The market party is on, but someone forgot to tell healthcare stocks.

They’re the only one of the 11 S&P 500 sectors that is actually down in the month since the presidential election. That has everything to do with these five letters: RFK Jr. But are concerns about Trump’s controversial pick to lead the Health and Human Services Department overblown? It appears Wall Street is starting to think so, as the sector has been in steady recovery after an initial sell-off. Still, as a whole, healthcare stocks have been the weakest performers of any major sector this year. And that spells opportunity for value investors.

In today’s issue, we add a big-name, undervalued healthcare stock to our Buy Low Opportunities portfolio. It’s a company whose name you likely know – and that’s showing signs of more consistent profit growth.

Details inside.

Today’s opportunity skews toward the more speculative end of the spectrum, which is part of why I find it so darn enticing.

If you’re interested in a gold miner that also has an angle to help the U.S. produce a critical element, antimony, currently in short supply outside of China, Russia and Tajikistan, none of which are cozying up to the U.S. right now, this is the stock for you.

While we began a position in this stock via yesterday’s Special Bulletin, all the details are inside this month’s Issue.

This was a good week for Explorer stocks, and as we head into the end of the year, Sea Limited (SE) is so far up 190%, IBM (IBM) is up 48% and Dutch Bros (BROS) was up 62% in November alone.

Tariffs are topic one in Washington and the financial media. Markets don’t know how everything will work out. Mexico is America’s largest trading partner, followed by Canada and then China. America still imports 4 million barrels of crude oil a day from Canada, which is also a key partner on the critical minerals front. More than half of America’s imports of fruits and vegetables come from Mexico. Automakers, which have built factories in Mexico to produce vehicles for the American market, are at risk and their stocks are falling at the wrong time.

But there’s one huge (non-Tesla) exception, which we will add to the Explorer portfolio today.

The market continued to inch its way higher in the two weeks since I last wrote. The Stock of the Week portfolio isn’t inching – it’s soaring. Multiple positions in our portfolio were up double-digit percentages in the last couple weeks, with several others hitting new 52-week or all-time highs. As always, it’s a testament to the elite stock-picking ability of our superb analysts. And today, we add another stock, a familiar name that has regained momentum enough to warrant inclusion in last week’s Cabot Top Ten Trader advisory.

Details inside.

The holiday-shortened week yielded more gains for the leading indexes as traders ready themselves for the close of 2024. Here is how our positions performed last week.

The holiday-shortened week yielded more gains for the leading indexes as traders ready themselves for the close of 2024. Here is how our positions performed last week.

Cannabis stocks are now trading like the group is no longer a viable sector.

I do not believe that is the case. True, companies continue to face pressure from price wars and unbridled issuance of permits for new stores in New Jersey and elsewhere.

But ultimately, the fate of cannabis businesses lies in the hands of politicians.

Today brought some selling in growth stocks, mostly egged on by weakness in some “old” leading groups, but the evidence (both market-wide and among leading stocks) is still bullish, so we are, too, though we continue to keep our feet on the ground and manage our portfolio given things are a bit euphoric. Today, we’re filling out one of our positions, leaving us with 13% cash.

Elsewhere in today’s issue, we go over some intriguing new ideas (including one peer of a name we own that looks terrific), and answer some of the barrage of questions we’ve been getting, with some talk about the weakness seen in the formerly strong chip group.

Despite some early morning sell-offs nearly every day last week, the bulls stepped up each time, and by week’s end the S&P 500 had gained 1.6%, the Dow had rallied 2%, and the Nasdaq had added 1.55%.

Despite some early morning sell-offs nearly every day last week, the bulls stepped up each time, and by week’s end the S&P 500 had gained 1.6%, the Dow had rallied 2%, and the Nasdaq had added 1.55%.

With the approach of the Christmas shopping season, we’re heading into what’s regarded as prime “restaurant season,” as the holidays typically see more foot traffic than any other time of the year, and with December historically the highest-selling month for U.S. restaurants.

Today, we introduce a stock that’s poised to take advantage of the holiday shopping boom - and the ongoing post-Covid recovery in the trillion-dollar industry.

The election is changing things.

The difference is the expectation of stronger economic growth. As a result, new sectors have emerged as market leaders. Cyclical sectors have taken off. Financial, energy, and consumer discretionary sectors are leading the market. And this changing dynamic is likely just in the very early stages.

In this issue, I will focus on an opportunity in the financial sector.

Financial stocks, of which banks make up a big part, generally make profits from the spread between the cost of funds, mostly short-term rates, and what they charge for loans. Higher spreads mean more profits.

The Fed has begun a rate cutting cycle that will likely last for two years. Banks also need a good economy with strong loan demand. The better economic prognosis after the election is bullish. Plus, there is likely to be a much friendlier regulatory environment for banks and financial companies in the new administration.

In this issue, I highlight one of the highest-growth major financial companies that will surely benefit from the improving dynamic going forward. 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, and a price spike should be ahead.

It was a relatively quiet week for Explorer stocks as a financial media frenzy focused an unprecedented amount of attention on the expected financials of one stock – Nvidia (NDVA).

Nvidia has quickly become the third most valuable company in the United States.

As of last Friday, about 30% of the S&P 500’s gain for the year was due to Nvidia, according to an S&P analyst.

