Issues
After a huge run, last week definitely showed some short-term character changes for many stocks, especially leading titles, with some flashing legitimate abnormal action; even among the top-down evidence, we’ve seen sluggishness, with the broad market showing wear and tear as sentiment remains relatively buoyant. That said, there are still plenty of stocks either holding their own or still doing well, too, including some growth-y themes that are seeing fresh buying of late, a sign big investors aren’t going into hibernation. When you put it all together, we do think paring back some and seeing how things play out makes sense, but it’s as important as ever to take things on a stock-by-stock basis. We dropped our Market Monitor to a level 6 and will leave it there today, but we’re flexible and could ratchet it higher if growth stocks start to rebound strongly.
This week’s list has a wide assortment of names—but nearly all of them are growth-oriented, which we take as a good sign. Our Top Pick is a mega-cap that staged an awesome breakout on earnings last week. Near-term wobbles are possible, but we think big investors will support any dip.
This week’s list has a wide assortment of names—but nearly all of them are growth-oriented, which we take as a good sign. Our Top Pick is a mega-cap that staged an awesome breakout on earnings last week. Near-term wobbles are possible, but we think big investors will support any dip.
The major indexes have mostly held serve near all-time highs this month. But beneath the surface, some selling has emerged, as high-flying growth stocks, the Dow, small caps and the Equal Weight index are all down in December. Is it a sign of broader selling to come? That may depend on language coming out of this week’s Fed speak and presumed rate cut. Regardless, I don’t think the bull market is on borrowed time – I expect it to continue well into 2025.
With that in mind, we reintroduce one of my favorite stocks – one that I previously added in the teeth of the bear market in 2022 before it took on too much water but has been rounding into shape for more than a year. Now, Carl Delfeld is recommending it to his Cabot Explorer readers. Today, we give it a second go-round with high hopes for next year and beyond
Details inside.
With that in mind, we reintroduce one of my favorite stocks – one that I previously added in the teeth of the bear market in 2022 before it took on too much water but has been rounding into shape for more than a year. Now, Carl Delfeld is recommending it to his Cabot Explorer readers. Today, we give it a second go-round with high hopes for next year and beyond
Details inside.
For the second straight week the leading indexes went in vastly different directions as the S&P 500 fell 0.6%, the Dow lost 1.9%, and the Nasdaq gained 1%.
For the second straight week the leading indexes went in vastly different directions as the S&P 500 fell 0.6%, the Dow lost 1.9%, and the Nasdaq gained 1%.
After an amazing run higher, growth stocks hit an air pocket this week, with many highfliers coming down and some abnormal action being seen. We haven’t exactly floored the accelerator during the past few weeks, and we took our cues from individual stocks, paring back this week and leaving us with a good-sized cash position. That said, we’re not making any major market call--the trends remain up, and many growth stocks are acting OK--so while we want to see how growth reacts from here, we’re flexible and could put some money back to work soon if key names stabilize.
The markets are reacting to the inflation report, hot off the press. Core CPI was 3.3%, just as economists had predicted. That bodes well for the upcoming Federal Reserve meeting, where most experts forecast another 25-basis-point reduction.
Over the past month, the markets surged following the election but have pulled back in the last few days. While I think we may see some small pullbacks in the next month or so, I’m still bullish but think strategic buys—not dartboard throwing—are the method to boost portfolio returns.
Over the past month, the markets surged following the election but have pulled back in the last few days. While I think we may see some small pullbacks in the next month or so, I’m still bullish but think strategic buys—not dartboard throwing—are the method to boost portfolio returns.
It’s been a great year in the market with the S&P up 27%. And there is good reason for optimism about 2025.
We are in a bull market that began in October of 2022. Bull markets don’t usually run out of gas after just two years, especially recent ones. The Fed has begun a rate-cutting cycle that is likely to last for the next two years. Plus, the economy is solid and expected to get stronger. Rate cuts in a strong economy are unusual, but the combination should be great for stocks.
One sector may have a better 2025 prognosis than the overall market: Financial stocks have been on a tear since the summer. The Financial Select Sector SPDR Fund (XLF) is up 33% YTD and 22% since early August. Despite the recent spike, many financial stocks are still cheap after a decade and a half of underperformance.
Financial stocks are dependent on yield spreads, economic growth, and relaxed regulations. All those areas are improving or expected to improve as a result of the election.
In this issue, I highlight one of the highest-growth companies in an industry that is on the rise. It is the leading all-digital bank in the country. Unlike many other industry-leading stocks, it is still well below the high because of a recent temporary stumble which has likely only delayed its price spike.
