Volatility continues to rule the roost.

And this past week it seems as though the bears, after a brief hiatus, made an appearance, pushing the S&P 500 ETF (SPY) lower by 3.3%.



Since last week’s issue we added another trade, this time an iron condor in IWM. Volatility picked up a little bit towards the latter part of the week, so we decided to add an iron condor to the mix to take advantage of the inflated volatility. I discuss the trade in greater detail in the Weekly Trade Discussion.

I’m going to keep it rather short this week as we are moving through the final week of the earnings doldrums. And I can’t be happier. Next week offers up little to nothing in the way of earnings trades as we enter one of the slowest weeks for announcements on the calendar. But the following week is a completely different story as the big banks kick off earnings season.

The first half of the year is in the books, and it was a doozy, but we’re glad we’ve been able to sidestep a good chunk of the historic damage. Now the focus is on what’s next, and it’s important to respect the evidence today (we’re remaining highly defensive) but also stay flexible; we have seen some relative strength in some growth areas and we’re open to whatever comes. In the near-term, we’d like to put a little of our giant cash hoard (89%!) to work, but want to see the market stabilize a bit more first.

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



As we approach the mid-point of the calendar year, we provide our traditional mid-year update for the stock market and high-yield bond market. Our commentary on stocks reviews what sectors worked (only one), what sectors and stocks stood out as the weakest, how the value vs. growth shift has played out so far, and what helped developed markets outside the United States limit the depth of their selloffs. We also discuss the state of two key drivers of future stock market performance, the role of the two “Easts,” and offer some advice on what not to do in this market, as well as a suggestion about what value investors might want to do.



Our call last year to avoid high-yield bonds, cousins of sorts to turnaround stocks, was spot-on. We walk through the effects of inflation on the two components of high bond yield prices, provide some historical perspective on yield spreads, and describe how only two of the three ingredients for a bankruptcy cycle are in place. We also suggest that while high-yield bonds are more attractive today than a year ago, it is still a time to be selective.



Our feature recommendation this month is ESAB Corporation (ESAB). This high-quality company was recently spun off from Colfax Corporation and checks nearly all of our boxes for an appealing turnaround stock, yet it is being overlooked as investors migrate to familiar stocks.



We note our recent ratings change of Marathon Oil (MRO) from Buy to a Sell.

If there is one message I want you to take home from today’s issue, it’s that cannabis stocks are cheap. Really cheap. And they may never be this cheap again.

So if you’ve got some cash sitting around that you want to “risk” in a long-term investment, consider the stocks I’ve rated buy.



In the meantime, our portfolio, which has beaten the index in each of the past four years, is 58% in cash, waiting patiently for the turn.



Full details in the issue.



Yours for wealth and wisdom.

It’s often hard for investors to rationalize, but bad economic news is sometimes “just what the doctor ordered” for the market. And that was the case last week as housing numbers again disappointed, consumer sentiment hit a record low, and perhaps for the first time in months, an inflation-related data point may have cooled off. What this means is it appears the economy is slowing down, which could allow the Federal Reserve to slow down the speed at which it raises interest rates.

Note: Due to the celebration of Independence Day next week, the next issue will be delivered Tuesday, July 5.
The market rallied strongly last week, erasing some of the carnage of the previous two weeks, but the main trend is still down and thus caution is still advised.


This week’s stock is a growth company that serves the solar power industry, and the stock looks attractive now because it’s basically been treading water for 17 months.


As for the current portfolio, which is 25% in cash, there’s one Sell.


Details in the issue

Note: Due to the celebration of Independence Day next week, the next issue will be delivered Tuesday, July 5.



After two brutal weeks for the indexes, the market staged a very nice snapback last week, and this comes after some decent resilience in many growth names during the June mini-crash. But the real question is can the market build on it: We’ve seen a handful of nice baby steps for the market this year, but each time the sellers reappear quickly and smack everything lower. Overall it’s best to remain mostly defensive until the buyers show they’ve conclusively taken control from the bears, which will take more time.



On a positive note, this week’s list has many names either showing some outsized accumulation of late or are forming solid bottoming areas. Our Top Pick is one that’s had a couple of false starts this year but looks ready to run if the market can get going.

