Today, I’m recommending a tech company that is growing like crazy yet trades at a “value” price.

Key points:

· High insider ownership.
· Hidden assets that will eventually be monetized.
· Buying back stock (over 20% of shares already retired).

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

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the February 7, 2023, issue.

We continue our mini-series on the Tech Hype Cycle and Value Investing with a look at what happens to companies after they tumble into the “Trough of Disillusionment.” We also include our perspective on the favorable earnings update from Sensata Technologies (ST).

This week, we changed our rating on State Street Corp. (STT) from Hold to Sell, and our rating on Dow (DOW) from Buy to Sell. Both are quality companies, but their shares have reached our price targets and we see no compelling reason to raise these targets.

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.

Following a monster week of earnings, a Federal Reserve interest rate hike, and the January Jobs report, “risk on” continues to be the theme in early 2023 as the Nasdaq once again led the indexes higher.

After a very strong first few weeks of the year, stocks have begun the much-called-for pullback, which sets up a “good” test for the nascent uptrend—if the sellers swarm, that would be a sign the bulls aren’t yet ready to take control, but for the first time in a while, the burden of proof is on the bears as the majority of evidence is positive. If something changes, we’ll pare back, but to this point we like what we see. Our Market Monitor now stands at a level 7.

This week’s list has something for everyone, including a few more earnings winners as more firms report. Our Top Pick is a software name that has a long-lasting growth story and a chart with a big bottom—and a big breakout last week. Aim for weakness if you want in.

The stock-market picture continues to improve, and it’s possible the current rally is more than yet another head fake; it could be the start of a new bull market. While we’re not there yet, there’s reason for optimism. So today, we take another big swing by adding a fast-emerging electric vehicle maker that has struggled since its IPO last June but is showing signs of life lately. It’s a recent recommendation from Cabot Explorer Chief Analyst Carl Delfeld.

We took a few losses last week, which at the moment looks a bit premature.

At the time I wrote, “Well, I think we all knew the time would eventually come. We are going to close out our February IWM iron condor as it has reached our stop-loss. This marks our first loss since August 11 and only our second since initiating the Quant Trader service back in early June.”

The market was in a short-term overbought state, so while I was hesitant to take off the two trades, mechanically it made sense and it’s the mechanics that keep us out of trouble and give us the opportunity for long-term successful results.

The probabilities continue to lead to the way!

Last week, we placed an earnings trade in Starbucks (SBUX). Per usual, we used an iron condor, but went with a slightly more conservative approach by increasing our probabilities of success on both sides of the trade to just over 90%.

Thankfully, SBUX opened up well within our chosen range after earnings and as a result we were able to immediately take off the trade for a one-day profit of just under 6%. For those who waited a little longer to take off the trade, a 9.5% return was easily attainable.

We continue to be in great shape as we approach the February 17, 2023 expiration cycle.

My only hope is that we can add a few more trades to the mix this week. Earnings are coming in fast and furious and, as a result, I have my eyes on a few potential stocks that reside on our weekly watch list. Starbucks (SBUX), Citigroup (C), Cisco Systems (CSCO) and several others are just a few of the names I’ll be looking to sell puts on this week.

Following a monster week of earnings, a Federal Reserve interest rate hike, and the January Jobs report, “risk on” continues to be the theme in early 2023 as the Nasdaq once again led the indexes higher.

Following a monster week of earnings, a Federal Reserve interest rate hike, and the January Jobs report, “risk on” continues to be the theme in early 2023 as the Nasdaq once again led the indexes higher.

This month we are dialing up the risk a little with a small software company that has a potentially disruptive platform that streamlines back-office processes for small and mid-sized businesses.

There are risks. The economy isn’t super strong, and this is a competitive market. But this company has a truly innovative set of solutions, is in one of the market’s most beat-up sectors and has new products and a low-cost customer acquisition strategy.

It’s also profitable and generates positive free cash flow, two attributes that make it an attractive acquisition target.

Enjoy!

This week could be a doozy for the market as traders are eagerly awaiting the “big” Federal Reserve announcement on Wednesday, as well as a monster week of earnings reports, and the January Jobs Report on Friday. Buckle up!

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.

The action in the second half of August was encouraging, but as has been the story of 2021, a lot of that move has been erased so far in September—and that goes for just about everything.

The S&P 500 has finally failed to make a new high every day lately and is 2% below the high-water mark! That doesn’t seem like it should be news but in this market it’s worth noting.

So far, the post-Labor Day market has been just a little bit crummy. Stocks have drifted slightly lower over the past week. While that’s nothing alarming, it is a reversal of the summer market where stocks were drifting slightly higher. It could be that the balance has been tipped toward the negative.

Here we are in September. So far, it’s not bad. But it’s not good either. For the first week after Labor Day, the market has drifted lower. It’s no big deal. But stocks have been losing a battle they were winning in the summer. The bulls were eking it out then. Now the bears are prevailing, slightly.

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

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.

We’re past the earnings season, so there were no companies reporting earnings this week. The next scheduled earnings report looks to be on October 8, with Lamb Weston (LW) reporting.

Despite more grumblings out there about how “we are due for a pullback,” stocks continue to hold up. In fact, many growth stocks have done far better than that and are jumping higher on almost a daily basis.

Over the summer, the strong economy prevailed over concerns about the virus. And the market drifted higher. We’ll see if the scales get tipped the other way in this historically tough month for the market.

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.

The shares of this apparel company were just upgraded by Stifel to ‘Buy’. The shares have a current dividend yield of 3.02%, paid quarterly.

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).

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.