2022 went out with a whimper for the market as the indexes posted one of their worst years on record.

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

Our letter describes our view that 2022 was a bridge year and that we may need some or all of 2023 to complete the bridge-crossing. We also provide our outlook for the stock market, the economy and the geopolitical environment, with some caveats about forecasting and model use provided by Yogi Berra and George Box.

All-in, we see 2023 as a year with many changes but also a year in which consumers, companies and countries – amazing sources of ingenuity and resolve – work their magic to adapt to whatever curve balls are thrown at them. Our optimism is undaunted.

We also have moved our rating for Arcos Dorados (ARCO) from Hold to Sell.

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 calendar has flipped, but nothing has changed with the evidence during the past couple of weeks—the intermediate-term trend, which was stubbornly up for a while, has given way, joining the long-term trend on the downside, all while growth stocks underperform. Most indexes and sectors are doing more chopping than plunging, and it’s important to remain open to anything—but, simply put, the onus clearly remains on the bulls to step up. Our Market Monitor remains at a level 4.

Our first list of the New Year casts a wide net, and our Top Pick is a powerful turnaround play that also provides exposure to the improving non-U.S. area of the market.

A new year brings renewed optimism, and boy do we as investors need it after one of the worst years for stocks in recent memory – the fourth-worst in the history of the S&P 500, to be exact. So today, as we enter what is likely to be (though not assured, of course) a better year for stocks – perhaps much better – we try and strike an optimistic tone by adding a promising mid-cap growth stock to the Cabot Stock of the Week portfolio. It’s a brand-new recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

I hope everyone had a wonderful and safe holiday season! Once again, as we enter our last holiday-shortened week, I’m going to keep it short. We currently have one trade on, our IWM iron condor, which looks great at the moment. In fact, it looks like we might see a max win on this one of over 20%. However, the plan this week is to add a bit more exposure to the mix. I want to add another iron condor and hopefully a bull put and bear call for the February expiration cycle. The first goal is to add the February iron condor and then work the other two strategies into the portfolio as the market environment dictates.

I’m going to keep it short today as we enter the last of our holiday-shortened weeks.

The focus, as always, continues to be adding a few positions to the mix. I’ll be adding a new position in WFC this week with the hope of adding at least one, if not two, more underlying stocks to the portfolio as we start out 2023.

Earnings season is right around the corner, but we still have a few weeks of a light earnings calendar. However, this week we do get a quick preview of one of the Dow stocks, Walgreens Boots Alliance (WBA).

Other than WBA there really isn’t much discuss as the majority of the companies due to release earnings this week have little to no options volume. But, as I said before, that all ends in a few weeks when earnings season starts in earnest.

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 finish a tough year for stocks we should guard against pessimism since interest rate hikes should slow and level out and lower valuations for growth stocks could ignite a rally. Explorer stocks had little news as we sell one holding and are close to selling MP Materials (MP) as well. This week we go back to a small-cap medical technology stock trading at an attractive price.

Cannabis stocks and exchange-traded funds (ETFs) are ending the year at their lowest levels ever, and everyone knows exactly why. Sector investors were let down by lawmakers in Washington, D.C. who had suggested they’d secure approval of favorable banking reform by year-end while they still had the votes. This reform would have been a game changer since it would provide cannabis companies access to banking services and maybe even listings on major exchanges.

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

In this issue, we discuss our Top Five Stocks for 2023. While we like all of our recommendations, these five have what we believe are the most favorable combinations of risk/return potential and timeliness.

We also review this past year’s capital markets and grade our 2022 outlook. We also provide our outlook for 2023, acknowledging the wisdom of Yogi Berra’s advice that “predictions are difficult, especially about the future.”

Like nearly all asset classes, high-yield bonds had weak performance this past year. However, conditions are more favorable, and investors may want to nibble on new high-yield investments.

Our feature recommendation this month is one of the most disliked stocks in the market, social media company Meta Platforms (META). The company’s core fundamentals are strong but are being obscured by the immense waste of capital that is its metaverse investment. Any relenting on this mission could lead to an impressive turnaround of the company and its remarkably inexpensive stock.

Stocks trend higher over time. And history clearly illustrates that bear markets are ideal times to invest ahead of the next bull market. The average bear market is about 15 months long. And this one is already almost a year old. There is a high-percentage chance that a rally ignites in 2023 that will lead us out of this bear market and into the next bull market.

Today’s note includes earnings updates on Duluth Holdings (DLTH) and Signet Jewelers (SIG), the podcast and the Catalyst Report.

