It’s possible stocks are stretched, at least in the near term, and the just-underway earnings season will put that to the test in the coming weeks. The next big move may be to the downside, so today we’re adding some more portfolio protection in the form of a mega-cap health insurer that pays a modest dividend but has a history of beating the market. It’s the latest recommendation from Cabot Dividend Investor Chief Analyst Tom Hutchinson.

The goal this week is to add some positive deltas to the portfolio. We took a loss in our DIA bear call spread early last week, which was our first loss since February 2. And while the small setback should be expected (losses will occur) we continue to progress higher as the overall returns remain just under 100%, and remember, this is during what has been one of the more volatile periods in market history, a year when the major indexes were deeply entrenched in negative territory.

The message remains consistent again this week in all five of our open positions: All there is to do at the moment is allow time decay to work its magic.

All five positions are shaping up nicely as we head closer to May 19, 2023 expiration. But with earnings season upon us, as I stated last week, I expect to see several short-term positions (30 to 60 days ‘til expiration) being added to the mix. I’ve been very conservative about adding new positions to the mix and I don’t necessarily think all is clear ahead, but I do think we have an opportunity during this earnings season to add a few selective positions to the portfolio.

As we enter our second week of earnings trades, we are greeted with a plethora of opportunities. My focus this week will be on Morgan Stanley (MS) and American Express (AXP). That being said, there are several other stocks that could garner some attention as well, including Netflix (NFLX) and International Business Machines (IBM). So, given the number of potential opportunities this week, expect to see at least two, if not three, trade alerts as we move throughout the week.

After the recent pullback, the All-Weather portfolio is now up 9.88%, with the Vanguard Total Stock Market ETF (VTI) doing the heavy lifting, up 25.36% since it was introduced to the portfolio back on 6/15/22.

I will be rolling all of our LEAPS positions to the 2025 expiration cycle this week. So, be prepared to make a few trades this week as we increase the duration of our LEAPS while simultaneously continuing to sell more call premium.

While the action under the surface was hardly encouraging, in the face of plenty of hawkish headlines from the Fed it was impressive that the S&P 500 gained 1.4%, the Dow rallied 1.44%, and the Nasdaq added 1% last week.

While the action under the surface was hardly encouraging, in the face of plenty of hawkish headlines from the Fed it was impressive that the S&P 500 gained 1.4%, the Dow rallied 1.44%, and the Nasdaq added 1% last week.

The broad markets have improved nicely in the past month, albeit with a recent pullback. Leading sectors were Communication Services, Consumer Staples, Healthcare, Technology, and Utilities. Style-wise, large-cap growth stocks beat their value peers, gaining 3.64% for the month.

The employment picture remains healthy, with 236,000 jobs added in March, taking the unemployment rate down to 3.5%. This was the slowest job growth in two years, so economists are hoping that will slow inflation—and the Fed’s rate hikes!

So far, this has been a positive year for the market. But an enormous amount of uncertainty remains.

The painful high inflation/hawkish Fed conundrum that caused last year’s bear market appears to be ending. But a high risk of recession is taking over. It will be difficult for stocks to rally into the next bull market without knowing the timing, severity, or duration of a possible recession.

Inflation could remain sticky. A recession could hit in any of the next three quarters. A recovery may be lame when it finally arrives because the Fed may have to keep interest rates high. We don’t know if six months from now we will face more inflation, a recession or even stagflation.

Today, I’m recommending a failed biotech that is undergoing a strategic review.

Key points:
· Based on conservative assumptions, I see 30% to 92% upside within 12 months.
· Low downside risk given stock market cap is 51% of net cash.
· High insider / institutional ownership assures incentives are aligned.

All the details are inside this month’s Issue. Enjoy!

The holiday-shortened week was mostly a non-event as the S&P 500, Dow and Nasdaq were mixed. And while the week was quiet, under the surface there was selling pressure in growth stocks and materials that raised some yellow flags.

After a couple of good weeks, some pullback was half-expected—and, when looking at the big-cap indexes, nothing out of the ordinary has been seen. That said, digging deeper, we saw a good amount of selling in resilient stocks, another round of selling in the broad market all while defensive names found buyers. To this point, the potential leaders that took on water are still holding onto intermediate-term support, so we’re not advising any major change in stance. That said, the next couple of weeks will be key (for good or bad), especially as earnings season gets started. We’ll leave our Market Monitor at a level 5 today.

