – are bearish too.

The stock market’s enduring slide must be driven by something – the S&P500 rarely (but occasionally) falls 16% in four months for “no reason.” No doubt the long list of issues led by inflation, war in Europe, the end of cheap and easy money, the cut-off of generous stimulus checks and a possible recession feature large.

ENS is the GoDaddy of Defi. In this week’s market update we will highlight this lesser-known investment opportunity.

We include comments on earnings from 12 companies, summarize the podcast, include The Catalyst Report and summarize the May edition of the Cabot Turnaround Letter.

The Federal Reserve, America’s central bank, raised its benchmark rate a half percentage point yesterday as assets that investors perceive as safer were among those to rally. While macro issues such as inflation and interest rates are certainly important, in the end it will be company performance relative to expectations that will be decisive.

Even if inflation may be peaking at levels last seen four decades ago, the key question is whether these levels are transitory or sticky and likely to come back to earth slower than many imagine.

To most people it’s May the fourth be with you day, and tomorrow is Cinco De Mayo. But to the market it’s Fed day. And that’s all that matters.
The Fed meets today and is widely expected to raise the Fed Funds rate by 0.50%. That would be the largest single-meeting rate hike in more than twenty years. It’s necessary because the Central Bank is a million miles behind the curve in countering this high and persistent inflation, currently running at more than 8%.

This market distinctly turned ugly again. The S&P 500 and the Nasdaq closed at year-to-date lows on Friday.

It was hoped that earnings could save the floundering market. But it isn’t happening. Inflation and slowing growth are creating a pall over everything. The Fed seems determined to make up for lost time and aggressively hike interest rates. Stocks can’t get much traction as investors look ahead to more inflation, rising interest rates and a weaker economy.

As I think about the market, I’m struck by how negative sentiment is. The U.S. Sentiment Bull-Bear spread is at -43%. Typically, when it is this negative, forward returns look quite attractive.

Investors always like a safe place to salt away some cash, particularly during a period of market volatility.

Traditionally, that’s been money market funds, or as part of an asset allocation strategy, many have turned to short-term investment-grade bonds.



Those more typical fixed-income funds often play a role as a way to dampen the volatility of equities, and provide some stability during times of high volatility.

Gold prices took a dive in late April, falling 6% after briefly reclaiming the $2,000 an ounce level earlier in the month. While disappointing, the yellow metal still finished the first four months of this year with a net gain of 6%.

Of technical significance, gold remains above its widely-watched 200-day moving average, which tells us that despite the recent weakness, the bulls still have control over the intermediate-term trend.

Over the weekend, Bill Gurley tweeted his perspective on valuation and global markets. Bill is a General Partner at Benchmark, a venture capital firm in Menlo Park, CA. Benchmark has invested in many defining companies including Uber, Zillow, and Grubhub.
His tweets echo what we have been preaching here at Cabot SX Crypto Advisor since inception.

We included comments on earnings from nearly a dozen recommended companies, news about other recommended stocks, and a delay in the publishing of the May edition of the Cabot Turnaround Letter as the chief analyst is stuck in London.

As we enter the final month of the year, market volatility has increased, and with it, investor anxiety. But the main trend of the market remains up, so I remain confident that intelligent investors who follow proven investing disciples can make money—which brings me to an email I received from a reader just today.

After a so-so bounce yesterday (good for the major indexes, not great for the broad market), a combination of fresh virus fears and hawkish words from the Federal Reserve is sending the market reeling again. As of 12:30 EST, the Dow is off 590 points and the Nasdaq is down 264 points.

This mega restaurant company beat analysts’ earnings by $0.30 last quarter. The shares have a current dividend yield of 2.21%, paid quarterly.

This giant oil company blew right through analysts’ earnings estimates, posting EPS of $2.96, compared to the forecast of $2.21. The shares have a current dividend yield of 4.71%, paid quarterly.

General Motors has made a remarkable transition from bankruptcy in 2009 to a highly-profitable and innovative contender in the rapidly changing global auto industry, driven by CEO Mary Barra.

This is the world’s largest uranium company, and its shares were just upgraded at BofA to ‘Buy.’

On to the market, we’re in a good old-fashioned correction for growth stocks. The action in a lot of individual names is as ugly as we’ve seen in a while, with some stocks looking just downright awful. This is a broad move – very few stocks are being left out of it. I suspect the selling has been exacerbated by this being a holiday week.

Today, MRO stock is up 2% along with its oil stock peers. We are going to take advantage of today’s stock gains to exit this stock position for a small loss, so we can move this capital into a fresher idea next week (reminder: tomorrow is one of our two weeks off per year from publishing Profit Booster).

Despite what the broad market indices say, it’s a gross day for the market, and for software stocks in particular. This had been an interesting group in recent months. We’ve seen several rocket to unbelievable heights, while others have continued to falter. It doesn’t take a lot of imagination to foresee a scenario where there is some mean reversion here (i.e. the strongest ones come down, weakest ones pop back up).

The major indexes are doing well today thanks to some mega-cap names, but under the surface, we’re seeing a ton of damage among leading growth stocks. As of 11:15 am ET, the Dow is up 240 points and the Nasdaq is up 91 points, but most growth-oriented funds are down and many names are off big.

Our first pick is a semiconductor company that just closed its acquisition of software company Oculii. The company will report earnings on November 11; current estimates are EPS of $0.49 on revenues of $90.35 million. Our second recommendation is some profit-taking on a previous idea.

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.