Issues
Goodyear Tire & Rubber (GT) is no stranger to veteran subscribers of the Cabot Turnaround Letter. The stock was initially recommended in 2022 and was a long-time holding in the portfolio. I made the decision to sell the stock when I took over as chief analyst last summer, which at the time seemed like a good idea.
Indeed, the stock had been underperforming for quite some time, and management had just warned of “weaker underlying trends in the industry” for the second half of 2024, augmented by lower tire volume and higher costs. The stock dropped 16% to a new 52-week low at that time (early August) and was threatening to break a benchmark “support” level in its long-term chart, while the firm’s debt remained disturbingly high.
Indeed, the stock had been underperforming for quite some time, and management had just warned of “weaker underlying trends in the industry” for the second half of 2024, augmented by lower tire volume and higher costs. The stock dropped 16% to a new 52-week low at that time (early August) and was threatening to break a benchmark “support” level in its long-term chart, while the firm’s debt remained disturbingly high.
After a big rally, the market had earned the right to retrench a bit, and that came about last week after stocks were hit with a few “bad” news items, starting with the downgrade of U.S. debt, followed by a new high in longer-term (30-year) Treasury rates and capped by a threat of higher tariffs on Europe.
Those tariff worries eased over the weekend and in reaction the S&P 500 gained 2% on Tuesday.
Those tariff worries eased over the weekend and in reaction the S&P 500 gained 2% on Tuesday.
It’s been a wild market so far this year. The S&P 500 has gone from the cusp of a bear market to within 5% of the all-time high in just seven weeks.
Uncertainty remains. A negative development could still roil the market on any day. Negotiations will likely take more twists and turns in the weeks and months ahead. But investors appear, at this point, to believe that the tariff situation won’t blow up. The fear of Armageddon is being removed.
But there’s still the economy. It could gain steam or slow toward recession. We are in a place, at least for a while, where anything can happen. It’s tough to pick a horse amid such varying possibilities. Fortunately, there is a trend to bank on that will thrive regardless of the near-term gyrations of the market or economy.
Artificial intelligence is a massive growth catalyst that will endure and thrive in any environment. Investors temporarily forgot all about it. It’s a generational phenomenon that hasn’t gone away. It just took a break. Now, those stocks are soaring back.
In this issue, I highlight a stock that is likely to benefit in the months and years ahead. It is still well off the high with good momentum and has a huge catalyst for growth in the months and years ahead.
Uncertainty remains. A negative development could still roil the market on any day. Negotiations will likely take more twists and turns in the weeks and months ahead. But investors appear, at this point, to believe that the tariff situation won’t blow up. The fear of Armageddon is being removed.
But there’s still the economy. It could gain steam or slow toward recession. We are in a place, at least for a while, where anything can happen. It’s tough to pick a horse amid such varying possibilities. Fortunately, there is a trend to bank on that will thrive regardless of the near-term gyrations of the market or economy.
Artificial intelligence is a massive growth catalyst that will endure and thrive in any environment. Investors temporarily forgot all about it. It’s a generational phenomenon that hasn’t gone away. It just took a break. Now, those stocks are soaring back.
In this issue, I highlight a stock that is likely to benefit in the months and years ahead. It is still well off the high with good momentum and has a huge catalyst for growth in the months and years ahead.
After a big rally, the market had earned the right to retrench a bit, and that came about last week. Still, the action has been normal thus far, with most indexes and stocks losing ground but doing so relatively grudgingly while remaining north of key support. Of course, we’re still dealing with a thinner batch of leadership, as relatively few stocks are hitting virgin turf and there’s already a good number of smaller, more speculative names moving. Even so, we’re taking things on a step-by-step basis, and it’s been so far, so good for the rally—we’ll leave our Market Monitor at a level 7 and see how things go.
This week’s list has something for everyone, though again, most are either showing great strength (often after earnings) or pulling back normally after big recoveries. Our Top Pick has stormed back on record volume as earnings blew away estimates.
This week’s list has something for everyone, though again, most are either showing great strength (often after earnings) or pulling back normally after big recoveries. Our Top Pick has stormed back on record volume as earnings blew away estimates.
