Going back to 1960, nearly 85% of the cumulative total return of the S&P 500 Index can be attributed to reinvested dividends. And that’s why today we’re adding a new high-yield fund to the portfolio that gives us exposure to fast-growing overseas markets.

Quick note: Because next Monday is Memorial Day, our next issue of Profit Booster issue will be published Wednesday, May 29.

Coming out of May expiration we had five positions close for full profits (noted below), and we are going to exit one position today for a virtual breakeven as PR closed below the strike price that we had sold (totally fine). First, let’s start with the one trade we need to adjust …

Quick note: Because next Monday is Memorial Day, our next issue of Top Ten will be published Tuesday after the close, May 28.

The market’s good-looking rebound continued last week, with big-cap indexes notching new highs and most other indexes close to doing so. Granted, a lot of individual stocks are still battling with resistance from their prior highs in February/March and many growth names are set to report earnings during the next couple of weeks. Throw in the fact that sentiment has definitely gotten a bit complacent again and you want to pick your stocks and entry points carefully. Still, right now the intermediate-term trends are up for the market’s major indexes and most leading and potential leading stocks. We’ll keep our Market Monitor at a level 8.

This week’s list has a lot of enticing names, with some showing power and others set up nicely to break out if the bulls remain in control. Our Top Pick is a retail name that appears to be finally getting going after a long, tedious consolidation.

The market is at all-time highs, and so are many of our Cabot Stock of the Week stocks. Sure, there are potential landmines out there – inflation, the Fed, this Wednesday’s Nvidia (NVDA) earnings report if it fails to meet lofty expectations, etc. – but right now, Wall Street is buying, so we will too. Today, we add one of the market’s best growth stocks so far this year. It’s been sitting in Carl Delfeld’s Cabot Explorer portfolio since late last year – he has a huge gain on it already – and we were reluctant to add it to the Stock of the Week portfolio until it pulled back a bit. Now it’s done so – the stock peaked in mid-March – but it’s building momentum again. It’s one of the best AI plays not named Nvidia or Microsoft.

Details inside.

The market has steadily improved its standing since its low three weeks ago, so much so that our Cabot Tides and Two-Second Indicator have returned to bullish territory; that had us start putting money to work last week and we’re doing a bit more buying tonight. Granted, this isn’t the same environment as, say, last November, as buying pressures are still sporadic and growth stocks are good (not exceptional), so we’re moving in steps and want to be “pulled” into a heavily invested position via more strength.

In tonight’s issue, we review all of our stocks, especially our recent buys, and write about one growth area where it appears investor perception has changed for the better in a big, big way.

Somewhat quietly, the Dow has rallied eight straight days, and is leading the market higher as of late. Such is the rotation of the market, especially during earnings season (which I touch on in this issue).

For the week the S&P 500 gained 1.4%, the Dow rallied 1.75% and the Nasdaq gained 1%.

Somewhat quietly, the Dow has rallied eight straight days, and is leading the market higher as of late. Such is the rotation of the market, especially during earnings season (which I touch on in this issue).

For the week the S&P 500 gained 1.4%, the Dow rallied 1.75% and the Nasdaq gained 1%.

In the May Issue of Cabot Early Opportunities we dig into prospects across next-gen AI-enabled devices, emerging markets, meal replacement shakes and picks-and-shovels type infrastructure plays.

As always, there should be something for everybody.

Enjoy!

Somewhat quietly, the Dow has rallied eight straight days, and is leading the market higher as of late. Such is the rotation of the market, especially during earnings season.

For the week the S&P 500 gained 1.4%, the Dow rallied 1.75% and the Nasdaq gained 1%.

There’s no doubt the evidence has improved during the past three weeks, with the major indexes living above their 50-day lines, the broad market returning to good health and with some leadership names perking up, too. Of course, that doesn’t mean it’s perfect out there—defensive-type indexes and stocks have been outperforming, earnings season has been very tricky and we’re even starting to see some hot and heavy action in speculative names, which usually isn’t a great sign. All in all, the evidence is certainly more good than bad, so we’ve extended our line a bit but are also looking to be “pulled” into a more heavily invested position should more leadership names emerge. For now, we’ll leave our Market Monitor at a level 7.

This week’s list has something for everyone, with a lot of charts showing power, usually following earnings. For our Top Pick, we’re going to the cyclical side of the market, with a name that has out-of-this-world earnings and is just emerging from a tight area.

It’s another dreaded inflation week, yet there’s not much dread in the market right now, considering the S&P 500 is up 3.75% in May and the Dow is off to its best winning streak in May ever (!). Still, a “hot” CPI or PPI number this week could prompt another pullback like we saw in April, so this week we’re playing it safe by adding a reliable, large-cap, dividend-paying healthcare stock. It’s been a longtime favorite of Cabot Dividend Investor Chief Analyst Tom Hutchinson.

Details inside.

Markets have continued to improve, and so have economic statistics. Housing price increases—while slowing somewhat—are still on the rise, with the Case-Shiller Index posting a 7.3% increase in prices for the month.

ADP employment rose to 192,000, higher than the 183,000 expected. Job openings declined just a bit, to 8.5 million from 8.8 million last month. And the unemployment rate edged up from 3.8% to 3.9% in April.

