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.

Most people in the market (and in life) think of a lot of things as black and white, good or bad, bull or bear … and, frankly, for the market anyway, that’s often a good approach. We’re trend followers, after all, and we’ve designed our indicators to mostly be green or red, telling us whether stocks are headed up or down. It’s often best to play things in a decisive manner.

Although uncertainty in the market is growing, there are still strong income stocks out there. But we must be careful to find the right ones. A good stock needs to be resilient in a continuing recession, yet able to thrive amidst high inflation, or both, or neither. In this issue, I highlight such a rare bird.


The portfolio is also eliminating a cyclical position and adding a more defensive one. At the same time, we are seizing upon recent strong performance in another stock and selling a call to lock in a high income in this uncertain market.

Today we are adding a recent earnings season winner, though because of the weakness in the market the last two trading days, we are playing it somewhat defensively.

With short-covering activity no longer a factor, gold remains in a tenuous position on a short-term basis. A strengthening 10-year bond yield and a robust dollar are further headwinds for the metal.

Lithium, meanwhile, is back in a commanding lead among the key industrial metals—thanks in part to the newly passed Inflation Reduction Act law.



In the trading portfolio, no new positions are recommended for now as the broad metals market is unsettled.

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.

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).

After an insane couple of weeks this one has felt relatively calm. There is still plenty of market-moving news around the election, vaccines, the pandemic’s frightening trajectory, etc. but I think we’ve all become somewhat accustomed enough to alarming headlines – within a certain range – that it’s harder to get shaken now than in the past.

Markets steadied this week as the political situation became clearer and prospects for Covid-19 vaccines becoming available in the first half of 2021 seem more promising. The Explorer portfolio performed well this week, with a couple of ideas breaking out to new highs.

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.

This year continues to amaze. The market had another big rally this week on news of very positive late-stage trial results for a coronavirus vaccine from pharmaceutical company Moderna (MRNA). The S&P 500 soared to a new all-time high, the first since early September.

This was a busy week, with many of our companies reporting earnings.

This building products company posted earnings of $1.04 per share last quarter, compared to analysts’ estimates of $0.78.

Three of our portfolio stocks report earnings.

Three analysts have increased their EPS estimates for this pest control company in the past 30 days; they now forecast growth of 47.1% for the company next year.

Two of our portfolio stocks report earnings.

This midstream MLP (Master Limited Partnership) ETF has a current annual yield of 35.22%, paid monthly.

Yesterday, voters in all five states where it was on the ballot—Arizona, Mississippi, Montana, New Jersey and South Dakota—said they were in favor of legalization, and in every case, the majority vote was clearly positive, not even close.

Our second recommendation is a short that is failing technical tests.

Our first idea today is picking up steam due to its coronavirus testing; the company just walloped analysts’ projections for its third quarter.

Four of our portfolio stocks report earnings.

As I noted in this morning’s Covered Call email, this portfolio position broke my mental stop last week.

Our second recommendation is a sale of a previous idea.

Our first idea is an infrastructure play that just walloped earnings estimates.

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.