See-sawing—that’s what these markets bring to mind. And I think we can expect more of the same, due to three factors:

1. The war in Ukraine2. Rising inflation—up about 8.4% last month3. Increasing interest rates. Economists now expect the Federal Reserve to raise rates by one-half a percent, in both May and June

Explorer recommendations were pretty flat this week but demonstrated some strength as well. JPMorgan led the banks, reporting a first quarter with a net profit of $8 billion on over $32 billion of revenue. Keep your perspective and play defense and offense. Emerging markets offer you both and we will be adding to the portfolio selectively. This week I highlight a defensive healthcare play of the highest quality.

Today, I’m recommending a company that provides the “picks and shovels” to the massive Alzheimer’s market.
Other key points:

•High insider ownership (30% of the company).•45%+ revenue growth this year.•Secular winner trading at P/E of 33x.

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

The market situation is changing. Amidst persistent high inflation and concerns about future economic and earnings growth, investors are adjusting. Energy is up nearly 40% YTD as that sector benefits from inflation. Utilities and Consumer Staples are also thriving as investors focus on value, defense, and income in the market uncertainty.
Many stocks in the CDI portfolio have performed well and are likely to continue doing so. But because of the high prices they are rated a HOLD. However, there are two standout positions. In this month’s issue, I highlight two stocks that have what it takes in this market. They both benefit in the current environment, sell at reasonable valuations, and pay sky-high yields.


The market situation is changing for the worse overall. But there are still great opportunities if you know where to look.

In this month’s issue, we focus on the smaller, and lesser known ETFs featured in the undiscovered portfolio.

While asset allocation is a tried-and-true method for longer-term investing, you can boost your return with ETF trading. That’s what the undiscovered portfolio is designed to do.



With market volatility remaining, this portfolio gives you an opportunity to capture excess returns from asset classes outperforming the broader market.

With commodities and energy stocks still holding up, though, today I’m adding an American company engaged in hydrocarbon exploration: Marathon Oil (MRO).

The ongoing war between Russia and Ukraine—and the consequent sanctions and production cuts—has forced producers across several areas of the metals sector to make desperate bids to secure much-needed supplies.

This dynamic is expected to keep metal prices elevated across the board in the coming weeks and months. As noted here previously, there are other fundamental factors behind the bull market in the major industrial metals, but this is diminished by the Russia factor.



In the portfolio, we just added a new position in a silver miner that is showing a surprising amount of relative strength given the current silver market backdrop, as well as a major player in the titanium dioxide market.

There were a lot of positives that built up for the market during February and early March, but that multi-week stretch of improving evidence has certainly run into a wall—the market has taken it on the chin during the past couple of weeks, with the major indexes giving up a big chunk of their gains (the brief intermediate-term trend all-clear is gone), and more worrisome to us, nearly every stock that has run into resistance has at least stalled out, if not come unglued. We don’t believe all of the good vibes built up are out the window; this recent action could easily be part of a longer bottoming process for the market. But we never advise ignoring the evidence in front of us, so we’re pulling our Market Monitor down to a level 5.



This week’s list is heavy on some cyclicals but also some dependable growth outfits. Our Top Pick looks to be one of those, a medical firm with a few good-selling drugs on the market and sold earnings growth projections.

Today’s recommendation is a well-known pharmaceutical giant whose stock recently broke out above the high it hit in 2000, 22 years ago! But that’s not why it’s recommended today. Today’s story is all about new drugs and renewed growth.
As for the current portfolio, there are four stocks rated sell!


Details inside.

The market’s evidence improved under the surface for much of February and early March, with the strong rally last month only adding to the good vibes. A pullback wasn’t unexpected, but so far, the way things have retreated hasn’t been encouraging, with a lot of potential leaders taking it on the chin and our nascent Cabot Tides buy signal back on the fence.


To be fair, the decline hasn’t cracked the uptrend in the market or most stocks, and a couple of good days would do wonders. But with few stocks really making headway, we advise going slow, adhering to your stops and holding a good chunk of cash.


