This month we’re jumping into a highly specialized financial services company that helps immigrants send money to friends and families overseas.

You can think of it as the modern version of Western Union (WU). But there’s more to the story than that. Starting with a vision that’s a lot more about helping customers than overcharging them.

The hook is that revenue growth is off the charts. And it’s profitable!

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.

Following a tough 9% dip in the Nasdaq and 6% haircut in the S&P 500, the market rebounded about as well as the bulls could have hoped--though, with that said, we don’t advise cannon-balling back into the pool per se, as the intermediate-term trend is mostly neutral here, interest rates are still a bugaboo and a lot of stocks still have work to do to repair the damage seen in late July and early August. Simply put, we see the past two weeks as a great first few steps for the market trying to emerge from its correction—but now we need to see continued follow through. We’ll bump our Market Monitor back to a level 6.

After a couple of so-so lists, this week’s crop of stocks is broad and includes many that have shown outsized buying volume of late. There are many enticing choices, but our Top Pick is threatening to break free from its recent launching pad and a giant post-IPO base after another great quarterly report.

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

We do a deep-dive into what ails Citigroup (C) shares and remain steadfast in our conviction.

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.

It’s September, which normally spells doom for investors. Even if that’s the case again this month, the “doom” is likely to be short-lived, as new bull markets like the one we saw in the first half of 2023 almost never up and fizzle. Short-term wobbles aside, share prices are likely to be higher by year’s end – perhaps much higher. With that in mind, today we take another dip in the growth pool by adding a favorite of Cabot Growth Investor Chief Analyst Mike Cintolo – a high-tech stock that’s already up more than 50% year to date and yet trades well off its late-2021 peak.

All of our positions look to be in great shape at the moment. Yes, there is a good chance we will be issued shares of WFC at the September expiration in 11 days, but that’s just part of the income wheel strategy. Sell puts until you are assigned shares. Sell calls against those newly issued shares until they are called away. Repeat.

We officially enter the quiet period for earnings this week. That being said, several companies with decent options liquidity are due to report this week in Kroger (KO) and DocuSign (DOCU). And next week several more are due report, with the highlight being Oracle (ORCL). All of this is basically a reminder that just even though another earnings season has passed us by there are still opportunities, while limited, to be had before the next earnings season begins.

Last week the market extended the recent rally. The move higher pushed the major indexes into a short-term overbought state while the VIX has, not surprisingly, moved into a short-term oversold state. Typically, when we see this type of short-term extreme hit the market a reprieve is right around the corner.

I had intended on adding a new position to the mix last week, but after coming down with my first case of Covid, I was down and out for a few days with little energy for adding new positions. However, now that I’m back in action I fully plan on adding several new positions to the portfolio this week, most likely over the next two days. Stay tuned for the alert.

The market is on course to have a nice week as the S&P 500 is higher by 3%, the Dow is up 1.2% and the Nasdaq tacked on 3% of gains. The VIX is trading at 13, which is lower by 17% on the week, which given the market’s gains is not surprising ahead of a long weekend.

The market is on course to have a nice week as the S&P 500 is higher by 3%, the Dow is up 1.2% and the Nasdaq tacked on 3% of gains. The VIX is trading at 13, which is lower by 17% on the week, which given the market’s gains is not surprising ahead of a long weekend.

One down, one to go.

Cannabis stocks soared today (August 30) on news that Health and Human Services (HHS) recommends cannabis get downgraded to Schedule III under the Controlled Substances Act, from Schedule I.

I predicted this a few days ago on the Cabot website, and in my last Cabot Cannabis Investor update on August 9.

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 market turned ugly again fast yesterday. It was the worst single-day selloff in years after reality crushed the pipedream that inflation is plunging and the Fed will stop being hawkish by early next year.

The headline inflation number came in at 8.3% for August versus an expected 8.1%. Although it was lower for the second straight month, after 8.5% in July and 9.1% in June, it was worse under the hood. CPI inflation was lower because of falling gas prices. Virtually everything else rose. Core inflation, which subtracts volatile food and energy prices, rose significantly from July to August.

A sizeable drop in the market indexes yesterday got all the headlines, as it leads to concerns the Federal Reserve will be more aggressive in raising interest rates to tamp down inflation that isn’t cooling as quickly as hoped. The drop plunked the markets on top of a zone of support – all the trading that happened below current levels in mid-June to mid-July – so there is no need to panic.

In our August 24 note, we commented that the current stock market felt like the scene in the 2000 movie “The Perfect Storm” in which the fishing boat Andrea Gail, after an intense battle with the storm, finds herself in calmer waters lit by rays of sunshine.

It has been a bullish weekend for crypto after SEC Chairman, Gary Gensler, issued a statement saying that Bitcoin and Ethereum should be regulated by the Commodities and Futures Trading Commission (CFTC), while “tokens” or cryptocurrencies that share the characteristics of equities should be regulated by the Securities and Exchange Commission (SEC).

