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

While much of our emphasis is on mid-cap and large-cap turnarounds, there are often attractive turnarounds in the small-cap segment of the market. Companies in this group, with market values generally below $1 billion, can offer worthwhile investment opportunities. This month, we are focusing our research exclusively on small-cap turnarounds and discuss eight names with interesting potential.

Our feature recommendation this month is L. B. Foster Company (FSTR), a small-cap manufacturing and distribution company focused on the railroad, precast concrete structures and customized steel fabrication, coatings and measurement industries. After years of difficulties, a diligent and impressive turnaround effort is underway and starting to show progress, even as investors overly discount its prospects.

The market’s steady advance came to a halt last week, though given the recent run higher, the losses felt “normal.” For the week the S&P 500 fell 1.4%, the Dow lost 1.67%, and the Nasdaq declined by 1.45%.

Few stocks have participated in the YTD rally. In fact, just ten large-cap technology stocks accounted for just about all the market gains this year. The market has so far shunned defense and favored growth. But that situation is unlikely to persist.

There is still lots of risk. Inflation could be stickier, and the Fed could be more hawkish than currently anticipated. Even if a recession never happens, it’s reasonable to expect that the economy will slow in the second half of the year. And overall market earnings have already contracted for the last two quarters.

The relative performance of defensive stocks historically thrives in a slowing economy. If the rally broadens in such an environment, it will need participation from the defensive sectors. If the market pulls back, defense should be the best place to be.

I highlight a new buy-recommended stock in the issue. It is a legendary income stock that pays dividends on a monthly basis. It’s also near the lowest price level of the past two years.

The much-anticipated market dip finally arrived last week, and so far, when you look at the leadership of this market—the Nasdaq and leading individual stocks—the action has been completely normal, and in fact, seems to be producing some higher-odds entry points as names dip toward support. Once again, though, we need to keep a close eye on the broad market—the intermediate-term trend remains up, but it’s getting close to the edge, with another bad week possibly putting the broad market back in the soup. We’ll leave our Market Monitor at a level 7 today but we’re watching things closely in case weak breadth causes the selling pressures to build.

This week’s list has a growing number of pullback-related setups. Our Top Pick quacks like a new technology leader that’s pulled back reasonably after a strong rally. It’s volatile, so start small and use a loose leash.

The market has pulled back after a huge run-up, which is normal action and likely not a product of renewed Fed fears that didn’t exist a week ago. These types of pullbacks in bull markets, like the new one we’ve just entered, are buying opportunities. And so today, we add a high-profile growth stock that is already up more than 80% year to date but may be just scratching the surface of its artificial intelligence potential, which could open up new revenue streams. It’s a new recommendation from Tyler Laundon in Cabot Early Opportunities.

The eight-week rally in the market-leading Nasdaq 100 (QQQ) ended last week as the tech-heavy index finally surrendered to short-term overbought conditions. Makes sense…because over that period of time QQQ saw returns of just under 15%, well over a third of the 37.9% year-to-date returns.

The pullback led us to lock in profits in our August 18, 2023 SPY 465/470 bear call spread and our July 21, 2023 IWM 196/191 – 156/151 iron condor. We locked in 10.1% and 6.2%, respectively, to bring our total returns to 159.9%. Our win ratio stands at 88.6% (31/35 winning trades) since we launched Quant Trader on June 2, 2022.

We sold put premium in PFE and (covered) call premium in GDX and KO last week. And with the market pulling back last week and out of a short-term overbought state, I intend to add even more premium to our plate. We will be adding one, if not two, positions to the mix.

Last week I stated my goal was to bring in total potential returns of roughly 10% to 12.5% per expiration cycle. By adding a few stocks/ETFs we should be able to reach that target.

The market’s steady advance came to a halt last week, though given the recent run higher, the losses felt “normal”. For the week the S&P 500 fell 1.4%, the Dow lost 1.67%, and the Nasdaq declined by 1.45%.

As we get closer and closer to the unofficial launch date of earnings season (July 14), a few decent opportunities still remain on the calendar. That being said, per the usual during earnings offseason, I’m going to keep it short today.

This week Walgreens Boots Alliance (WBA), Micron (MU), and Nike (NKE) are due to announce. And then we hit a dry spell until July 14 when many of the big banks are due to announce, the same day I’ll be hosting my first webinar of the earnings season.

The market’s steady advance came to a halt last week, though given the recent run higher, the losses felt “normal”. For the week the S&P 500 fell 1.4%, the Dow lost 1.67%, and the Nasdaq declined by 1.45%.

