Led by mega-cap tech stocks, the indexes tacked on modest gains last week. The S&P 500 rose 1%, the Dow added 0.84%, and the Nasdaq gained 0.7%.

Thank you for subscribing to the Cabot Value Investor. The new name for the former Cabot Undervalued Stocks Advisor more clearly and broadly describes our mission to serve value-oriented investors. We hope you enjoy reading the May 2023 issue.

Fitting for a value investment newsletter, your chief analyst will be making the pilgrimage to the Berkshire Hathaway Annual Shareholders Meeting this coming weekend.

In this month’s letter, we include our recent new Buy recommendation: NOV, Inc. (NOV). This high quality mid-cap company ($7.3 billion market cap) appears to be in front of an upshift in demand for sophisticated drilling equipment even as its shares trade at a modest valuation.

We also cover earnings reports and provide other relevant updates on our recommended companies.

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.

For the big-cap indexes, last week was intriguing, with a sharp dip from resistance on Monday and Tuesday leading to an equally-sharp snapback—a possible shakeout of sorts. That said, the bullish action remains concentrated in a handful of names; the broad market is still meandering at best and there were more than a few air pockets last week among potential leaders. All in all, we’ll drop our Market Monitor to a level 4—that said, there are still tons of earnings reports on tap this week and next, so a bunch of gaps up (and broad market strength) could give us plenty to work with.

This week’s list has a bunch of recent earnings winners as well as a few that are set to report. Our Top Pick was an early leader off last year’s October lows and looks to be resuming its uptrend after a two-month rest.

The good times keep rolling in the Stock of the Week portfolio, as more than a handful of our stocks are either at 52-week highs or all-time highs thanks in part to big earnings boosts in recent weeks.

While there are myriad potential potholes out there – another big regional bank failed, another interest rate hike is likely coming this week, the debt ceiling and mild recession are looming, earnings overall have been mixed, and so on – the market has been remarkably resilient of late. So this week we take another big swing by sticking with what has been our bread-and-butter niche since taking over this advisory last summer: up-and-coming retail leaders. The latest addition is a favorite of Cabot Growth Investor Chief Analyst Mike Cintolo.

Details inside.

Our focus this week will be on CVS Health (CVS), Starbucks (SBUX), ConocoPhillips (COP) and Apple (AAPL).


Last Friday, during our live webinar, we took a detailed look at what type of trading opportunities the four companies above (and several others) were offering prior to their earnings releases this week. Fortunately, it looks like all four offer some decent trading opportunities, although Mr. Market will ultimately dictate whether or not the same opportunities are available at the time of the trade. My hope is that we are able to get two to three trades off this week, bringing our total for this earnings season to seven.

We have two positions on at the moment, both due to expire at the June 16 expiration date. Fortunately, both are hovering around the same price we sold them for, so all is well at the moment. And given we are leaning slightly bearish in both positions, a move lower should certainly help both positions and possibly lead to some early profit taking.


My hope this week is to add one more trade to the June 16 expiration cycle, preferably a bullish leaning trade to balance out the deltas in the portfolio. Otherwise, we will simply sit on our hands and allow time decay to work in our favor.

We are 18 days away from the May 19, 2023, expiration cycle coming to a close and the three remaining May positions all remain in good standing. Moreover, time decay continues to accelerate, which has already started to give us an opportunity to roll our positions in an attempt to collect more premium.

We locked in profits in both PFE and KO and immediately sold more premium last week and if all goes well this week, I intend to do the same with the remaining three May positions.

*Since we started the Income Trader service back in early June 2022, we’ve brought in a total of 69.14% in income. My hope is that we can step up our gains even further by adding as we progress through 2023.

Led by mega-cap tech stocks, the indexes tacked on modest gains last week. The S&P 500 rose 1%, the Dow added 0.84%, and the Nasdaq gained 0.7%.

Led by mega-cap tech stocks, the indexes tacked on modest gains last week. The S&P 500 rose 1%, the Dow added 0.84%, and the Nasdaq gained 0.7%.

After another month of dramatic declines in March, cannabis stocks showed a little more stability in April.

This is encouraging, even though it is never really possible to “call the bottom” in out-of-favor groups.

How out of favor is cannabis? I’ve invested through three bear markets, and I don’t think I have ever seen a group as unloved as cannabis is now. Remember, this is a good thing if you are a contrarian investor looking for bargains, as long as the group in question is not a value trap. (Like the declining newspaper industry years ago, a value trap that Warren Buffett got caught in.)

Before we dive into this week’s covered call idea I wanted to address several positions that expired last Friday, and how we will manage those trades …

In the middle of an earnings recession and a slowing economy, defensive stocks are probably the best places to be. These companies can maintain earnings growth while most companies are sliding and remain consistent even as the economy deteriorates further.

