After a negative start to the week last Monday, the market surged higher on Wednesday, following what many traders view as a “less hawkish” speech by Federal Reserve Chairman Jerome Powell.

Not much has officially changed with the market since our last issue, with the Cabot Tides positive, but the other indicators still down and with most growth stocks still having trouble making any real progress. That said, we are seeing a gradual improvement in the evidence, with other indicators closing in on green lights and, even among individual stocks, some better, more proper action.

Overall, we remain defensive, but we are making a couple of small moves tonight, adding two half-sized positions, including one in a stock we already own.

In tonight’s issue, we go over all our stocks, highlight some new names and even talk about one non-growth sector that intrigues us. Ideally, the market is ready for a real rally, and if so, we’ll be aiming to put our remaining 70% cash position to work. But for now, going slow remains your best course.

Centrus Energy (LEU) shares were largely unchanged as the company is well positioned to benefit from growth in next-generation nuclear technology, helping provide reliable and carbon-free electricity. This is still a buy for aggressive investors.

This month we’re going with a little-known consulting company that’s growing revenue and EPS in the double digits as it helps organizations adapt to the changing times.

It is growing especially quickly in areas like digital transformation, which is challenging for lumbering organizations in the healthcare and education segments where the firm generates the bulk of its revenue.

With a fresh revenue and profit growth strategy and a plan to return more money to shareholders, this little company’s stock looks great.

Enjoy!

The high-growth cannabis sector continues to be full of rapidly evolving developments that could move our stocks significantly at any moment.

Beyond the potentially transformative changes in the works on legalization, almost all our companies just reported solid third-quarter revenue growth.

That means this issue of the Cabot SX Cannabis Advisor focuses heavily on corporate trends and developments in the company update section, below. The updates are longer than usual, covering the key news events and developments at our companies revealed in quarterly results and other news flow.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the December 2022 issue.

While investment losses are everywhere this year, we highlight two ways to harvest these losses and discuss seven stocks that have strong appeal as year-end bounce trades.

We also highlight four attractive stocks held by highly-regarded long-term value investment funds that we found in our analysis of the recent 13F regulatory filings.

Our feature recommendation this month is theme park operator Six Flags Entertainment (SIX). This company is aggressively working to improve its profit structure under a completely new leadership team but the turnaround is taking longer than investors would prefer, leaving its shares overly depressed. For patient long-term investors, the shares offer an attractive, asymmetric potential return.

With one month left to go in this miserable year, the stock market picture is the brightest it’s been in some time. The S&P 500 is up 11% since its mid-October bottom, volatility is way down, and December is traditionally (though not always) one of the better months on the calendar for investors. The next Fed meeting or inflation data point could throw cold water on all that, but for now the water is at least lukewarm, which means it’s time to take a chance and dive in head-first with a new small-cap financial recommendation courtesy of Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

Not much has changed in the past week. We currently have two open positions: a bear call spread in SPY and an IWM iron condor. Both are due to expire December 16, 2022, and both are currently in a profitable state. My hope is that we can take both of our trades off this week for nice profits.

I also plan on adding another bear call spread to the mix this week, this time for the January expiration cycle. And if we see a decent pullback this week, I’ll follow that trade with a bull put spread in January.

We locked in a return of 3.9% in GDX and 3.8% in KO last week and, if all goes as planned, look to lock in even more in PFE this week. Moreover, I plan on continuing to wheel both GDX and KO, so expect to see trade alerts for both stocks as I intend on selling a few puts.

Lastly, if the market cooperates and pulls back a bit from its current short-term overbought state, I intend on adding a few short-term trades to the mix, mostly by selling puts, but we could see an appearance of a jade lizard. Stay tuned!

We are officially entering the earnings doldrums, but that certainly doesn’t mean that opportunities won’t present themselves. For instance, this week Marvell (MRVL) announces earnings and offers a decent opportunity for an iron condor and potentially a candidate for a short strangle.

I’ve gone over an iron condor example in the “Weekly Trade Ideas” section below and will send out a short strangle idea as we get closer to the earnings announcement Friday. As always, I’ll let everyone know (in a separate alert) whether or not I will be making the trade.

The holiday-shortened week was fairly positive as the S&P 500 rose 1.6%, the Dow added another 1.9%, and the Nasdaq gained 0.75%.

The holiday-shortened week was fairly positive as the S&P 500 rose 1.6%, the Dow added another 1.9%, and the Nasdaq gained 0.75%

Markets reacted well to yesterday’s inflation data that showed evidence of cooling as the economic recovery continued amid pandemic-related strained supply chains and signs that the recent rise in Covid-19 infections is starting to slow some business activity.

With economic data pouring in amid a slew of earnings reports there is a lot going on out there. The resulting stock price movements often drive a combination of heartache and exhilaration, and that has certainly been the case for us over the last two weeks.

