Despite some worries early in the week, the bulls once again bought the dip, and pushed the indexes near all-time highs. For the week, the S&P 500 and Dow gained approximately 1.35%, and the Nasdaq rallied 1.7%.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the February 2024 issue.

Spin-offs should be in every value investor’s toolkit. In this issue, we are adding a spin-off, Worthington Enterprises (WOR), to our Buy recommendations roster.

We comment on recent earnings from Comcast (CMCSA) and provide updates on our other recommended stocks.

Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.

The primary evidence remains bullish, so we’re still thinking mostly positive, especially when looking at the big picture. But there’s no question things are getting more and more divergent: The broad market and even most big-cap stocks are flat to down so far this year, and more recently, as interest rates have backed up and financial stocks get hit, we’re seeing selling pressures start to spread. That doesn’t necessarily portend doom, but coming on the heels of a multi-month advance, this kind of action does raise the risk of a change in character; we’re going to pull our Market Monitor down a notch to level 7—still bullish, but holding a little cash, booking some partial profits on the way up and being more discerning on the buy side makes sense.

This week’s list has its share of hot stocks, and we’re impressed that we’re still seeing some strong earnings winners that are moving on very, very strong volume. For our Top Pick, we’ll go outside the tech space with a name that just lifted out of a multi-month base on earnings and could be leading a new group move. Try to buy on dips.

The major indexes are up to new highs, though they again have become very dependent on the Magnificent Seven in the last month after stocks of virtually all sizes and sectors rallied in November and December. Outside the Mag Seven, most stocks have been stagnant so far in 2024. Not so in the Stock of the Week portfolio, where we have multiple stocks hitting new highs, none of which belong to the Mag Seven, and TWO stocks that have doubled in the last year! We try and keep the hot streak going by adding a familiar, big-name growth stock that was beaten to a pulp during the bear market of 2022 and 2023 but has demonstrated some real momentum in the last three months. It’s a recent recommendation from Cabot Explorer Chief Analyst Carl Delfeld.

We made our third straight successful trade for this earnings cycle late last week. We were thankful to take quick profits in Microsoft (MSFT) Wednesday morning. All went as planned as MSFT opened well within the chosen range of our iron condor and, as a result, we were able to take off the trade for a nice one-day gain of 11.1%. Our total return for this earnings cycle stands at 23.2%.

Not much to say this week. The plan remains simple. I continue to focus on balancing out the overall deltas of our current positions by adding a trade, most likely a bull put spread. I’ll be concentrating on sector ETFs and individual stocks as the major indices continue to see low levels of volatility.

As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.

Despite some worries early in the week, the bulls once again bought the dip, and pushed the indexes near all-time highs. For the week, the S&P 500 and Dow gained approximately 1.35%, and the Nasdaq rallied 1.7%.

Despite some worries early in the week, the bulls once again bought the dip, and pushed the indexes near all-time highs. For the week, the S&P 500 and Dow gained approximately 1.35%, and the Nasdaq rallied 1.7%.

We were able to sell some call premium in PFE and put premium in BITO. As a result, we now have 6 positions in the portfolio with the hope to add a few more sources of income over the next week or two.

January offered us another good month as we brought in over 12% worth of premium. Let’s continue to keep it simple, stay mechanical and allow the strategy to do the heavy lifting. Our total returns now sit at all-time highs of 124.9%. We introduced the portfolio in June 2022 and continue to be impressed by the resilient and consistent nature of the income wheel strategy during all market environments.

The auto insurance market has been in a deep freeze since the middle of 2021. But now it’s thawing ... maybe even shifting into growth mode. That means huge potential for companies with direct access to the market.

That’s where today’s idea comes in. It’s a micro-cap internet company that offers unfiltered exposure to the auto, home and renters’ insurance markets.

All the details are inside the February Issue of Cabot Small-Cap Confidential.

The Federal Reserve held interest rates steady and signaled it is open to cutting later this year, especially if economic growth and employment slow in an election year. Big tech earnings so far are a mixed bag and below elevated expectations.

But cybersecurity companies have been resilient due to ever-growing demand. And today, we add a familiar cybersecurity name to the Explorer portfolio.

Our Cabot Cannabis Investor portfolio is up 35% this year. That’s more than 10 times the 3% gain for the S&P 500.

The broader cannabis sector has done well too, but not quite as well as our Cabot Cannabis Investor portfolio of the 12 best names in the space.

The New Cannabis Ventures Global Cannabis Stock Index and the ETFMG Alternative Harvest exchange traded fund (MJ) are up 14.5%. We’re up more than twice as much.

Our Cannabis Plus Insider Portfolio is up 39.3% since I launched it on March 29 last year. Here we have outperformed the market by threefold. The 39.3% advance compares to gains of 12.7% for the Russell 2000 index, and 22.3% for the S&P 500 over the same time. The smid-cap Russell 2000 is a more appropriate comp than large-cap names in the S&P 500. This portfolio invests in cannabis related companies that have the right kind of insider buying, and do not touch the plant.

The market has continued to hold up surprisingly well in the face of less-than-great inflation reports.