We are in a bull market that began in October of 2022. Bull markets don’t usually run out of gas after just two years, especially recent ones. The Fed has begun a rate-cutting cycle that is likely to last for the next two years. Plus, the economy is solid and expected to get stronger. Rate cuts in a strong economy are unusual, but the combination should be great for stocks.
One sector may have a better 2025 prognosis than the overall market: Financial stocks have been on a tear since the summer. The Financial Select Sector SPDR Fund (XLF) is up 33% YTD and 22% since early August. Despite the recent spike, many financial stocks are still cheap after a decade and a half of underperformance.
Financial stocks are dependent on yield spreads, economic growth, and relaxed regulations. All those areas are improving or expected to improve as a result of the election.
In this issue, I highlight one of the highest-growth companies in an industry that is on the rise. It is the leading all-digital bank in the country. Unlike many other industry-leading stocks, it is still well below the high because of a recent temporary stumble which has likely only delayed its price spike.
It was another interesting week for the market as the Nasdaq rallied 3.3%, while the S&P 500 added 1% and the Dow fell 0.6%. That is quite the performance difference between the Nasdaq and Dow!
From a top-down perspective, the market remains in good shape, but the real action in the past few weeks has concerned leading stocks, and today many hit air pockets, with plenty of short-term abnormal action (and some intermediate-term abnormal action, too). So where do we stand? One day doesn’t mean the party is over, and frankly, we see some stocks that are approaching decent risk/reward entries, but today is a red flag for some names and is a reminder to manage your portfolio (partial profits, respecting stops) and to aim for decent entries. We’re not panicking, but we’ll lower our Market Monitor to a level 7 and see how things go from here.
This week’s list has a nice mix, with some winners that have been resting for a few weeks alongside some names that have recently shown power. Our Top Pick is a name we’ve kept an eye on for a long time and is now beginning to emerge after a tough mid-year stretch.
This week’s list has a nice mix, with some winners that have been resting for a few weeks alongside some names that have recently shown power. Our Top Pick is a name we’ve kept an eye on for a long time and is now beginning to emerge after a tough mid-year stretch.
At a high level, the market is still humming on all cylinders, with the S&P 500 and Nasdaq hovering near all-time highs. But look closer, and some cracks have egun to form, with the Dow down in the last week and some high-flying growth stocks – including several in the Stock of the Week portfolio – getting sold off today. With inflation data to come later this week, it’s possible a pullback of some kind is in order. So today, we add an inflation-proof stock that Clif Droke just wrote extensively about in his Cabot Turnaround Letter advisory.
Details inside.
Details inside.
It was another interesting week for the market as the Nasdaq rallied 3.3%, while the S&P 500 added 1% and the Dow fell 0.6%. That is quite the performance difference between the Nasdaq and Dow!
It was another interesting week for the market as the Nasdaq rallied 3.3%, while the S&P 500 added 1% and the Dow fell 0.6%. That is quite the performance difference between the Nasdaq and Dow!
Updates
The market continues to struggle with the rapid jump in interest rates (10-year at 4.63% after hitting 4.7% on Tuesday).
I think we’re still fluctuating somewhere between a code yellow and a code orange situation (was code green a few weeks ago!) so long as that yield doesn’t go over 4.7% and all hell doesn’t break loose in the Middle East.
I think we’re still fluctuating somewhere between a code yellow and a code orange situation (was code green a few weeks ago!) so long as that yield doesn’t go over 4.7% and all hell doesn’t break loose in the Middle East.
When I started in this business as an institutional stockbroker, Peter Lynch, the portfolio manager for Fidelity’s Magellan fund, was seen as a master of the game. His forte was picking smaller growth stocks. Upon stepping down in 1990 after his fund became too big to make any small-cap stock pick meaningful, he had delivered, over a 13-year period, a 29% per annum return to investors.
His lessons still ring true today.
His lessons still ring true today.
There’s a lot of noise out there. Sticky inflation and the Fed’s response to it; Iran getting involved in the Israel-Palestine war; war in Ukraine now in year three; a pivotal U.S. presidential election drawing ever closer; first-quarter earnings season underway, etc., etc. But the only thing that truly matters to the market, at least lately, is bond yields. Specifically, yields on the 10-year U.S. Treasury bonds. The last couple years, the inverse bond yield-stock market correlation has been undeniable.
After five consecutive up months for the market, April has been a bummer. Is this just an overdue end to the recent rally or something worse?
The S&P 500 is down 3.6% so far in April. But the more interest rate-sensitive sectors have faired far worse. Sure, the rally was long in the tooth anyway. But the narrative has also changed for the worse.
