Last week the stock market once again had some wild ups and downs, led mostly by volatile moves in the bond market. And while the start of the week was ugly, the action Friday was impressive – though the situation in the Middle East may throw those good vibes from Friday right out the window. By week’s end the S&P 500 had gained 0.5%, the Dow had fallen 0.3%, and the Nasdaq had risen by 1.6%.

The market remains in a correction, with most indexes, sectors and stocks in control of the sellers, and until that changes, we’re advising a cautious stance with plenty of cash and little new buying; in the Model Portfolio, we trimmed further this week and are up to around 65% in cash.

That said, we’re staying alert for many reasons, not the least of which is that we’re starting to see some real, true oversold readings (which we consider “alerts”) and because more than a few growth stocks are resisting the decline, hitting higher lows since August. That’s not a reason to buy, but we’re keeping our watch list in good shape and are ready to move if the buyers appear.

Explorer stocks, with the exception of Neo Performance (NOPMF), held their own in a difficult week. The market concerns center on the impact of high interest rates and mortgage rates on consumer spending, investment, and economic growth.

We’re switching things up this month, steering clear of high-tech, medical devices and other fancy types of companies.

This company is super easy to understand, sells a product pretty much everybody adores, has a seasonal tailwind and is executing on its profit growth agenda.

All the details are inside this month’s Issue.

Ahead of the long holiday weekend the market had yet another good week. The S&P 500 gained 1.75%, the Dow rallied 1.5%, and the Nasdaq rose another 1.9%.

This week in an attempt to diversify the portfolio we are adding an energy play.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the October 2023 issue.

We include brief updates from investor day presentations by Philip Morris International (PM) and Sensata (ST), as well as comments on our other recommended names. We also share a view on how streaming services are changing the sports viewing experience, along with a thought on why Comcast (CMCSA) should be fine.

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.

I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.

The market looked ugly early last week before finding some support, but we’re going to need to see more before changing our stance. We will say that, with September in the rearview mirror, there are many studies that point to a year-end rally and we continue to see a decent number of potential growth-y leaders that aren’t far from overcoming some technical hurdles. In other words, now’s not the time to stick your head in the sand, but as always, we want to see it first (some decisive buying) before taking much action. We’ll leave our Market Monitor at a level 5.

This week’s has a broad array of resilient stocks, with our Top Pick in pole position to be one of the top growth stocks—if and when the market gets going.

October is the most celebrated month in Cabot’s native home of Salem, Massachusetts (i.e., home of the Salem Witch Trials). All month long, it’s one costume-heavy Halloween party. Will a similar party commence on Wall Street? The odds favor it. October has a long history of being a month where markets bottom – and rallies begin. In fact, it happened just last year. One area of the market that has already begun to rally is cannabis, thanks to some (long overdue) new legislation. So today, we add back a bit of cannabis exposure courtesy of Cabot Cannabis Investor Chief Analyst Michael Brush.

Details inside.

Our BITO calls expired worthless and as a result, we were able to bring in roughly 3.5% on the trade. I will be selling more calls early this week.


Otherwise, all continues to be well as we head towards the October 20, 2023, expiration cycle. There isn’t much to do other than allow time decay to work its magic as we head closer and closer to the end of the October 20, 2023, expiration cycle. If our positions act accordingly, we have the opportunity to buy back our positions early, lock in profits, and bring in 5% to 10% worth of call premium over the next week or two.

As I stated last week, volatility has once again made an appearance. However, as we have all seen over the past few months, sightings have been rare and, more annoyingly, fleeting. If volatility and in turn IV ranks are able to stay at current levels or potentially rise a little, we should begin to see opportunities pick up. As always, my goal is to have three to five open trades at any given time. With IV ranks low across the board the past few months, we’ve remained patient and kept our powder dry. But all of that is quickly changing, at least for the moment. If volatility continues to trade around these levels expect to see a few additional trades. As it stands, we have two open trades, one of which we opened late last week and thankfully, both trades look good at the moment.

I’m going to keep it short today, with just a quick update.


The earnings calendar is somewhat bare as we finally reach the end of the earnings doldrums. Next week, however, earnings season finally returns with several of the big banks due to report, including Citigroup (C), JPMorgan Chase (JPM), Wells Fargo (WFC) and several others. I expect to be a part of one, if not two, of those earnings announcements. Of course, I will go over a preliminary, detailed look at a trade or two in next week’s issue. However, until then, we should expect to stay on the sidelines as there just aren’t any opportunities that meet our strict criteria.

The bond market’s wild gyrations were once again front of mind for traders last week, though interestingly by week’s end the market was mostly mixed as the S&P 500 lost 0.75%, the Dow fell 1.34%, and the Nasdaq was virtually unchanged.

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This week, Dow (DOW) and Nokia (NOK) reported earnings. The deluge for our companies starts next week with twelve companies reporting.

Next week, we will publish the November edition of the Cabot Turnaround Letter on Wednesday and our proprietary Catalyst Report on Friday.

