Not too much to report this week as we simply allow our August positions to erode in value, which as options premium sellers is a good thing. We enter earnings season this week, so I fully expect to add several positions to the portfolio over the coming weeks. We currently have six open position with the intent of getting up between eight and 10.

This month we’re digging into an emerging software star that specializes in helping brands communicate with consumers like you and me.

The details behind the technology are a bit technical. But if you’ve noticed an uptick in personalized emails and text messages letting you know it’s a good night to get takeout, or that those shoes you’ve been pining for are back in stock, you get the picture. Enjoy!

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 July 2023 issue.

Almost like an annual rite of passage, major banks reported their Federal Reserve stress test results last week. All major banks passed, in that their capital levels were in excess of the minimum requirements under the Doomsday Scenario conditions outlined in the test assumptions. We’re not the biggest fans of these tests, for reasons outlined in our monthly letter.

Citigroup remains a riskier bank relative to other majors, but also has a higher return-potential share valuation, plus a 4.5% dividend yield to reward patient investors.

The major indexes all closed last week near their highs, which is one big factor keeping the top-down evidence very bullish; nothing has changed with our big picture positive thoughts. That said, right now, we don’t think the situation is as strong as the indexes suggest—just looking at a variety of names, it’s clear many are consolidating even as the S&P and Nasdaq tested new high ground late last week. Again, we’re not saying that’s a big bugaboo, but right now, we continue to think being more discerning when looking for entry points makes sense, as does pruning some laggards if you have them. We’ll keep our Market Monitor at a level 7.

This week’s list has something for everyone, with a decent amount of cyclical exposure but also some true blue growth names as well. Our Top Pick is helping to lead a new group move in metal stocks in general (and copper in particular).

Another interest rate hike and negative second-quarter earnings growth have done little to slow the bull market rally or investor confidence, so this week we add a “Bull Market Stock” to take advantage of the strength. It’s a term coined by our Mike Cintolo, so naturally, today we add Mike’s favorite Bull Market Stock, one he recently recommended to his Cabot Top Ten Trader audience, a company that benefits directly anytime there’s a bull market and the big institutions are buying stocks hand over fist.

Over the past several weeks I’ve heard the phrase “the animal spirits have returned” at least six or seven times. Okay, I’ll give you one or two, but seven?

The overall market ends the month with another nice return. The S&P 500, the Nasdaq 100, and the Dow Jones were up 3.0%, 3.8% and 3.1%, respectively, in July. It’s been a tremendous run and one we should be excited about for a variety of reasons. Since mid-March the S&P 500 has gained 19.6% and now sits just 5.0% below its all-time high. To put things in perspective we are looking at one the best years over the past two decades … and one that is currently outperforming 2021 (solid green line).

Not too much to report this week as we simply allow our August positions to erode in value, which as options premium sellers is a good thing. We enter earnings season this week, so I fully expect to add several positions to the portfolio over the coming weeks. We currently have six open position with the intent of getting up between eight and 10.

So far, so good this earnings season.

We’ve had three successful one-day trades … 8.0% in JPM, 6.4% in IBM and more recently 5.4% in V.

Earnings announcements continue this week with a long list of more well-known blue-chip stocks due to announce. As I stated on our call last Friday, I hope to make at least two trades this week. During each earnings cycle we aim to make somewhere between 8 to 12 trades and given the opportunities ahead I don’t see any reason why we wouldn’t fall within our typical range.

As earnings season approaches the midway point, and following the Federal Reserve’s announcement of a 25-basis point interest rate hike last week, the market continued its ascent. For the week the S&P 500 gained 1%, the Dow rose by 0.65% and the Nasdaq added 2%.

As earnings season approaches the midway point, and following the Federal Reserve’s announcement of a 25-basis point interest rate hike last week, the market continued its ascent. For the week the S&P 500 gained 1%, the Dow rose by 0.65% and the Nasdaq added 2%.

The big-picture outlook with the market hasn’t changed, with all of our key market timing indicators bullish, many studies pointing to higher prices down the road and leaders--even those that have taken hits--showing little abnormal action. That said, near-term, the odds are growing we may see more choppy trading, if not a pullback of some sort, so we’re not pushing the envelope here and are ditching names that crack. Earlier this week, that meant selling one position, and today, we’re selling another, leaving us with 28% in cash.

To be clear, the odds still favor the next big move being up, so we’re aiming to put some money to work in new leadership that emerges on earnings, or current leadership that pulls in to support. For now, though, we’ll hold the cash and see how earnings season progresses.

Elsewhere in tonight’s issue, we go over a few new ideas, with the biggest write-up being what could be the #1 AI platform play (not picks and shovels, but actual platform) out there. It’s on our watch list.

As a practitioner in the investing world, I find theoretical debates to be sometimes interesting but usually not highly applicable to my work. This mirrors a favorite saying of mine, attributable to Albert Einstein: “In theory, theory and practice are the same. In practice, they are not.”

