JPMorgan (JPM) is due to report results Friday, kicking off bank earnings season. Lately, the market seems to be more focused on earnings than Fed interest rates, and this is a good thing.

As markets move towards the “Great Rebalance”, looking to diversify portfolios with different asset classes and international stocks, the Explorer and I are headed to Europe, Asia, and Latin America during the next year. But today, stick to the U.S. and add a very familiar face to the portfolio.

There is a colossal housing shortage in this country.

A decade of underbuilding in the housing industry following the financial crisis has left the industry unable to meet the needs of the growing population. It is estimated that the demand for homes exceeds the current national supply by a whopping 4.5 million.

The jilted supply/demand dynamic has caused the median U.S. home price to soar a staggering 40% just since the pandemic. In addition, mortgage rates have soared to the highest level in two decades. The prices and mortgage rates are making housing unaffordable for vast numbers of potential buyers. Sellers are unwilling to trade up and get a higher mortgage rate.

There aren’t enough new homes, and existing homes aren’t coming on the market either. Buyers can’t buy and sellers won’t sell. But there is reason to believe the housing problems will get a lot better in the years ahead.

While the situation is likely to improve, the supply/demand imbalance will likely remain for several years. That’s a problem for the housing market and economy to work through. But it’s good news if you’re a homebuilder. New homes should be in high demand for years to come, and sales should increase with the improving conditions.

In this issue, I highlight the premier luxury home builder in the U.S. The stock has the best track record of all large homebuilders, and the company is in an ideal position to benefit from high demand and increasing buying in the years ahead.

Despite plenty to worry about in the market including the rising tensions in the Middle East and the short-lived port strike, impressively the S&P 500, Dow and Nasdaq all rose marginally last week.

In the market, it’s not the news that counts, but the market’s reaction to the news—and that makes last week’s trading noteworthy: Middle East attacks along with a dockworkers strike (that was quickly put off for a few months) could easily have sent risk-on assets reeling, but instead, most indexes took the news in stride and, somewhat surprisingly, we’ve seen defensive stocks hit the skids. Now, to be clear, there are still flies in the ointment out there, including the possibility of a counterstrike overseas (rumblings of that today), rising Treasury rates, and a lot of indexes, sectors and stocks are still rangebound. There’s no question there remain many stocks that act well (including tons of Top Ten names), but we’re staying in the same stance as we wait for upside confirmation from more of the market—we’re encouraged, but we’re leaving our Market Monitor at a level 7 as we wait for the buyers to truly flex their muscles.

This week’s list is another one with something for everyone in terms of stories and setups. Our Top Pick is a firm that has its hands in many nuclear power cookie jars; the stock just emerged from a multi-month rest on big volume.

Spooky season is upon us! Yes, the usual October selling has commenced, although it’s been fairly mild thus far. But things feel unsettled, what with the expanding war in the Middle East, a toss-up presidential election less than a month away, and with earnings season getting underway this week. So today, to counter any further turbulence, we trim one modest laggard and add a new, low-beta, dividend-paying European stock that’s been a favorite of Cabot Explorer Chief Analyst Carl Delfeld for some time.

Details inside.

Despite plenty to worry about in the market including the rising tensions in the Middle East and the short-lived port strike, impressively the S&P 500, Dow and Nasdaq all rose marginally last week.

Despite plenty to worry about in the market including the rising tensions in the Middle East and the short-lived port strike, impressively the S&P 500, Dow and Nasdaq all rose marginally last week.

Surging data center demand. Electric vehicles. Heat pump HVAC systems. Severe weather events. Hurricanes. Rising sea levels. North Carolina flooding.

This is just a short list of the drivers behind rising electricity demand, the harsh realities of being behind the curve when it comes to global warming, and the resulting push toward energy efficiency and greenhouse gas emission reductions.

Today’s portfolio addition is a small and still-unknown company that helps solve these challenges, moving the country toward a more sustainable, clean-energy future.

I think you’ll find it interesting.

The market remains positive, but not powerful, with a lot of growth stocks and especially growth indexes and funds still batting with months-old resistance. Big picture, we think the next major move is up and a lot of the leadership of any coming run has already declared itself; indeed, we think we own some of the best names out there. But we’re not pushing the envelope here, as the market continues to deal with uncertainties (including this week’s Middle East tensions and dockworkers strike). We have no changes again tonight, though we’re staying flexible and are looking to add exposure as opportunities arise.