Earlier this week, we sold one of our recent buys, and while we have no new sells tonight, we are placing a couple more names on Hold and have relatively tight stops in place in case the selling continues.

Inflation is hot and the Fed just began raising rates. It is expected to hike ten more times by the end of next year.

While yield curve inversion and recession risk is out there, many banks are flush with cash. And consumers are in great shape. As rates go steadily higher, bank stocks are poised to significantly grow earnings.



The most aggressive way to play this is with a bank that’s leveraged to short-term rates. That’s the strategy we’ll take today with a pure-play digital currency bank.



Enjoy!

Greentech remains near-term bullish, an encouraging sign as most subsectors are holding on to gains. Our featured stock is an innovative energy storage venture that has exceptionally encouraging performance since going public in February. It’s not all clear skies however – we tweak some of our holdings this issue to acknowledge specifics with companies.

Clearly the fundamentals of the U.S. and global economy look awful right now. But the market is looking past the first half of 2020 and into the second half of the year and 2021.

Most positions are up 5%-6% for the week, with a couple of exceptions.

I expect to be adding and removing stocks from these portfolios in 2020, more frequently than usual. That’s because when a stock market recovers from a big drop, stocks tend to get stuck in trading ranges, advancing in fits and starts.

Remain defensive. There are good and bad aspects to the market’s short-term action; overall, we’re optimistic a bottom-building process is underway, but we’ll see how it goes.

After falling over 30% in record time, the market has had a nice rebound. In less than a week the market jumped 15% from the lows. It has since stabilized somewhat with less volatility. While the worst may be over, I don’t think we’re out of the woods yet.

The past week has seen the market rocket higher on hopes for a massive $2 trillion economic stimulus plan that would try to help consumers and businesses get through the tunnel of productivity and financial devastation that this pandemic has created.

In such an environment it’s easy to assume the worst and miss the flipside of the equation – great companies trading at prices that just a month ago we would have considered incredible. Market volatility and uncertainty are creating great opportunities.

The market doesn’t know how long this will last. And that’s why it hasn’t been able to find a bottom. But there has been some very encouraging news in the past week.

The economy has fallen into a recession. The official economic statistics are not at our doorsteps yet – two quarters of falling GDP – but it’s fairly obvious that American business has gone into hibernation for at least a few months.

As financial markets begin to thaw, global leaders build consensus on how to address this pandemic, options of potential interim treatments for Covid-19 surface and the framework of economic relief starts to firm up (even though it won’t be enough), the stock market may be showing early signs of stability (a relative term).

Remain defensive. There are certainly indications that a countertrend rally could start at any time, so we’re not anxious to raise more cash, but we’re sticking with the trend, which remains down. In the Model Portfolio, we have no changes tonight—we’re holding four resilient stocks and a cash position of 71%.

Fear of the spread of a new virus has devolved into an economic disaster, at least in the short term.

Five analysts have increased their EPS estimates for this health benefits company in the past 30 days.

This morning, this portfolio stock reported results for the fiscal year ending March 31, 2020.

Here’s a mid-year update on this bank that is a good potential takeover target.

Our second recommendation is a sale of a restaurant company that will be slow to recover from the pandemic.

Hit by the slow economy, our first idea is a mortgage insurer is trading at a discount, and its addition to a visible index should help attract investors.

Yesterday, after the market closed, rumors emerged that this portfolio stock is once again in talks to sell their gas stations.

There are five holdings in this fund.

Yesterday we decided to sell a stock due to lackluster performance over the last month.

Tomorrow is the expiration of June options and we are going to close five positions for full profits ranging from 9.75% to 17.64%.

COVID-19 caused travel and destination companies to lose ground, but this ski resort is holding up well.

Nine analysts have increased their earnings estimates for this semiconductor manufacturer in the past 30 days.

Our next recommendation is profit-taking on a previous pick.

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.