I hope everyone had a wonderful Fourth of July! On Wall Street, the celebration continues, as stocks have stretched to new 2023 highs as we enter the second half of the year. Several of our stocks are hitting new 52-week or even all-time highs, as the bull market is no longer just a mega-cap tech or AI stocks phenomenon, with many sectors and subsectors now along for the ride. So today, we add a cyclical stock that has been acting like a growth stock – so much so that it caught the attention of Mike Cintolo, who recommended it to his Cabot Top Ten Trader readers.

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

Almost like an annual rite of passage, major banks reported their Federal Reserve stress test results last week. All major banks passed, in that their capital levels were in excess of the minimum requirements under the Doomsday Scenario conditions outlined in the test assumptions. We’re not the biggest fans of these tests, for reasons outlined in our monthly letter.

Citigroup remains a riskier bank relative to other majors, but also has a higher return-potential share valuation, plus a 4.5% dividend yield to reward patient investors.

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.

Due to the holiday-shortened week I am going to keep it short today.

We added a new stock to the mix last week, the DKNG August 18, 2023, 22.5 puts. Our total now stands at six stocks, but I don’t plan on stopping there. This week I intend to add one more stock/ETF to the mix, but unlike our other positions, this position will be a short-term trade lasting roughly 30 to 60 days.

Due to the holiday-shortened week I am going to keep the report short this week.


I am excited to inform everyone that I will be adding educational videos to the mix, focusing on all assets of the service. So, if you have anything, and I mean anything, that you would like for me to discuss or explain in greater detail please do not hesitate to email me with your requests.

Due to the holiday-shortened week I am going to keep it short today.


Earnings are slim to none this week. However, that all changes next week when the big banks kick off. JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC) as well as several other big banks are due to report in a little over a week. Yes, that’s right, the wait is almost over…earnings season kicks off Friday, July 14 and I fully anticipate making one if not two trades that day.



Until then, we patiently wait.

Overall, the market’s action remains as close to pristine as you could hope for. Under the hood, there has been a touch of rotation, with some growth stocks chopping around while cyclical, construction and materials names perk up. All in all, we wouldn’t be surprised if growth continued to catch its breath, as the recent pullback was very brief, but that’s short-term nitpicking: While dips and potholes will come, the bottom line is that the vast majority of evidence is bullish, so you should be, too. We’ll bump our Market Monitor up to a level 8, and think adding exposure (ideally on dips) makes sense.

This week’s list reflects the broadening we’re seeing out there, with a few tech names but many others from other corners of the market. Our Top Pick is a long-term winner in the aerospace and defense field whose stock just broke out.

You are receiving the typical Monday morning update today as the Cabot office will be closed on Monday, and then the stock market is closed on Tuesday. Have a great Fourth of July weekend!

You are receiving the typical Monday morning update today as the Cabot office will be closed on Monday, and then the stock market is closed on Tuesday. Have a great Fourth of July weekend!

It’s not a perfect picture, but the vast majority of evidence out there remains bullish, and that’s especially true for the vital leading index (Nasdaq) and leading growth stocks, which have rested normally after beefy, big-volume advances. We’re putting a bit more money to work today by averaging up in a current name, and will ideally put more to work when either (a) a couple of our current holdings overcome resistance (to average up), and/or (b) when some names on our watch list consolidate a bit longer.

In tonight’s issue, we talk about some of the confusion we’re hearing out there about sentiment (not a worry at all in our book), talk about one non-growth sector that reminds us a lot of oil stocks a couple of years ago (before that big run) and go in-depth on some new ideas and, of course, all our holdings.

Fed Chairman Jerome Powell’s continued warnings of future rate hikes weighed on markets as did the Biden Administration’s suggestion that there should be new restrictions on selling advanced chips to China. Despite this, chip stocks such as Nvidia (NDVA) and the PHLX Semiconductor index were down by less than 1%.

Artificial intelligence (AI) calculations largely take place in data centers full of servers with graphics processing units (GPU)s from Nvidia and its competitors. It is estimated that 20% to 25% of the company’s revenue from Nvidia’s AI chips have been coming from China. To avoid further upsetting Beijing, no action is expected until after Treasury Secretary Janet Yellen’s visit to China in July. Washington is also preparing legislation to screen China-bound investments by U.S. companies. AI, quantum computing, biotechnology and large-capacity batteries are at the top of the list.

There is a potentially nice trading opportunity setting up in cannabis near-term.

When Washington, D.C. lawmakers return from their July 4th break on July 10, they are likely to get down to serious business on the SAFE Banking Act.

This proposed law would boost investor interest in the space because it would allow banks to work with cannabis companies. This would help cannabis companies in several ways.

There is no shortage of data pointing to just how bad this market is. With year-to-date (YTD) performance for the S&P 500, Nasdaq and S&P 600 of -17%, -27% and -18%, respectively, this is one of the worst YTD starts in decades.

The market is down again today, though we do see many stocks and some growth funds putting up a fight. As of 1:30 ET, the Dow is down 333 points and the Nasdaq is down 82 points, though growth funds are up in the 1% to 4% range.

It looked grim for a while there. And we’re certainly not out of the woods yet. But hope has stopped the market decline, at least for now.



The broader S&P 500 index closed earlier this week at a YTD low, down over 16% for the year and over 17% from the high. It is dangerously close to the 20% bear market level which would officially end the bull market that started in March of 2020. That would be an important psychological level that would likely prompt more selling.

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.

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.

It’s time for a seasonal copper trade, and this ETF is a good entry point for the metal.

With today’s 9% intra-day price drop following a disappointing near-term outlook, Cisco (CSCO) shares look more attractive and we would buy/add to positions here, as the long-term fundamental picture remains healthy.

The November expiration cycle was a great month for the Cabot Profit Booster portfolio as we will have three positions expire for full profits (IGT, BLDR, DDOG), while one is at a profit though it may not reach its peak potential (MRO). More on that below

This Virginia utility beat analysts’ earnings estimates by $0.07 last quarter. The shares have a current dividend yield of 2.41%, paid quarterly.

Shares of DLocal (DLO) are getting hammered today (-20%, roughly) after the company released formal Q3 results. Recall, preliminary results were released in October at the time of the secondary offering (priced at 52.25, versus stock at roughly 37 mid-day today).

A Republican representative has proposed new legislation to deschedule cannabis (making it less restrictive), which has given the cannabis stocks some momentum.

We’re up 160% on our Excelsior portfolio’s Navitas Semiconductor warrants (NVTS.WS) today. At a recent price of 6.70, the warrants are trading for more than their maximum fair value and we recommend selling most of the position today.

A Republican representative has proposed new legislation to deschedule cannabis (making it less restrictive), which has given the cannabis stocks some momentum.

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.