The Federal Reserve resumed lifting interest rates Wednesday with a quarter-percentage-point increase that brings interest rates to a 22-year high. The decision was unanimous.

The benchmark federal funds rate will go to a range between 5.25% and 5.5% as the Fed continues its fight against inflation. This is the 11th increase since March 2022, when rates were near zero.

Inflation has already retreated from a four-decade high last summer and the consumer-price index was up 3% in June year over year which is much lower than the June 2022 peak of 9.1%.

Politicians in Washington, D.C. let cannabis investors down once again.

Commentary from lobbyists and Senators had suggested the Senate banking committee might make progress on cannabis sector banking reform (allowing banks to work with companies) in late July.

That turned out not to be the case. I cautioned at the time that a risk here is that the actions of politicians are hard to predict. But it was worth having exposure, in case there actually was progress on so-called SAFE banking, which seemed possible at the time.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the August 2023 issue.

In this letter, we include our Mid-Year 2023 updates for our stock market and high yield bond market outlooks. After being totally wrong with our stock market outlook for 2023, what do we see for the rest of the year, and why? We were nearly spot-on with our high yield bond market outlook. How does this market look to us now?

Our feature recommendation this month is Kopin Corporation (KOPN), an obscure optical display company that previously was run like a hobby by a brilliant scientist. Its primary output was a chronic stream of operating losses and share offerings that heavily diluted its investors. Now, under completely new leadership, the company is being run like a for-profit commercial enterprise with a vast market opportunity ahead.

Ahead of the long holiday weekend the market had yet another good week. The S&P 500 gained 1.75%, the Dow rallied 1.5%, and the Nasdaq rose another 1.9%.

This week in an attempt to diversify the portfolio we are adding an energy play.

The population is aging. And it’s aging at warp speed. People 50 years of age and older now comprise a third of the U.S. population. The fastest growing segment of the population is 65 and older as an average of 10,000 baby boomers are turning 65 every single day. And it’s not just this country – aging is a global phenomenon.

We don’t know how sticky inflation will be or what the Fed will do. We don’t know if there will be a recession this year or next year or what the recovery will look like, or who will be the next president. But we do know that the population is shifting and companies on the receiving end of the torrent of dollars that will flow as a result should benefit mightily.

In this issue, I highlight another new stock to buy. This stock is cheap with strong momentum and properties that should help it perform well in any kind of market. It’s a healthcare stock ahead of a huge megatrend, the aging population.

Investing with the tailwind of a megatrend makes it so much easier to make a successful investment. It makes mediocre stocks great and good stocks one of your best investments ever.

After a non-stop run for two-plus months, we’re finally seeing a bit of sloppiness in the Nasdaq and some growth stocks that have had huge runs— combining the recent action with the fact that the advance has been going on 12 weeks and earnings season is upon us, and further stumbles are certainly possible in growth. All that said, it’s been more about rotation than outright selling, as the broad market has actually picked up steam, and none of this alters our big-picture bullish thoughts, as the top-down evidence remains overwhelmingly positive. Put it together, and we’re still bullish, but we’ll pull in our Market Monitor a notch to a level 7 to reflect some of the near-term wobbles.

This week’s list reflects the market action, with more non-tech names, be it cyclical plays, drug firms or even a bull market-related business. Our Top Pick is a bull market stock that has just come alive after a long bottoming effort.

The bull market keeps rolling along, though both the Fed and a busy, star-studded earnings slate could provide a couple speed bumps this week. Still, I wouldn’t bet against this market right now, at least not in the intermediate or long term, so today we’re adding another high-upside pick. It’s a mid-cap software stock that’s trading well below its post-IPO highs, but that has built up a full head of steam the last two-plus months. It’s a new addition from Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

As I stated on our subscriber-only call last week, expect to see several trades this week. On the call I went over several trades, bullish, bearish and neutral, and I expect to add at least one of each over the next week or so.

We need to ramp up positions and now that July expiration has passed, we start selling premium going out roughly 30 to 60 days, but given the low-volatility environment that has taken over the market, I would expect to sell premium going out towards a longer duration trade. Just know that even though we place a trade going out further in duration, say 60 days, it doesn’t mean that we are going to be in a trade for that long. As we discussed on our call, our average hold time per trade duration is 20.5 days, regardless of the duration of the trade at the point of entry.

Not too much to report this week as we simply allow our August positions to erode in value, which as options premium sellers is a good thing. We enter earnings season this week, so I fully expect to add several positions to the portfolio over the coming weeks. We currently have six open position with the intent of getting up between eight and 10.

It’s been just over a week since the big banks announced earnings and during that time we’ve been fortunate to make an 8.0% return in JPM, and more recently, 6.4% in IBM using the Earnings Trader strategy.

Earnings announcements really ramp up this week with a long list of well-known blue-chip stocks due to announce. As I stated on our call last Friday, I hope to make at least two to three trades this week. During each earnings cycle we aim to make somewhere between 8 to 12 trades and given the opportunities ahead I don’t see any reason why we wouldn’t fall within our typical range.

Sector and index rotation was the name of the game last week as money raced out of tech to end the week and into sectors that had not been participating in the market’s advance recently. That being said, this is not necessarily a bad sign as the S&P 500 gained 0.7%, the Dow rallied 2.08% and the Nasdaq lost 0.6%.

Sector and index rotation was the name of the game last week as money raced out of tech to end the week and into sectors that had not been participating in the market’s advance recently. That being said, this is not necessarily a bad sign as the S&P 500 gained 0.7%, the Dow rallied 2.08% and the Nasdaq lost 0.6%.

This week’s Friday Update includes comments on our companies. There were no ratings changes or earnings reports.

