Today, I’m recommending a U.K. natural gas company that is trading at a ridiculously cheap valuation and is run by capable operators who generated a 40x return on their last natural gas company.
Other key points:

• •It’s benefitting from the booming natural gas market in Europe.•It’s trading at 1.5x free cash flow.•It has high insider ownership (20% of the company).

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

The old Wall Street bromide that says “bull markets climb a wall of worry” can be applied to lithium. The battery metal is facing new worries over the impacts of a proposed tax that many fear will keep supplies restricted. While potentially bad for the EV market, it has so far been good for prices.

Elsewhere, steelmaking coal is on the rebound while related stocks are looking good. Industrial metals, meanwhile, are coming off major lows but have rebound potential.



I continue to recommend that we remain mostly defensive until weakness subsides.

Since last month’s issue, we’ve seen continued volatility in the U.S. equity markets.
Trading volume was among the slowest this year; according to Dow Jones Market Data Group, the typical daily volume in the New York Stock Exchange is close to 5 billion. However, this year, it has been around 4 billion.


The second-quarter earning session is just around the corner. Investors are eager to see how companies are contending with soaring inflation and other factors, including the U.S. labor market participation.

This week got off to a weaker start Monday ahead of important inflation data Wednesday and Thursday, which could set the tone for the market for the weeks to come. Buckle up!

It hasn’t been smooth, of course, but the market’s evidence has improved a bit during the past six or seven weeks. The way we look at this is that the market has put itself in a position to do something positive in the intermediate-term—but it still has to actually do it, meaning show enough strength to turn the trends up and see more stocks break out and follow through to higher prices. Right now we remain in watch and wait mode: We’re keeping our eyes open, but it’s best to remain defensive until the bulls show us more.



This week’s list is again heavy on biotech and Chinese names, though we’re also seeing some strength in a few new (but smaller and sometimes less liquid) growth names. Our Top Pick is a unique medical-related outfit whose stock is changing character for the better.

We remain in a confirmed bear market, so caution is still appropriate. But the bear may end soon, and when it does, we’ll get back to more aggressive investing.
This week’s recommendation is a healthy company that pays a very large dividend and has a solid future serving one of our country’s strongest energy sectors.


As for the current portfolio, there are no changes.


Details in the issue.

The close of the June expiration, back on the 17th, was witness to the low set in 2022. The SPDR S&P 500 ETF (SPY) hit an intraday low of 362.17 before rallying to close the expiration cycle at 365.86.

Since then, the market stalwart ETF has rallied 6.2%.



To put things into perspective, SPY was trading for over 410 when we first established positions back on June 3 before losing roughly 11% into the close of the June expiration cycle.



Thankfully, the bulls stepped back into the fray when the July expiration cycle began, prompting the 6% rally.

Back and forth we go as the bulls decided it was their turn to take charge this week.

The S&P 500 (SPY) pushed 2.0% since last week’s issue while the tech-heavy Nasdaq 100 (QQQ) gained an impressive 4.6%. Growth as seen through the Russell 2000 (IWM) saw an increase of 4.7%.



Nothing new here.



Volatility continues to define the market in 2022, and until fears subside on a potential recession, rising inflation and ongoing geopolitical turmoil, I don’t expect much to change.

Earnings season is finally upon us.

Next week offers up a few potential trading opportunities, particularly in the big banks. JP Morgan (JPM), Morgan Stanley (MS), Citigroup (C), Wells Fargo (WFC) and US Bank (USB) are the big announcements on the docket and the companies I will be focusing on.

All of the major indices pushed higher this week which helped the majority of our positions.

The S&P 500 (SPY) pushed 2.0% since last week’s issue while the tech-heavy Nasdaq 100 (QQQ) gained an impressive 4.6%. Growth as seen through the Russell 2000 (IWM) saw an increase of 4.7%.



Nothing new here.