The S&P 500 is down 3.6% so far in April. But the more interest rate-sensitive sectors have faired far worse. Sure, the rally was long in the tooth anyway. But the narrative has also changed for the worse.
This market has been resilient. But that resilience is being severely tested. The next couple of weeks should tell us the near-term direction of stocks.
The S&P rallied higher for five straight months. That’s long in the tooth for any rally. The market is down so far in April and the story is changing for the worse.
The S&P rallied higher for five straight months. That’s long in the tooth for any rally. The market is down so far in April and the story is changing for the worse.
Wells Fargo (WFC) kicked off the Cabot Turnaround Letter earnings season today, showing EPS of $1.26/share, which exceeded estimates by 17 cents. WFC also beat top-line revenue estimates by $710M, coming in at $20.86B. Despite the comfortable beats, WFC shares are essentially flat for the day.
The story of the week was yesterday’s slightly hotter-than-expected CPI report, which has shifted the rate cut narrative/speculation to only two cuts this year, down from three, and sent the 10-year yield north of 4.55% (it was below 4.4% last Friday).
While this morning’s better-than-expected PPI number has helped to soften the CPI blow, the debate from here is going to be just how long the Fed is willing to push its luck/try not to rock the boat and keep rates where they are.
While this morning’s better-than-expected PPI number has helped to soften the CPI blow, the debate from here is going to be just how long the Fed is willing to push its luck/try not to rock the boat and keep rates where they are.
Stocks have also been a bit stuck in the mud for the last month or so, partly because investor confidence in the Fed’s interest rate-slashing timetable has waned as inflation has remained stickier than expected. Wednesday’s CPI print didn’t help; March inflation came in at 3.5% year over year, a tad hotter than the 3.4% expected and up from 3.2% in February. The month-over-month increase was 0.4%, higher than the 0.3% bump that was anticipated. Stocks promptly sold off, with all three major indexes down more than 1% in early Wednesday trading.
Eventually, however, inflation will dip below that stubborn 3% threshold, and the Fed will start to cut short-term interest rates. We just don’t know when.
Eventually, however, inflation will dip below that stubborn 3% threshold, and the Fed will start to cut short-term interest rates. We just don’t know when.
Cannabis stocks are generally flat since I sent you the March 27 issue of Cabot Cannabis Investor.
Given the potential magnitude of near-term catalysts, I suggest continuing to hold exposure to the group, and accumulating on weakness. If you have zero exposure, consider buying some now. If you have full exposure, consider adding on any substantial weakness of 2%-4% or more in this highly volatile group.
Given the potential magnitude of near-term catalysts, I suggest continuing to hold exposure to the group, and accumulating on weakness. If you have zero exposure, consider buying some now. If you have full exposure, consider adding on any substantial weakness of 2%-4% or more in this highly volatile group.
It’s still a bull market and a rally. But the S&P has been in a sideways funk since the middle of last month.
April has not had news that the market seems to like. There has been stronger-than-expected economic news. The manufacturing numbers were the highest in about two years, and the Fed upgraded its 2024 GDP forecast from 1.4% to 2.4%. But sometimes good news is bad news.
April has not had news that the market seems to like. There has been stronger-than-expected economic news. The manufacturing numbers were the highest in about two years, and the Fed upgraded its 2024 GDP forecast from 1.4% to 2.4%. But sometimes good news is bad news.
The next earnings season starts very soon, with Mattel (MAT) set to report on Tuesday, April 23.
Alerts
Our Small Dogs of the Dow portfolio continues to push higher. More specifically, our INTC position is up over 100% since we initiated it back at the beginning of 2023. The underlying stock position is only up 40%, again showing the power of using a poor man’s covered call strategy on individual stocks and ETFs.
Since we introduced our GDX position back in early June 2022, we’ve managed to bring in 14.97% worth of premium and capital gains by using our simple income wheel approach. Comparatively, the stock is down 11.1% over the same time frame – once again proving the power of taking the patient, disciplined and conservative approach of the income wheel options strategy.
I will be exiting the Wynn Resorts (WYNN) trade today. I will discuss the trade in greater detail in our upcoming weekly issue.
Since we introduced our PFE position back in early June 2022, we’ve managed to bring in 25.7% worth of premium and capital gains by using our simple income wheel approach. Comparatively, the stock is down 23.1% over the same time frame.
Wynn Resorts (WYNN) is due to announce earnings today after the closing bell.
Sell ATI (ATI) For a Quick 15% Gain; Krystal Biotech (KRYS) Reports
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.