Issues
The bulls made it six straight winning weeks, powered by a semiconductor surge that has shown no signs of slowing down. Also helping the mood: the April jobs report blew past expectations Friday, with the economy adding 115,000 jobs against a forecast of just 65,000.
The bulls made it six straight winning weeks, powered by a semiconductor surge that has shown no signs of slowing down. Also helping the mood: the April jobs report blew past expectations Friday, with the economy adding 115,000 jobs against a forecast of just 65,000.
The bulls made it six straight winning weeks, powered by a semiconductor surge that has shown no signs of slowing down. Also helping the mood: the April jobs report blew past expectations Friday, with the economy adding 115,000 jobs against a forecast of just 65,000.
Markets have been resilient driven by earnings, hopes of a Hormuz deal, and a ramping up of share buybacks by big tech this year.
Explorer stocks had a good week. Brookfield Renewable (BEP) shares were up 7.5% this week as attention was riveted on clean energy in the wake of the Middle East conflict.
Explorer stocks had a good week. Brookfield Renewable (BEP) shares were up 7.5% this week as attention was riveted on clean energy in the wake of the Middle East conflict.
Small businesses drive a lot of U.S. job growth – yet many can’t get the loans they need from paper-bound, cautious banks.
Today’s featured company aims to change that. It is a digital lending specialist that’s transforming into a full-scale bank. By leveraging over two decades of data, it is capturing market share while maintaining impressively low default rates.
All the details are inside the May issue of Cabot Small-Cap Confidential.
Today’s featured company aims to change that. It is a digital lending specialist that’s transforming into a full-scale bank. By leveraging over two decades of data, it is capturing market share while maintaining impressively low default rates.
All the details are inside the May issue of Cabot Small-Cap Confidential.
Soaring oil prices ground airline stocks to a halt in March, and most of them have yet to recover as crude oil remains in the triple-digit range. And yet, most airlines are still on track for another year of record sales and passenger numbers. That includes this month’s new addition to the Cabot Value Investor portfolio, which expects double-digit revenue and triple-digit earnings growth this year, and yet the stock trades 37% below its 2017 highs. Shares had momentum before the Iran war. Now they’re trading at a rarely seen discount. That spells opportunity and perfectly fits our growth-at-value-prices mandate.
Details inside.
Details inside.
The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.
We continue to see and hear about many uncertainties, not the least of which is the continued back-and-forth in the Middle East—but despite that, stocks have continued to handle themselves very well, oftentimes actually advancing despite the supposed fundamental headwinds. Of course, near term, some sort of pothole is possible, and the next two weeks are actually prime time when it comes to earnings season for growth stocks, so we’ll see how it goes. But we’ll bump our Market Monitor to a level 8 given the positive evidence.
This week’s list features a lot of recent earnings winners as well as some good setups. Our Top Pick has solid growth and free cash flow, and the stock just emerged from a huge base after earnings.
This week’s list features a lot of recent earnings winners as well as some good setups. Our Top Pick has solid growth and free cash flow, and the stock just emerged from a huge base after earnings.
Booming earnings vs. a damaging war. That’s the tug-of-war investors are grappling with right now.
In March, the sudden war in Iran sent stock prices tumbling; in April, stocks rebounded with a fury, thanks in part to double-digit earnings growth and hopes of peace. Where the market goes in May will depend on how long the war drags out – and how long the Strait of Hormuz remains closed. In the meantime, though, artificial intelligence is clearly back in favor, so today we add a new AI name courtesy of Cabot Early Opportunities Chief Analyst Tyler Laundon. It’s a name that’s hitting fresh all-time highs as I write this – with potentially much greater upside ahead.
Details inside.
In March, the sudden war in Iran sent stock prices tumbling; in April, stocks rebounded with a fury, thanks in part to double-digit earnings growth and hopes of peace. Where the market goes in May will depend on how long the war drags out – and how long the Strait of Hormuz remains closed. In the meantime, though, artificial intelligence is clearly back in favor, so today we add a new AI name courtesy of Cabot Early Opportunities Chief Analyst Tyler Laundon. It’s a name that’s hitting fresh all-time highs as I write this – with potentially much greater upside ahead.
Details inside.
The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.
The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.
The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.