The major indexes are down modestly today after the European Central Bank laid out a plan to tighten policy. As of 215 pm, the Dow was down 157 points and the Nasdaq was off 129 points.

After trading as low as 1139 on May 12 the S&P 600 Small Cap Index has staged a modest recovery, crossing back above the January and February lows of around 1230 two weeks ago.

There’s reason to be heartened this week, as the market and Greentech continue to improve, extending on the hints of a turnaround we discussed in our issue last week. In fact, Greentech is looking better than the broader market right now, as it sits over the 20-day and 40-day moving averages (the S&P 500 and Nasdaq Tech 100 are below their 40-day) and we’re seeing Greentech’s 40-day line start to make a turn higher.

Things are looking better. The market stopped going down. Now it’s going sideways. That’s better.

Stocks have moved above the bear market precipice as investors have apparently priced in the fact that inflation will be persistent and the Fed will have to raise rates aggressively this year. That’s a major bummer to factor in. The market appears to have absorbed that shock, at least for now.

Our weekly note usually follows the theme of “what’s on our minds.” The topics range from discussions about individual stocks to the overall market to inflation and other matters. We usually have a lot on our minds, so it’s mostly a matter of picking one.

The Undiscovered Portfolio within ETF Strategist is delivering exactly the kind of return we’d hope to see in a down market, with three of four funds showing gains as of Thursday.

As you see in the table below, even the fourth fund has only a small loss of less than 2%. That’s well ahead of recent performance in the major indexes.

Hurricane season is upon us, a time of year that normally sees increased storm activity along America’s coasts. If a prediction by a major investment bank is correct, the U.S and other major countries will also experience an “economic hurricane” at some point in the coming months.

The “hurricane” prediction made headlines last week after JPMorgan Chase (JPM) CEO Jamie Dimon used the term to describe what he sees as a precarious balancing act the Federal Reserve must perform in trying to control inflation by raising interest rates without pushing the economy into recession.

We reiterate our bullish call that the highest-quality names have likely bottomed. This thesis stems from the fundamental financial performance of the names we have been tracking. As these companies have delivered high-quality earnings reports, their positive financial results have de-risked the process of investing in these great businesses. They are worth owning today, to hold well into the future, making it a compelling time to invest in areas like cloud computing, enterprise and SME software, semiconductors, financial technology, and cryptocurrency.

This week’s Friday Update includes comments on earnings from Duluth Holdings (DLTH). Two stocks are at or near our price targets and we summarize the podcast.

Explorer positions had an up week as the S&P 500 has begun a turnaround from bear market territory and is now down “only” about 13% for the year. This means it is up around 6% since hitting its recent low on May 19 as the Fed has softened its tone and China tries to get growth going.

Electric vehicle sales are set to more than triple to just over 20 million in 2025, according to BloombergNEF. This is up from a previous estimate of 15 million.

Things have gotten a little better in the market. The situation has gone from bad to crummy.

The S&P 500 rallied from the lows to move away from the bear market precipice. The index also closed the week in positive territory for the first time in eight weeks and actually managed to eke out a very slight gain for the month of May. It’s not much. But it beats spiraling downhill.



For the first time in ages, inflation numbers were better than expected. There were also some positive numbers for the economy today. There seems to be a feeling that stocks have priced in the current negative environment for now. And there is some faint hope that inflation will recede all by itself and therefore the Fed won’t have to drive the economy into recession.

While these shares are trading at a discount, some company insiders have been adding to their holdings. The company is expected to grow earnings by more than 22% next year.

I’ve been in the business of writing and publishing investment advice for 35 years and over that time I’ve become a dyed-in-the wool, card-carrying optimist about the market.

While these shares are trading at a discount, some company insiders have been adding to their holdings. The company is expected to grow earnings by more than 22% next year.

It’s another ugly day out there as the market remains in wait-and-hear mode pending commentary from Fed Chairman Jerome Powell, who will update us on his latest thinking tomorrow. While investors seem to be finding a certain level of comfort with data showing vaccines and treatments are effective against the Omicron variant, the wholesale inflation number from today and prospect of rate hikes is casting a bit of a pall over the market.

This preferred stock is issued by a telecom company whose earnings are expected to grow at an annual rate of more than 85% over the next five years.

Shares of Arena (ARNA) are up over 80% today to around 92 on news that Pfizer (PFE) is seeking to acquire the company for $6.7 billion in cash. The implied takeout price is 100 a share.

This medical device company beat earnings estimates by $0.08 in its most recent quarter. As COVID eventually subsides, demand for its products should continue to grow.

Today Everbridge (EVBG) is trading sharply lower following an out-of-the blue announcement that the CEO is leaving. Not only is David Meredith leaving his post as CEO but also as a member of the Board of Directors.

This Ohio bank beat analysts’ EPS estimates by a nickel last quarter. The bank just raised its dividend by 27%. The shares have a current dividend yield of 3.06%, paid quarterly.

At the end of last quarter, 64 hedge funds entered this exchange stock—the highest number ever. That has pushed the shares up; you may want to wait for a brief pullback before buying.

SentinelOne (S) is one of our newer positions and has been hit hard during the recent market retreat. Part of this is because it is a recent IPO, part is because the broader group of security stocks has sold off (NET, ZS, OKTA, CRWD, etc.).

Our first idea is a fun whose top five positions are: MSCI Inc (MSCI, 8.36% of assets); Penn National Gaming Inc (PENN, 7.56%); Vail Resorts Inc (MTN, 6.74%); CoStar Group Inc (CSGP, 5.70%); and Ansys Inc (ANSS, 5.00%). Our second recommendation is a sale of a previous pick.

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.