The market has had a good year so far. The rally that began at the end of October is still in force. But things are getting wobbly.


Last week’s inflation number came in higher than expected. CPI was 3.1% for January and that’s down a lot from the high of 9.1% in June of 2022. But it’s still above the Fed’s target rate of 2%. And inflation has stopped going down even with interest rates at the highest level in decades. That’s a problem.

In what has been a basically good market this year, investors just got a dose of bad news. Inflation isn’t going down enough, even with the current high rates. That makes the rate cut “Holy Grail” far less likely anytime soon.

The Fed will have to at least keep interest rates at a very high level to prevent inflation from reigniting. But at some point, the Fed will need to lower interest rates in order to keep the recovery alive. But they can’t, at least to an impactful degree. Historically, inflation tends to come right back when the Fed takes its foot off the gas.

As the stock market soars ever higher, driven in no small part by the Magnificent Seven mega-cap tech stocks, vitriol again is being heaped upon passive investing. This form of investing, more commonly known as indexing, is considered “passive” because it considers no other traits beyond a stock’s weight in an index. There is no work involved in picking such stocks or setting the weighting – the index passively determines these. The opposite, of course, is “active” investing, in which investors work to select which stocks, and how much, to buy and sell. Active investing can involve a lot of activity.

This week, we review earnings reports from Agnico Eagle Mines (AEM), Goodyear Tire & Rubber (GT) and TreeHouse Foods (THS).

Next week, we anticipate earnings from Elanco Animal Health (ELAN), Macy’s (M), Gannett (GCI), Dril-Quip (DRQ), Vodafone (VOD) and Warner Bros Discovery (WBD).

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Small caps have had a volatile week, which we can blame on the CPI inflation report (Tuesday) and subsequent move in interest rates. That all said, if you just woke up from a two-week nap you wouldn’t notice much at all at the small-cap index level. It’s actually a touch higher than it was on January 30 and currently challenging the levels seen last Friday (pre-CPI report).

That’s all a long-winded way of saying the market has digested the CPI report and determined (for now) that one slightly-higher-than-expected reading doesn’t make a trend. It’s helped that a few Fed officials have said the same.

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It sounds heartless to say, but successful investing is largely about exploiting the emotions of others.

The two biggest emotions to exploit in the market are obviously fear and greed. When investors are too fearful, it pays to exploit that emotion by betting the other way. And vice versa for greed.

Another common emotion to exploit is impatience.

WHAT TO DO NOW: Hold your strong stocks, but near-term, it’s OK to sit on your hands a bit and see how things shake out. The overall evidence remains bullish, but there have been some yellow flags of late and yesterday’s broad, sharp decline is likely to have some near-term reverberations. We took partial profits in Arista (ANET) yesterday, selling one-third of our shares, and placed Pulte (PHM) on Hold, leaving us with around 33% in cash—and some great performers. We’ll stand pat tonight, though if things settle down for a couple of days, we could put some of our cash back to work.

The market looks strong right now. The S&P 500 just made a new all-time high in a young bull market and the index is up 5.38% in just the first five weeks of this year.

Inflation is way down. The Fed is done hiking rates. The economy is still strong. And earnings are solid. That’s a good macroeconomic background for stocks. But how long will this good news last?

WHAT TO DO NOW: The market’s action of late is encouraging for sure, but there’s still more work to do with our Cabot Tides and growth funds. Today we’re going to sell our small remaining position in DoubleVerify (DV) and hold the cash—with an eye toward redeploying the funds in the near future should the market and individual stocks continue to firm up. Our cash level will now be around 45%.

The broad market is getting whacked today after holding up relatively well in the face of rising bond yields. The reasons behind why bonds are selling off and yields are rising is beyond the scope of our discussion today. But suffice to say there are forces at work that are more complex and nuanced than a simple “Fed says higher for longer so yields are rising.” The recent spike in the 10-year yield may well have more to do with the federal deficit and supply/demand dynamics. So yeah, beyond the scope.

We allowed our BITO calls to expire worthless last week. As a result, we locked in a return of 3.4%. Now it’s time to sell more call premium against our BITO shares. We have managed to reap a total return of just over 105% since introducing Income Trader 16 months ago.

With November expiration only 49 days away, and with implied volatility kicking up over the past week, at least a little, I want to sell some premium. So, I’m going to start with another bear call spread in SPY and add some additional positions over the coming week.

WHAT TO DO NOW: The market’s action of late is encouraging for sure, but there’s still more work to do with our Cabot Tides and growth funds. Today we’re going to sell our small remaining position in DoubleVerify (DV) and hold the cash—with an eye toward redeploying the funds in the near future should the market and individual stocks continue to firm up. Our cash level will now be around 45%.

We allowed our calls to expire worthless last week, thereby reaping the entire call premium. As a result, it’s time to start selling more call premium.

We have a few positions with calls due to expire tomorrow, so let’s get ahead of it and buy back our short calls and immediately sell more calls to collect another round of premium.

WHAT TO DO NOW: The market’s action of late is encouraging for sure, but there’s still more work to do with our Cabot Tides and growth funds. Today we’re going to sell our small remaining position in DoubleVerify (DV) and hold the cash—with an eye toward redeploying the funds in the near future should the market and individual stocks continue to firm up. Our cash level will now be around 45%.

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.