We’re in a period where it appears the pros of slightly stronger economic growth outweigh the cons of a slower-than-desired inflation retreat. Earnings season is helping to return focus to company specifics, for the time being.

Our earnings season really heats up next week as we should have at least six positions report. It’s going to be an intense week, so buckle up!

Retail sales rose 3% in January, the Census Bureau said yesterday, reversing November and December’s declines. Manufacturing output increased by 1%, following a steep 1.8% decline in December. Positive but slow growth right now might be just what we need to avoid more interest rate increases by the Fed.

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.

January inflation came out. It wasn’t good. Is this rally doomed?

It has been a good year so far in the market. The S&P 500 is up about 8% and the Nasdaq has rallied more than 13% in just the first six weeks of this year. Stocks have been lifted by optimism of a soft landing.

For the first time that I can remember, I didn’t watch the Super Bowl. We had been skiing all weekend in New Hampshire, and I was EXHAUSTED. I think our entire household was asleep by 8 p.m. It sounded like an incredible game, but I’m not upset I missed it. An amazing night of sleep was worth it. Maybe that means I’m getting old?

A few weeks ago, we introduced the Gartner Hype Cycle, which traces the path that all tech companies follow in what essentially is an immutable law of tech investing. Currently, tech stocks have passed the Peak of Inflated Expectations and are sliding down to the Trough of Disillusionment. A few will ascend back to prosperity along the “Slope of Enlightenment” if they maintain both their relevance and their competitive edge. But most will lose one or both of these traits and thus continue downward in what could be labeled the “Decline into Oblivion.”

Stocks are bracing for the January inflation report, which comes out today. The number could determine the next thrust of the market.

It’s been a good year so far for stocks, despite the slight pullback last week, as investors embrace the notion of falling inflation and a Fed that will finish raising interest rates around midyear. But a bad inflation report could put the kibosh on that optimism and send stocks reeling.

This week, we comment on earnings from Adient (ADNT), Brookfield Re (BANR), Brookfield Asset Management (BAM), Goodyear Tire (GT), Mattel (MAT), Newell Brands (NWL) and Western Union (WU).


Next week, Toshiba (TOSYY), TreeHouse Foods (THS), Conduent (CNDT), Ironwood Pharmaceuticals (IRWD) and Organon (OGN) report earnings.

This week has been taking place in the shadow of last week’s market-moving events.

Of course, I’m talking about the FOMC meeting and the resulting 25bps hike, followed by Jerome Powell’s press conference where the term “disinflation” reverberated around the conference room over and over. The event sent the market higher in a risk-on rally that extended the move from the day before.

Throughout U.S. history, federalists and states’ rights advocates have battled it out. Federalists believe in strong centralized power. The other side wants issues to get resolved locally. Federalists are usually on the left, and states’ rights advocates are normally conservatives. But not always. It depends on the issue.

Of the many scenarios I considered for Enovix (ENVX) following Q3 earnings, seeing the stock down 40% was way down the list. Clearly the risks are relatively high with a stock like this – not unlike an early-stage biotech company – but so too are the potential rewards.

We’ve had TransMedics (TMDX) for just two months and the stock has traded up 45% - 50% in that time frame, with very little volatility.

I’ve been trying to figure out a way to efficiently share expected earnings dates, consensus earnings expectations and other key data points with you. In that effort, I’ve programmed a spreadsheet to pull data from one of my sources (image below).

WHAT TO DO NOW: The market has been doing fairly well of late, so much so that our Cabot Tides are on the verge of a green light. That said, individual stocks remain hit or miss at best; we had one gap up strongly yesterday, but today, Wolfspeed (WOLF) is disintegrating after earnings—we’re forced to sell our half-sized position today. Details below—and we’ll have far more in tonight’s regular update.

I will be exiting the Mastercard (MA) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET tomorrow, October 28.

As discussed in our weekly issue and on our weekly call, I will be taking a position in Mastercard (MA) today.

SPY has moved significantly higher over the past few weeks. As a result, I’ve decided to take my SPY November 18, 2022 325/320 bear call spread off the table for a profit. Some may choose to hold on to the trade, just remember, we still have 24 days left until expiration and lots can happen over that timeframe.

As part of the Income Wheel approach, we allowed our Coca-Cola (KO) calls to expire out of the money at expiration last week. As a result, our calls expired worthless and we reaped the entire premium.

After allowing our DBC October calls to expire worthless, we need to sell more premium against our DBC calls, this time for the December expiration cycle.

The Cabot Profit Booster portfolio has three positions set to expire this afternoon. My plan is to simply let these calls expire, and then we will evaluate where we stand with the stocks come Monday/Tuesday morning, depending on market conditions.

Our BITO 14 calls for the October 21, 2022, expiration cycle are essentially worthless. Same goes for our GDX 26 calls.

CVX jumped over the past two days. As a result, we need to roll our October 21 calls into November. The jump in the stock has pushed our return to upwards of 35%, while the underlying stock is sitting at a 7.0% gain since we added it to the 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 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.