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

This week’s action has been a disappointment, with growth stocks suffering selling while defensive names have picked up steam. Still, nothing much has changed--the top-down evidence is mixed, and growth stocks, while taking on water, haven’t suffered anything abnormal to this point. Thus, given that we’re about half in cash, we’re mostly standing pat in the Model Portfolio tonight.

More than $15 trillion in assets are linked to the performance of the S&P 500 index in some way, according to S&P Dow Jones.

Apple, at about $2.4 trillion, and Microsoft, at $2.1 trillion, are so large that, taken together, the two companies would be the third-largest sector of the index, behind tech and health care. This share is trending lower as other companies rise.

We’re digging into another compelling MedTech story this month.

The company in focus is a spine specialist. It’s been grabbing market share from larger players by growing a portfolio that covers the full spectrum of spine care, from imaging and surgery planning to surgical tools and implants.

It’s a great example of how intense focus on a specific market can set one player apart from the big boys. Enjoy!

Despite the banking worries of last month, the S&P 500, Dow and Nasdaq have strung together three straight weeks of gains.

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

We comment on the price of gold and what we see as its primary drivers. Gold is now trading above $2,000/ounce. We also provide updates on our recommended stocks.

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.

The market put on a constructive show last week, though today was a bit sloppy, as the surprise OPEC supply cut hiked oil prices brought some rotation ... and provided a reminder we’re still in a very news-driven environment. All in all the story remains mostly the same: There are positives, especially among growth titles, but the market is bifurcated and tricky, with a lot of stocks still in the doghouse. At this point we think playing things mostly halfway (good amount of cash, some nibbling on strong names) is still the best stance. We’ll leave our Market Monitor at a level 5 tonight.

This week’s list is a bit more mixed than in recent weeks, with less growth and more cyclical and cheap situations. Our Top Pick is an old friend in the cybersecurity space that has a few months of positive momentum as Wall Street anticipates big profit growth ahead.

The market is arguably the healthiest it’s been since 2021 – remarkable considering all the economic and sociopolitical hand grenades tossed at investors in the first quarter of 2023. So, this week we lean into the recent strength by adding another growth stock in the form of a small-cap semiconductor play with strong ties to Apple. It’s a stock recently recommended by Cabot Early Opportunities Chief Analyst Tyler Laundon, and one that has plenty of momentum – up 35% year to date.

Earnings season is finally near, but we still have one week of little to no trading opportunities. Constellation Brands (STZ) offers the best opportunity of the week, but liquidity could be a potential issue. Otherwise, the metrics of the trade look quite appealing.

We currently have two open positions, a bear call spread in DIA and an iron condor in IWM. Our deltas are currently skewed towards the bearish side of things, so we will need to balance out our deltas by adding a bull put spread or some other bullish leaning strategy. So the focus this week will be adding some positive deltas to the mix to bring the portfolio closer to a delta-neutral state.

We need to sell premium early this week in Wells Fargo (WFC) and Gold Miners (GDX). I plan on entering new positions on Monday or Tuesday so be on the lookout for a trade alert or two over the next few days. Additionally, I hope to add a few brand new stocks to the mix this week as I want to ramp up the number of our positions in our Income Wheel Portfolio.

Many of the underlying trends in cannabis continue to be favorable even if this is not reflected in the stock prices, which are down sharply this month.

States continue to advance legalization of recreational use. Lawmakers remind us that federal regulatory reform in banking remains on the table, and will get taken up by key Congressional committees this year. Europe should begin to advance recreational use legalization within the next several weeks, starting with Germany. Cannabis sector insiders are stepping up to buy stock. Industry consulting firms continue to affirm robust sales growth projections of 13% a year through 2027. There are tentative signs that price compression is neutralizing.

Greentech continues to sit on the bearish side of things, but it’s holding the bottom of the trading range the sector has been in since May 15.

This week’s Friday Update is brief, with no earnings reports or ratings changes. And, with the long holiday weekend just ahead, there was little news on our recommended companies.

Since May, Greentech has traded in a 20-point range, between 70 and 90 in the benchmark we look to for sentiment, the Wilderhill Clean Energy Index. On Monday, we saw a break below support to 68, enough to cause concern we could be in store for an extended correction.

Bring it on. Persistent high inflation, a rapid Fed tightening cycle, and the explosion of Omicron have barely mussed the bull’s hair.

The market is higher so far today, though volumes and volatility are already fading ahead of the long holiday weekend. As of 11 am EST, the Dow is up 177 points and the Nasdaq is up 98 points.