Defense is king right now. But defensive stocks are even better when they offer growth as well. In such uncertain times, it makes sense to bank on things that are more certain. Stocks poised in front of a megatrend are the best bet. A megatrend acts as a powerful tailwind for a stock that can make a mediocre pick very good and a good pick great.

In this issue, I highlight a defensive stock that is also one of the world’s largest producers of alternative energy. At the same time, it is also one of the best traditional regulated utilities in the country. It offers defense as well as growth and can thrive in any kind of market.

With this update, I’m giving you trades for rebalancing the Aggressive portfolio (100% equity) and the Moderate portfolio (60% equity/40% fixed income).

Any time the broad market declines 10% or more, into correction territory, it’s wise to evaluate your holdings and be sure nothing has strayed too far out of line from your predetermined allocation.

Our recent ratings change from Buy to Sell for an energy company, earnings updates and other comments on our recommended companies, and some thoughts on the amazingly complex macro environment.

The market put on a good show for the third day in a row – at the close, the Dow was up 418 points and the Nasdaq was up 178 points.

While the Russia-Ukraine conflict continues to add a huge amount of uncertainty in global markets we now have a little more clarity on the interest rate environment here in the U.S. after the Fed hiked rates by a quarter point yesterday.

It’s Fed decision day. The Central Bank is going to raise rates. And the market loves it.

All three market indexes are up big for the second day in a row. Despite the fact that the Fed will today announce the first rate hike since 2018, it’s expected and the market isn’t worried. As a matter of fact, investors sense we will navigate this minefield with no additional cause for concern.

It’s that time of the month. I mean when all eyes are on the Fed, of course. But this time investors have one eye on the Fed and the other eye on Russia.

At the same time, a new narrative is emerging: slowing economic growth. The last several trading days are reflecting investor angst that inflation, the Russian war, and a tightening Fed will slow growth both domestically and internationally. That’s new.

We relate a quote from the movie “Anchorman” to the financial markets and provide updates on our recommended companies.

The three “strategic” portfolios, allocated according to aggressive, moderate, and conservative risk tolerances, trade less frequently, and are designed to help investors meet specific goals.

For more than a year, gold remained stuck in a holding pattern while other metals roared higher in response to global manufacturing demand and supply shortages. All the while, the global economic and geopolitical situation was becoming increasingly tenuous, prompting us to repeatedly wonder when a flight to the safety of gold would transpire.

Our comments on recommended companies that reported earnings, news on several companies and some brief thoughts about the effects of the war in Ukraine on investments.

It has felt like a horrible week, but the reality is that, despite both the Nasdaq and the Dow both falling into correction territory, all but two of our stocks have held above their previous lows.

Today is the expiration of October options and three of our positions will likely expire for profits. The details are below, but the headline is we are simply going to let these situations play themselves out today, and then will revisit where we stand Monday/Tuesday of next week.

Analysts expect this off-price retailer to grow by triple-digits over the next five years.

As we alluded to in this week’s report, the major industrial metals are improving with copper showing the greatest relative strength. We have added some new positions to the portfolio in light of this strength, and here we’ll highlight the latest ones.

Our first idea is a software company who beat EPS estimates by $0.12 in the last quarter. Our sale recommendation is a company whose earnings forecasts are dimming.

The good news is that the marijuana industry is growing rapidly, with the leading companies continuing with their programs of store openings and acquisitions.

The top five holdings of this fund are: Microsoft Corp (MSFT, 11.29% of assets); Tesla Inc (TSLA, 8.41%), Danaher Corp (DHR, 6.09%); Honeywell International Inc (HON, 5.60%); and Cisco Systems Inc (CSCO, 5.29%).

This biopharma has a promising Alzheimer’s drug in the pipeline. But please note that these shares are speculative, so please don’t overload your portfolio with them.

We jumped into Bellring Brands (BRBR) as a trade in September and the stock has slid since. It’s down less than 10%, but the trajectory is clearly not working in our favor and I’m not going to let a trade attempt turn into something significant.

The broad industrial and precious metals market remains subject to the wild oscillations of daily news headlines. There are, however, some glimmers of life in beleaguered metals like copper and platinum.

Today is something of a battleground day for Accolade (ACCD) given that the stock slid into yesterday’s earnings call near the low end of its 2020 trading range amidst concerns that the Delta variant would challenge the critical selling season, which is underway right now.

This oil company is forecast to grow at a rate of 16.8% next year. The shares have a current annual dividend yield of 3.02%, paid quarterly.

The FDA just approved our first pick, a mega-pharma company’s new migraine drug, Still trading at a discount, the shares have a current annual dividend yield of 4.75%, paid quarterly. Our second recommendation is taking some profits off the table, due to declining technical support.

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.