Stocks continued to rally this week in what has been one hell of a move for the market. SPY is up almost 12% in just 27 days. Annualized, that’s more than a 150% return for the world’s largest stock market index. Realistic? Nah, but it certainly shows just how sharp this rally has been over the past month.

A few weeks ago, almost every index pushed into a short-term overbought state due to the rally. And over the two weeks that followed almost every market and sector index continued that push into an extreme overbought state. Obviously, this didn’t bode well for our SPY iron condor, but hey, we know we are going to take a loss from time to time and in most cases, they are far less. But it’s the transition periods from low to high volatility and vice versa where most options strategies struggle.

The market looks pretty good these days. I’m not saying we are completely out of the woods, but the indicators are promising. The Dow Jones Industrial Average has risen about 1,500 points since last issue. And while Energy (up 36.8%) and Utilities (up 3.7%) are the only two sectors ahead for the year, we’re seeing positive moves in several other areas.

On the good news side, expectations for inflation seem to be tempering. We’ll know more tomorrow, but right now economists are calling for a decline in the inflation rate from 9.1% in July to 8.7%. And in better tidings, the three-year inflation rate is now forecast at 3.2%, down from 3.6%.

The market’s evidence continues to slowly, steadily improve--it’s not 1999 out there, but there also aren’t any obvious yellow or red flags, either. Given the trickiness of individual stocks, we’re still thinking going slow makes sense, but we’re aiming to extend our line as stocks present opportunities, while punting on names that are breaking down. In the Model Portfolio tonight, we have some changes, but on balance we’re pushing more toward the bullish position.



We also talk about playing so-called off-the-bottom stocks (and have one old friend we’re keeping an eye on from that group), as well as reviewing some names we’re watching and presenting one sign that says most investors are still worried about the market (usually a good sign).

We are likely in a recession. Meanwhile, inflation continues to rage on. That means stocks will have to navigate an environment of both recession and inflation, at least for the rest of the year.
That’s tricky because few companies perform well with both. Commodity-based companies thrive in inflation but struggle in recession. Many defensive companies that shine in recession don’t like inflation.


In this month’s issue, I highlight a stock in one of the rare sectors that can successfully navigate both recession and rising prices at the same time – midstream energy. Strong operational performance, a low valuation, and a high and safe yield are perfect for the current situation.

Today, I’m recommending a liquidating real estate trust with significant upside.
Key points:

• •Its assets are conservatively worth 50% more than its current market cap (it has no debt).•It pays a 10% dividend yield.•Ongoing asset sales will create even more income and the trust will be completely liquidated within 5 years.

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

This week, in an attempt to keep the portfolio as diversified as possible, we are adding a stock/company that operates primary care facilities.

Gold and silver prices have perked up since our last regular issue, thanks in part to a substantial reduction in short positions among commercial hedgers. Other segments of the market are improving as well, including platinum and palladium.

Elsewhere, titanium has fallen from grace—in part due to a TikTok rumor mill video. Other industrial metals, meanwhile, are coming off major lows but have recovery potential.



In the trading portfolio, I’m putting our favorite silver-tracking ETF back on a buy, while adding another steel-related position.

Lots of moving parts in this week’s update. We add one stock (as always), sell another, and have several ratings changes – a reflection of a mixed second-quarter earnings season, and on the cusp of the latest inflation data, to be released this Wednesday. Most of our stocks are acting well, however. And the market continues to inch forward, especially growth stocks, which is why our latest addition is a mid-cap (Internet of Things) IoT company courtesy of Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

Last week was another constructive one in our book, with the market shrugging off some “bad” news and with a few more names beginning to pop above resistance and react well to earnings. Having rallied nicely off the lows, a pullback or consolidation would be relatively normal at this point, the nature of which should be telling--and, of course, if the market simply ignores its short-term “overbought” condition, that would be very encouraging. As for the here and now, the evidence says we’re seeing more good vibes, but there’s still work to be done. We’ll leave our Market Monitor at a level 5 for now.


This week’s list is full of stocks that have shown great power on earnings, which is always good to see. Our Top Pick is helping to lead what looks to be a turnaround in the HCM group.

It was a fairly quiet week as the market continued to push higher and now seems to be hitting some strong overhead resistance.

We did add a bear call spread to the portfolio due to the ongoing overbought nature of this market and so far, so good. But we are early in the trade, so not much to discuss at the moment.



Our SPY iron condor, due to expire in two weeks, is the current focus. SPY finally pushed through our short call strike of 412 and the major market ETF now stands slightly above our breakeven of 412.70. The historic one-month rally in July has led to an ongoing overbought reading in SPY for what is now almost three weeks.

The upcoming week of earnings is a fairly slow one, with only a few real choices on the docket. Disney (DIS) is definitely the highlight of the week and the one I will be focusing on.

