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.

The Senate banking committee is likely to approve key cannabis sector banking reform today.


Approval would be a significant catalyst for the group. So, it may spark a tradable rally.


Short-term traders may want to sell the strength in this volatile group. Another option would be to de-lever cannabis exposure by selling a portion of AdvisorShares MSOS 2x Daily ETF (MSOX) holdings and swapping the funds into the unlevered version, AdvisorShares Pure U.S. Cannabis ETF (MSOS). That maintains exposure to the group in front of expected catalysts ahead but dampens some portfolio volatility.

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the September 2023 issue.

The attention of most investors, commentators and analysts has been on the winners, notably the Magnificent Seven, driving this year’s stock market rally. As contrarians, we are fine with letting a few overpriced trendy stocks capture the spotlight. One place that draws our attention is the other end of the spectrum – those with the worst performance. While most of these stocks fully deserve the market’s dour judgment, some have favorable changes underway. We look into four large and mid-cap stocks that fit this description and one that does not. We also discuss a tactic to help improve one’s success in investing in out-of-favor stocks.

Our feature recommendation this month is Advance Auto Parts (AAP), one of the four major auto parts retailers. The shares have fallen sharply out of favor, but a comprehensive and much-needed overhaul is now starting.

We also include our recent Sell recommendations: Toshiba (TOSYY), Holcim AG (HCMLY), First Horizon (FHN) and ESAB Corporation (ESAB), and our suspension of our rating of shares of Kopin Corporation (KOPN).

The stock market is inherently unpredictable in the near term. That’s what makes it a market. But it has been especially hard to predict in recent years. And there might be more of the same going forward.

There could be continued economic growth with rising interest rates and inflation or an economy bounding toward recession in the next couple of quarters, or anything in between. Sure, the market could find the means to rally with a desirable in between scenario. But it is more likely that the market will just bounce around or move lower.

Amid such uncertainty, it makes sense to find stocks that can weather any scenario. Instead of placing a bet on what the Fed or inflation or the economy might or might not do, it makes sense to seek out an all-weather income generator.

In this issue, I highlight the stock of a company that operates in an incredible niche market that has provided earnings growth for 31 consecutive years and enabled the stock to consistently outperform the market in every kind of environment. The company is positioned for strong growth in the years ahead and is selling below its average valuations over the last five years despite the high-priced market.

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.

The Fed’s latest hawkish stance prompted an upside breakout in Treasury rates and a big late-week selloff in the stock market, with just about everything getting whacked. That action puts to bed the rally attempt from late August, of course, and reinforces our overall stance—the intermediate-term trend remains down, and with the broadening of selling pressure, we’re pulling our Market Monitor down to a level 5. To be fair, though, we’re not sticking our head in the sand: Yes, there are many worries, but the longer-term trend is still up and there’s plenty of evidence suggesting a resumption of the post-bear rally is coming at some point. Even so, it’s best to wait to see the bulls arrive first than to catch falling knives—right now, we advise holding plenty of cash.

While there aren’t many super-strong stocks out there, this week’s list has many that have taken the selling in stride thus far. Our Top Pick is helping to lead a group move that got underway a few weeks ago and could be starting its first pullback—further weakness would be tempting.

So much for the market being boring! The Fed – with its “higher for longer” vow – broke up the recent monotony, albeit not in a good way. The S&P 500 has dipped to its lowest level since June, and growth stocks have had a rough go these last two months. But all signs point to a fourth-quarter bounce-back – new bull markets almost never up and fizzle within a matter of months. Knowing this, today we add a beaten-down biotech stock with plenty of upside, a recent recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

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. I’ll continue to remain cautiously optimistic and patient until then.

All is well as we head towards the October 20, 2023, expiration cycle. Our BITO position is due to expire at the end of the week, and if all goes well, I intend to buy back our BITO calls, lock in profits and immediately sell more call premium. Otherwise, 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 bring in 5% to 10% worth of call premium over the next 26 days.

Earnings are due to officially begin in just over two weeks with the big banks reporting. Until then, the market gods offer up the liveliest week of the earnings doldrums with several potential opportunities, most notably in COST (COST), Micron (MU) and Nike (NKE). I’ll take a closer look at a potential Costco trade In this week’s Trade Ideas section.

It was a somewhat ugly week for the market as the Federal Reserve continued to push its hawkish agenda and the bond market reacted violently. By week’s end the S&P 500 had lost 2.93%, the Dow had fallen 1.89%, and the Nasdaq had declined by 3.62%.

It was a somewhat ugly week for the market as the Federal Reserve continued to push its hawkish agenda and the bond market reacted violently. By week’s end the S&P 500 had lost 2.93%, the Dow had fallen 1.89%, and the Nasdaq had declined by 3.62%.

Cabot Options Institute Fundamentals is focused exclusively on the Poor Man’s Covered Call strategy, which is a way to collect reliable gains from a relatively simple options strategy, without the substantial up-front cost of a regular covered call strategy.

Cabot Options Institute Earnings Trader shows you how to use options to profit during the most profitable period in the market: earnings season. Most people are unaware, but you can reliably collect a month’s worth of gains in a matter of days… and sometimes hours.

The market sold off sharply this morning after another hotter-than-expected inflation report—but, interestingly, the major indexes turned up early on, with the Dow closing up a huge 825 points (2.8%) and the Nasdaq rallying 232 points (2.2%), though individual stocks were far more mixed (though all closed miles off their lows).