Between the expansion of the war in the Middle East, a U.S. dockworker strike that could slow the supply chain again, and the uncertainty of a too-close-to-call presidential election next month, there are a lot of headwinds out there serving to counterbalance the good vibes created by last month’s Fed rate cut. Add in the fact that we’re in the traditional “spooky season” of October – the month in which the market has bottomed in each of the last four years – and it’s a good time to add some security to your portfolio.

So today we do just that … by adding a well-known home security company to our Buy Low Opportunities Portfolio. It’s been in business for a century and a half but has only been a public company for the past seven years. And with profits accelerating, the stock has become cheap.

Details inside.

It was a mostly quiet week for the market, which isn’t terribly surprising as traders have moved past the Federal Reserve event and have turned their attention toward the election. By week’s end the S&P 500 had gained 0.4%, the Dow had rallied 0.5% and the Nasdaq had fallen 0.55%

Just looking at the headline evidence, it remains in good shape—the intermediate-term (and longer-term) trend of the indexes is up, and the same can be said for most growth measures. The only “problem” is that the action, while positive, isn’t very powerful: Some indexes that are technically trending up are still battling with resistance and haven’t made much progress for many weeks or months, and the same can be said for a lot of individual stocks, including some formerly leading areas (like chip stocks) that continue to lag. Thus, we’re sticking with our current stance—leaning bullish for sure, but picking our spots and stocks carefully and not rushing into things. We’ll again leave our Market Monitor at a level 7 tonight.

This week’s list is well-rounded, though for our Top Pick, we’ll go with a super-strong name that looks like one of the leaders of a potential group move.

Small caps are having a very nice week as a lot of rate-sensitive areas of the market zoom higher following the Fed’s meeting and Jerome Powell’s press conference yesterday.

I’ve been saying I think small caps are very attractive lately, so the directional move here isn’t a surprise, though the pace of this week’s gains is rather eye opening. The S&P 600 Small Cap index is up about 7% over the last two days through midday Thursday!

Welcome news: The Fed holds interest rates steady in a sign tightening has peaked and that rates cuts may be coming in 2024. Big positive for stocks.

One of the Explorer’s themes is the exciting and potentially profitable sector of medicine and life sciences. A success story is Novo Nordisk (NVO), which is up about 45% this year. The Denmark-based company has been the talk of the pharma and medical world and even Hollywood with stars trying the firm’s diabetes and weight-loss medicines, Ozempic and Wegovy.

Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.

There are three big developments in the cannabis space to report.

* A buyout of one of our portfolio names, which nets us 105% gains in four months.

* A confirmation that the Biden administration is serious about some major cannabis reform, which would be a huge catalyst for the group.

* A buyable selloff. Cannabis stocks sold off sharply Tuesday probably based on false fears that rescheduling won’t happen. I think that’s wrong, and the weakness is a buy.

When a band interviews a possible new hire, a common question is, “Who are your influences?” No musician was raised in a vacuum – everyone gets their musical foundations and inspirations from someone else. The Rolling Stones, for example, were heavily influenced by the Chicago blues and R&B scene including Muddy Waters and Bo Diddley. Learning someone’s influences helps the interviewer understand how a musician got to where they are and perhaps where they are headed in terms of their musical style, and provides some insight into what motivates the musician’s passion.

The rally that began in November is slowing down, but not dying.

Things are still good. Inflation is falling, the Fed is probably done hiking rates, longer-term rates have peaked, and the economy is still strong. But it’s that time of year. The holidays have a way of taking investor focus away from the market. Stocks tend to do whatever they were doing when investors stopped paying attention, which in this case is edging higher ever so slowly.

There were no earnings reports or ratings changes this week.

WHAT TO DO NOW: Continue to lean bullish, though keep an eye on things in the short term. Overall, our indicators look very good, so we’re aiming to put more money to work—but near-term, we are seeing a few warning signs, so we’re picking our spots and stocks carefully. On yesterday’s special bulletin we sold Noble (NE) and added another half position in PulteGroup (PHM), but tonight, we’ll stand pat and see how things go in the coming days. Our cash position is now 36%.

