After a modest bounce in May and early June, another thunderstorm has hit the market, driving the indexes and most stocks to fresh lows. Of course, the Federal Reserve is on everyone’s mind these days, but really, you don’t need to guess about what they’ll do and what effect it will have--just following the market’s trends has kept us mostly on the sideline in recent weeks and months, and they’ll be your best guides going forward. In the meantime, we’re actually trimming one of our two positions tonight, but we’re keeping our eyes open for signs the buyers are putting up a fight.



In tonight’s issue, we write about the energy sector, our current holdings and a few new ideas, too. We offer no predictions and remain mostly safe on the sideline, but the environment is certainly ripe for a turn given how everyone’s predicting doom, so it’s important to keep your head up and be ready should the evidence improve.

In the June issue of Cabot Early Opportunities we add a conservative stock from our Watch List that’s acted well over the last month and also take a partial position in an emerging player in the energy space. We also refresh the Watch List with a pure-play beverage stock, a biotech stock with a big date in November and another emerging energy name.
Enjoy!

This week’s covered call trade is a defensive play on a retailer that has outperformed its peers amidst the market mayhem.

After several weeks of underperformance, gold is once again showing promise after the latest round of global equity market weakness. As we’ll discuss here, it’s looking like safety demand for the metal is rising.

Titanium, meanwhile, remains strong and is currently the top-performing metal.



Lithium was shaken by a bearish Goldman Sachs call, but the metal’s trend is still up.



All told, I continue to recommend that we stay on our toes as market turbulence is very high right now.

The S&P 500 is now in bear territory, which should not be particularly surprising to anyone.

The economy is slowing, inflation is high, war is still raging in Ukraine and China’s economy is not in good shape.



For investors, the trick is to not get discouraged about the current market, but instead, to seek opportunities to profit.



That’s exactly the point of the Undiscovered Portfolio (more about that below). If you’ve invested in that portfolio, you know we’ve been able to identify exchange-traded funds with higher probabilities of delivering positive returns in this market.

Note: Because of the Juneteenth Holiday, which will close all markets next Monday, next week’s issue of Cabot Stock of the Week will be published on Tuesday June, 21.
And I think the market will likely be higher then, because the selling has been so pervasive in recent days that a bounce is overdue.


In the meantime, in continuing to manage our portfolio, we are selling Intel (INTC) today, mainly because it’s our biggest loss and the trend looks bad.


As for today’s recommendation, it’s a Chinese stock in the EV space that has fallen 76% from its high of last year and is ripe for a rebound.


Details in the issue.

So far, so good. As of Friday, all three of our open positions are in the green, even though the overall market has pulled back rather significantly.

We still have a lot of trades to place as we begin to build out each one of the portfolios. So, that being said, I’m going to keep it rather short today as we are just in the early ramp-up phase of the five portfolios that reside in the Fundamentals service. This will no doubt be the shortest issue you will ever receive. Enjoy!

The market did a decent job during the prior three weeks of getting in position to flash an intermediate-term green light, but it was a case of close but no cigar, and now the sellers are back at it, with stocks essentially having a mini-crash since last Thursday. It’s vital to remain focused on the evidence, which obviously remains negative, and to honor your stops for things that are falling out of bed. Looking ahead, there’s certainly enough panic and some positives in the broad market to put in a low, but of course we have to see the buyers step up and take control before putting much capital in harm’s way.

This week’s list has a collection of decent-looking stocks—nothing is really great here, but these names are either in overall uptrends or have shown recent buying power. Our Top Pick is from the latter camp, with shares miles above their prior low and recently reacted well to earnings.

We are up to three positions in the Income Trader service. As I’ve stated in the past, my goal is to have 5 to 10 ongoing positions in both the Income Trades Portfolio and the Income Wheel Portfolio. That being said, I want to ramp up at a measured pace, especially given this market. So, expect to see 2-3 trades added each week over the next several weeks.