This week’s list has an interesting mix of names, including more than a few turnaround-type actors that remain under accumulation. Our Top Pick is a former winner that offers a mix of growth and defensiveness in this environment.

It’s official. We are in a correction.

The S&P 500 fell 10% from the high on a closing basis earlier this week. In and of itself, a correction is normal in bull markets, especially considering the current circumstances. After a massive 100% move higher in less than two years, a correction might be considered healthy.

Russia’s invasion of Ukraine likely brings some short-term effects that matter to the Greentech sector. The primary one is probably a rise in costs for oil and natural gas, partly because oil tends to react upward on global crises generally, and also because the cancellation of the Nord 2 undersea natural gas pipeline to western Europe from Russia means natural gas will leave the U.S. as LNG to supply Europe.

I feel very good about the Cabot Micro-Cap Insider portfolio. Each stock looks attractive on an absolute and relative basis. And none of the portfolio should have a direct impact from the geopolitical events in Russia/Ukraine.

Mike Tyson inadvertently offers sage advice for investors. We add a new Buy, two stocks are approaching our price targets so we put them under review, and one stock surges following a shareholder-friendly payout announcement.

In this week’s ETF Strategist update, I’ll continue answering questions I received after we launched this advisory.
In particular, a reader asked why the specific funds were included in the allocation.

We comment on seven companies reporting earnings.

This has been a relatively quiet week for us in terms of quarterly reports as Repligen (RGEN), which reported this morning (details to follow), was the only portfolio company on the schedule.

The market is down on the day, though individual stocks aren’t doing too badly. As of 2 pm EST, the Dow is off 280 points while the Nasdaq is off 165 points.

After a good day yesterday, stocks have resumed the decline.

The Russia/Ukraine thing abated yesterday, and the market was thrilled. The thrill is already gone, and investors are back to worrying about inflation and a tightening Fed.

More color on our recent sale that generated a 40% gain since September and comments on other recommended stocks.

Earnings have been terrific again. Rising corporate profits have so far kept stocks out of correction territory. But earnings season is ending. And problems are growing.

I try not to spend too much time doing macro analysis, but one thing I’ve spent some time thinking about is the coming shift in consumer spending from goods to services.

This food company is expected to grow by 13.5% next year. Its shares have a current dividend yield of 2.40%, paid quarterly.

The shares of this food equipment manufacturer are being scooped up by hedge funds, with 35 total funds now owning stock in the company.

Our interest in oil and natural gas exploration and production (E&P) companies has been warming up lately. Many of these stocks are beaten down, yet oil prices have remained resilient, leaving producers like ConocoPhillips meaningfully undervalued.

Sell USB November 19th $60 calls at $2.30 or better

This athletic wear company beat analysts’ earnings estimates by $0.46 last quarter, and 26 analysts have recently boosted the company’s EPS forecasts.

This medical supply company is forecast to grow by 29.6% this year.

This morning we found out that Endava (DAVA) has postponed its Q4 earnings report from tomorrow (September 23) until next Tuesday (September 28).

Monday’s big, sharp market pullback was shocking to some investors, and scary enough to cause many to sell stocks in the fear that the correction would go deeper. It certainly might—the September/October period often brings major corrections—and maybe it should, though should is a word that I try to avoid when writing about the market.

The top five holdings in this ETF are: Enphase Energy Inc (ENPH, 11.34%); SolarEdge Technologies Inc (SEDG, 10.01%); Sunrun Inc (RUN, 7.18%); Xinyi Solar Holdings Ltd (00968, 6.88%); and First Solar Inc (FSLR, 6.21%).

Coverage of the stock of this dynamic tech company was initiated last month by several brokerage companies, with the following ratings: Credit Suisse, Outperform; Wedbush, Outperform; Loop Capital, Buy; and Piper Sandler, Overweight. By the way, this technology is catching on with many real estate pros, as it’s 3-D picture is a great way to show a house!

The broad market gapped sharply lower today on fears China’s Evergrande could cause a domino-effect of loan defaults. That triggered a few of our sell-stops.

The market is taking a beating so far on Monday, and this time, the selling is across the board. As of 1 pm, the Dow is down 724 and the Nasdaq is down 392.

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.