The superb rally that began after October is fading.

November was the best month for the S&P 500 in over a year. But now some reality is starting to set in. Wall Street took the good news about peak interest rates to another level and started pricing in Fed rate cuts early next year. The market is pulling back after the Fed dismissed that notion.

The market had a great November. But the rally petered out.

Wall Street always overdoes it. It took the good news about peak interest rates to another level and started pricing in Fed rate cuts early next year. The market pulled back on Monday because the Fed dismissed that notion.

In today’s note, we discuss the recent earnings reports from Duluth Holdings (DLTH) and Kohl’s (KSS). Our note also includes the monthly Catalyst Report and a summary of the December edition of the Cabot Turnaround Letter, which was published on Wednesday.

WHAT TO DO NOW: Earnings season remains a landmine of sorts, though we have seen some names find support later in the week. This bulletin is in regards to MasTec (MTZ), which, frankly, reported a totally unexpected sour quarter and poor outlook, which is leading to a big break today. We’ll sell half of our shares and hold the cash for now, leaving us with around 41% on the sideline.

I will be exiting the ConocoPhillips (COP) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET Friday, August 4.

ConocoPhillips (COP) is due to announce earnings Thursday before the opening bell.

Sell Terex (TEX)

We jumped into TEX four months ago on March 3, literally just a few days before the stock took a dive that ended up sending it 30% lower over the next few weeks. We held on and those of you that added shares along the way should have a much better return than the roughly 7% gain showing in our official portfolio. With so many growthier stocks acting well and TEX up over 50% from its April lows, I’m going to take the modest gain and boot it from our portfolio today. To be clear, I don’t hate TEX and think the bullish thesis I presented back in March still holds true. That said, the reality is there are just too many other stocks with better upside potential right now and I want to maintain concentration in those while taking down our market exposure ever so slightly through next week’s Fed meeting (our next Issue is due out in two weeks). SELL

WHAT TO DO NOW: After selling half of DoubleVerify (DV) yesterday, we’re going to prune our position in Celsius (CELH), which has been stalling out for about a month and a half and is now cracking some near-term support. The big-picture chart isn’t bad, so we’ll hold a good-sized stake, but we’ll trim here and hold the cash. That will leave us with around 36% in cash.

WHAT TO DO NOW: The market is quiet today, and while the possibility of a near-term pullback in growth stocks is growing, the big-picture evidence remains in good shape. Today, though, we are pulling the plug on Inspire Medical (INSP), which hasn’t been able to get going and today is cracking support on big volume. We’ll sell our half position and hold the cash.

We are adding another stock to our active, Buffett’s Patient Investor portfolio today. Again, my intent is to ramp up the portfolio to a minimum of five positions over the coming expiration cycles, with the ultimate goal of having eight to 10 positions. But we will continue to stay methodical in our approach and add positions when it makes sense.

I will be exiting the Visa (V) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET Friday, July 28.

While the S&P 500, Nasdaq 100 and Russell 200 are down on the day, the Dow is up on the day. As a result, our Dogs and Small Dogs portfolios are benefitting greatly, as seven out of the ten positions are up on the day.


We still have a few July positions to roll forward and several underlying stocks that have recently pushed above their short call strikes. So, the plan is to buy back our short calls, where needed, and immediately sell more premium. I’m going to start today with AMGN which is one of the few positions with July 21, 2023, calls.

WFC has provided us a nice source of income since we introduced the big bank to the portfolio. We’ve managed to bring in 20.5% of options premium/income in just under one year using the Income Wheel strategy while the stock itself has only made half of that return at just over 10%.

While the S&P 500, Nasdaq 100 and Russell 200 are down on the day, the Dow is up on the day. As a result, our Dogs and Small Dogs portfolios are benefitting greatly, as seven out of the ten positions are up on the day.


We still have a few July positions to roll forward and several underlying stocks that have recently pushed above their short call strikes. So, the plan is to buy back our short calls, where needed, and immediately sell more premium. I’m going to start today with AMGN which is one of the few positions with July 21, 2023, calls.

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.