As Congress struggled with raising the debt ceiling, the excess of Federal spending over tax revenue totaled $459 billion through the first four months of the fiscal year (started October 1, 2022). Meanwhile, the strong dollar is a drag on multinational earnings. Today, we explore a fascinating company and stock that leverages artificial intelligence to accelerate biotech development.

Welcome to our first annual TOP PICKS issue! For this month, I asked the Cabot analysts to give me a couple of their top picks for 2023. I think you will find they have produced a nice selection of companies in diverse sectors. And just as I did in my previous newsletter, Wall Street’s Best Stocks, I’ll keep track of their picks and let you know how they fare.

The market is at a crossroad.

It is possible that we could get through this cycle soon and without a recession. The market could rally to new highs without much more trouble. On the other hand, a more hawkish Fed or deeper economic downturn than currently anticipated could cause another market plunge.

You could just bet on one scenario and hope for the best. But there might be a better way to navigate these waters. Instead of gambling on a certain outcome, we can buy stocks that should thrive in both bull and bear markets.

In this month’s issue, I highlight four current portfolio positions that are “all-weather” stocks. These stocks should do just fine if the market takes off and doesn’t look back in a soft landing. But they should also perform relatively well in case a more ugly scenario unfolds. They should be solid in almost any kind of market environment and pay you a great income in the meantime.

Today, I’m recommending a tech company that is growing like crazy yet trades at a “value” price.

Key points:

· High insider ownership.
· Hidden assets that will eventually be monetized.
· Buying back stock (over 20% of shares already retired).

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

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the February 7, 2023, issue.

We continue our mini-series on the Tech Hype Cycle and Value Investing with a look at what happens to companies after they tumble into the “Trough of Disillusionment.” We also include our perspective on the favorable earnings update from Sensata Technologies (ST).

This week, we changed our rating on State Street Corp. (STT) from Hold to Sell, and our rating on Dow (DOW) from Buy to Sell. Both are quality companies, but their shares have reached our price targets and we see no compelling reason to raise these targets.

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.

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.

After a very strong first few weeks of the year, stocks have begun the much-called-for pullback, which sets up a “good” test for the nascent uptrend—if the sellers swarm, that would be a sign the bulls aren’t yet ready to take control, but for the first time in a while, the burden of proof is on the bears as the majority of evidence is positive. If something changes, we’ll pare back, but to this point we like what we see. Our Market Monitor now stands at a level 7.

This week’s list has something for everyone, including a few more earnings winners as more firms report. Our Top Pick is a software name that has a long-lasting growth story and a chart with a big bottom—and a big breakout last week. Aim for weakness if you want in.

The stock-market picture continues to improve, and it’s possible the current rally is more than yet another head fake; it could be the start of a new bull market. While we’re not there yet, there’s reason for optimism. So today, we take another big swing by adding a fast-emerging electric vehicle maker that has struggled since its IPO last June but is showing signs of life lately. It’s a recent recommendation from Cabot Explorer Chief Analyst Carl Delfeld.

We took a few losses last week, which at the moment looks a bit premature.

At the time I wrote, “Well, I think we all knew the time would eventually come. We are going to close out our February IWM iron condor as it has reached our stop-loss. This marks our first loss since August 11 and only our second since initiating the Quant Trader service back in early June.”

The market was in a short-term overbought state, so while I was hesitant to take off the two trades, mechanically it made sense and it’s the mechanics that keep us out of trouble and give us the opportunity for long-term successful results.

The probabilities continue to lead to the way!

Last week, we placed an earnings trade in Starbucks (SBUX). Per usual, we used an iron condor, but went with a slightly more conservative approach by increasing our probabilities of success on both sides of the trade to just over 90%.

Thankfully, SBUX opened up well within our chosen range after earnings and as a result we were able to immediately take off the trade for a one-day profit of just under 6%. For those who waited a little longer to take off the trade, a 9.5% return was easily attainable.

We continue to be in great shape as we approach the February 17, 2023 expiration cycle.

My only hope is that we can add a few more trades to the mix this week. Earnings are coming in fast and furious and, as a result, I have my eyes on a few potential stocks that reside on our weekly watch list. Starbucks (SBUX), Citigroup (C), Cisco Systems (CSCO) and several others are just a few of the names I’ll be looking to sell puts on this week.