Stocks are starting the week back in business after last week’s dip over the credit downgrade. The credit downgrade doesn’t appear to be having much effect on the market at this point. Unless that changes, the market appears poised to continue to forge higher, at least for the time being.

Meanwhile, it’s still earnings season and the past couple of weeks have been busy for the portfolio. Earnings had been very kind to the portfolio two weeks ago with Digital Realty (DLR), AbbVie (ABBV), and Intel (INTC) all getting sizable boosts with better-than-expected results. But the season soured on the portfolio last week as both Qualcomm (QCOM) and Star Bulk Carriers (SBLK) laid eggs.

We comment on earnings from Adient (ADNT), Dril-Quip (DRQ), ESAB Corp (ESAB), Frontier Group Holdings (ULCC), Gannett (GCI), Goodyear Tire (GT), Janus Henderson Group (JHG), Kaman Corporation (KAMN), Warner Bros Discovery (WBD) and Western Digital (WDC).

WHAT TO DO NOW: Continue to pare back and hold some cash—though you should also continue to hold your resilient stocks and keep your eyes open for an eventual turn back up in the market (and growth stocks in particular). In the Model Portfolio, we sold pieces of DoubleVerify (DV) and Celsius (CELH) earlier this week, leaving us with 36% in cash. We’ll stand pat tonight but will be on the horn if we have any further changes going ahead.

This is a short week as we begin the second half of 2023 with inflation down, recession fears fading, and the animal spirits of investors alive and well.

In the first half of 2023, market performance was positive and narrow, largely driven by the big tech names, and especially artificial intelligence (AI) related stocks. The Dow was up 3.8%, the S&P 500 gained 15.9%, and the tech-heavy Nasdaq was up 31.7%. We will continue to explore the world for the best value and growth stocks providing both conservative and aggressive ideas. EVs across the supply chain, resources, and emerging markets remain the focus but we have the flexibility to change course as opportunities arise.

The market continues to ride the soft-landing high. The S&P 500 returned more than 3% in July and is now up 19% YTD and within just 4% of the all-time high.

The bullish mood is brought on by the fact that the miserable inflation/Fed conundrum that drove stocks into a bear market last year is ending. And it appears that we will not have to endure a recession. Even though S&P earnings are falling for the third straight quarter, investors are bullish about the future.

This was another quiet week in the micro-cap world as large-cap stocks continue to roar higher.

Many large-cap companies have reported, but we will have to wait a few weeks for our micro-cap companies to report Q2 earnings.

Here are some takeaways from earnings season.

The good times are here again. The S&P 500 is up over 19% YTD and is now within just 4% of the all-time high. Stocks are in a strong uptrend that began in the beginning of May and appear likely to move still higher.

Inflation is crashing. The Fed is about out of bullets. And there is no recession in sight. Things could always discombobulate down the road. But there doesn’t appear at this point to be anything ahead in the next month or so that will change the current positive narrative.

This week, we comment on results from General Electric (GE), Mattel (MAT), Polaris (PII), Vodafone (VOD), Volkswagen AG (VWAGY), Western Union (WU) and Xerox Holdings (XRX).

Next week, twelve companies are scheduled to report.

We also include the Catalyst Report and a summary of the August edition of the Cabot Turnaround Letter, which was published on Wednesday. We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.

Earnings season is now in full swing, but central bankers stole the show this week.

On Wednesday the FOMC hiked by another 25bps (as expected) and Fed Chair Jerome Powell gave the market just enough for the bulls to remain in control, for now.

The highlights: First, he said he thinks the Fed can get inflation down to 2% by 2025 while avoiding a recession. The Fed’s staff no longer predicts a recession.

Let the good times roll. Inflation is collapsing. The Fed is almost done hiking rates and likely to turn distinctively more dovish in the 2024 election year. There is no recession and no signs of recession. Stocks are thriving. And it’s summer.

With 30 days left until the May 19 expiration cycle ends, we have the ability to lock in roughly 75% of the original premium sold.

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.

We currently own the GLD January 19, 2024, 145 call LEAPS contract at $37. You must own LEAPS in order to use this strategy.

I will be exiting the American Express (AXP) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET tomorrow, April 21.

As discussed in our weekly issue last week, I will be taking a position in American Express (AXP) today.

With 30 days left until the May 19 expiration cycle ends, we have the ability to lock in roughly 75% of the original premium sold.

Sell Another Third of Shift4 Payments (FOUR)


This bulletin concerns Shift4 (FOUR), which has been weakening of late but not cracking – until today, when a short seller effectively questioned the firm’s books, causing the stock to sink on heavy volume so far today.

We currently own the CVX January 17, 2025, 125 call LEAPS contract at $59.80. You must own LEAPS in order to use this strategy.

By the looks of it JPM will have its first 5% move immediately following an earnings announcement since October 2008.

Tomorrow marks the earnings releases of several big banks, most notably JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC).

I want to add some downside exposure so with DIA trading for 337.40, I want to place a short-term bear call spread going out 37 days and outside of the expected range to the upside, or 350. My intent is to take off the trade well before the May 19, 2023, expiration date.

Our DIA bear call spread has hit its stop loss, so we are going to stay mechanical and exit the trade.

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.