Updates
Market activity in the second half of March and early April has been entirely dominated by the escalating conflict with Iran and the uncertainty radiating outward from it. Volatility has spiked, investors have reacted by taking risk off the table, and the odds of bad things – recessions, energy shocks, rate hikes, etc. – have gone up.
Not surprisingly, sudden macro shocks tend to wreak havoc on the stock market in the short term. But they also create opportunities in companies where the underlying catalysts – new products, capacity expansions, commercialization cycles or structural industry shifts, etc. – are still unfolding.
Not surprisingly, sudden macro shocks tend to wreak havoc on the stock market in the short term. But they also create opportunities in companies where the underlying catalysts – new products, capacity expansions, commercialization cycles or structural industry shifts, etc. – are still unfolding.
Despite the big shake-up at the top of the Department of Justice, the catalyst of cannabis rescheduling is likely still on track. It may happen fairly soon.
The backdrop here is that cannabis reform slow-walker Pam Bondi is out as attorney general (AG). Near term, she is being replaced by her former underling, Todd Blanche.
The backdrop here is that cannabis reform slow-walker Pam Bondi is out as attorney general (AG). Near term, she is being replaced by her former underling, Todd Blanche.
Things are looking up. Investors sense an imminent end to this war. We may not be out of the woods yet. Hostilities may continue for a while longer. But there is increasing optimism among investors that the war will end soon.
The S&P 500 pulled back 7.7% in the first 30 days of March. The index has gained back 3.8% in the three trading days since, not including Monday. And that’s from just a whiff of hope for peace in the weeks ahead. With an actual end to the conflict, stocks could gain back all the March losses and more in a short period of time.
The S&P 500 pulled back 7.7% in the first 30 days of March. The index has gained back 3.8% in the three trading days since, not including Monday. And that’s from just a whiff of hope for peace in the weeks ahead. With an actual end to the conflict, stocks could gain back all the March losses and more in a short period of time.
Seemingly absent from the myriad discussions involving the Middle East war, soaring fuel prices and accelerating worries over a potential global recession is practically any mention of the turmoil in the private credit market.
This was a major talking point among financial pundits prior to the start of the Iranian affair, but it has since been relegated to the proverbial rubbish bin as mainstream news headlines are now heavily tilted toward all things Middle East.
This was a major talking point among financial pundits prior to the start of the Iranian affair, but it has since been relegated to the proverbial rubbish bin as mainstream news headlines are now heavily tilted toward all things Middle East.
Stocks rebounded the last couple days on hopes that the Mideast conflict will end soon and stocks for the week largely posted modest gains.
One winner of higher oil prices is China, which, while still the world’s biggest oil importer, supplies more than 70% of all the world’s green hardware such as solar, wind, and batteries. Beijing is installing solar panels at a rate equivalent to one nuclear power station every day. This is a big story.
One winner of higher oil prices is China, which, while still the world’s biggest oil importer, supplies more than 70% of all the world’s green hardware such as solar, wind, and batteries. Beijing is installing solar panels at a rate equivalent to one nuclear power station every day. This is a big story.
Things are looking up. Stocks are up big this week after what had been a miserable month of March.
The administration is making noises like the Iran war will end soon. Of course, we’ve been down this road before. Stocks have been taking one step forward and two steps back all month. But this week’s rally so far has more heft than previous March rallies. Investors seem more assured this time that good things will happen.
The administration is making noises like the Iran war will end soon. Of course, we’ve been down this road before. Stocks have been taking one step forward and two steps back all month. But this week’s rally so far has more heft than previous March rallies. Investors seem more assured this time that good things will happen.
The Iran market continues. Stocks began the week on a positive note. But it’s been one step forward, two steps back in a month-long slow bleed.
The S&P 500 closed last week down nearly 8% for the past month. The index is now within a mere percentage point of correction territory (down 10% or more from the high). But it hasn’t been panicked selling so far, just a consistent downward trajectory.
The S&P 500 closed last week down nearly 8% for the past month. The index is now within a mere percentage point of correction territory (down 10% or more from the high). But it hasn’t been panicked selling so far, just a consistent downward trajectory.