Based on resilient price action and cumulative strong earnings reports, we are purchasing another 2.5% stake in Okta, Inc (OTKA). Increasing our total position to 5% of the equity portfolio. We will continue to build a position in this name. From a technical perspective, we look for tradable stocks that are building a strong base, forming a cup and handle pattern. Furthermore, in my experience, stocks and cryptocurrencies breaking above their 21-day moving averages on volume can run.

With earnings season starting next week, few if any companies had much to say this past week. We had no companies reporting earnings this past week and only one provided news of any note.

So, we delve briefly into cryptocurrencies and more deeply into the fascinating financial, strategic and governance train wreck that is Wayfair (W).



Next Friday, Wells Fargo (WFC) reports earnings, and Mattel (MAT) and Nokia (NOK) report the following week. Then, the earnings deluge starts with 13 companies reporting during the week of July 24th.

The indexes had a good day, with growth stocks and the broad market doing even better. When the closing bell rang, the Dow was up 347 points while the Nasdaq was up 259 points.

The market has moved off the lows of last month. But stocks really aren’t going anywhere.
The problem is recession. An increasing number of economists are calling for a recession in the next year as the Fed aggressively raises rates and pulls back stimulus in an effort to tame this high and persistent inflation. Stocks are already at least partially pricing in a recession that may not even happen.

The first half results are in. The S&P 500 has had the worst first half since 1970. Not good.
All year long the market has grappled with the strong possibility that the Fed will have to induce a recession in order to tame the high and persistent inflation. There had been hope that a recession might be avoided. But recent evidence is indicating the recession scenario.

Not surprisingly with the holiday weekend, last week was a quiet week. And I bet this week will be quiet too.
But we did get some good news!

A rough second quarter came to an end last week. I would call this a “Nickels and Dimes” market; you make a nickel when the market goes up, and before you know it, you have lost dimes since the market goes down so fast. But that doesn’t mean you have to give up on your opportunity to profit.

The ProShares Short Bitcoin ETF (BITI) launched on Tuesday, June 21. This is the first ETF of its kind launched in U.S. markets, catering to investors (and bears) who are looking to hedge their cryptocurrency holdings. As active investors here at Cabot, we believe the launch of this product to be a compelling way for our readers to profit from short-term declines in cryptocurrency markets and offers a new way to hedge our long portfolio.

Weakness persists in most metals—and commodities in general—as investors continue to worry about the heightened risk of another recession. Despite the bad news, however, there are some promising areas of strength which we’ll discuss here.

Before we do, let’s start with the areas we’ve been avoiding. Industrial metals like copper, steel and aluminum just made fresh lows last week, with the former hitting its lowest level since 2020. “Dr. Copper,” the metal with a PhD. in economics, is especially worthy of mention.

The shares of this medical device company have recently been upgraded at UBS to ‘Buy.’

The shares of this medical device company have recently been upgraded at UBS to ‘Buy.’

Xometry (XMTR) has just announced that preliminary Q4 revenue will be $65.5 - $67.5 million. This is in the range of what we expected when factoring in the $3.5 to $4.5 million of acquired revenue from the Thomas Publishing business. And it’s above management’s prior Q4 guidance of $60 - $62 million. Excluding the acquired revenue, growth was roughly 64.5%.

This fintech company is expected to grow at an annual rate of 27% over the next five years.

The shares of this mega beverage maker were recently upgraded by Guggenheim to ‘Buy.’ The company has a current annual dividend yield of 2.81%, paid quarterly.

The shares of this mega beverage maker were recently upgraded by Guggenheim to ‘Buy.’ The company has a current annual dividend yield of 2.81%, paid quarterly.

This has been another extremely challenging week. Yesterday the Nasdaq opened in the green and was up over 2% before selling off hard into the close. It ended down more than 1%. Today, the Nasdaq is toying with a somewhat key technical level at 14,000.

Yesterday was an ugly day as the Nasdaq got off to a good start and was up more than 2% then faded, with the selling accelerating into the close. The index ended the day down more than 1% and today is toying with the somewhat critical 14,000 level.

The market is getting hit again today, though some stocks are trying to put up a fight. As of 12 am EST, the Dow is down 80 points and the Nasdaq is off another 134 points.

2022 has gotten off to a rough start for the bulls as growth stocks have gone through a mini-crash, and of late the selling has moved to the rest of the market. Whether this is the start of a real market correction, or simply a normal pullback, is anyone’s guess. Regardless, because we are selling calls to lower our breakeven on our stock purchases, the Profit Booster portfolio has held up much better than the overall market.

This Real Estate Investment Trust ETF began trading last September. It’s top five holdings include: Medical Properties Trust, Inc. (MPW, 1.66% of assets); Omega Healthcare Investors, Inc. (OHI, 1.59%); Spirit Realty Capital, Inc. (SRC, 1.57%); Vornado Realty Trust (VNO, 1.54%); and Equity Residential (EQR, 1.54%).

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 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.