We’re entering a period where macro factors are going to fade slightly as investors refocus on company specifics. That’s because earnings season kicks off tomorrow with financials.

The latest week of action suggests the market-wide bearishness is affecting Greentech, with only 6% of the U.S. listed stocks in our universe posting gains since our issue hit your inbox last Wednesday. At that time, we said Greentech is in a zone of support. It still is, but today’s early trading is pushing the sector toward testing a lower trendline we see as a crucial support level. We’re now also about a 6% decline from current levels to a test of the 27-month low set in May. Those two levels provide a band of support at 42-40 for PBW and, as our proxy for the Greentech sector, that’s important support we want to see hold.

Things haven’t been pretty in this market, to say the least. The summer rally topped in the middle of August, and it’s been downhill ever since. In September, the selloff became more inclusive and took just about everything down, including previously buoyant defensive stocks.
The main catalyst for the selling was the August inflation numbers that came out in September. Core inflation was far worse than expected, at a time when investors were hopeful that inflation had already peaked and there would be a light at the end of the tunnel. The market, which doesn’t take disappointment well, has since priced away most of that hope.

Stocks, of course, continue to tumble. Investors’ plates are overflowing with fears ranging from inflation to trade/military wars to financial collapse to the upcoming midterm elections in the United States.

• Ethereum Name Service (ENS) is up 7.5% this week while global markets are down
• FTT, the native token of crypto exchange FTX, surged 7% after a report that payment giant Visa (V) has partnered with the exchange to roll out crypto debit cards. “Even though values have come down there’s still steady interest in crypto,” Visa Chief Financial Officer Vasant Prabhu told CNBC
• Deloitte predicts 75% of merchants are currently looking to adopt cryptocurrencies as part of their digital payment strategies

For our recommended stocks, earnings season starts next week, led off by Walgreens Boots Alliance (WBA) on Thursday, October 13 and Wells Fargo (WFC) on Friday, October 14. The following week Mattel (MAT) and Nokia (NOK) report earnings. The earnings deluge for our companies starts the following week on October 24.

For our recommended stocks, earnings season starts next week, led off by Walgreens Boots Alliance (WBA) on Thursday, October 13 and Wells Fargo (WFC) on Friday, October 14. The following week Mattel (MAT) and Nokia (NOK) report earnings. The earnings deluge for our companies starts the following week on October 24.

Stocks struggled back from early losses yesterday after blue chips posted their biggest two-day gains in more than two years.

Explorer stocks had a good week with most up nicely and Infineon (IFFNY) up about 18%.

Perhaps the best indicator of where the U.S. and global economy is going are commodity prices. For example, copper prices are gaining ground though they are still far from highs reached earlier this year.

After an awful September and third quarter, the market roared back earlier this week on bad economic news.

A bad manufacturing and employment report indicative of a declining economy sent Treasury yields lower and stocks higher. The reason is that the sooner the economy rolls over the sooner the Fed will be done hiking and the sooner the market will recover. If we can just get on with a recession, this high inflation and aggressive Fed misery will end, and a new bull market can begin.

Waking up today to more rumors that Avalara (AVLR) is going to be sold to Vista Equity Partners wasn’t too surprising. Speculation had been swirling for weeks. But when the implied takeover price of 93.5 was announced anybody that follows this company did a double take. Was there an error in the press release? AVLR closed at 95.6 last Friday.

We will finally be initiating a position in our active portfolios (Buffett, O’Shaughnessy) this week. Stay tuned!

Cleveland-Cliffs (CLF), North America’s largest flat-rolled steel and iron ore pellet maker, just reported mostly upbeat second-quarter earnings.

Procept BioRobotics (PRCT) beat expetations yesterday, delivering Q2 revenue of $16.7 million (+97%) and giving full-year upped guidance of $66 - $68 million (a $7 million increases and compares to consensus of $61.6 million).

Earnings Recap: ABNB, SPT, FSR, AXNX, ARIS

Ingles Market (IMKTA) reported Q3 results this morning with revenue rising 14% to $1.46 billion and diluted EPS (for class A shares) dipping 6% to $3.57. Management citied rising fuel and food costs, as well as supply chain issues and labor costs as crimping gross margin.

Sprout Social (SPT) beat Q2 expectations on the top and bottom lines. Revenue grew 37.4% to $61.4 million (beat by $1.09 million) while EPS of -$0.04 beat by $0.02. Full-year guidance of $253.9 - $254 million is slightly above $252.7 million and implies growth of over 35%.

It’s not 1999 out there, but the market and individual stocks continue to repair the damage from the past few months. Today, we’re going to add a half-sized stake in Enphase Energy (ENPH), leaving us with around 70% in cash.

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

TransMedics (TMDX) reported yesterday afternoon with revenue beating while EPS came in a little light. Revenue rose 150% to $20.5 million (beating by $4.2 million) while GAAP EPS of -$0.41 missed by $0.06. Big picture, this was a good quarter and adds to the positive momentum the company showed last quarter.

Starbucks (SBUX)
As discussed in our weekly issue last week, and on our weekly call, I will be taking a position in Starbucks (SBUX) today. SBUX is due to announce earnings after the closing bell today (August 2). The stock is currently trading for 84.65.

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

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.