I’m going to push back my hedge trade for next week as I plan on buying back most of our current positions and immediately selling more premium. Once I have a better idea of the premium we are able to bring in by selling more premium, most likely for the October expiration cycle, I will send out an alert with my hedge-based trade followed by a detailed explanation of how the trade will work going forward.

Since our last issue the market has pulled back sharply. No worries, as our portfolio was leaning bearish so the pullback gave us the opportunity to take off two of our bear call spreads. We took off both our SPY and DIA bear call spreads for returns of 14.42% and 15.47%, respectively.
Now we are left with our iron condor in IWM which I hope to take off for a small profit over the next week or so. But I also want to ramp up our positions again with implied volatility once again popping off near-term lows and now hovering above 25.

The market has been iffy since Fed Chair Jerome Powell’s “prepare for pain” speech at Jackson Hole last Friday.

With interest rates up and (most) stocks down since I’m going with a high-quality name this month.



This healthcare specialist just posted 44% growth in Q2 and has grown its covered lives by 80% over the last 12 months. It’s profitable, and with a bucket of new contracts in the first half of 2022 the business looks set up for a terrific 2023.



Enjoy!

This was a tough week and major indexes slid between 4% and 5% in August, their worst monthly performances since June. Nuclear energy play Centrus Energy (LEU) was a standout Explorer stock, up 56% over the last month. Today, we go to Canada for an interesting and speculative maritime robotics play.

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



One of our more productive methods for finding attractive turnaround stocks is to see what other like-minded investors are holding. We culled the list of hundreds of positions held by our evolving list of 50 or so preferred managers, as reported in the quarterly 13F filings, and discuss three of the most promising.



We also combed through the roster of stocks trading at low prices – another great source for turnaround stock ideas – and review four that have particular appeal.



Our feature recommendation this month is Warner Brothers Discovery (WBD). While most investors view this company as a “play” on streaming, we view it as an undervalued turnaround of the poorly managed WarnerMedia assets that it recently acquired from AT&T.

We note our recent ratings change of Lamb Weston Holdings (LW) from Buy to Sell.

In recent months I’ve been telling you that cannabis stocks were incredibly cheap and overdue for a bounce, and now it seems the world is starting to agree, as all our cannabis operators have seen their stocks climb in the past month.

Of course, the broad market’s rebound has helped, but the broad market doesn’t have the compelling fundamentals of the cannabis industry’s top stocks.



Bottom line: while the first six months of 2022 were rough, that’s history, and we are now on the path toward renewed profits as the leaders of this growth industry see their stocks come under accumulation once again—and we wait patiently for federal legalization.



Full details in the issue.

This week we are adding leading energy player Devon Energy (DVN). Please note, we will VERY likely collect the $1.55 quarterly dividend in the coming weeks, though I won’t include that in the profit and loss equations as it’s not a certainty.

Stocks continued to retreat last week, prompting us to sell two more stocks today and downgrade another. But the pullback looks pretty normal on the heels of the 17% run-up from mid-June to mid-August and in light of Fed Chair Jerome Powell’s hawkish comments last Friday. And one sector, in particular, has been immune to the recent selling: renewable energy. So today, I’d like to introduce Brendan Coffey, Chief Analyst of our fledgling Sector Xpress Greentech Advisor newsletter and a first-time Stock of the Week contributor. Brendan will tell you about what has been his best-performing clean energy stock of late.

Details inside.

No student of the market is going to look at the action of the past week and shrug it off; that said, looking at the evidence, we can’t say the rally has gone kaput, at least not yet: By our measures, the intermediate-term trend is still pointed up, and a lot of high relative strength stocks (like those found in Top Ten) are pulling back very normally at this point, We’re not going to whistle past any graveyard: We’ll move our Market Monitor back down to a level 5, and if things worsen from here, we’ll quickly bring that down another notch or two--but we’re still holding our resilient names until something changes.



This week’s list reflects the renewed strength we’ve seen in commodity and “old world” names, even as the market has retreated. Our Top Pick is a name we missed a couple weeks back but think this pullback marks a decent entry point.

It has been a fairly quiet week for the market so I’m going to keep it short this week. Most of the potential market-moving news was backloaded coming into the week with the Fed meeting at the annual Jackson Hole summit. Jerome Powell, as always, has the potential to move the markets significantly, which is why this post-expiration week has been a slow one for trading.

We currently have three positions on and all of them are in profitable territory. If all goes well over the coming days, there is a good a chance that I will lock in profits in all three trades and immediately initiate several more positions. I continue to tread lightly, as there is no use trying to force trades at the moment.

We are officially in the doldrums between earnings seasons. But an opportunity or two can still be found each week. And while the offseason earnings trades oftentimes lack all of the necessities for an actual trade, it’s still worth looking at potential trades as we patiently wait for another earnings season, if only for educational purposes.

I’m going to keep it short this week as it has been a fairly quiet week for the Income Trader service. We added some calls on PFE, but other than that, we are well positioned into the September 23, 2022 expiration cycle. I plan on adding a minimum of two additional short-term positions next week and as I spoke about on our call last week I intend on taking some of the premium we’ve collected and create a black swan trade just in case we see a swift drawdown as we move into the latter part of 2022. It never hurts to have a little insurance just in case and it would only cost us a few percentage points. I’ll be discussing the details of the trade in the next issue.

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.

The indexes are having another good day today, led by growth stocks this time—as of 3:30pm, the Dow is up 253 points and the Nasdaq is up a big 322 points.

The New Year is a wild one so far in the market with big up and down swings. The Dow was down big Monday and it’s up big today as bank stocks have caught fire.

As I think about the market in 2021, I’m conflicted. While I see signs of market excess, I have high conviction in our list of open recommendations and continue to find a bunch of additional companies that look attractive.

The major indexes had a down day on the first trading day of the year.

This social media company beat EPS estimates by $0.10 last quarter. It is forecasted to grow by l52.3% annually, over the next five years.

Undervalued, and ready to begin distributing dividends, this Spanish bank looks like a good bargain.

The expiration of our December covered calls is today, and I’m happy to report that four positions (GM, PINS, YETI, CGC) are closing for max profits

We’re starting off our 2021 Top Picks with this marijuana REIT that just raised its quarterly dividend to $1.24 per share.

The electric car boom is pushing this stock up, and the company is expected to post EPS growth of 25% annually over the next five years.

Marijuana stocks as a whole pulled back normally over the past week, but the correction may have ended yesterday, with most of the leaders still well above their 50-day moving averages—and the best have continued to hit new highs. Bottom line, the trend remains up and thus I’m keeping our portfolio fully invested.

This biopharma is forecasted to grow at an annual rate of 98% over the next five years.

While not yet profitable, this software company saw its revenues jump 38% last quarter, and its loss of $0.12 was much better than the Street’s estimate of -$0.21.

Selling Industrial & Technology

Selling Industrial & Technology

This communications company posted EPS of $0.27 last quarter, handily beating Wall Street’s estimates of $0.13.

Sell BGS February 19 $27.50 call at $2.40 or better

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.