Okay, we have two trades in the books. Both bear call spreads due to expire on July 15, 2022. So, it’s no surprise to say we are leaning bearish at the moment. Our deltas reflect our current stance, and we’re OK with it. In fact, we might be leaning a bit bearish for a while.

There is a good chance I’ll be taking the SPY 440/445 bear call off the table for a nice profit early next week, if not prior to the publishing of this issue. We can lock in some early profits and it simply doesn’t make sense to hold any risk through expiration when we can lock in over 50% of the original premium sold back on June 2.

We are firmly entrenched in the doldrums between earnings cycles, but it doesn’t mean that opportunities won’t arise.

Plus, as I wrote last week, the downtime between cycles gives us some time to reflect on the prior earnings season and, more importantly, prepare for what is ahead.



There is one potential opportunity next week, which we will discuss below. Again, there is no doubt that opportunities are scarce as we are firmly between earnings cycles.

Aside from Sea (SE), which zoomed from 80 to 88 this past week, Explorer stocks were largely flat, which to some these days is a good week. This week we look at the history of market pullbacks and some encouraging analysis on bounce-backs and trade before getting to a new recommendation from Shanghai.

The market has served up a good deal of volatility lately and for the most part our stocks have handled it well (so far).

Markets were abuzz this week with talk of a “tech meltdown,” with Tesla (TSLA) getting hit rather hard on Tuesday, falling more than 20% before bouncing back 10% yesterday.

After a stratospheric 60% rise from the March low, the S&P 500 pulled back 7% in the last few days.

The recent (and ongoing?) tech momentum reversal appears to be due to a variety of concerns ranging from doubt about valuations, worries about the pace of the economy’s recovery, the lack of another stimulus package and slowing growth in the Federal Reserve’s asset purchases.

The overall market remains in an uptrend, but we’re seeing more and more unusual action among individual growth names, and thus are making moves mostly on a stock-by-stock basis.

The market indexes continue to soar to new all time highs with no signs of stopping, despite the fact that the virus is still hanging around and economy is still beaten up.

Labor Day marks the start of a new year of sorts and a rebirth of seriousness in the collective psyche. The other side of Labor Day is a new ballgame, when investors shake off the apathy of summer and refocus with intensity.

One benefit of investing in micro-caps is that you can talk to management.

There isn’t any major news for any of our stocks.

The Cabot Global Stocks Explorer portfolio had another good week, with four stocks all making major moves.

These are the dog days of summer. It’s a rare time of year when a certain degree of slackery is not only tolerated, but expected. People tend to focus on enjoying the waning days of summer. More serious issues and considerations get postponed until after Labor Day.

Shares of this oil refiner have perked up a bit lately; it still has a high dividend yield of 9.62%, paid quarterly and is in a renewable diesel joint venture.

One of our portfolio stocks moves to Hold

This internet gift company is expected to grow at an annual rate of 20% over the next five years.

I usually wait until the second Wednesday of the month to share my latest micro-cap recommendation with you, but in this case, I couldn’t wait.

Big Data is where a lot of past and future profits are being made.

We are moving Amplify Energy (AMPY) from HOLD to SELL.

In the past 30 days, 13 analysts have increased their EPS estimates for this tech company.

This healthcare company beat earnings estimates last quarter, posting EPS of $0.35 vs. the $0.16 that Wall Street forecasted.

Given the market pullback, a couple names on my watch list are looking particularly interesting. I haven’t completed my analysis yet, but stay tuned—all of these names could ultimately make their way into the Cabot Micro-Cap Insider portfolio.

Our second recommendation is a sale of a previous pick whose shares are not recovering fast enough.

Our first idea today is a food distributor who beat EPS estimates by $0.10 last quarter and has a 6.8% annual dividend yield, paid quarterly.

The idea is to sell a covered call, meaning you already own or you just purchased V on the buy recommendation.

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.