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.

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.

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.

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.

Explorer stocks had a great week as Centrus (LEU) is up another 10%, Cloudflare (NET) adds 20%, Infineon (IFNNY) reports revenue jumping 33% and Ford (F) reports eye-popping sales results for July. Data and analysts are divided so stay cautiously optimistic and consider today’s new recommendation at the heart of U.S.-China rivalry.

The market is getting stronger and higher-growth names are leading the charge.

This month we dig into an overlooked company with a global payments platform that’s helping solve digital payment challenges in complex industries.



Growth is expected to be over 30% for a number of years, and the stock is acting well.



Enjoy!

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



When considering turnaround situations, our most-preferred catalyst is a chief executive officer change. When a business is sliding backwards, this could be exactly the change needed to restore its prosperity. For frustrated shareholders, the change can bring immense potential. We discuss six new CEO situations that look appealing.
Long ago, astute investors noticed that the stocks with the highest dividend yields in the Dow Jones Industrial Average tended to become the index’ best performers in future years. Following the recent market sell-off, we re-visited this group to look for interesting opportunities. We review six of the highest dividend yielding Dow stocks, and leave out three that have immense strategic and profit pressures.
Our feature recommendation this month is Volkswagen AG (VWAGY). The shares have plummeted after our timely sale last year for a 182% total return and we take this opportunity to repurchase them at the current low price. The financially sturdy company has a new CEO and another possible catalyst from a Porsche initial public offering.



We note our recent ratings change of Credit Suisse (CS) from Buy to a Sell.

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the August 2022 issue.

Ernest Hemingway’s quote about “… gradually then suddenly…” could apply to the escalating geopolitical tensions.



It has been a quiet month for new recommendations and ratings changes as we patiently wait for attractive opportunities in a difficult investing climate.



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.



I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.



Thanks!

July concluded with an impressive rally, led by strong earnings reactions from mega-cap technology stocks (MSFT/AMZN/AAPL) which helped propel the S&P 500 to gain 4.25% on the week, the Dow to rise 3%, and the Nasdaq to soar higher by 4.7%.

What a week for the market! That’s not something we’ve said a whole lot this year. But we’ll take the good news and try and capitalize on the momentum by adding the first pure growth stock to the Stock of the Week portfolio in a while – one that Cabot Growth Investor analyst Mike Cintolo thinks could be a new leader in its fast-blossoming field.

Plus, with a lot of our stocks acting well, we’ve upgraded two of our existing recommendations to Buy. Details inside!

2022 has been pretty sour this year, but let’s give credit where it’s due—the market has been able to put one foot in front of the other for a few weeks now, and importantly, after showing enough strength to turn the intermediate-term trend up two weeks ago, the buyers have kept on buying, really the first time we’ve seen that all year. The vast majority of action has been from off-the-bottom names, so it’s not the time to go bananas on the buy side. But with the evidence continuing to improve, we’re OK extending your line as things start working.



This week’s list has a wide range of names in a variety of sectors. Our Top Pick has a reliable story and solid growth, and its sector is suddenly acting very spunky. Try to buy on dips after the recent move.

Over the past month or so, it seemed like stocks would continue their frenetic surge. This week, however, the market appears relatively lackluster with a lot less excitement. Some investors may yearn for more fireworks, but as a value investor, I find this calm to be more sane.

This week two companies reported: Signet Jewelers (SIG) and Duluth Holdings (DLTH).

The Explorer portfolio had another good week despite a sharp pullback by ElectraMeccanica (SOLO). We still have a big profit there, so I advise you to sell half your position and let the rest ride. As you review your stock portfolios going into 2021, I encourage you to take partial profits from your big winners.

November was quite a month in the market. It was one of the very best months for the market indexes in decades. The Dow was up 11.8%, the S&P 500 rose 10% and the Nasdaq gained another 11% in the month.

The final tally is in, and it was a November for the ages. The Dow Jones Industrial average was up 11.8% for November, making it the best month for the index since 1987. The S&P 500 climbed 10% while the Nasdaq gained another 11% for the month. History clearly shows that November was a spectacular month. What happened?

Investor sentiment is high these days. Just look at the Citi Panic/Euphoria Index

This note is a Monday edition, following the long Thanksgiving weekend last week. No companies reported earnings last week, and we review Adient’s (ADNT) earnings that were reported today.

For the third straight week the market has rallied on the news of another coronavirus vaccine with positive late stage trial results.

Other than price changes not much has happened with our stocks since I wrote last week. With our offices closed tomorrow and Friday we’ll all be taking a short break before gearing up for the last month of the year.

Remain optimistic but pick your stocks carefully. The overall market is in good shape, and there’s definitely more good than bad among individual stocks, though it’s also tricky, with plenty of rotation and news-driven moves.

Stocks showing strength and breadth like we haven’t seen in a long time, particularly with the broad market at a record high. Despite flattish returns from the formerly high-flying mega-cap tech stocks, the broad stock market is no longer grinding higher, it is surging higher, lifting the S&P 500 index to a month-to-date gain of 8.8% through Monday.

Given the news that we are likely to have several effective vaccines approved over the next couple of months, value stocks, which tend to be more cyclical and thus will benefit more sharply from an improving economy, have outperformed growth stocks.

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.

This portfolio stock reported Q3 results yesterday that came in ahead of expectations.

This consumer products company beat earnings estimates by $0.21 last quarter.

This preferred stock is issued by a Chicago-based regional bank.

With all five states that voted on marijuana proposals last week saying “Yes,” the trend toward nationwide legalization is now clearer than ever—and marijuana investors have been acting accordingly.

Rich is recommending a sell for this portfolio stock.

Tyler reports on three stocks in the portfolio.

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

The major indexes are bouncing this morning, and growth stocks are stabilizing, which is a good first step. As of 9:55 am the Dow is up 75 points and the Nasdaq is up 169 points.

This toy manufacturer beat analysts’ EPS estimates by $0.25 last quarter.

Tyler updates us on two more stocks that reported earnings recently.

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.