Not much has changed since last week, other than that we are seven days closer to the May 19, 2023, expiration cycle coming to a close. Thankfully, our three remaining May positions all remain in good standing.

We locked in profits in both PFE and KO and immediately sold more premium just over a week ago and I will most likely do the same in our May 19, 2023 positions this week which should bring our total return to around 75%.

Despite a concerning start to the week for the bulls, Friday’s big rally provided some hope that the market could get back in gear. By week’s end the S&P 500 had lost 0.8%, the Dow had fallen 1.24%, and the Nasdaq had gained 0.07%.

Despite a concerning start to the week for the bulls, Friday’s big rally provided some hope that the market could get back in gear. By week’s end the S&P 500 had lost 0.8%, the Dow had fallen 1.24%, and the Nasdaq had gained 0.07%.

The market remains in a rough spot, with a hawkish Fed that continues to raise rates into what’s become a rolling bank crisis, with some big names going under and others walking the plank. Far more important to us than the news is the market’s reaction to the news--and it remains mixed when it comes to the indexes (intermediate-term trend neutral), but growth stocks remain iffy at best, with many good-looking setups falling apart on earnings of late, and with relatively few really powering ahead. All of this can change in a hurry, but until it does, we continue to think growth investors should remain generally cautious and flexible as we wait for a more certain environment that will entice big investors to pile in.

In tonight’s issue, we have no changes to the Model Portfolio (though one small position is on a tight leash), holding north of 60% in cash and working on building our watch list. Elsewhere tonight, we write about the market’s very narrow nature, highlight the housing group (which has a history of trending even in bad markets) and have re-added a few names back to our watch list after some old favorites have popped on earnings.

The Federal Reserve yesterday raised the target for its benchmark interest rate by 0.25% to a new range of 5%-5.25%, the highest since September 2007. This will impact the value and stability of the U.S. dollar and stock markets in several ways.

During the only stable dollar eras of the last century, annual GDP growth averaged 4.9% from 1922-29, 4% from 1948-71, and 3.7% from 1983-2000.

In comparison, over the last two decades, a more volatile dollar saw average growth of only 1.9%. Had the dollar remained stable since 2000, with a steady 3.7% growth, the economy would be nearly 50% greater than it is today, and we probably would have avoided all these financial crises along the way.

For the second month in a row we’re going where the growth appears most resilient. Which means MedTech.

This month it’s another company focused on the spine. But a very specific area. The company specializes in implants for sacroiliac joint (SI) fusion. It already reported Q1 results (beat expectations) and the stock is acting well.

Enjoy!

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

Capital market conditions have tightened in the past year, making companies that hold excess cash more valuable and less reliant on fickle external financing. Our search for cash-rich companies that have real products and services with proven and enduring demand whose shares are out-of-favor turned up three promising stocks. Several currently recommended Cabot Turnaround Letter names would also make this list.

Our research process involves looking at a large number of possible turnaround ideas. As investing legend Peter Lynch once said, “The person that turns over the most rocks wins the game.” We uncovered six stocks that have both promising turnarounds ahead yet also have discounted share prices.

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.

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.

In today’s ETF Strategist update, I’ll answer two questions that came in this week. Here is a summary, and I go into further detail in the short podcast that accompanies this update.

The last few months have been a tale of two markets for the metals. Base metals like copper, tin and aluminum have outperformed, while steel and precious metals like gold, silver and platinum have underperformed.

We comment on earnings from several recommended companies. Also, we raise our price targets for three stocks that have moved above our existing price targets. And, rooting for the turnaround Cincinnati Bengals.

The S&P 600 SmallCap index continues to firm up and even make some progress moving off support near the 102 level (the IJR ETF is at 107 now).

Explorer stocks were all up this past week with the exception of Ford (F) as inflation numbers out this morning are expected to show consumer-price inflation picked up again in January, to an annual pace of 7.2%.

After a rough start to the year, the market has stabilized and recovered somewhat.

Earnings are terrific again. About 80% of S&P 500 companies have reported, with average earnings growth of around 23%. Earnings have saved and revitalized the market throughout the pandemic recovery. And this is another stellar quarter for corporate profits.

Greentech is still bearish, but a 12% rebound from the lows of last week gives us the feeling that things are stabilizing. Our sector is being helped by very good earnings results in solar and renewable-energy related semiconductors, which clearly are easing various investor fears.

Earnings reports from two recommended companies were mildly encouraging. There was very little news on other recommended companies. We note our recent Sell recommendation that produced a 41% return since our September 2021 Buy recommendation. We also comment on an emerging macro concept useful for value investors.

We comment on earnings from our recommended companies, a new buyback at a recommended company, trapdoor tech stocks, the possibility of a massive economy-wide inventory downcycle, and thoughts on energy stocks.

We had a good run in steel and steel products manufacturer Nucor Corp. (NUE), America’s largest and most diverse steel maker. Unfortunately, however, that run has come to an end and I now recommend selling our remaining position in the stock.

Shares of CS Disco (LAW) are selling off today on what’s been a generally weak day for growth stocks (though getting better as we move into the early afternoon). The catalyst here is a secondary offering by selling shareholders (non-dilutive) that has not priced yet (probably tonight, or tomorrow).

Fundamentally, all is well in the marijuana sector as the industry’s leaders continue to grow, both organically and by acquisition. The average rate of revenue growth for the plant-touching companies in our portfolio in the most recent quarter was an amazing 132% from the previous year.

In the past 30 days, seven analysts have raised their EPS forecasts for this utility. The shares have a current annual dividend yield of 3.77%, paid quarterly.

These preferred shares are issued by a global financial company.

Nickel futures are back to a 7-year high and recently hit $19,000 a ton in a resurgence from last month’s pullback. Nickel prices are being supported by strong battery-related demand from electric vehicle (EV) makers.

Analysts are increasing their EPS estimates for this electronics company. The company’s earnings are expected to grow at an annual rate of 30% over the next five years.

We’ve been enjoying a crazy-strong market in many growth stocks lately, which has padded our paper gains in many of those positions. Today we’re going to step off the gas a little, book a few modest profits and step aside from some positions that haven’t done a lot lately.

The major indexes finished mixed yesterday, with the Dow off 269 points while the Nasdaq was up 11 points, though growth stocks were actually hit fairly hard, with a few more names showing potholes.

This telecom company is forecasted to grow earnings by 40.25% annually over the next five years.

The trend is clearly up in this hospitality stock, with institutional investors like mutual funds, jumping back into the shares after the breakdown due to COVID.

In JOANN’s second quarter as a public company, management has dealt with the Delta variant complicating social sewing events and supply chain challenges driving up costs. The net effect in Q2 was that revenue of $496.9 million missed by almost $36 million and adjusted EPS of -$0.20 missed by $0.06.

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.