Big picture, the prominent topics of debate out there continue to be the potential economic impact of Omicron and the longer-term market/stock valuation/investor risk tolerance impact of a rate hike cycle (assuming the Fed can pull that off).

For metal investors, it has been a classic tale of two markets. On the precious metals side of the market, disappointment still reigns as gold remains stuck in neutral and the white metals (led by palladium) are still in the dumps.

This week’s Friday Update is brief, with no earnings reports. As next Friday is a Christmas holiday, we will be publishing our Friday note and podcast next Thursday, December 23.

It’s been a challenging week for growth investors as the stocks that climbed the fastest are getting hit the hardest, such as our Cloudflare (NET) position, despite still posting strong numbers. On the other hand, Oracle (ORCL), where expectations are more modest, jumped from 89 to 104 this week on earnings that beat expectations.

The biggest thing happening is the change in fiscal stimulus and interest rate policy. Yesterday the Fed said it intends to accelerate the tapering process by reducing purchases by $30 billion a month (from $90 billion to $60 billion) starting in January. This is half of what was being purchased a few months ago. The program is on track to end by March 2022.

The Central Bank is coming out with its December announcement this afternoon. The market has been anxiously anticipating this meeting. And it’s a little nervous, as well it should be.

Private equity, the polished-up name for venture capital and leveraged buyout funds, is white-hot. If every market cycle has its own Masters of the Universe (the 1990s had tech mutual funds, the 2000s had hedge funds), the past decade’s MOTU was clearly private equity. Today, everyone wants to get in on the bonanza: MBA graduates, bankers, mutual funds, hedge funds, endowment and pension funds, insurance companies, wealthy individuals … and soon the average retail investor will get government-approved access to private equity investments. Exuberance1 abounds.

Avalara (AVLR) shares are rising today after the company beat expectations and gave a solid outlook for the rest of the year. Maintaining at buy.

This small bank beat analysts’ EPS estimates by $0.03 last quarter, earning $0.31 per share. The bank has a current annual dividend yield of 4.15%, paid quarterly.

Revolve (RVLV) beat expectations in Q2 but concerns that the story has been “as good as it can get” and that things will slow down in the coming quarters, in part due to Delta variant circulation curbing going-out activities, are hammering shares today (-20% at the worst, better now). All things considered the selling appears overdone and I expect a bounce in the coming days. How RVLV acts in the near future will determine its standing in our portfolio, but at the moment aggressive investors may want to step in to buy. Formally, we are maintaining at hold to see how this earnings report is digested over the coming days.

Oaktree reported a reasonably strong quarter, with net investment income (adjusted for the merger with Oaktree Strategic Income) of $0.19/share, sharply higher than $0.12 a year ago and the consensus estimate for $0.14. Net asset value, or NAV, increased 2% from the prior quarter and 19% from a year ago (despite paying out roughly 8% of its NAV in dividends during this period).

The earnings of this construction company are forecasted to grow by 37.8% this quarter.

Inspire (INSP) is soaring this morning as the company trounced Q2 estimates and management raised guidance. Revenue was up 335% to $55 million (beating by $9.1 million) while EPS of -$0.48 improved from -$0.88 in the year-ago quarter and beat by $0.14. Driving the results was the addition of 63 new U.S. centers (well above expectations for 35 to 40) and a jump in covered lives. Results were strong both in the U.S. (up 349% to $49.4 million) and Europe (up 201% to $3.6 million) with average prices of both $23.9K and $23.4K (U.S. flat, Europe up modestly).

Looking at the charts of our portfolio stocks today, there’s been no real change since last week, so I have no changes. But there have been a few relevant news items.

The shares of this car parts manufacturer are rated ‘Strong Buy’ by two analysts and ‘Buy’ by one analyst. Wall Street expects the company to earn $80,240,000 in 2021.

This morning, we received bad news from Medexus. Medexus announced that it has received a complete response letter from the FDA related to Treosulfan, its newly in-licensed drug that was expected to drive substantial revenue growth. What is a complete response letter?

Our buy recommendation today is expected to grow earnings by more than 26% this year. We are also selling two previous ideas.

This transaction service company is due to report earnings on August 3. Estimates call for EPS of $0.57 on $138.35M in revenues.

This biopharma has a new distribution agreement for its obesity drug, and is expected to grow by 47% this year, then 16.1% annually over the next five years.

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.