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.

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!

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.

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.

As we enter the fourth week of earnings we’ve been averaging only one trade per week. No biggie. We should still see our average of 8-12 trades by the end of the season and with a few key opportunities next week I hope to make at least two, potentially three trades. Of course, Mr. Market will truly decide whether or not we are able to place more than one or two trades next week.

The recent rally in the market has helped all our positions. If this keeps up, we should reap quite a bit of premium for the August expiration cycle.

We added JPM to our shorter-term Income Trades Portfolio and plan to add several more as we progress through earnings season. My intent is to add at least two to three more to that portfolio by the end of next week as the opportunities are plentiful currently. As I’ve stated in the past, the goal is to ladder our shorter-term trades, so we have trades expiring on a weekly basis. Of course, we are in the beginning stages of the service, with a challenging market, so I will remain patient in my selection. If Mr. Market cooperates, stay tuned for several trade alerts as we move through next week.

We locked in another gain this week, marking our fifth straight winner since starting the Quant Trader service. Our cumulative total is 56.26%, for an average winner of 11.25%. The gains have been on the smaller side, but given the volatility we’ve seen in this market, I’ve chosen to take winners off the table when we can lock in 50% to 75% of the original premium sold. In some cases, I might let a few winners run a little longer, but not in this market. There is no need to press. And when you think the market has lost 2.6% over the same time frame, well, I think we’ve done okay for ourselves.

The market’s slow, steady improvement continues, with our Cabot Tides turning positive last week and some more stocks starting to shape up. That said, we still think it’s best to go slow here, partially due to more time being needed for setups to emerge, and partly because so many names we’re watching actually report earnings in the next week or two; the reactions will go a long way toward telling us if this rally has legs. Right now, we’re cautiously optimistic--we have no more buys tonight but could in the days ahead if things go well.



In tonight’s issue, we write about our new additions, review some other top ideas (including one that’s shown repeated huge-volume buying over the past many months) and remind you that the market is very capable of getting going despite the bad economy.

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 consensus opinion right now is that the market is strong because it’s looking favorably on the prospects of a clear-cut winner in the upcoming presidential election and that the likelihood of another round of stimulus is going up.

The Explorer portfolio had another positive week, as the market is hostage to enacting another politically difficult stimulus package. Count me as skeptical. Stay-at-home stocks are leading the market while economic-recovery stocks struggle.

We just had a week that I believe is indicative of this market over the next month or so. There seems to be too much headline risk for stocks to make a substantial move higher.

In short, it looks like there will be a tug-o’-war with good news and bad news at least up until the election. I expect the market will continue to bounce around in that time frame. However, there could be great things for the market beyond the election and the pandemic. The forecast is choppiness now, and a bull run later.

In my Cabot Micro-Cap Insider Guide (which you can download on our members page), I describe the three buckets of my recommendations:

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.

Our covered call ideas for the October expiration cycle are on their way to yielding us another solid month of profits ranging from 7.88% to 17.41%.

This payment solutions company is expected to grow at triple-digit rates in the next five years.

Chart is an interesting company, for sure, and we would be happy to buy again at much lower prices.

This closed-end fund has a current annual dividend yield of 6.73%, paid quarterly.

After last week’s two rounds of buying, the portfolio’s cash level is now down to 27%, and all our stocks look good. So now the question is whether we should continue buying.

This Chinese e-commerce company is expected to grow by 21.3% next year.

Today, this portfolio stock published a press release that it will make a $1.35 per share distribution on October 27.

In the past month, four analysts have increased their EPS estimates for this utility.

This food company beat analysts’ EPS estimates by $0.70 last quarter.

Yesterday saw strong buying in marijuana stocks across the board, with both U.S. and Canadian stocks benefitting.

Our second recommendation is a short sale of a company that is being weighed down by COVID-19.

Since its $0.06 earnings beat, our first idea today—a restaurant chain—has seen its earnings estimates upgraded by 31 analysts.

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.