The S&P 500 is at a new all-time high. While the market hasn’t been exciting compared to earlier this year, it’s clearly moving the right way.

Most of our stocks continue to build bases, so I remain patient, waiting for a renewed advance by the sector. The standout stock in our portfolio is Innovative Industrial Properties (IIPR), which broke out to a new high last week after a great report.

One change to our ratings this week – We’re buying Aptiv (APTV) after spending some weeks on “watch.”

Just reading those words, “climate change,” is almost certain to light up emotions. Regardless of one’s opinions on the degree of urgency and which of a very wide range of proposed policies and actions should be taken, how could words about the end of the world as we know it not ignite emotions?

Today’s note includes earnings updates on 11 companies and the podcast. On Thursday, we moved shares of Oaktree Specialty Lending Corporation (OCSL) from Buy to Sell.

Stocks enjoyed a good rally today, with growth stocks in the lead—at day’s end, the Dow was up 271 points while the Nasdaq lifted 115 points. Not much has changed with the overall environment over the past week. From a top-down point of view, things remain mostly choppy and challenging, with our Cabot Tides remaining effectively neutral, relatively few stocks hitting new highs (though there has been a bit of improvement of late) and even growth-oriented indexes (IWO, IVOG, ARKK) mostly stuck in the mud.

The earnings extravaganza is in full swing. It’s the peak of the season that marks the peak earnings growth of this extraordinary recovery. And the market is sort of yawning it off. Part of the issue is summer malaise. People just tend to focus more on enjoying the waning days of summer than stocks this time of year. But it also may be that this quarter just isn’t as important one might expect.

According to Detrick, “The S&P 500 is up 17.02% YTD at the end of July. Since WWII, this has happened only 12 other times and the rest of the year was higher 11 times. The only time it didn’t work was ’87, but it was up 32% YTD right now (stretched rubber band).” In other words, stocks in motion tend to stay in motion. While I don’t make investment decisions based on these data points, I do find them to be helpful to give me context for what the broader market is likely to do.

It’s a crazy earnings season that the market is treating like a boring one. The second quarter marked the near-full opening up of the economy after the pandemic. It is compared to last year’s second quarter when the economy crashed amidst the lockdowns. Analysts are expecting average earnings growth of 74% for S&P 500 companies, one of the highest quarterly growth rates ever recorded. So far, earnings are exceeding those expectations. And the market is yawning it off. Stocks are doing the same thing as before earnings, trending slightly higher in an up and down fashion. What’s going on?

The big news this week is that Amazon will no longer screen most job applicants for marijuana use. Plus, the giant is supporting federal marijuana legalization. That’s one more step in the right direction.

This software company beat analysts’ earnings estimates by $0.36 last quarter. It is forecasted to grow earnings at an annual pace of 17.5% over the next five years.

EPS projections for this media company have recently been raised by 8 analysts, and 5-year growth is estimated at 57.4% annually.

Earlier this month, this healthcare tech company began selling its shares to the public.

Yesterday I mentioned that I would follow up today with notes from the Thunderbird Entertainment (TBRD.CA, THBRF) earnings call. Here are a few tidbits from that call.

This REIT is beginning to recover from COVID, and looks very undervalued. The REIT has a current dividend yield of 7.21%, paid quarterly.

The top five holdings in this ETF are: Pfizer Inc (PFE, 5.43% of assets), Sanofi SA ADR (SNY.PA, 5.36%), AstraZeneca PLC ADR (AZN.L, 5.23%), AbbVie Inc (ABBV, 5.06%), and
Novo Nordisk A/S ADR (NVO, 5.06%).

Our first recommendation has a current annual dividend yield of 2,81%, paid quarterly. Its top five holdings include: The Home Depot Inc (HD, 4.58% of assets), International Business Machines Corp (IBM, 4.18%), Pfizer Inc (PFE, 4.17%), PepsiCo Inc (PEP, 4.07%), and Texas Instruments Inc (TXN , 4.01%). Our second recommendation is a sale of a previous idea after disappointing results.

The company is executing on its turnaround, led by the relatively new CEO. However, after our more detailed review of the company’s future prospects, the shares appear to fully discount a robust profit recovery and are trading at our price target. Their Investor Day was uninspiring – while the company is operating much better and has at least a temporary cyclical tailwind, the management is talking about pursuing their growth ambitions, going so far as to outline as much as $4 billion in buying power over the next several years. For perspective, $4 billion in cash flow compares to the company’s current $2.7 billion market cap.

This chemicals company beat analysts’ EPS projections by $0.42 last quarter, and five analysts have boosted their estimates for the company in the last 30 days. The shares have a current annual dividend yield of 2.26%, paid quarterly.

On Friday our five May covered call positions expired.

A triple-digit revenue increase and an exciting acquisition are on taps for this cannabis company.

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.