Stocks took a bit of a breather this week after weeks of positive gains fueled by tariff deals and pauses, sinking inflation and a very strong Q1 earnings season. Which way the market goes from here may depend on the headlines, but also on whether the bulls have the appetite for another big push to new highs. One area of the market we know is working? Precious metals. Gold has attracted most of the attention. But silver is starting to play catch-up. So today, we add a high-upside silver play via Cabot Explorer Chief Analyst Carl Delfeld.
Details inside.
Details inside.
As I do periodically over long holiday weekends, I stepped away from the “typical” Monday morning update and spent time with the family. Here is a shorter version of usual weekly update, focused entirely on our current open positions.
As I do periodically over long holiday weekends, I stepped away from the “typical” Monday morning update and spent time with the family. Here is a shorter version of usual weekly update, focused entirely on our current open positions.
The gold-silver ratio is an intimate relationship. It indicates how many ounces of silver are needed to buy one ounce of gold. In the last century, this ratio reached its lowest point at just under 15:1 at the end of 1979 and peaked at over 110:1 during the COVID crisis.
This year, we passed the 100:1 mark for only the fourth time in a hundred years – a strong signal that silver may be underpriced.
So today, we add an aggressive silver play to the Explorer portfolio as a bet that it will close the gap on gold.
This year, we passed the 100:1 mark for only the fourth time in a hundred years – a strong signal that silver may be underpriced.
So today, we add an aggressive silver play to the Explorer portfolio as a bet that it will close the gap on gold.
The stock market has perked up considerably since the Liberation Day turmoil in early April, igniting shares of stocks across the market cap spectrum.
We look under the hood of five names that span the risk spectrum this month, including a couple of old names that might be familiar and a new one that’s been hard to ignore.
We look under the hood of five names that span the risk spectrum this month, including a couple of old names that might be familiar and a new one that’s been hard to ignore.
*Note: Your next issue of Cabot Profit Booster will arrive next Wednesday, May 28 due to the market holiday next Monday, May 26 in observance of Memorial Day.
Sparked by positive trade developments, the stock market raced higher last week as the S&P 500 rallied 5%, the Dow gained 3.4%, and the Nasdaq added 6%.
Sparked by positive trade developments, the stock market raced higher last week as the S&P 500 rallied 5%, the Dow gained 3.4%, and the Nasdaq added 6%.
The evidence continues to take steps in the right direction, with most of the intermediate-term, top-down measures now pointing up and, after last week, more and more leadership-type names are beginning to perk up. Of course, the headline news from this weekend was the downgrade of U.S. debt, which could be used as an excuse to pull in some indexes and stocks that have had good runs … though today there wasn’t much of that at all. All told, we’re increasingly optimistic when it comes to the bigger picture, though we still want to see more fresh leaders emerge. We have our Market Monitor at a level 7.
This week’s list is a bit eclectic, with everything from earnings winners to earnings setups to news-driven names. Our Top Pick acts like an institutional leader and has the story and numbers to match.
This week’s list is a bit eclectic, with everything from earnings winners to earnings setups to news-driven names. Our Top Pick acts like an institutional leader and has the story and numbers to match.
The market is healthy again, or at least WAY healthier than it was a month ago, as tariff worries have faded, for now, and encouraging inflation and jobs data have helped restore investors’ faith in the U.S. market. Stock of the Week stocks have performed even better, as is often the case, led by the likes of Sea Limited (SE), Banco Santander (SAN), BYD (BYDDY) and old reliable, Tesla (TSLA). Today we add to our haul by striking while the iron is hot on growth stocks by recommending Mike Cintolo’s latest addition to his Cabot Growth Investor portfolio.
Details inside.
Details inside.
Updates
As you read this, I am likely fortifying my house in preparation for the 400-500 Trick-or-Treaters that are sure to descend on our place in Vermont in a few hours. That’s no exaggeration – we live on a crowded street that draws kids from all over town, and even adjoining towns, trying to maximize their Halloween hauls. The 1,000 pieces of candy I buy every year and the countless ghouls, skeletons, smoke-emitting jack-o’-lanterns and giant spiders I’ve accrued the last few years to adorn our lawn are almost like an annual tax.
