We are up to five positions in our Income Wheel Portfolio and finally approaching a diversified mix of stocks. However, I wouldn’t mind adding at least one or two more to the portfolio over the coming weeks.

Now my focus is on finding a few shorter-term trades using a jade lizard and possibly selling a put or two. If all goes as planned and the market cooperates, expect to see at least one, if not two, shorter-term trades next week.

Volatility continues to rule the roost.

And this past week it seems as though the bears, after a brief hiatus, made an appearance, pushing the S&P 500 ETF (SPY) lower by 3.3%.



Since last week’s issue we added another trade, this time an iron condor in IWM. Volatility picked up a little bit towards the latter part of the week, so we decided to add an iron condor to the mix to take advantage of the inflated volatility. I discuss the trade in greater detail in the Weekly Trade Discussion.

I’m going to keep it rather short this week as we are moving through the final week of the earnings doldrums. And I can’t be happier. Next week offers up little to nothing in the way of earnings trades as we enter one of the slowest weeks for announcements on the calendar. But the following week is a completely different story as the big banks kick off earnings season.

The first half of the year is in the books, and it was a doozy, but we’re glad we’ve been able to sidestep a good chunk of the historic damage. Now the focus is on what’s next, and it’s important to respect the evidence today (we’re remaining highly defensive) but also stay flexible; we have seen some relative strength in some growth areas and we’re open to whatever comes. In the near-term, we’d like to put a little of our giant cash hoard (89%!) to work, but want to see the market stabilize a bit more first.

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



As we approach the mid-point of the calendar year, we provide our traditional mid-year update for the stock market and high-yield bond market. Our commentary on stocks reviews what sectors worked (only one), what sectors and stocks stood out as the weakest, how the value vs. growth shift has played out so far, and what helped developed markets outside the United States limit the depth of their selloffs. We also discuss the state of two key drivers of future stock market performance, the role of the two “Easts,” and offer some advice on what not to do in this market, as well as a suggestion about what value investors might want to do.



Our call last year to avoid high-yield bonds, cousins of sorts to turnaround stocks, was spot-on. We walk through the effects of inflation on the two components of high bond yield prices, provide some historical perspective on yield spreads, and describe how only two of the three ingredients for a bankruptcy cycle are in place. We also suggest that while high-yield bonds are more attractive today than a year ago, it is still a time to be selective.



Our feature recommendation this month is ESAB Corporation (ESAB). This high-quality company was recently spun off from Colfax Corporation and checks nearly all of our boxes for an appealing turnaround stock, yet it is being overlooked as investors migrate to familiar stocks.



We note our recent ratings change of Marathon Oil (MRO) from Buy to a Sell.

If there is one message I want you to take home from today’s issue, it’s that cannabis stocks are cheap. Really cheap. And they may never be this cheap again.

So if you’ve got some cash sitting around that you want to “risk” in a long-term investment, consider the stocks I’ve rated buy.



In the meantime, our portfolio, which has beaten the index in each of the past four years, is 58% in cash, waiting patiently for the turn.



Full details in the issue.



Yours for wealth and wisdom.

It’s often hard for investors to rationalize, but bad economic news is sometimes “just what the doctor ordered” for the market. And that was the case last week as housing numbers again disappointed, consumer sentiment hit a record low, and perhaps for the first time in months, an inflation-related data point may have cooled off. What this means is it appears the economy is slowing down, which could allow the Federal Reserve to slow down the speed at which it raises interest rates.

Note: Due to the celebration of Independence Day next week, the next issue will be delivered Tuesday, July 5.
The market rallied strongly last week, erasing some of the carnage of the previous two weeks, but the main trend is still down and thus caution is still advised.


This week’s stock is a growth company that serves the solar power industry, and the stock looks attractive now because it’s basically been treading water for 17 months.


As for the current portfolio, which is 25% in cash, there’s one Sell.


Details in the issue

Note: Due to the celebration of Independence Day next week, the next issue will be delivered Tuesday, July 5.



After two brutal weeks for the indexes, the market staged a very nice snapback last week, and this comes after some decent resilience in many growth names during the June mini-crash. But the real question is can the market build on it: We’ve seen a handful of nice baby steps for the market this year, but each time the sellers reappear quickly and smack everything lower. Overall it’s best to remain mostly defensive until the buyers show they’ve conclusively taken control from the bears, which will take more time.



