What started out looking like another positive week for the market later turned into a week of little gains or losses, as economic data and Fed speak weighed on stocks on Thursday and Friday. For the week the S&P 500 and Dow fell marginally, while the Nasdaq rose just over 0.5%.

In the February issue of Cabot Early Opportunities, we continue to pursue stocks offering exposure to a diversity of end markets.

Our top pick this month is a mega-cap tech company making waves with AI investments that promise to shake up one of the largest software markets in the world.

We also take a look at a small industrial company, cover two software stocks with leadership positions in their respective markets and peak at a recovering semiconductor stock.

As always, there should be something for everyone in this month’s issue!

For the first time in the new year, the market had a bad week. The declines aren’t terribly surprising or worrisome (for now), as the recent rally had been without much of a pause.

After living through 2022, we’re certainly not going to whistle past any market graveyards, so our antennae are up when it comes to the market’s recent wobble—but instead of guessing what may come, it’s best to just go with the evidence in front of you, and so far, everything looks normal. That doesn’t necessarily mean we’d be piling in here, but we continue to lean bullish. We’ll leave our Market Monitor at a level 7 today.

This week’s list is very mixed, but with the chip sector looking peppy, our Top Pick is comes from that space and also quacks like a new growth leader. The stock is extended here, but dips of a couple of points would be enticing.

An improving stock market brings our Stock of the Week portfolio to capacity, 20 stocks, with today’s addition of a fallen growth stock whose name you will almost certainly recognize. It’s a company whose business was hampered more than most during Covid, but has now returned to pre-pandemic levels – and is on track to resume its prior growth trajectory in the years ahead. And the stock is finally playing catch-up. It’s a new addition from Cabot Growth Investor Chief Analyst Mike Cintolo.

We currently have three open positions due to expire in March, all of which are leaning towards the bearish side of things. As a result, we need to add some positive deltas to the mix, which I intend to do this week. Other than that there really isn’t much to discuss at the moment since we are relatively early in the March expiration cycle.

Expiration is upon us and our positions are shaping up nicely for some decent returns. There really isn’t much to do this week with our existing positions other than just allow them to play out through expiration. That being said, I continue to scour our Income Trader watch list for new trading opportunities to add to either the Income Wheel Portfolio or the Income Trader Portfolio. Now that earnings season is nearing an end my hope is to add several positions to the mix.

It’s a slow week for the earnings calendar as we begin to wind down earnings season. There are only a few noteworthy opportunities with our focus squarely on Cisco Systems (CSCO), Devon Energy (DVN) and Coca-Cola (KO). Admittedly, while the three companies fulfill our liquidity screen, the options premiums offered in each are less than ideal, which could ultimately be a deterrent from taking a trade this week. No worries, because some of our favorite trading opportunities come the following week in the form of Walmart (WMT) and Home Depot (HD).

Thanks to the bulls, we are seeing a nice pop in all of our portfolios.


While our passive portfolios continue to perform well, our Dogs of the Dow portfolio, particularly the Small Dogs portfolio, has shined, up 12.51% in just over a month’s worth of performance. In fact, all but one of the stocks that reside in the Small Dogs are seeing positive performances with CSCO being the laggard, down -2%.

Following a monster week of earnings, a Federal Reserve interest rate hike, and the January Jobs report, “risk on” continues to be the theme in early 2023 as the Nasdaq once again led the indexes higher.

For the first time in the new year, the market had a bad week. The declines aren’t terribly surprising or worrisome (for now), as the recent rally had been without much of a pause.

There are never any guarantees in the market, but after a very tough 2022, just about all of the top-down evidence (and our indicators are now bullish). We’re not big on labels, but we’re clearly seeing bull market behavior; while leadership usually develops over time (and we’re seeing that here), it’s best to continue stepping into the market as long as things remain in good shape.

Elsewhere in tonight’s issue, we write about some new names go through a variety of topics after that, relaying some thoughts based on various questions we’re receiving.

All eyes are on the Fed. Sure, there’s inflation and Omicron and some other stuff. But Wall Street types mostly care about the Fed.