“Risk-off” has become the new mantra on Wall Street as fears of a global recession abound in the wake of the month-old Iran-Israel conflict. Not surprisingly, equity prices across a broad swath of industries have suffered as participants contemplate liquidity concerns as energy prices spiral, with select areas of the formerly high-flying tech sector facing extreme selling pressure.
But what is surprising to some is the way certain asset categories are responding to the broad market selling pressure. Some of the most historically defensive areas of the market are reacting in ways that are atypical, forcing investors to ask the question: “Are we entering a bear market, and if so, how should we hedge against it?”
But what is surprising to some is the way certain asset categories are responding to the broad market selling pressure. Some of the most historically defensive areas of the market are reacting in ways that are atypical, forcing investors to ask the question: “Are we entering a bear market, and if so, how should we hedge against it?”
WHAT TO DO NOW: Remain defensive. The vast majority of market timing evidence remains negative, and while there continue to be some rays of light out there, most stocks are bumping downhill. Given the time since we hit new highs (back in October) and the fear that’s being built up (lots of headline-grabbing bad news), the odds are rising that the next upmove will be a lucrative one—but we have to be patient until the liftoff comes. The Model Portfolio has four smaller positions left and a cash position of around 78%; we’ll stand pat tonight, though we’re not ruling out a small move or two going forward, depending on what comes.
Investing in value stocks is a bit like putting together a successful March Madness bracket.
Sure, you could pick all favorites to advance to the Final Four, but it rarely works out that way. In fact, only twice since the current format (64 teams initially; now 68 teams, with four play-in games) of the men’s basketball NCAA Tournament was formed in 1985 have all four 1 seeds advanced to the Final Four. One of them happened to be last year. But in the previous 11 tournaments, at least one team from outside the top 4 seeds (and sometimes multiple teams) advanced to the Final Four. (Note: This only applies to the men’s NCAA Tournament; the women’s tournament tends to feature far fewer upsets, for whatever reason.)
Sure, you could pick all favorites to advance to the Final Four, but it rarely works out that way. In fact, only twice since the current format (64 teams initially; now 68 teams, with four play-in games) of the men’s basketball NCAA Tournament was formed in 1985 have all four 1 seeds advanced to the Final Four. One of them happened to be last year. But in the previous 11 tournaments, at least one team from outside the top 4 seeds (and sometimes multiple teams) advanced to the Final Four. (Note: This only applies to the men’s NCAA Tournament; the women’s tournament tends to feature far fewer upsets, for whatever reason.)
Oil prices, geopolitics, and shifting inflation expectations continued to drive noisy headlines over the last week, and the stock market has been responding with intermittent bouts of risk-off behavior.
Year to date, the divergence between large caps and small caps remains one of the market’s defining features and is – for obvious reasons – especially notable for us.
Year to date, the divergence between large caps and small caps remains one of the market’s defining features and is – for obvious reasons – especially notable for us.
This Iran-driven market is getting a bit of a reprieve this week, so far.
The indexes started the week sharply higher on rumors of talks to end the conflict. If the conflict does end, there should be a strong relief rally in the market. But it’s also quite possible that nothing comes of the talks and the market selling continues. We’re certainly not out of the woods yet.
The indexes started the week sharply higher on rumors of talks to end the conflict. If the conflict does end, there should be a strong relief rally in the market. But it’s also quite possible that nothing comes of the talks and the market selling continues. We’re certainly not out of the woods yet.
Alerts
Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
Portfolios
Strategy
Here’s a refresher on what qualities help a stock pass our Individualized Retirement Income System tests for inclusion in the Cabot Dividend Investor portfolio.
We take a look at some of the major rotations of the past year, and how, when—or if—they were resolved.
What does risk tolerance really mean, and how can you figure out what yours is?
If you’re a typical Cabot growth investor, you like to own stocks of fast-growing companies ... the kind that go up fast and come down fast. The ride up with these stocks is wonderful. But the ride down can be shocking. Stocks like these can easily fall 40%, 50% or more in a prolonged market decline, destroying the value of your portfolio.
Using Options to Hedge a Portfolio
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 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.
I want to clarify a few things about our Hold and Buy ratings.
This guide will help you execute the three types of options strategies recommended in Cabot Options Trader: Buying puts and calls, covered call writing and spreads.
This guide will help you execute the options strategies recommended in Cabot Options Trader.
Guide to Options Trading — Pro Version