On a positive note, this week’s list has many names either showing some outsized accumulation of late or are forming solid bottoming areas. Our Top Pick is one that’s had a couple of false starts this year but looks ready to run if the market can get going.

We are only two weeks away from our first subscriber-exclusive event and subsequent earnings cycle. That first week of earnings should offer some nice trades in some of the major banks.

I will be going over potential trades, step-by-step, in our webinar. This will give you all the insights into how I approach earnings trades, our goals for the upcoming earnings season, the approach to order entry and more importantly order exits, managing trades, chasing trades, etc.

We are up to four positions in our Income Wheel Portfolio and I think we are approaching a decent mix right now.

Now that we are up to at least four stocks, I want to focus on finding a few shorter-term trades using a few jade lizards. Expect to see at least one if not two shorter-term trades next week as we continue to ramp up the portfolios.

Since last week’s issue we locked in another profitable trade, this time in XOP.

Convenient timing on our part allowed us to take a 15.2% return on the trade. We had sold the July 15 190/195 bear call spread for $0.70 on June 8. By June 17 our 190/195 bear call was worth less than $0.05, so we decided to lock in some profits and move on to the next opportunity. With 28 days left until expiration it just doesn’t make sense to hold any risk to try and make an additional $0.05, if we have the potential to simply take profits off the table.

Second quarter earnings season is winding down. It was quite a quarter! We’re impressed that so many companies have aggressively reduced their operating costs in the recently completed quarter.

Many of our micro-cap stocks reported excellent quarters.

This week is off to a good start for growth stocks—many of the names that have been acting wobbly during the past couple of weeks bounced decently yesterday and today.

With most of our companies having now reported we are turning our attention back to the longer-term future. For the most part, earnings from our companies were good and we’ve only made a few incremental ratings changes here and there.

Markets are showing great resiliency as the S&P 500 nears a record and stocks have risen all but one day in August. Optimism about an eventual stimulus bill and the prospect of declining Covid-19 cases and a vaccine are still supporting the economy and markets.

The S&P 500 is now within 1% of the all time high. It could even make a new high today. The index has rallied 54% since the lows of March. What pandemic?

We are mostly through the bulk of earnings season and it has been enlightening, particularly as we learn about the pandemic’s effects on profits. Earnings season should be a period when company results can be clearly measured, especially since we are dealing with numbers.

Remain bullish, but continue to keep your antennae up. The Nasdaq has pushed to new highs, our trend-following indicators are positive and most leading stocks remain in uptrends, so we’re still in a bullish frame of mind.

The horrible second quarter is behind us and a rapidly recovering economy with a very accommodative Fed lies ahead. There are a lot of reasons for the rally and unless investors get scared straight the rally seems destined to continue.

The market has resumed its uptrend and the S&P 500 is now back to within 3% of the all-time high.

In the past 30 days, 13 analysts have increased their EPS estimates for this auto reseller, and are predicting 37.10% next year.

Fundamentally, the only recent news regarding the marijuana industry is that the U.S. House of Representatives will vote on the MORE Act, which would deschedule marijuana and thereby legalize it federally, the week of September 21. Passage is likely. Getting through the Senate is not.

Our first idea today is a mutual fund with top five holdings.

Our second recommendation is a sale to rebalance the contributor’s portfolio.

The big question on investors’ minds is if this tech stock retreat is a precursor to something larger or a “normal” correction in the context of a bull market.

This deeply-discounted beverage company’s latest quarterly earnings were more than double the analysts’ estimates.

Growth stocks remain under severe pressure, with more unraveling today.

This Tennessee bank is forecasted to grow at double-digit rates next year.

We all know this market has been overdue for a pullback, if not a larger correction, especially for many tech stocks.

Growth stocks are being taken to the woodshed today, and this comes after some climactic upside action in the indexes and key leaders in recent days/weeks. Moreover, we’re starting to see some growth leaders crack support for the first time during this rally.

This REIT’s price has not recovered from the March market rout, so it looks pretty undervalued.

The environment has been crazy, and today is seeing another huge rotation out of extended growth leaders and into the rest of the market.

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.