Stocks are higher as we write this but, after a strong recent run, the gains are fading and individual stocks are mixed. As of 3 pm, the Dow is up 70 points but the Nasdaq is up just 2 points. It’s nothing dramatic or all at once, but we continue to see steady improvement in the market. From a top-down perspective, the Nasdaq is actually extended to the upside (pullbacks are possible), but growth-oriented indexes and funds are finally showing a little oomph on the upside. More important to us, an increasing number of individual growth titles are acting well, with some upside follow-through emerging; indeed, the number of new highs on the Nasdaq seems to finally be turning up after months of sloughing off.

Although it went by way too fast, it’s been a glorious summer in the market. The S&P 500 is up 8% since Memorial Day. And the index is now up over 20% so far in 2021.

The market still looks strong. The S&P 500 is on pace for a 3% gain in the month of August, which would be the seventh straight monthly gain. The index is already up 20% for the year.

The market seems expensive, but the S&P 500 keeps making new all-time highs.

The concept of “temporary inflation,” which many investors and analysts embraced earlier this summer, has given way to concerns that rising prices will likely persist a lot longer than formerly expected.

We’ve seen a nice little rally as we head into the waning weeks of summer. The S&P 500 has been incredibly strong and even the S&P 600 Index, which hasn’t made any net new progress since March, popped off last week’s low and is back to within 5% of an all-time high.

While only insiders will be attending the Federal Reserve’s annual Jackson Hole symposium, which starts this morning, markets will react to any hints on the Fed’s move to tighten monetary policy and lift interest rates.

The summer malaise is in full swing. The market is doing pretty much exactly what it was doing when investors went on vacation and stopped paying attention.

I’m fairly active on Twitter; it’s probably my favorite site. It’s entertaining and a great way to stay on top of news. And it’s an incredible resource for finding new stock ideas. I can say with confidence that Twitter has made be tens of thousands of dollars. The one problem with Twitter is there is a lot of noise.

The Cabot Undervalued Stocks Advisor is on vacation this week, recharging the batteries for what could be a very interesting September and fourth quarter in the financial markets. As such, this week’s edition will be abbreviated in length, although we include our Cisco earnings commentary in full.

The broad market making new highs this week gives us a bullish framework to work within. For the sectors that comprise most of Greentech, it’s a mixed bag, however.

The expiration of our May covered calls is this Friday, and several of our positions are trading below the strike price of our covered call options (CLF, LEVI, HOG), though it’s a close call, and a totally fine situation.

This preferred stock has a current annual dividend yield of 4.33%.

Porch Group (PRCH) Reports Q1

As I write this morning, the market is selling off broadly, raising the question of whether this downtrend will gain real momentum. The truth is no one knows. What we do know is that the Dow is just seven trading days off its all-time high, while the Nasdaq, where growth stocks have been hit harder, has been losing momentum since mid-February. Thus, technically, these indices have been diverging for three months and now the odds are growing that the broad market will follow the Nasdaq’s lead on the downside.

Editor Jeffrey Hirsch is repositioning his portfolio for seasonal strength with this bond fund buy. The fund has a current annual dividend yield of 2.13%, paid monthly.

U.S. Neurosurgical Holdings (USNU) recently filed a 10-Q to report first-quarter earnings.

This gaming company posted a loss last quarter, but revenues were up by triple-digits, and analysts are piling into the stock.

This mortgage REIT invests primarily in agency mortgage-backed securities, including the Government National Mortgage Association, or Ginnie Mae; the Federal National Mortgage Association, or Fannie Mae (FNMA); and the Federal Home Loan Mortgage Corporation, or Freddie Mac (FMCC).

This may just go down on record as one of the worst earnings seasons ever for growth stocks. Two weeks ago, things were “fine.” Since May began, not. Inflation is the bogeyman spooking investors and his shadow has crept out from below desks and up the walls of those with growth-heavy portfolios. The sell orders picked up steam early this week, and while the last two days have been far better, the divergent action between growth stocks (cloud, MedTech, Internet, etc.) and other areas of the market is crystal clear.

BioLife Solutions (BLFS) reported yesterday afternoon and Q1 results beat expectations. Revenue was up 38.6% to $16.9 million (beating by $800K) while adjusted EPS of $0.01 beat by a penny. Management also bumped up full-year guidance, with revenue now expected in the $106 to $115 million range.

Five analysts have increased their EPS estimates for this aviation-supply business in the past 30 days.

Coverage of the shares of this motorcycle manufacturer have been initiated and upgraded by three brokerage houses.

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.