This week’s Friday Update is brief, with no earnings or ratings changes. Despite the uncertainty in the broad stock market, there wasn’t much news on our recommended companies.

Despite another dip in the Nasdaq today higher growth stocks have mostly come up off of last week’s lows as early indications suggest the Omicron variant can be held at bay with vaccinations (especially booster shots).

After a solid three-day rally, stocks sold off again today—the Dow was actually up a point but the Nasdaq fell 270 points (1.7%) and most growth stocks were down in the 3% to 5% range.

Our comments this week are mostly questions. Day-to-day gyrations make sense on the surface. Yesterday, the market surged on news of China easing its monetary policy combined with a growing sense of relief that the Omicron variant is milder than previously understood. But in the wider context, the market’s position and trend makes less sense.

The past week brought a swift correction to Greentech with the sector falling more than 16% from last Wednesday to Monday’s intraday low.

Everything was going so well. And then things turned sour on a dime. The party pooper virus is up to its old tricks again.

Selling panics are never fun, but they can be quite useful for gauging gold demand, for extreme financial market volatility often reveals just how much safe-haven interest truly exists for the metal. And we’re about to find out just what participants think about gold after shunning it for most of this year.

This past Wednesday we published the December edition of the Cabot Turnaround Letter. Our first article, “Year-end Selling: Turning Other’s Losses into Gains,” describes three reasons why many investors, including highly experienced professional managers, tend to sell weak stocks toward year end without regard to price or value – and how this can produce quick profits for nimble investors. We include six stocks that look well-positioned to bounce.

The market has entered a rough patch, especially for tech and stocks that have not been demonstrating relative strength. Explorer stocks are all over the map, with Coupa (COUP) and Cloudflare (NET) showing some weakness, many positions holding steady, and Novonix (NVNXF) up 25% in the last week.

The big news this week is the emergence of a new coronavirus strain in Africa. The news prompted a steep selloff last Friday and then again yesterday. This throws a wrench in the works.

I hope you had a wonderful Thanksgiving! Mine was perfect. We had a great holiday in Milton, MA, with my parents, my family, my sister and her family. After essentially skipping Thanksgiving last year, it felt especially great to get my extended family together.

I was recently able to speak to Laurie Sims, President at Libsyn. We had a nice conversation, and I got some good insights into the business. See my notes at the end of this update.

This investment company is expected to grow earnings at a rate of 16.7% this year. The shares have a current dividend yield of 5.65%, paid monthly.

In a recent note, analysts at RBC noted that their buy rating for this energy company was based partly on its excellent earnings per share, which were “the best since the 1Q20 print, and more than double the 59 cents reported in the year-ago quarter”, as well as it’s “reliable dividend.” The shares have a current annual dividend yield of just 8.6%, paid quarterly.

Gold broke decisively above the widely watched $1,800 level on Friday on a weaker dollar and rising geopolitical worries involving the situation in Afghanistan. As of late Friday, gold was headed for its best weekly close in almost two months.

This payments company is expected to grow its EPS by 53.76% annually over the next five years.

This logistics company beat Wall Street’s estimates by $0.63 last quarter, and 12 analysts have recently boosted their EPS projections for the company.

This industrial company beat analysts’ EPS estimates by $0.22 last quarter.

Greystone Logistics (GLGI) filed its 10-K recently, and I was surprised that sales declined in the 4th quarter by 5%.

I recently downgraded Donnelley Financial (DFIN) to Hold as I had concerns that the company was overearning given buoyant capital market activities which tend to be cyclical.

The top five holdings in this fund are Tesla Inc (TSLA, 11.96% of assets); Honeywell International Inc (HON, 7.71%); Danaher Corp (DHR, 5.14%); Eaton Corp PLC (ETN, 4.44%); and 3M Co (MMM, 4.34%).

This Latin American McDonald’s franchisee is forecasted to grow earnings by 101.5% this year.

Today is the expiration of five of our covered call positions, and I’m not going to sugar coat it, it was a choppy month for the market, and our trades. Importantly, we are going to exit several positions today.

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.