Tomorrow afternoon traders will get another look at how the Federal Reserve perceives the inflation situation, as well as its plans to manage interest rate hikes going forward. Below are the expectations in the options market, the bond market, and from a couple Wall Street firms.

Ahead of the “big” Federal Reserve announcement on Wednesday, the market surged higher last week. The S&P 500 gained 4%, the Dow rose 5.7%, and the Nasdaq rallied 2%.

Since earnings season began, we’ve been fortunate enough to lock in all three of our earnings trades for winners. Our cumulative totals sit at 17.3% for an average one-day return of 5.8%.

Our latest winner came on Wednesday as we placed a trade in Mastercard (MA). We locked in a profit shortly after the opening bell the following day for a one-day return of 5.3%, mostly due to the volatility crush that occurs immediately following an earnings announcement when most of the near-term, built-in uncertainty in the stock has passed.

We currently have two positions open, both of which have a probability of success higher than 84%.


With December expiration quickly approaching (45 days) I plan on adding several new positions this week. We want to have, at the minimum, one bullish, bearish and neutral trade for each expiration cycle and December is no different.

This week I intend on adding several new positions to the mix. My hope is to add two new positions to the “Wheel” portfolio and two short-term, one-off trades.


Also, with PFE closing in the money, or above our 47 calls at expiration, we will need to sell some puts early in the week to start a new phase of the wheeling process. Our shares were called away at $47. We’ve managed to lock in $3.62, or 7.24% worth of premium since introducing PFE to the portfolio. Our breakeven currently stands at 46.38.

Happy Halloween! True to the occasion, the final day of October is cause for investor celebration this year – all three major indexes were up sharply this month (one more sharply than the other two). Yet, with the Fed set to talk interest rates again this week and midterms and more inflation data on tap for next week, things also still feel a bit spooky out there. So, to fortify our portfolio against any further impending doom, today I’m adding a household name that has a proven track record, pays a hefty dividend, and has been overly punished by all the selling over the past year. In fact, value expert Bruce Kaser just added it to his Cabot Undervalued Stocks Advisor portfolio.

Enjoy!

Ford (F) reported a down third quarter, but Explorer stocks had a good week with all positions in the black. MP Materials (MP) and Oracle (ORCL) were up 11%, and SQM rose 8%.

The headline of today’s GDP report will likely be more upbeat than the two previous negative growth numbers, instead showing that third-quarter GDP grew at about a 2% annualized pace.

But beneath these numbers, investor sentiment, economic trends, and geopolitical risks are not all that encouraging.

How should investors take all this in and execute a strategy to exploit the situation?

This week earnings season really gets in gear … buckle up, and be prepared to jump into some earnings season winners if the market can continue to show signs of strength.

This week earnings season really gets in gear … buckle up, and be prepared to jump into some earnings season winners if the market can continue to show signs of strength.

Election season lurks just around the corner.

The looming midterm outcomes have huge implications for cannabis – since the group is so dependent on legal reform in the hands of politicians.

There are going to be plenty of (tradeable) election-related ups and downs. But for reasons I will explain, cannabis stocks might see some very bullish catalysts near term, no matter which party takes the Congressional elections.

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

At it most basic, investing is a mental game supplemented by a calculator. Our articles use one or both aspects to find attractive investing ideas.

Our first group covers enduring companies with out-of-favor stocks with theses well supported by a calculator. Our other articles discuss companies with deeper issues but whose shares have been so heavily sold that their risk/return trade-offs are highly attractive, even if their theses rely less on a calculator and more on pure contrarian instincts.

Our feature recommendation this month is a high-quality, well-capitalized bank that emphasizes credit card loans

The market has likely not bottomed yet. The current rally will unlikely be sufficient to drive us out of this bear market ahead of continued high inflation and likely recession in the months ahead.

However, while the market indexes may have further downside, one area of the market may well have already bottomed, namely interest rate-sensitive stocks.

Previously buoyant defensive stocks got clobbered as interest rates spiked to the highest levels in 15 years. But the evidence is overwhelming that the economy is likely headed toward recession in the months ahead. Recessions put downward pressure on interest rates. As the economy worsens and inflation declines, rates are likely to move lower, negating most of the damage done to conservative dividend payers.

There are powerful reasons to believe that interest rate-sensitive stocks may have already bottomed. In this issue, I highlight one of the very best utilities on the market. It’s near the 52-week low after an overdone selloff and should be highly resilient in a recession.