Living in such a bustling Halloween hotbed is fun, and it’s certainly a blast for our two kids. But it’s a lot of work, and we’re always happy when the calendar flips to November. And in that way, it reminds me a bit of the market every October.
Living in such a bustling Halloween hotbed is fun, and it’s certainly a blast for our two kids. But it’s a lot of work, and we’re always happy when the calendar flips to November. And in that way, it reminds me a bit of the market every October.
It has been a great market for most of the last two years. But the bull run will be severely tested over the next couple of weeks.
The S&P 500 is within a whisker of the all-time high after rallying 22% YTD and over 60% in the past two years. The recent investor perception is that the Fed has begun a rate-cutting cycle that will last for two years, and the economy is still solid. That view will be put to the test this week.
The S&P 500 is within a whisker of the all-time high after rallying 22% YTD and over 60% in the past two years. The recent investor perception is that the Fed has begun a rate-cutting cycle that will last for two years, and the economy is still solid. That view will be put to the test this week.
It has been a great market for most of the last two years. But the bull market chops will be severely tested over the next couple of weeks.
The S&P 500 is within a whisker of the all-time high after rallying 22% YTD and over 60% in the past two years. The recent investor perception is that the Fed has begun a rate-cutting cycle that will last for two years, and the economy is still solid. That view will be put to the test this week.
The S&P 500 is within a whisker of the all-time high after rallying 22% YTD and over 60% in the past two years. The recent investor perception is that the Fed has begun a rate-cutting cycle that will last for two years, and the economy is still solid. That view will be put to the test this week.
In today’s note, we discuss a flurry of key news developments for several of our portfolio positions, including Baxter International (BAX), B2Gold (BTG), Intel (INTC), Polaris (PII), Solventum (SOLV), Viatris (VTRS) and Vodaphone (VOD).
We’re adding two new stocks to the portfolio, providing us with exposure to the white-hot silver mining sector as well as the seasonally strong food services industry.
We’ll also discuss some catalysts for the under-the-radar restaurant group, including three very attractive potential turnaround plays.
We’re adding two new stocks to the portfolio, providing us with exposure to the white-hot silver mining sector as well as the seasonally strong food services industry.
We’ll also discuss some catalysts for the under-the-radar restaurant group, including three very attractive potential turnaround plays.
WHAT TO DO NOW: The market remains in good shape, though we have seen the indexes and many individual titles exhale a bit of late as many short-term uncertainties (earnings season and the election) and headwinds (rising interest rates) weigh. We’re bullish overall, but are being selective on the buy side—tonight, we’re standing pat, holding our 20%-ish cash position and collection of relatively strong performers.
The S&P 600 SmallCap Index has dipped about 3% over the last week while yields have gone up.
The chart of the 10-year yield and the small-cap index plotted together makes this inverse relationship (in the very short term) clear as day.
The chart of the 10-year yield and the small-cap index plotted together makes this inverse relationship (in the very short term) clear as day.
October hasn’t been accompanied by the type of stock selling we’ve witnessed the last two years, when U.S. markets fell sharply in October and reached a second-half-of-the-year bottom both times. Instead, this October has wrought a more subtle disappointment: rising interest rates.
Indeed, despite the Fed’s 50-basis point cut to the federal funds rate in mid-September ringing in a new era of rate slashing, 10-year Treasury yields have risen steadily since the calendar flipped to October, going from 3.80% to 4.24% – their highest level since July. In fact, Treasury yields are up 15% since September 18, the day the Fed cut rates for the first time in four and a half years.
Indeed, despite the Fed’s 50-basis point cut to the federal funds rate in mid-September ringing in a new era of rate slashing, 10-year Treasury yields have risen steadily since the calendar flipped to October, going from 3.80% to 4.24% – their highest level since July. In fact, Treasury yields are up 15% since September 18, the day the Fed cut rates for the first time in four and a half years.
The market has been generally very good, although it’s wobbling this week so far.