Volatility continues to define the market in 2022, and until fears subside on a potential recession, rising inflation and ongoing geopolitical turmoil, I don’t expect much to change.

No question this is a challenging market but Explorer stocks held their ground. Cloudflare (NET) had a good week up five points, and Ford (F) remains my favorite pick on risk/reward basis. This week we move to a surprising trend that will benefit America, the climate, and your portfolio.

This month we go back to the MedTech well and pull out a small company with a potentially transformative technology that could shake up the organ transplant market.

With recent FDA approvals and a platform that appears to be head and shoulders above the standard of care, this company is enjoying rapid revenue growth now.



Enjoy!

Anyway, the market doesn’t seem to be fazed by all the incredible things going on in the world these days. Stepping back, that makes some sense.

Stocks trading on U.S. markets faced some resistance as hopes for some sort of stimulus bill fade and as mixed earnings report begin rolling in. A key question is whether the pandemic boom stocks will have the revenue and earnings growth to support their sharp advances.

I expect a strong bull market on the other side of the election and pandemic, but things could be dicey in the near term.

The market is still solid. The bad news and uncertainty hasn’t dragged it down in any significant way. Investors still see the prize of a rapidly recovering economy and the pandemic fading. While I see very good days ahead for the post election and post pandemic market, there may be some rough seas ahead in the near term.

Many great investors including Peter Lynch and Warren Buffett recommend ignoring macro and politics and focusing on bottom up company analysis. They argue that anything else is a waste of time. Focus on things that are more predictable.

With low interest rates and easy borrowing terms, and some supportive jaw-boning and incremental buying by the Federal Reserve, new corporate debt issuance in the United States is reaching record highs.

This week is the start of earnings season. We review Wells Fargo’s (WFC) earnings and provide updates on several Cabot Turnaround Letter recommended stocks.

The market took a hit today, which wasn’t totally unexpected; overall, the damage was contained, with the Cabot Tides remaining positive and most growth stocks still in good shape

I don’t anticipate any major changes in our portfolio leading into earnings as I’d prefer to hear what’s new and then go from there. That said, we have a couple of minor adjustments based on stock price action.

The stock market had a decent week, gaining about 5% since our last letter. While market commentators have ascribed a range of reasons for the strength, including new hope for a federal stimulus package, a growing consensus about the outcome of the presidential election, and perhaps some modestly increased optimism in what had become a sense that the economic recovery was faltering.

This market looks like it wants to go higher. After selling off nearly 10% in September, the S&P 500 has resumed its uptrend and is not far from the all time high.

We are combining our regular Friday afternoon Members-Only Podcast with any earnings updates. By combining these, you will receive the same research, perspective and analysis as always yet in one easy-to-read email.

The weakness in the market and growth stocks is continuing this morning.

We’re selling this portfolio stock with a 54% profit since its December 2019 recommendation.

This e-commerce company beat analysts’ estimates by $0.12 last quarter and is expected to grow by 42.9% next year.

This CRM software company is expected to grow 42.1% next year.

Shares of one of our oldest positions are trading off more than 10% today after Bank of America analysts downgraded the stock to neutral from buy and trimmed their price target to 150 from 162.

Continue to take things on a stock-by-stock basis. We’ve seen a buyers’ strike during the past two weeks, with many stocks and indexes falling under their own weight; our Cabot Tides buy signal has vanished, with the market now nine weeks into a rest after the March-August advance.

This portfolio stock reported Q3 results this morning before the market opened. As expected, the company delivered outstanding results that surpassed expectations on both the top and bottom lines.

This cybersecurity firm beat analysts’ estimates by $0.17 last quarter.

We’re selling one stock and buying another half on two others.

Market gyrations have discounted this cloud-monitoring stock to an even better buyable level.

The fund has an annual current dividend yield of 3.52%, paid quarterly.

We are raising Duluth Holdings (DLTH) price target to 17.50 from 15.

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.