Stocks keep rising to new highs, though only a handful of sectors are truly participating in the rally. That will need to change if the market is to sustain its recent momentum, but for now, we’ll go with the tides and lean into one of the new-age subsectors that’s been attracting major sponsorship: GLP-1, a.k.a. weight-loss drugs. They’re all the rage these days and have driven portfolio holdings Eli Lilly (LLY) and Novo Nordisk (NVO) to great heights. And today, we add a more under-the-radar, indirect play on the trend in the form of a mid-cap health food upstart that was recently recommended by Tyler Laundon to his Cabot Early Opportunities audience.

Details inside.

Markets have been sideways in the past month, affected by wars, upcoming elections, and analysts see-sawing on the possibility of a Fed rate reduction. The Federal Reserve is meeting this week, and predictions for a rate cut this year are all over the board: none, one, or two.

I expect we’ll have more volatility as we near the fall election cycle.

In the meantime, economic stats look good! Manufacturing continues to climb, jobs are still being added at a rapid pace (272,000 vs. the estimate of 190,000), and the unemployment rate—at 3.9%—remains steady.

The market remains a mixed bag, with some big-cap indexes moving up, but just about everything else still stuck in a trading range, while leading growth stocks remain hit or miss. That said, there are some encouraging signs, including some fresher leadership and resilient action among a bunch of names we’re watching and own, so we continue to play things in the middle--we’re holding some strong names and actually averaging up on one of our stocks tonight, but we’re also holding a chunk of cash and being selective.

Despite some selling pressures early last week, the indexes rebounded nicely on nearly every small dip, and by week’s end the S&P 500 had gained 1%, the Dow was mostly unchanged, and the Nasdaq had risen by 1.8%.

Despite some selling pressures early last week, the indexes rebounded nicely on nearly every small dip, and by week’s end the S&P 500 had gained 1%, the Dow was mostly unchanged, and the Nasdaq had risen by 1.8%.

The market has been terrific. And it will probably finish the year higher than it is now. But there is reason for caution.

Because of sticky inflation, interest rates remain near the highest levels in 20 years and may continue to stay high or go higher, until they drive the economy down. A hugely contentious presidential election is about to take place. And there are two significant global wars going on.

Steep selloffs are common even in markets that rise over time. The S&P 500 doubled over the last five years. But it crashed 30% in record time at the onset of the pandemic in 2020. There was also a bear market in 2022 during which the S&P fell over 20% and the Nasdaq plunged well over 30%. Of course, most stocks were down a lot more than the indexes. If you targeted some of the very best stocks at fire sale prices you could have gotten amazing returns.

In this issue, I highlight a way to target the purchase of the very best stocks at fire sale prices amid market turmoil that may occur from the potentially market-roiling issues this year or next. Most investors don’t buy when the market is crashing because it’s natural not to want to try and catch a falling knife. But there’s a way to take emotion out of the equation and calmly plot a way to fantastic returns.

Despite some selling pressures early last week, the indexes rebounded nicely on nearly every small dip, and by week’s end the S&P 500 had gained 1%, the Dow was mostly unchanged, and the Nasdaq had risen by 1.8%.

It’s now been a couple of months since the market’s April low, but instead of a firm uptrend that’s telling you big investors are diving in or adding to positions, we’re seeing lots of split action. Whether this is a fresh launching pad for most stocks or near-term toppy action that will lead to a summer slump is anyone’s guess—right now, we’re just following along with the evidence, which means holding and targeting stocks that are fresher and under accumulation, raising stops and dumping names that crack and holding a chunk of cash given the sloppiness seen in the broad market. We’ll leave our Market Monitor at a level 7, but once again, it’s mostly about what you own.

From solar to chips to biotech to aerospace, this week’s list is another that has something for everyone. Our Top Pick is a turnaround-type chip player whose stock has decisively blasted off in late April as business is set to turn up.

It’s another week of inflation data, Fed speak and interest rate angst, but you shouldn’t let any of it influence what stocks you’re buying and selling. Stock of the Week is a long-term stock portfolio, and one week of parsing CPI data and Jerome Powell’s words isn’t going to alter the trajectory of your best stocks. Meanwhile, the major indexes are at all-time highs, despite some under-the-surface churn. So today, we take a big swing in the form of a small-cap, Canadian-based rare earths company that’s been in Carl Delfeld’s Cabot Explorer portfolio for months.

Details inside.

In 2000 a small company began selling a proprietary surgical adhesive to seal up arteries. Over the next two decades that company would acquire several highly specialized products for patients undergoing heart surgery.