The bull market that started two years ago has returned more than 60% in the S&P 500. The index is up about 23% year to date. The market rally has also broadened since the summer to include many other stocks and sectors besides technology.
The bull market that started two years ago has returned more than 60% in the S&P 500. The index is up about 23% year to date. The market rally has also broadened since the summer to include many other stocks and sectors besides technology.
In today’s note, we discuss the reasons why it’s a good time to exit our (mostly) profitable holdings in Alibaba Group Holding (BABA), Nokia (NOK), Tyson Foods (TSN) and Zillow (Z).
We’re adding two new stocks to the portfolio, providing us with exposure to the booming software and utilities sectors.
We’ll also discuss some catalysts for three stocks across three different sectors in what look to be powerful intermediate-term turnarounds.
We’re adding two new stocks to the portfolio, providing us with exposure to the booming software and utilities sectors.
We’ll also discuss some catalysts for three stocks across three different sectors in what look to be powerful intermediate-term turnarounds.
While the S&P 500 Index made record highs (again) this week, the real story has been in small caps.
From last Wednesday’s close through mid-day today, the S&P 600 small-cap index is up 2.9%, more than twice the return of the large-cap index, which is up 1.3%.
The gains have been propelled by consumer discretionary, staples, financials, industrials and tech stocks.
From last Wednesday’s close through mid-day today, the S&P 600 small-cap index is up 2.9%, more than twice the return of the large-cap index, which is up 1.3%.
The gains have been propelled by consumer discretionary, staples, financials, industrials and tech stocks.
Bank stocks such as Morgan Stanley (MS) and Goldman Sachs (GS) had strong earnings while tech is starting to show signs of weakness. ASML (ASML) reported sharply lower quarterly sales and giant Samsung Electronics’ share price (listed on the Korea Exchange) has fallen almost 30% over the past six months as it struggles to catch up with SK Hynix and Micron in supplying the most advanced AI chips.
Still, everyone is waiting for Nvidia’s (NVDA) earnings as capital spending in AI remains robust.
Still, everyone is waiting for Nvidia’s (NVDA) earnings as capital spending in AI remains robust.
We spend the vast majority of our time focused on U.S. stocks, and rightly so.
After all, although America has just 4% of the world’s population and generates 23% of the global GDP, 72% of worldwide investment capital is spent on U.S. stocks. That’s a stat our global investing expert, Carl Delfeld, relayed to me and my colleague Brad Simmerman on our latest Street Check podcast (click here to listen to the entire conversation). I knew the global investment axis tilted toward the U.S. – just maybe not that much.
After all, although America has just 4% of the world’s population and generates 23% of the global GDP, 72% of worldwide investment capital is spent on U.S. stocks. That’s a stat our global investing expert, Carl Delfeld, relayed to me and my colleague Brad Simmerman on our latest Street Check podcast (click here to listen to the entire conversation). I knew the global investment axis tilted toward the U.S. – just maybe not that much.
Alerts
Shares of Cadre (CDRE) were down almost 10% yesterday on news of a secondary offering, which will be priced at 35, roughly the level of yesterday’s closing price. It’s not atypical for a stock like this to absorb a secondary over a week (roughly) then resume its upward march. Additionally, with part of CDRE’s growth strategy revolving around M&A, it’s not too surprising that they would seek to raise capital and do so with equity (strong stock) rather than debt (high cost). Maintaining Buy rating as this offering doesn’t change the big-picture story. BUY
Dogs of the Dow Portfolio Alert (VZ, AMGN), Buffett’s Patient Investor Portfolio Alert (GOOGL)
I’m going to hold on to my March SPY iron condor and will close towards the end of the trading session tomorrow or Friday depending on the price action over the next two days. When I do close, I only plan on closing the bear call side and will allow the bull put side to expire worthless.
For those who are new and wish to enter a trade, all of the details are listed in the alert (as always) for those wanting to initiate a position. As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.
Spotting a “top” in in high-flying stocks is impossible but sticking to a system of taking partial profits on a very fast-moving stock is pretty darn easy, if you can manage your emotions.
Portfolios
Strategy
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 Top Ten 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 Top Ten features.