We have three positions due to expire this week, all of which are profitable positions. As a result, I’ll be selling more premium early next week to replace our expiring positions and hopefully adding another one to two positions to give us eight total income-producing positions in our portfolio. Otherwise, we will continue to allow our wheel-based approach to work its magic. So far, we’ve managed to reap a total return of 114.7% since initiating our Income Trader service for Cabot Wealth readers 19 months ago.

We are completely flat at the moment.

Volatility continues to float between a fairly tight range of 12 to 14 which makes it challenging to sell premium, at least in the major indices. If we see a push to 15 or higher, I’ll most likely add a premium selling play in SPY. Until then, my focus is sector ETFs and individual stocks. I’m leaning more towards the former at the moment with earnings season upon us. But I’m definitely looking to sell premium shortly after a few key announcements in some of the big blue-chip stocks over the next few weeks in Microsoft (MFST), Visa (V) and a few others.

As I discussed in our first subscriber-only webinar of 2024, the week after the initial big banks announce is slow. Yes, there are a few more big banks that announced prior to the opening bell (GS, MS) this morning, but, as we talked about, we didn’t really want to hold an earnings-based position over the long weekend.

With expiration upon us, we have several trades to place during the holiday-shortened week. All but one position in our two “passive” portfolios (All-Weather, Yale Endowment) have short calls that need to be rolled. Additionally, there is a good chance that I will sell my 2025 LEAPS and extend my duration through buying new 2026 LEAPS. I like to do this when my LEAPS have 10-12 months’ worth of life. It is possible that I will wait one more expiration cycle before making the transition, but as always, I’ll let everyone know in my numerous trade alerts this week. It’s going to be a busy expiration cycle and a great opportunity to add some new positions.

The three leading indexes again made a run at new highs last week as the S&P 500 gained 1.75%, the Dow rallied 0.7% and the Nasdaq added 2.88%.

The three leading indexes again made a run at new highs last week as the S&P 500 gained 1.75%, the Dow rallied 0.7% and the Nasdaq added 2.88%.

It’s turning out to be a typical volatile January, with last week’s harsh selling among leading stocks leading to this week’s strong snapback that’s seen many leaders (including a few names we own) roar back to new high ground. That’s not to say the wobbles are over--in fact, we’d half-expect some more wiggles given earnings season is just getting started. But overall, things are volatile, but still bullish, so while we’re not flooring the accelerator, we are staying positive.


Last week, we sold half of one stock and placed another on Hold, but tonight, we’re going to start a new half-sized position in an old (from last year) favorite that we think got derailed mostly by the market environment last summer and fall--and now looks poised to do well if the market holds together.

Welcome to our TOP PICKS issue! For this issue, I asked the Cabot analysts to give me a couple of their top picks for 2024. I hope you will be pleased with the diversity—market-cap and sector-wise—that the analysts have offered.

But first, let’s talk about the market.

Things look good for 2024. Inflation is down, interest rates have likely peaked, and there is no sign of recession. But you never know. It’s a tough game to predict the future of the market. However, certain trends are likely to persist.

It’s a good bet that interest rates have peaked. Sure, they could edge higher from here. But they are unlikely to soar to new highs past 5% for the 10-year Treasury. The situation would have to completely reverse for that to happen. Meanwhile, stocks that have been dragged lower by rising interest rates have come alive again.

These stocks, which have strong track records of market outperformance, are at historically cheap valuations, have established upward momentum, and are positioned ahead of a likely slowing economy.

Also, artificial intelligence is here to stay. Businesses must spend on it not only for competitive advantage, but as a matter of survival. The new technology will continue to be a strong growth catalyst for technology stocks. And the trend will continue regardless of what the Fed does, or the state of the economy, or who is elected president.

In this issue, I highlight a fantastic dividend stock whose long record of strong performance has been interrupted these last two years. It’s also a company that focuses on technology and will surely benefit from the proliferation of AI in the years ahead. The timing for this stock should be outstanding.

2024 got off to a somewhat rocky start as the S&P 500 fell 1.8%, the Dow lost 0.6% and the Nasdaq lost 3.5% last week. And while the indexes fell there is rarely much to learn from the first week of the year as it is routinely “wonky,” with traders rotating from one sector to the next, and tax-related trading moving money out of recent winners.

Heads up: Because of MLK Day, next week’s issue will be published next Tuesday (January 16) after the close.

As for the market, we don’t want to repeat ourselves, but early January is known for sharp moves, and that might be playing out now. We’re not ignoring the short-term gyrations, especially if a stock really cracks key support, and, frankly, we’d expect some more tossing and turning, but we advise focusing more on the intermediate term—and on that front, the vast majority of evidence remains in the bull camp. We’re going to nudge our Market Monitor down to a level 7 to respect the wobbles we’ve seen, but overall we’re leaning bullish until the evidence changes.

This week’s list is an interesting one, with a batch of proven performers along with some off-the-bottom and more speculative situations. Our Top Pick is a name that was left for dead during the bear phase but has the makings of a powerful turnaround as revenue growth accelerates from modest levels and some newer offerings take root.

Stocks had a sluggish first week of 2024, but it’s not cause for concern yet. In fact, all of the Cabot Stock of the Week holdings are acting well enough that we haven’t had to subtract from the portfolio in weeks, allowing it to swell to 26 stocks with today’s new addition. It’s an undervalued dividend stock that is showing signs of life with interest rate cuts now firmly on the horizon – which should directly benefit its business. Tom Hutchinson just recommended the stock to his Cabot Dividend Investor audience.