However, the following week we see lots of the big boys due to report, including Walmart (WMT), Home Depot (HD), Lowe’s (LOW), Target (TGT), Cisco Systems (CSCO) and several others.

Not much to speak of this week. We didn’t make any moves, just allowed time decay to work its magic on our August positions. As a result, we should be able to buy back several of our short calls/puts and immediately sell more premium for the September expiration cycle. So, expect to see several trade alerts next week on our existing positions and a few new positions as I intend to make a few short-term trades as we move towards the September expiration cycle.

The big news this week was, of course, the swearing in of President Biden and all the associated stories about the transition. Fun fact – portfolio holding Everbridge (EVBG) supplied its Mass Notification system to help keep Washington, D.C. area residents and visitors safe and tuned in during, and leading up to, the Presidential Inauguration.

Not much has changed with the market’s picture—most stocks (especially cyclical stocks) are very strong, and we’re happy that the Model Portfolio is off to a good start this year after a great 2020. However, things are also quite frothy, few stocks are at attractive entry points and there remains a bunch of crosscurrents (day-to-day rotation, etc.) that’s making timing trickier.

The market is off to a good start this year and anticipating wonderful things for 2021.

As value investors in a remarkably robust (exuberant) stock market, full valuation impels us to want to sell a stock. Such is the case with General Motors. On most conventional metrics, the stock is fairly priced. Through the courtesy of several friends, we’ve seen some of the math that Wall Street analysts use to justify prices well over $100/share and find them laughable, at best. As GM shares burst again through our price target, we were on the razor’s edge of selling.

The broader stock market continues to perform well. In fact, the S&P 500 has gained 12% since the election. This is the most ever (starting date 1950), according to Ryan Detrick of LPL Financial.

The positions remaining in the portfolio will benefit if the market continues to move higher.

This week we had two companies reporting earnings, one reports next week, and the earnings deluge starts the following week with at least seven companies reporting.

As we near the end of the second week of 2021 and approach inauguration day, the market is barreling full steam ahead, seemingly unaware of the dung piles that are consistently thrown in its path.

The phrase you hear more than ever from market prognosticators these days is that they are “cautiously optimistic” about the state of the stock market. In some ways this is pretty useless advice, but in another it hits the nail on the head. The market clearly wants to continue to rise; the world is awash in liquidity, and the Fed seems determined to keep interest rates low for some time. In addition, momentum tech stocks seem unstoppable.

In this issue I highlight two timely stocks for purchase now.

Most stocks on the Cabot Undervalued Stocks Advisor recommended list had strong performance this past week. Part of the strength was perhaps due to money managers’ general optimism that seems to brighten with turn of the calendar. With last year’s bonuses firmly in the bag, professional investors often view January as the start of a new clock. This translates into a higher tolerance for risk-taking, as there are nearly 12 months ahead to make up for any mistakes. Cyclical and value stocks tend to be major beneficiaries of this optimism.

This week we had one company reporting earnings - Lamb Weston Holdings (LW). We are raising our price target on Signet Jewelers (SIG) to 42 from 35. DuPont (DD) shares are under review as they trade above our 75 price target.

This recent IPO reports earnings on February 1, and analysts are forecasting annual growth of 45.86% over the next five years.

This semiconductor cleaning company earned $0.73 per share last quarter, beating analysts’ estimates by eight cents.

Based on the below press release highlighting the agreement for Australia’s Lynas to build a rare earths refinery in Texas, I recommend you sell your MP Materials (MP) position.

Earnings for this insurance company are due on February 3, with a consensus estimate of $2.81 per share. Nine analysts have recently increased their EPS forecasts for the company. The shares have a current dividend yield of 2.0%, paid quarterly.

This preferred stock is backed by a global financial company.

Over the long run, the S&P 500 has produced an average annual return of about 10% per year. Our aim at Cabot, through our various services, is to do better, and in the long run we do.

We are raising our price target on General Motors (GM), following our review as the shares have surged through our 49 price target, to the mid-50s.

The top five holdings in this ETF are: Aphria Inc (APHA.TO, 9.09%), Canopy Growth Corp (WEED.TO, 7.73%), GW Pharmaceuticals PLC ADR (GWPH.L, 7.62%), GrowGeneration Corp (GRWG, 6.90%), and Tilray Inc (TLRY.TO).

Last Friday the ADNT January 36 Call that we sold for $2.15 expired worthless (good situation), leaving us with our stock position, and an approximate profit of 6.5%.

This gold producer just reported that its gold production rose by 32%, year-over-year. The company also raised its dividend.

This is a very speculative biotech that has interesting potential.

We are raising our price target on Mohawk Industries (MHK).

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.