Nio (NIO) was up 22% this week though markets face headwinds of inflation and increasingly loose talk of recession by many including Fed Chairman Jerome Powell. With regret, we let go of Sea (SE) but add another favorite selling at a sharp discount to its high—and in the middle of the unstoppable trend of cybersecurity.

There is overwhelming historical evidence that buying good stocks in bear markets is a highly successful long-term strategy. After all, it’s better to buy stocks cheap. And the market always trends higher over time. The truth is that buying stocks in a bear market is the most successful investment strategy ever devised.
Of course, the market may fall further before it recovers. You don’t have to pick one day and invest all your cash. You can trickle in over time. You can invest just a little right now. If the low is already in, you got a great price. If the market falls more, you put more money in later. Over time it will work out.


In this issue, I highlight a portfolio position in the technology sector. The sector plunged into a bear market before the S&P and will likely be one of the first sectors to lead the way back up. The sector was already down less than the overall market in last week’s tumult.

Tuesday there were some rays of sunlight amidst the storm, but until proven otherwise, we are in a bear market and should proceed with caution. This brings me to this week’s trade, which is a defensive trade on a recent outperformer, that we recently traded successfully

It’s about at this point in a bear phase where investors start to throw up their hands. But it’s important to stay in touch: While the past two weeks brought most stocks lower, the selling was focused on areas that hadn’t yet gotten hit, while some of the “leaders” of this bear phase are actually trying to hold up. If you want to play a bounce, we actually think some of those areas could prove fruitful, though of course we’d keep things small and stay in an overall defensive stance.



This week’s list reflects all of this, with names from a handful of areas that have been forming higher lows in recent weeks (or months) and even showed some solid support (or even upside volume) of late. Our Top Pick is a Chinese EV player that’s showing excellent power and sports fantastic growth.

The market is enjoying a big bounce today, but that’s not unexpected given last week’s washout; the main trend is still down.

And that means continued caution is the prescription, which is filled this week with an old-school vehicle parts company that pays a solid dividend and has a nearly bulletproof business.



As for the current portfolio, which is 25% in cash, there’s one Sell and a couple of downgrades to Hold.


Details in the issue.

Not much to say this week. We are now four weeks away from the next round of earnings and there is no doubt it will be an interesting one. I will continue to share any ideas that come our way and possibly make a trade or two in the process. This week, we actually have a potential trade on our hands in FedEx (FDX). I will discuss the trade in the “Trade Ideas” section below.

We recognize opportunities are scarce; they always are when we are in between earnings cycles. However, when earnings season is in full swing, we will often see 20 to 30 trade ideas per week, with the potential to send out alerts on two to five each week. Of course, if you wish to trade more (beyond our alerts), other ideas will be there for you to peruse and trade as you wish.



We try to place trades on at least 10-15 trades per earnings cycle, sometimes more, sometimes less.

Before I get started, I wanted to thank everyone that wrote in this week. I appreciate all of the kind words during and after our first subscriber-exclusive webinar. If you didn’t get a chance and want to check it out, click here or go to your subscriber page at your leisure. As I stated in the webinar, if you have any feedback, comments or questions please do not hesitate to email me at andy@cabotwealth.com. I’m more than happy to help in any way I can.

Monday saw a historic amount of selling pressure. In fact, fewer than five stocks in the S&P 500 were able to eke out a gain on the day.



And it only got worse.

Before I get started, I wanted to thank all of you that wrote in this week. I’ve received kind words across all four of my services and I greatly appreciate it. I hope you will all find my services and statistical approach to options useful for years to come. As I stated in our most recent webinar, if you have any feedback, comments or question please do not hesitate to email me at andy@cabotwealth.com.

Monday saw a historic amount of selling pressure. In fact, fewer than five stocks in the S&P 500 were able to eke out a gain on the day.



And it only got worse.

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

U.S large-cap markets are more expensive than international developed and emerging markets.

Our portfolio has been largely treading water for a few weeks. That’s not surprising given that we’ve been waiting for earnings season to start (it finally has!) and that there’s this persistent sense that bad news for the economy resulting from the coronavirus equal more stimulus and accommodative fiscal policy equals support for equity markets and, in some ways, good news for certain tech and MedTech companies.

Earnings reports have been mixed and market activity muted this week, but today the four technology giants will report after the market closes. Germany reported that its economy contracted the most on record, shrinking 10.1% in the second quarter.

So far, earnings season hasn’t had that much of an impact on the overall market. I don’t think investors know quite what to make of this quarter. It’s bad. But everyone knows that going in.

It’s been a crazy second quarter. So far, this earnings season is not having a big effect on the overall market. Everybody knows the quarter was bad. But, unlike most quarters, this one doesn’t really portend any future trend.

By far the worst performing sector in recent years has been the energy sector. From its peak in mid-year 2014 when oil prices reached over $100/barrel to its current state of complete disarray, the S&P Energy Sector index has collapsed 63%. For comparison, the broad S&P 500 index has gained 65% and even the often-maligned Materials Sector index has risen by 25%.

Remain bullish, but don’t get too aggressive. Growth stocks and the market are still in uptrends, so we’re sticking with a heavily invested stance, but many leaders have wobbled of late, the number of stocks hitting new highs has dried up a bit and earnings reports are coming up for a ton of names.

After last week’s selloff in tech, this week has been relatively calm, though the action at mid-day today suggests we could see more selling before the closing bell.

Every week there’s bad new and good news. This week there is bad news about tensions with the Chinese and good news regarding a European Union stimulus and energy demand. Every week there’s bad news and good news about the virus. The spread of the virus is increasing but the market always seems to rally on some promising new treatment or vaccine that offsets the worry.

Three weeks ago, when the marijuana sector seemed extremely extended to the upside, we sold 25% of each of the positions in our four U.S. multi-state operators

Our second recommendation is a sale of an aerospace/defense company whose shares are not moving.

Our first pick is a home goods retailer whose online sales during this pandemic, have increased 46%.

This auto parts company beat analysts’ estimates by $0.09 last quarter.

This stock just IPO’d last month and will report earnings tomorrow.

This small bank has an enviable track record of profits.

This fund gives you exposure to some market-beating Asian stocks.

In today’s Issue of Cabot Early Opportunities I mistakenly left off two stocks in our portfolio.

Our second idea is some nice profit-taking.

Our first recommendation today is a building product supplier that recently reported quarterly results that beat estimates for both revenues and earnings.

This entertainment Real Estate Investment Trust just increased its dividend by 3 ½ cents, to $1.19 per share annually.

On Friday this recommendation closed at 14.74, which was below the August 15 strike that we had sold last month. Because the stock closed below 15 the calls that we sold for $1.65 expired worthless. This is a good situation.

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.