The new year is off to a good start, with stocks across the board showing true signs of momentum and very few still in the doldrums. Several of our Stock of the Week positions, in fact, are hitting either all-time highs or 52-week highs! But just in case this is yet another bear market rally, today we’re covering our bases by adding a big, well-known bank trading at bargain prices. It’s a longtime recommendation from Cabot Undervalued Stocks Advisor Chief Analyst Bruce Kaser – and one that Bruce says has more than 60% upside.

We finally added our Dogs (and Small Dogs) of the Dow portfolio to the mix! As it stands, we have five portfolios in the Fundamentals service, three passive portfolios and two active. While our passive portfolios are fully up and running, we still need to add several more positions to our active portfolios to get them fully situated.

The market raced higher again last week and is now officially in a short-term overbought state. In fact, all of the major indices stand in a short-term overbought state. Historically, this type of situation leads to a mean-reversion event, but if we are indeed in a “new” bullish market environment, an overbought state can lead to extended moves. It’s always the transitions from high to low IV environments or vice versa that give high-probability spreads challenges. And while our positions are okay at the moment, another round of bullishness over the next week or two will force us to make either an adjustment or simply take off our trades for a small loss. Of course, I’m also still looking to add a position or two to the mix, but I don’t want to lean too heavily in one direction.

Our BITO and KO are all due to expire this week. I will allow our BITO calls to carry through expiration, but plan to buy back our KO puts and immediately sell more puts, thereby collecting more premium for our position in KO.

Surprisingly, if BITO does close above our 11.5 strike at expiration this week, we should see a nice overall profit in the position. I’m not sure many can say they’ve been able to scratch and claw a profit out of BITO, especially when you consider we took on the position back in early June when BITO was trading for around $18. Again, another reason why premium selling should be an integral part of everyone’s investment plan.

Last week we entered our first trade of the earnings season. Last Friday, JPM announced earnings, and the stock immediately pushed lower after the release. The stock opened at 135 and tested the short 133 put of our iron condor. As a result, we decided to exit the one-day trade for just over 4%, not too bad for a one-day gain. Of course, JPM continued to trade higher, giving those that decided to hold on to the trade a little longer the opportunity to take the trade off the table for roughly double the return.

Very impressively, the rally that started late in 2022 continued last week, as the S&P 500 gained 2.7%, the Dow rose 1.8%, and the Nasdaq tacked on another 4.5% of gains.

Very impressively, the rally that started late in 2022 continued last week, as the S&P 500 gained 2.7%, the Dow rose 1.8%, and the Nasdaq tacked on another 4.5% of gains.

The market is ending the year a lot like it began it -- by going down, led mostly by growth stocks, and that’s keeping us defensive. We do think better times are ahead, and we even saw a positive broad market divergence this week as the Nasdaq retested its lows. But as has been the case all year, we’ll refrain from any major buying until the buyers truly show up.

Tonight’s issue talks about some puke action from individual investors (a good thing) and the fact that, after this bear ends, the market is likely set to resume its advance (not a long-term top), plus we fine tune our watch list (one name broke out today) and dive into some potential leaders, too.

Last but not least, all of us here wish you and yours a happy, healthy and prosperous 2023. Cheers to better times ahead!

As we move into 2023, Explorer stocks are performing well as volatility is muted. My goal is to seek a balance between conservative and aggressive ideas so that you can select a blend that is appropriate for your circumstances and goals. I believe at some point in the first half of this year, markets will turn upward as more reasonable valuations will reignite investor interest. Today we return to a synthetic graphite idea that was a profitable trade about a year ago.

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.

Today, I’m recommending a biotech company.

Key points:

· I expect a dividend within 15 months representing 126% of its market cap.
· Asymmetric upside potential beyond the upcoming dividend.
· High insider ownership and insider buying.

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

Sure, it was a tough year for stocks. But 2022 was the worst year ever recorded for bonds.

The benchmark 10-year Treasury lost more than 15% in 2022, the worst calendar year performance ever recorded since it started being tracked in the 1920s. The 10-year + Treasury Bond Index lost 29.45% for the year, also the worst performance on record.