Earnings season is over, although it starts again on October 13 with Walgreens Boots Alliance (WBA). Today’s note includes a summary of the podcast.

The broad market pulled back 7% in the week after Fed Chair Jerome Powell’s Jackson Hole speech and small caps did a little worse, drifting as much as 10% lower as of Tuesday’s close. But the last couple of days have been better, setting up what could be a little relief rally next week.

Of course, the CPI numbers (to be released next Wednesday) will likely dictate broad market movement in the back half of the week (they should show continued moderating inflation).

Markets continue to at best tread water. Yesterday, markets performed better as the Nasdaq Composite ended a seven-session streak of declines.

Kraken Robotics (KRKNF) shares were up 20% in their first week as an Explorer recommendation as the company signed a follow-on contract to supply additional KATFISH™ for the NATO Navy’s new mine hunting vessels.

The market has closed lower for three straight weeks and declined about 9% from the August high as we head into September. Where do we go from here?

The market is having trouble deciding. It’s still unclear what the primary threat or driver will be. Is the main problem inflation or recession? It remains to be seen if inflation has indeed peaked and if it’s headed lower. The state of the economy is also unclear. Is this a recession after two consecutive quarters of GDP contraction? It is also an open question if the economy remains buoyant or is declining from here.

Three straight weeks of market declines have moved the S&P 500 down 8.9% from the mid-August high. The selling is continuing this first day after Labor Day, so far.

It’s our old friends inflation and recession causing trouble. The market increasingly fears recession as the hawkish Fed raises rates to tame inflation and investors anticipate a hard landing. The weakness may continue in the weeks ahead, as September is historically the worst month of the year for the market.

This week, we had limited news but there was one update that I wanted to highlight:
RediShred (RDCPD) completed a reverse split on August 18th. For every five shares that you previously owned, you now own one share. The stock price adjusted up to account for the reverse split. The reverse split has no economic impact on RediShred. You still own the same percentage of the company.

I want to close out our SPY July 29, 2022, 405/410 bear call spread today for $0.35. By closing out the trade we can lock in 8.70%.

Today, I’m going to issue my first alert, but it’s going to be a bit of a dress rehearsal. I’m going to follow the trade per usual with an opening and closing alert, but I want to go through the process the first time, step by step, so everyone has an understanding of what to expect going forward.

Our PFE puts closed worthless last Friday. As a result, we were able to lock in a 1.30% return. Certainly not a home run, but definitely the beginning of piling up premium in the market stalwart.

So, in today’s trade alert, I want to sell more puts in PFE with the intent of eventually wheeling into the position.

As I’ve been stating over the past few weeks, gold and energy look like an interesting short-term setup given the extreme oversold levels.

Today, given the extreme oversold readings, I’m going to open a position in the SPDR Gold ETF (GLD), more specifically a bull put spread.

I’ve decided to go ahead and buy back our short calls in DBC and GLD for the opportunity to sell more premium in August. Both short calls in DBC and GLD have little to no premium left, so now is as good a time as ever to sell more premium in both underlying ETFs.

In today’s trade alert, like my last one, I want to start out by selling cash-secured puts with the intent of eventually wheeling into the position.
This will make our fifth position in the Income Wheel Portfolio. I’m still looking for a few good candidates for a Jade Lizard or two, but I remain cautious given the current market environment. Moreover, I continue to try to and create a good mix of stocks with different levels of implied volatility.

We’ve been sitting on the sidelines for about a week, staying fairly cautious, while the market continues to vacillate wildly.
We currently have one trade open, a SPY bear call spread at the 405/410 call strikes due to expire in 29 days. The trade currently sits with a probability of success over 89%, so we feel good about this one at the moment.

Last week we finished opening our final position in the Yale Endowment Portfolio. As it stands, we now have two portfolios up and running.

Today we are adding the last of the Yale Endowment Portfolio positions. So far, we’ve ramped up both passive portfolios, All-Weather and Yale Endowment, and will be focusing on adding a few positions in the active portfolios (Growth-Value and Patient) next week.

Before we get to the trades today, I want to discuss an important topic, risk management.

Since we started the All-Weather portfolio, roughly three weeks ago, the S&P 500 is down roughly 9%. And last week was one of the worst in market history. Yet, our All-Weather portfolio is up roughly 2%, proving not only the power of the All-Weather approach, but also the poor man’s covered call strategy.

We recently locked in two profitable trades in SPY and XOP. Today, we are going to go back to the well and place another bear call spread in the SPDR S&P 500 ETF (SPY). Implied volatility is still inflated.

In today’s trade alert, like my last one, I want to start out by selling cash-secured puts with the intent of eventually wheeling into the position.
This will make our fourth position in the Income Wheel Portfolio. Our goal is to ramp up to five to ten. As for our open positions, you can read my thoughts in the previous issue, or watch the webinar from last week.

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.