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.

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

In last week’s newsletter, we discussed the case for future inflation being already priced into commodity prices. I also addressed the possibility that something might happen to unexpectedly reverse the trend of higher consumer prices, suggesting that China’s debt crisis as a likely culprit. And while China is still high on my list of possible trend reversal triggers, the latest broad market sell-off has provided an even more likely catalyst: public health worries.

The market has leveled off over the last few weeks. But the indexes are still within bad breath distance of the highs. We should be in for more of the same in the months ahead as this high market is due to cool off.

This week, I’m looking forward to Thanksgiving, my favorite holiday! What I love about Thanksgiving is there is minimal preparation (luckily, I don’t have to do the cooking!) and no gifts to give or receive. It’s just about getting together with friends and family and being thankful.

The market is beginning to more fully anticipate a post-Covid environment and economy. As such, investors are looking to slower/normalized/sustainable growth following the bulge from the pandemic stimulus programs and pent-up demand, higher interest rates, and a relenting of supply chain issues.

This week’s Update is being published on Wednesday due to the Thanksgiving holiday in the United States. The December edition of the Cabot Turnaround Letter will be published next Wednesday, December 1.

Inflation fears clipped growth stocks this week, so Greentech’s near-term outlook has gotten muddied a bit.

The big recent developments since I wrote last Thursday are the rise in Covid cases in Europe, and that Jerome Powell got the nod for another term leading the Fed.

For growth stocks and indexes, there’s clearly been a lot of damage this week. Funds like ARK Innovation (ARKK) have hit new six-month lows, while broader indexes like the Next Generation Nasdaq (QQQJ) and Russell 2000 Growth (IWM) have slid all the way to their 50-day lines and given up big chunks of their October rallies.

This week’s Friday Update includes our comments on earnings from Macy’s (M), Toshiba (TOSYY), and Vodafone (VOD).

There is one topic that brings together Wall Street, Hollywood and Silicon Valley – the metaverse. While “metaverse” definitions are varied, the idea of bringing people together in a virtual interactive world is, as they used to say, the talk of the town.

On to the market. It was a funkier week than last week, though big picture nothing has changed. We are moving into the tail end of earnings season so we may see a more moderate amount of investor interest over the next two weeks.

In the past 30 days, four analysts have boosted EPS forecasts for this construction and manufacturing supplier.

The top five holdings in this ETF are: The Estee Lauder Companies Inc Class A (EL, 3.38% of assets); Costco Wholesale Corp (COST, 3.30%); Kimberly-Clark Corp (KMB, 3.29%); Clorox Co (CLX, 3.25%); and Church & Dwight Co Inc (CHD, 3.21%).

With a new batch of stocks being added to our portfolio tomorrow and a few of our current names looking just OK we’re going to sell three stocks today.

This bank is innovating with the help of its Laurel Road digital banking platform. It has a current dividend yield of 3.58%, paid quarterly.

**NOTE: Due to time constraints from the Cabot Wealth Summit, the Cabot Early Opportunities issue scheduled for Wednesday, August 18, 2021 will instead be published on Thursday August 19.**

Porch Group (PRCH) reported yesterday afternoon with results coming in ahead of management guidance and significant contributions from acquired companies. Despite the strong high-level numbers, the stock is selling off today and we’re going to step aside with the modest profit we still have (around 25%).

This bank is innovating with the help of its Laurel Road digital banking platform. It has a current dividend yield of 3.58%, paid quarterly.

This software company posted EPS of $0.16 per share in its recent quarter, beating analysts’ estimates of $0.14 per share. Revenues of $209.74 million also beat by 3.41%.

This tech stock is expected to grow earnings by more than 28% this year. The current annual dividend yield is 2.15%, paid quarterly.

Shares of this utility were recently upgraded by B of A Securities, to ‘Buy.’ The shares have a current annual dividend yield of 3.33%, paid quarterly.

This afternoon we are moving Albertsons (ACI) from BUY to SELL.

ONTF, CRNC and EVBG Report.

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.