Today, the company is hitting its stride as surgeons and patients (and the FDA) see how much better its solutions are.

This month’s Issue has all the details.

Renewable energy stocks have never lived up to their considerable promise, having peaked more than 16 years ago. And yet, there’s rarely been a bigger gap between the stocks’ value and the industry’s growth in the wake of the Inflation Reduction Act. Renewable energy projects – solar in particular – have taken off since President Biden signed that bit of eco-friendly legislation, in August 2022. Most solar companies are reporting record revenues these days. But the stocks haven’t followed suit, trading at 2018 levels.

That seems like a pretty extreme divergence between the industry and its companies’ share prices. So in this month’s issue of Cabot Value Investor, we add a solar company that’s capitalizing on the global investment in alternative energy, but is still woefully undervalued, trading at a mere 0.18x record sales.

Details inside.

This morning, from Normandy to Washington, D.C., there will be ceremonies honoring the 80th anniversary of D-Day. Now, we are amidst a different type of struggle, and semiconductor chips are at the heart of it all. And today’s new Explorer recommendation is one of the more important cogs in that global struggle.

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.

This was another quiet week in the small-cap world, but large-cap companies are in the full swing of earnings.

Earnings season represents a great time to “check up” on our micro-cap recommendations to make sure each investment case is on track.

Here’s what’s on tap for earnings this week in the large-cap world.

As interest rates were roiling the stock market last year, it seemed like the long bull market was over. By mid-October, the S&P 500 had slid 27% from year-end 2021. Since then, however, stocks have surged. Today, the S&P 500 is 30% higher than that Halloween-month nadir. And, the index is only 5% away from reaching its prior all-time high. Clearly, the bear market has ended.

For nearly 40% of stocks in the index, their stock prices are now above their year-end 2021 level. It’s not just mega-cap tech stocks like Nvidia (NVDA), which is now 51% higher, or Apple (AAPL), up 8%, or Microsoft (MSFT), up 2%. More prosaic stocks like Occidental Petroleum (OXY), up 110%, Cardinal Health (CAH), up 81% and Lamb Weston (LW) up 78%, have rebounded sharply, as well

We comment on earnings from Capital One (COF), First Horizon (FHN) and Nokia (NOK). Next week, the deluge starts, with ten companies reporting.

WHAT TO DO NOW: Remain bullish, but be prepared for some near-term (and possibly earnings-induced) gyrations. Today’s sharp drop in the Nasdaq and many leaders is a short-term shot across the bow—combined with some other factors, the odds are growing that we may finally see some selling that lasts for more than a couple of days. That said, the overall environment remains bullish, with higher prices likely down the road. All in all, we’re bullish but are taking things on a stock-by-stock basis and expect some further wobbles in the days ahead. Our only change tonight is that we’re placing Celsius (CELH) on Hold. Our cash position remains around 16%.

Cabot Options Institute Quant Trader is focused exclusively on creating consistent returns using high-probability options strategies including bear call spreads, bull put spreads, iron condors and more. Whether you have questions about the strategies, or even about setting up your account, or how to make your own trades, Andy will answer all of your questions

Aside from AI, a few other big-picture themes came into sharper focus for me this week.

All are positive for small caps.

First, economists and analysts are reducing their recession risk outlooks as the economy continues to hold up reasonably well. That’s good for small caps as they are more economically sensitive than mid and large caps.

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.

With the Russell 2000 ETF (IWM) trading for 172.95, I want to place a short-term iron condor going out 57 days. As always, my intent is to take off the trade well before the May 19, 2023, expiration date.

Our BITO March 31, 2023 puts are essentially worthless, so we can lock in some decent profits and immediately sell more puts.

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 need to roll our short calls in TIP prior to expiration. However, I intend on allowing our DBC short calls to expire worthless and sell more premium at the onset of next week.

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.

With the market tumbling, GLD and TLT have surged higher. As a result, the deltas of both positions are at parity, so we need to buy back our short calls and sell more.

With 39 days left until expiration, we have the ability to take off our DIA bear call spread for a nice profit.

The market tried to find support today, but as the hours have passed things continue to open up on the downside, with sharp losses in the indexes (especially the broad market). After last night’s sales we have a good-sized cash position, and today we’re going to sell a bit more, dumping our position in Uber (UBER), which is our weakest remaining stock and whose breakout has failed. Our cash level will now be around 57%. Details below.

Trimming BCAB, SGHT and NRDS

We currently own the MMM January 17, 2025, 90 call LEAPS contract at $41.40. You must own LEAPS in order to use this 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 Momentum 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 Momentum Trader features.