But the disastrous year creates an opportunity. Last year seems to have squeezed many years of poor performance into one. Now bonds actually pay decent interest again. And every negative year for bonds ever recorded has been followed by a year of positive returns.

In this issue, I highlight a long-term corporate bond fund. It allows access to some of the highest yielding investment grade bonds in the last 15 years while also providing a monthly income. The fund is very likely to have a positive total return for the year, and perhaps very positive, at a time when the stock market is highly uncertain.

The market is selling off on Tuesday after briefly recovering last week. The latest worry is the debt limit. While this issue is likely to be resolved without any disaster one way or another, it puts a negative weight on an already teetering market.

Capital market, economic, geo-political and societal changes are happening quickly.

A recent survey by the American Association of Individual Investors (AAII) showed that the percentage of investors who think stocks will rise over the next six months plunged to its lowest level in more than a year.

The big developments over the last week have been the situation with the potential failure of Evergrande (Chinese property developer) and interest rates. As of mid-morning Thursday, we appear to be moving past these potential issues.

Today, markets are rallying as much as they fell on Monday ahead of the Fed meeting this afternoon.

Monday’s market tumble to two-month lows, which was the first gap lower that also pushed the broad market beneath its 40-day moving average since mid-summer, triggered a number of our sell-stops.

Monday’s big, sharp market pullback was shocking to some investors, and scary enough to cause many to sell stocks in the fear that the correction would go deeper. It certainly might—the September/October period often brings major corrections—and maybe it should, though should is a word that I try to avoid when writing about the market.

It’s not news that the stock market has been sloppy lately. After the steady march upward to a doubling of the S&P 500 from the early 2020 low, and a 33% increase from year-end 2019 before the pandemic, one can hardly be disappointed in the market’s performance.

This week, everyone is talking about Evergrande. In case you’ve missed it, Evergrande is a Chinese real estate developer. Its core business is building homes, but it branched out into other directions like investing in EVs, a theme park, and other business lines.

One of this year’s greatest paradoxes has been inflation’s return. On the one hand, the rising tide of inflation has lifted industrial metal prices to levels not seen in over a decade. But on the other hand, gold and other precious metals haven’t really benefited from it. What’s the reason for this seeming contradiction?

After a stunningly strong market so far this year, with the S&P 500 producing a 20% total return through Monday, the slow grind-down of most stocks since early September has seemed interminable. The 1,100 largest stocks in our 3,000-stock database have declined only 2% in the past two weeks, but the steady flow of higher inflation news, a growing likelihood of interest rate increases, a never-ending pandemic, the prospect of higher taxes of all kinds and memories of the tragic events of 9/11 makes us feel like we’re stuck inside on a cold, rainy day watching an awful four-hour movie.

Today’s note includes the podcast.

In the past 30 days, five analysts have increased their EPS estimates for this benefits management company.

Wednesday has witnessed some mixed action among the key metals, with liveliness in silver, weakness in copper and platinum and exceptional strength in steel.

The good news this week is that the state of Connecticut appears close to marijuana legalization, as the state Senate passed legislation early Tuesday morning, with an unexpectedly close 19-17 vote. Today—the last day of the 2021 session—the bill heads to the House of Representatives, which is expected to approve it. But you never know.

This insurance company beat analysts’ earnings estimates, posting EPS of $6.11, compared to the estimate of $3.87. The shares have a current annual dividend yield of 2.38%, paid quarterly.

Earnings estimates for this auto seller have risen by 35.7% in the past 60 days, with the June quarter EPS now expected to come in at $2.58.

Moving Biogen (BIIB) from BUY to SELL.

We are initiating coverage of Organon (OGN) with a BUY rating.

This afternoon we are making four ratings changes:

This food company beat Wall Street’s earnings estimates by $0.08 last quarter. Its shares boast a current annual dividend yield of 1.98%, paid quarterly.

Despite beating sales and earnings estimates for the quarter ($6.48 billion vs. $6.41 billion and $1.60 per share, compared to the estimate of $1.40 per share), shares of this discounter fell, due to forecasted rising freight costs—a good opportunity for entry.

In the past 30 days, 10 analysts have increased their EPS forecasts for this energy company. The shares have a current annual dividend yield of 7.09%, paid quarterly.

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.

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 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.