Details inside.

For many of your value stocks on the recommended list, the New Year’s rebound continues. Most of these shares were heavily over-sold late last year. Almost given up for dead, shares of Organon (OGN) have surged 38% since hitting an all-time low in mid-October. Similarly, shares of Barrick Gold (GOLD) are up over 43% since their nadir in November.

It been a good start to the year, with the S&P 500 up over 4%. There is optimism that the Fed will lose its hawkish nerve as inflation falls and the economy turns south. Inflation was lower again in December, with CPI of 6.6% versus 7.1% in November and 9.1% in June. At the same time the economy is weakening, and most economists are predicting recession this year. Since markets tend to anticipate six to nine months into the future, it might not be that long until investors start sniffing out the end of the inflation/Fed conundrum and past the recession into a recovery.

With today’s note, we discuss the earnings report from Wells Fargo & Company (WFC) and provide updates on several recommended stocks.

The inflation outlook has certainly moved toward the “less bad” end of the spectrum over the last week. That’s the big-picture reason stocks have been doing well since last Friday. On Tuesday the NFIB Small Business Survey (December data) showed that the percentage of small businesses with job openings is falling, as are the percentage of businesses expecting to increase hiring over the next three months and the percentage planning to raise average selling prices.

Cannabis stocks continue to get weighed down by the SAFE banking debacle. As you recall, late last year legislators failed to approve cannabis sector banking reform called the SAFE Banking Act that would have made it easier for banks to serve cannabis companies.

We’re only a week into the new year, but it’s been a good start for your value stocks. On average, prices of the stocks on the recommended list (excluding ARCO, which we sold last week) have increased nearly 7%. This is a favorable start, both in absolute terms and relative to the 3% jump in the S&P 500 Index.

So far, I like 2023 a whole lot better than last year. At midday on Monday, the S&P 500 is up 3.7% and the Nasdaq is 4.5% higher so far this year. And it hasn’t even been five full trading days yet. Later this week, the December CPI number will come out, on Thursday. CPI is expected to be 6.6%, versus 7.1% in November. Assuming the number comes in at or better than expected, it could be very positive for the market. Falling inflation means the Fed won’t have to be as aggressive and investors could start sniffing out an end to this inflation/Fed conundrum later in the year.

With today’s note, we make changes to ratings on two stocks (Macy’s and GE Healthcare Technologies), discuss the earnings report from Walgreens Boots Alliance (WBA) and provide updates on several recommended stocks.

WHAT TO DO NOW: Remain defensive. Early January is often marked by crosscurrents, and this year is no different, with a few intriguing rays of light popping up—but the market’s trends are pointed down and there remain far more sinkholes than shooting stars among individual stocks. In the Model Portfolio, we’ve shielded most of our money from harm’s way in recent weeks, but a couple of our names have been getting hit with growth stocks of late. Tonight, we’re forced to sell our half position in Enphase Energy (ENPH), bringing our cash position up to 80%. Details below.

U.S. conglomerates, all the rage in the 1970s and into the 1980s, are still alive and kicking though investors prefer a more sector and global approach.

Yesterday, General Electric (GE) completed the spinoff of its healthcare business, GE HealthCare Technologies (GEHC). GE HealthCare, which makes MRI machines and other medical equipment, now trades on Nasdaq under the ticker symbol GEHC.

A terrible year in the market just ended and it is highly likely that this year will be much better. That’s good news. The bad news is that the first part of 2023 may be just like 2022.

The results are in. The indexes returned the following for 2022; S&P 500 (-19.4%), Dow Jones (-9%), and the Nasdaq (-33%). It was the worst year for stocks since the financial crisis year of 2008. Plus, many individual stocks were down far more than the indexes.

In last week’s issue of Cabot Stock of the Month, I introduced you to a new section of the newsletter—ETF Strategies, which combines the portfolios and strategies of the former Cabot ETF Strategist newsletter.

I also created Risk Tolerance classifications: A for Aggressive, M for Moderate, and C for Conservative, for both ETF Strategies and the investments in the Cabot Stock of the Month portfolio.

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.

With the market looking iffy, the Fed on tap next week and a new Issue slated for Wednesday, I’m going to reduce our exposure a little today by selling Samsara (IOT).

August and September have brought plenty of ups and downs for the stock market, and not surprisingly the Profit Booster also had its ups and downs. One of our trades didn’t work, two are good, and two will expire for full profits. Let’s dive in …

We currently own the EEM January 19, 2024, 30 call LEAPS contract at $11.50. You must own LEAPS in order to use this strategy.

We placed our SPY trade on September 9th for $0.75, now it stands at $0.25 with 36 days left until expiration.

Shares of steel producers plunged on Wednesday after Nucor (NUE) said it expects third-quarter earnings to come in under Wall Street’s estimates.

We’re going to step away from Ingles Market (IMKTA) today and book a modest, single-digit loss on the name. I’ve had IMKTA on a short leash following the stock’s reversal soon after it hit an all-time high on August 23.

Greetings. I’d like to intro myself as the new editor of Cabot Sector Xpress Cannabis Advisor.

With the Russell 2000 ETF (IWM) trading for 183.51, I want to place a short-term iron condor going out 38 days. My intent is to take off the trade well before the October 21, 2022, expiration date.

We just placed our QQQ bull put spread two days ago, but with 42 days left until expiration and the ability to lock in over 50% of the original premium sold I intend on taking off the trade and establishing a few new trades over the coming days, possibly even later today.

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.