How about this market? Even with the technology sector still in a funk and the huge energy sector rally abating, the S&P 500 just made a new all-time high anyway.

Yesterday’s market drivers are taking a back seat while previously jilted and ignored stocks are taking the baton.

After a volatile March, the market has found its footing. Month to date, the S&P 500 is up 2.8%, and is back to an all-time high. Our open recommendations are up 81% on average from when they were initially profiled. In total (including closed recommendations), our picks are up 71% since being initially profiled. While there are definitely pockets of froth in the market, I continue to find many attractive opportunities, and I’m looking forward to profiling my latest idea next week.

Today’s note includes earnings updates, ratings changes, the podcast and the Catalyst Report.

Growth stocks had a great day yesterday for the first time in a while—while the Dow lost 85 points, the Nasdaq lifted 201 points (1.5%).

Energy and technology are no longer driving the market higher. As a result, the S&P 500 is kind of moving sideways.

The big news this week (completely unrelated to our recommendations) is that a family office called Archegos Capital Management has blown up and caused a mini-meltdown in the market.

Market leadership appears to be shifting. It’s interesting to note that utilities have been the top performing market sector over the past month and week.

Stop-losses, or more fully, stop-loss orders, are trading orders that are placed to execute a sale automatically if a stock falls below a specified trigger price. The idea is that these orders can prevent a small loss from becoming a large loss. It can also be used to lock in profits.

The bull market in our turnaround stocks continues to drive several names to prices above our targets.

It continues to be a very tough market, and with our exposure to small- and mid-cap growth stocks our portfolio continues to feel pressure. After some signs of stabilization last week the sellers are back in control this week and many names look destined to retest their March lows, or possibly dip a little lower.

It has been one year since the S&P 500 hit bottom and since the then the blue-chip index has roared back nearly 75%. Just imagine if we would have had a pile of cash and the guts to jump in.

Cerence (CRNC) reported this morning that Q1 revenue was up 22.6% to $95 million (beating by $7.1 million) while adjusted EPS of $0.59 was up 103% (beating by $0.08). There are a lot of initiatives at Cerence and management had a lot to say, but I’ll just mention a few things that jumped out at me.

In the past 30 days, 21 analysts have increased their EPS projections for this data storage company. The shares have a current dividend yield of 3.97%, paid quarterly.

As earnings season gets into gear we have a few updates on positions that have reported this week. Stepping back and looking holistically at our portfolio, which currently has 34 positions, we’re going to view earnings season as an opportunity to prune our portfolio a little. Essentially, we want to use the current market’s strength to our advantage to lock in some profits, exit stories that aren’t super-inspiring at the moment, and focus on the highest potential names.

This steelmaker’s shares were just upgraded to ‘Overweight’ at JP Morgan.

To follow up on today’s issue and new recommendation of Fisker, Inc.

This closeout retailer beat earnings estimates by $0.10 last quarter. The shares have a current annual dividend yield of 2.16%, paid quarterly.

The GameStop Affair last week offered great entertainment for those of us neither long nor short the stock, but in the end what does it mean? In my opinion, the market worked; I don’t see any real problems revealed (aside from naivety of many of the individuals). But I do think the spotlight on the power of individuals vs. professionals is likely to bring some legal outcome that will further empower individual investors, especially given today’s Democratic control of Washington.

The shares of this Real Estate Investment Trust were just upgraded to ‘Strong Buy’ at Raymond James and TD Securities to ‘Buy’. The shares have a current annual dividend yield of 3.02%, paid quarterly.

The top five holdings of this mutual fund are: UnitedHealth Group Inc (UNH, 5.85% of assets), Pfizer Inc (PFE, 5.52%), AstraZeneca PLC (AZN.L, 5.36%), Bristol-Myers Squibb Company (BMY, 4.23%), and Novartis AG (NOVN, 3.57%).

Profit of this rent-to-own company doubled last quarter, yet the shares look pretty undervalued. The company has a current annual dividend yield of 2.82%, paid quarterly.

It’s hard to say if this round of fun with Virgin Galactic (SPCE) is beginning to unwind or if the stock will be up 20% tomorrow (to pick a random number). However, judging by the action in many of the most speculative short squeeze stocks today (GME, NOK, AMC, etc.) there appears to be significant unloading today.

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.