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Small caps are still trading at a very steep discount that implies very attractive returns in the coming year. The Wall Street Journal had a so-so piece on this earlier in the week.

The brief earnings rally is already petering as positive surprises from some high-profile companies are being offset by others. The hope of a corporate earnings soft landing is getting some cold water thrown on it.

Better-than-expected big bank earnings along with other earnings beats from notable companies like Netflix (NFLX), United Airlines Holdings (UAL) and Johnson & Johnson (JNJ) are being smothered by overall results. So far, overall results are below average for the quarter.

Explorer stocks were all up this week though it is not clear we are out of the woods yet. Sociedad Química y Minera de Chile S.A. (SQM) jumped from 83 to 90, Infineon Technologies (IFNNY) shares had double-digit gains, and Kraken (KRKNF) was up 8% yesterday and almost 20% over the last two weeks as smaller stocks are in favor.

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So far, earnings season is showing that investor expectations have become overly negative. Results from banks indicate that consumer activity remains healthy even as domestic economic growth stalls.

The experience for base and precious metals investors since March, when most metals peaked, has been something akin to Chinese water torture. To be sure, there have been periodic opportunities in select metals (and related industries) along the way. But the main trajectory for the sector has been steadily lower most of this year.

For our recommended stocks, earnings season started this week with reports from Walgreens Boots Alliance (WBA) and Wells Fargo (WFC). Next week, Nokia (NOK) reports, and the deluge for our companies starts the following week on October 24 with fourteen companies reporting.

The market has been rallying furiously over the past several days on earnings. Is this the Promised Land or more false hope?

It’s just the kickoff of the third-quarter earnings season and the nation’s major banks have reported. These banks are considered bellwethers for the U.S. economy and numbers are better than expected. The results are reviving hope among investors.

This week was a slow one with few updates to CMCI companies.
It’s earnings season for many large-cap companies, but we will have to wait until November or later to get updates from most micro-caps.

Okay, it’s finally time to dip our toes into a few new positions for our active portfolios. I want to start by initiating one trade in each of our active portfolios today and plan to ramp both Patient Investor and Growth/Value portfolios up over the next few expiration cycles.

CS Disco (LAW) is getting hammered today after the company lowered full-year guidance. The main issue is that the company’s Review solution isn’t selling as well as expected. The idea here is that revenue per customer jumps when they add more modules to the eDiscovery solution. This is a standard software business model.

With the overall market in an extreme, short-term overbought state after rallying almost 12% in just 27 days, I’ve decided to place a bear call spread in DIA. We already have a bear call in SPY and I want to add another in DIA today for the September expiration cycle. I also want to place an iron condor today and my hope is to add a bull put spread or two over the next few days to fully balance out our deltas.

We need to roll our August positions as there is little to no value left (good thing) and sell more premium. So far, our most conservative portfolio is up over 10% since we started to initiate positions back in early June. Even with the wild whipsaws since that time, the portfolio has managed to endure with flying colors, maintaining a nice, smooth equity curve.

Our passive portfolios continue to shine! Our Yale Endowment Portfolio is up over 20% and our most conservative portfolio, the All-Weather Portfolio is up close to 10%. Not bad for just over two months. I’ve found over the years that the most conservative approach is often the best. Less volatility, smooth equity curve, rarely any sleepless nights and over the long term, the results are historically better than more aggressive approaches.

Well, I think it’s about time to rip the Band-Aid off and close our August 19, 2022 SPY iron condor. As we talked about last week, the move in SPY has been a historic one since we added our position back on July 14. At the time SPY was trading for 375.87. Now, only 27 days later, the world’s largest stock index trades 11.7% higher at 420. Not too shabby for the bulls.

I will be exiting the Disney (DIS) trade today. I will discuss the trade in greater detail in our upcoming subscriber-exclusive webinar, at noon ET this Friday.

Our WFC 39 puts for the August 19, 2022, expiration cycle are essentially worthless. Same goes for our KO 57.5 puts. As a result, I want to buy back both our WFC and KO puts, lock in a decent profit and immediately sell more premium in both.

The good news today is that the bottom seems to have passed, for both the broad market and stocks in the cannabis sector. The S&P 500 was down 25% at the bottom, while the cannabis index was down 84% at the bottom—and for both, that seems enough.

Today’s CPI reading showed inflation moderating a little (not a huge surprise) and the market has, so far, loved the result. The Nasdaq has been up over 2% in the early going.

As discussed in our weekly issue last week, and on our weekly call, I will be taking a position in Disney (DIS) today. DIS is due to announce earnings after the closing bell today (August 10). The stock is currently trading for 110.60.

DigitalOcean (DOCN) delivered Q2 results yesterday that slightly missed on revenue but beat by a good margin on EPS. Revenue was up 29% to $133.9 million (missed by $600K) while EPS of $0.20 beat by $0.10. Full-year revenue outlook was left unchanged, but profit outlook was raised as management has, and will continue to, rein in spending.

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.