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.

Are you tired of turning on your television first thing in the morning and getting heartburn over the market’s gyrations?

Yeah, me, too. So, I’m swearing it off. I’m only going to peek at it a couple of times a day, since it doesn’t seem to be finishing the day as it starts, and I just don’t need the angst.



Instead, I’m going to keep looking at the macro-economic figures and try to do my very best to find the right investments for you to weather these ups and downs.

It’s a raging bear market in technology.
But technology has been by far the best performing sector for well over a decade for good reasons. We are in fact in a technological revolution. Technological advances are accelerating. It feeds on itself and is transforming the world. Technology is where there is massive growth and excitement for the future.


Sure, the market might get cranky in the near term. Inflation and higher rates might be all the rage right now. But technology isn’t going away. It’s likely to grow even bigger in the future. The time to buy such stocks is when they are cheap and out of favor.


In this issue, I highlight three existing portfolio positions in the technology sector ready for purchase. All of these stocks sell at compelling valuations with strong growth likely ahead. They are victims of indiscriminate selling in the sector. At some point, hopefully sooner, investors will realize the value that has been created by this year’s market turmoil.

Today, I’m recommending a company that has grown revenue at a 30% CAGR and EBITDA an 80% CAGR over the past 10 years. Despite this impressive growth, the company trades at just 5.3x EBITDA.
Other key points:

•Top 3 player in the U.S. paper shredding industry.•Massive opportunity for organic and acquired growth.•High insider ownership (over 30% of the company).

All the details are inside this month’s Issue. Enjoy!

As has been the case for much of 2022, last week there were exciting rallies and nasty sell-offs. And while the S&P 500 fell 1.13%, the Dow lost 0.94%, and the Nasdaq declined 1%, big picture the market handled an avalanche of bad news last week very well. Maybe, just maybe, the market is in the digesting bad news stage.

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.

The title of this note might be, “What to expect when you’re expecting … earnings.” As companies in the Cabot Undervalued Stocks Advisor portfolio start reporting earnings this week, let’s look into what is behind the results and estimates.

The standout action this week has been in tech stocks, and it hasn’t been good. With the Nasdaq starting off the week with a big drop and large-/mega-cap leaders like Amazon (AMZN), Microsoft (MSFT) and Netflix (NFLX) moving materially lower as the week progressed it has felt somewhat disheartening to those with heavy tech exposure.

The Cabot Global Stocks Explorer portfolio did well this past week even though markets were a bit choppy, in line with mixed data and expectations about how fast growth will return.

The market is also having a stronger reaction to good news than to bad news. The indexes soared yesterday on news of potential Fed asset purchases, like quantitative easing, to support the economy and the market. Today the market is loving news of positive trial results for a coronavirus vaccine.

The market rally has stalled. The S&P 500 and the Dow are still lower than they were at the beginning of June. But in the face of a lot of bad news, the market isn’t going lower, it just stopped going higher. All three indexes are establishing or holding key technical levels.

Earnings season is upon us again. This quarterly ritual, when all public companies report their most recent results, is when investors can see hard facts about revenues, profits and balance sheets, as well as hear softer commentary from management about their explanations, outlook and plans.

Growth stocks remain very strong, and our market timing indicators remain positive, so you should remain mostly bullish. Of course, you should also keep your feet on the ground, as there’s little doubt things are fairly frothy here so some potholes could occur at any time.

The big-picture story out there continues to be the battle between bad news (rising infections, high unemployment, too many crumbling businesses) and good news (progress toward vaccines, therapeutics, etc.; accommodative policies from the Fed; improving fundamentals for some businesses arising from the pandemic). Then there’s all the uncertainty around the upcoming election that further confounds the mind.

After a lightning quick 46% move from the bottom, the rally has stopped. The S&P 500 has sort of been bouncing around sideways since the post-bottom high a month ago.

Stocks produced one of their strongest quarters in living memory, with the S&P 500 returning 20.5% in the period ending June 30. The index has nearly fully regained its previously-lost value, declining only 6% for the first half of the year. Investors frequently ask how the S&P 500 can be down only modestly given the Depression-like broad economic statistics.

This global drug company is working on a COVID-19 vaccine, and in recent news, reported that it has obtained the rights to sell lymphoma drug Tyvyt everywhere outside of China.

Tyler is selling a stock from the portfolio.

This preferred stock is backed by a global insurance company.

The spectacular results from the Cabot Profit Booster portfolio continued in August as we will likely close four positions tomorrow for yields as high as 17%.

Today we are recommending buying and selling insurance stocks.

Today we are recommending buying and selling insurance stocks.

Analysts expect this biotech company to grow by more than 30% next year.

There are five holdings of this long-term fund.

In the past 30 days, 25 analysts have increased their EPS estimates for this tech company.

Our latest addition reported first quarter of fiscal 2021 results last night that beat on the top line.

Analysts expect this medical device company to grow by more than 75% next year.

Tyler is selling a stock from the portfolio.

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.