We are only two weeks away from our first subscriber-exclusive event and subsequent earnings cycle. That first week of earnings should offer some nice trades in some of the major banks.

I will be going over potential trades, step-by-step, in our webinar. This will give you all the insights into how I approach earnings trades, our goals for the upcoming earnings season, the approach to order entry and more importantly order exits, managing trades, chasing trades, etc.

We are up to four positions in our Income Wheel Portfolio and I think we are approaching a decent mix right now.

Now that we are up to at least four stocks, I want to focus on finding a few shorter-term trades using a few jade lizards. Expect to see at least one if not two shorter-term trades next week as we continue to ramp up the portfolios.

Since last week’s issue we locked in another profitable trade, this time in XOP.

Convenient timing on our part allowed us to take a 15.2% return on the trade. We had sold the July 15 190/195 bear call spread for $0.70 on June 8. By June 17 our 190/195 bear call was worth less than $0.05, so we decided to lock in some profits and move on to the next opportunity. With 28 days left until expiration it just doesn’t make sense to hold any risk to try and make an additional $0.05, if we have the potential to simply take profits off the table.

Nio (NIO) was up 22% this week though markets face headwinds of inflation and increasingly loose talk of recession by many including Fed Chairman Jerome Powell. With regret, we let go of Sea (SE) but add another favorite selling at a sharp discount to its high—and in the middle of the unstoppable trend of cybersecurity.

The market is working its way through significant developments on many fronts – U.S. presidential race, raging pandemic, positive vaccine developments – and information overload is causing some intense action in individual stocks.

The economy is already rebounding, and at a stronger pace than was expected. But it still has one arm tied behind its back with the remaining restrictions and lockdowns. Plus, with the indexes not far from all time highs, the market had likely risen as much as it was going to before the next phase of the recovery came into view.

Just like that, the stock market emerged from its dark mood of October 30th to surge 8.6% in six trading days, with reinvigorated optimism following the evaporation of the election cloud and news of a very promising Covid vaccine.

This week, ten companies reported earnings, with Berkshire Hathaway (BRK.B) reporting tomorrow (Saturday): Barrick Gold (GOLD), Conduent (CNDT), Gannett (GCI), GCP Applied Technologies (GCP), General Motors (GM), Jeld-Wen Holdings (JELD), LaFargeHolcim (HCMLY), Meredith Corporation (MDP), Mosaic (MOS), and ViacomCBS (VIAC).

It appears that we will have a sharply divided government in Washington, which Wall Street initially is taking as a positive. A better way of putting it is that it could have been much worse for investors.

There should be a strong recovery and bull market on the other side of this election and pandemic. Any market spooking shenanigans in the meantime should present a buying opportunity.

We still don’t know who the president is... But the market loves it. The Dow is up over 700 points and the S&P 500 is up over 3% on the day.

While volatility has picked up recently, history suggests the market will end the year with a strong run.

Earnings season is in full gear this week, with 13 companies reporting.

A day like yesterday can make investors feel like there’s little reason to hang around in this market.

Be cautious. Growth stocks have been under pressure since early/mid-October, and our Cabot Tides buy signal has fallen by the wayside.

The anticipated market tumult has arrived. The S&P 500 is down over 5% in less than a week. It’s also down over 8% from the high. The high market combined with the mounting risks is finally spooking investors.

Several of our stocks have reached/exceeded our price targets, so we are making changes to several of our ratings:

A new CEO has given new life to this gold producer. In its latest quarter, it posted EPS of $0.41 versus the forecast of $0.32.

Late last week, P10 Holdings (PIOE) announced another transformative acquisition.

This company is making waves with a fast turnaround COVID-19 test; its shares were added to the S&P SmallCap 600 in September, increasing investor attention.

Eight analysts have raised their earnings projections for this bank.

This Latin American e-commerce company beat analysts’ estimates by $0.11 last quarter.

A wave of quarterly reports in recent days means most of our companies have reported.

Tyler updates us on one more stock that reported earnings recently.

This marijuana property REIT just reported a stellar quarter.

Our second recommendation is the sale of a previous pick.

Our first idea today is an undervalued tech company that has a current dividend yield of 2.90%, paid quarterly.

This e-tailer blew the door off earnings estimates last quarter, posting EPS of $2.30, vs. analyst projections of $0.80.

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.