In the June Issue of Cabot Early Opportunities we talk Artificial Intelligence (AI) and break down the technology into a few buckets of opportunity that make it a little easier to understand.

I also profile five ways investors can put their money to work in companies with AI exposure.

Enjoy!

The good times for the bulls continued as the S&P 500 rose for a fifth consecutive week, its longest such streak since November 2021, and it was also the best week for the S&P 500 since March.

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.

The market is finally enjoying a rally today, with the major indexes up after a few positive earnings reports. As of 2:45 ET, the Dow was up 644 points and the Nasdaq was rallying 400 points.

It’s hard to put a positive spin on the market’s action over the last week. The bottom line is investor sentiment is the pits and most stocks have been sliding. We owe Microsoft (MSFT) a debt of gratitude for stepping up with a good report and showing that things aren’t actually as bad in tech land as everybody seems to think!

It’s the heart of earnings season. More than a third of all S&P 500 companies report this week. Can the earnings barrage save this market?

The market could sure use some help. It just got hit with more bad news when it was already teetering. The market was see-sawing between generally positive earnings in a still strong economy and the specter of an aggressive Fed seriously slowing the economy over the rest of the year. Then it got hit with news of Covid spreading in China and likely slower growth in that country and globally.

The market is bearish and nearly every subsector within it is too – only real estate is above its primary moving averages among the S&P 500 sectors. There are a lot of warning signs around, with weakness broad among all stocks – only about a quarter of equities are trading over their 50-day moving average and less than 30% are over their 200-day. It’s time to be cautious and be prepared to cut losses and preserve capital.

The market isn’t much fun these days with the S&P 500 down ~10%. And unfortunately, it’s probably not going to get much better in the near term.

Earnings updates from three recommended companies as well as comments on other recommended stocks.

In the market today, how many companies can you confidently say you are comfortable owning for the next 25 years?

Those names are on a short list. Companies that come to mind include Apple, Google, Tesla, and Amazon.



According to studies performed by Wharton, the average tenure of a company in the S&P 500 is 21 years, compared to 36 years in 1965. This means stock picking is an art and companies often have an expiration date.

This week, we’re giving you a trade alert for the Undiscovered portfolio, which, as we’ve noted, trades more frequently than the strategic allocations.

We included comments on earnings from one recommended company, news about other recommended stocks, and a possible delay in the publishing of the May edition of the Cabot Turnaround Letter. We move one of our recommendations to Sell as its share price has surpassed our price target.

The major indexes are starting off the week on a decent note—as of 10:15 am EST, the Dow is up 74 points and the Nasdaq is up 3 points. But growth stocks are lagging, and some names are cracking near term.

Analysts expect this cable company to grow its earnings at a 37.09% annually, over the next five years.

I’ve decided to cut bait with Accolade (ACCD) since the stock just dribbled below its October low. This is another case where a healthcare tech stock just can’t seem to maintain enough momentum to keep investors engaged, despite the relatively steady financial performance and seemingly bright future.

SELL: AVTR and TIXT. Moving to HOLD: APP

Analysts expect this cable company to grow its earnings at a 37.09% annually, over the next five years.

AppLovin (APP) reported Q3 2021 results that surpassed expectations on the top line and missed on the bottom line. Maravai (MRVI) reported Q3 results yesterday that surpassed expectations.

This closed-end fund’s largest holders are: Parametric Portfolio Associates (11.86% of assets); SIT Investment Associates Inc (5.14%); and Saba Capital Management, L.P.(4.55%)

Kornit Digital (KRNT) reported Q3 results that missed on the top line and matched consensus on the bottom line. Net of the $7.9 million impact from warrants, revenue was up 51% to $86.7 million ($89.2 million expected) while adjusted EPS of $0.27 was in line.

The market is getting walloped today after a huge inflation report led to a horrible bond auction that kicked interest rates higher. As of 2 pm, the Dow is off 163 points, but the Nasdaq is down 200 points and many hot growth titles are pulling in hard.

Upstart (UPST) reported Q3 results yesterday, and the stock is taking it on the chin this morning despite strong results.

After a nine-month-long and very deep correction, during which the Global Cannabis Index fell 54% and many stocks fell farther, there was strong buying in the sector on Friday and Monday, signaling that the correction in the sector is likely over.

The shares of this financial business have recently been upgraded by Seaport Global to ‘Buy.’

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.