I hope everyone had a wonderful Fourth of July! On Wall Street, the celebration continues, as stocks have stretched to new 2023 highs as we enter the second half of the year. Several of our stocks are hitting new 52-week or even all-time highs, as the bull market is no longer just a mega-cap tech or AI stocks phenomenon, with many sectors and subsectors now along for the ride. So today, we add a cyclical stock that has been acting like a growth stock – so much so that it caught the attention of Mike Cintolo, who recommended it to his Cabot Top Ten Trader readers.

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.

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.

Due to the holiday-shortened week I am going to keep it short today.

We added a new stock to the mix last week, the DKNG August 18, 2023, 22.5 puts. Our total now stands at six stocks, but I don’t plan on stopping there. This week I intend to add one more stock/ETF to the mix, but unlike our other positions, this position will be a short-term trade lasting roughly 30 to 60 days.

Due to the holiday-shortened week I am going to keep the report short this week.


I am excited to inform everyone that I will be adding educational videos to the mix, focusing on all assets of the service. So, if you have anything, and I mean anything, that you would like for me to discuss or explain in greater detail please do not hesitate to email me with your requests.

Due to the holiday-shortened week I am going to keep it short today.


Earnings are slim to none this week. However, that all changes next week when the big banks kick off. JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC) as well as several other big banks are due to report in a little over a week. Yes, that’s right, the wait is almost over…earnings season kicks off Friday, July 14 and I fully anticipate making one if not two trades that day.



Until then, we patiently wait.

Overall, the market’s action remains as close to pristine as you could hope for. Under the hood, there has been a touch of rotation, with some growth stocks chopping around while cyclical, construction and materials names perk up. All in all, we wouldn’t be surprised if growth continued to catch its breath, as the recent pullback was very brief, but that’s short-term nitpicking: While dips and potholes will come, the bottom line is that the vast majority of evidence is bullish, so you should be, too. We’ll bump our Market Monitor up to a level 8, and think adding exposure (ideally on dips) makes sense.

This week’s list reflects the broadening we’re seeing out there, with a few tech names but many others from other corners of the market. Our Top Pick is a long-term winner in the aerospace and defense field whose stock just broke out.

You are receiving the typical Monday morning update today as the Cabot office will be closed on Monday, and then the stock market is closed on Tuesday. Have a great Fourth of July weekend!

You are receiving the typical Monday morning update today as the Cabot office will be closed on Monday, and then the stock market is closed on Tuesday. Have a great Fourth of July weekend!

It’s not a perfect picture, but the vast majority of evidence out there remains bullish, and that’s especially true for the vital leading index (Nasdaq) and leading growth stocks, which have rested normally after beefy, big-volume advances. We’re putting a bit more money to work today by averaging up in a current name, and will ideally put more to work when either (a) a couple of our current holdings overcome resistance (to average up), and/or (b) when some names on our watch list consolidate a bit longer.

In tonight’s issue, we talk about some of the confusion we’re hearing out there about sentiment (not a worry at all in our book), talk about one non-growth sector that reminds us a lot of oil stocks a couple of years ago (before that big run) and go in-depth on some new ideas and, of course, all our holdings.

Fed Chairman Jerome Powell’s continued warnings of future rate hikes weighed on markets as did the Biden Administration’s suggestion that there should be new restrictions on selling advanced chips to China. Despite this, chip stocks such as Nvidia (NDVA) and the PHLX Semiconductor index were down by less than 1%.

Artificial intelligence (AI) calculations largely take place in data centers full of servers with graphics processing units (GPU)s from Nvidia and its competitors. It is estimated that 20% to 25% of the company’s revenue from Nvidia’s AI chips have been coming from China. To avoid further upsetting Beijing, no action is expected until after Treasury Secretary Janet Yellen’s visit to China in July. Washington is also preparing legislation to screen China-bound investments by U.S. companies. AI, quantum computing, biotechnology and large-capacity batteries are at the top of the list.

There is a potentially nice trading opportunity setting up in cannabis near-term.

When Washington, D.C. lawmakers return from their July 4th break on July 10, they are likely to get down to serious business on the SAFE Banking Act.

This proposed law would boost investor interest in the space because it would allow banks to work with cannabis companies. This would help cannabis companies in several ways.

The Undiscovered Portfolio within ETF Strategist is delivering exactly the kind of return we’d hope to see in a down market, with three of four funds showing gains as of Thursday.

As you see in the table below, even the fourth fund has only a small loss of less than 2%. That’s well ahead of recent performance in the major indexes.

Hurricane season is upon us, a time of year that normally sees increased storm activity along America’s coasts. If a prediction by a major investment bank is correct, the U.S and other major countries will also experience an “economic hurricane” at some point in the coming months.

The “hurricane” prediction made headlines last week after JPMorgan Chase (JPM) CEO Jamie Dimon used the term to describe what he sees as a precarious balancing act the Federal Reserve must perform in trying to control inflation by raising interest rates without pushing the economy into recession.

We reiterate our bullish call that the highest-quality names have likely bottomed. This thesis stems from the fundamental financial performance of the names we have been tracking. As these companies have delivered high-quality earnings reports, their positive financial results have de-risked the process of investing in these great businesses. They are worth owning today, to hold well into the future, making it a compelling time to invest in areas like cloud computing, enterprise and SME software, semiconductors, financial technology, and cryptocurrency.

This week’s Friday Update includes comments on earnings from Duluth Holdings (DLTH). Two stocks are at or near our price targets and we summarize the podcast.

Explorer positions had an up week as the S&P 500 has begun a turnaround from bear market territory and is now down “only” about 13% for the year. This means it is up around 6% since hitting its recent low on May 19 as the Fed has softened its tone and China tries to get growth going.

Electric vehicle sales are set to more than triple to just over 20 million in 2025, according to BloombergNEF. This is up from a previous estimate of 15 million.

Things have gotten a little better in the market. The situation has gone from bad to crummy.

The S&P 500 rallied from the lows to move away from the bear market precipice. The index also closed the week in positive territory for the first time in eight weeks and actually managed to eke out a very slight gain for the month of May. It’s not much. But it beats spiraling downhill.



For the first time in ages, inflation numbers were better than expected. There were also some positive numbers for the economy today. There seems to be a feeling that stocks have priced in the current negative environment for now. And there is some faint hope that inflation will recede all by itself and therefore the Fed won’t have to drive the economy into recession.

This week, there wasn’t a whole lot of news. Last week, I closed out my BBX Capital (BBX) recommendation for a profit of +172%.

Is the market improving? There are some reasons to believe it might be.
The broader S&P 500 index has come right up to the precipice of a bear market, down 20% or more from the high on a closing basis. It closed down 19% and actually crossed the 20% on an intraday basis. The market had done a similar thing twice in the last bull market but stayed above the line and went on to rally from there.

In our view, the best, quality assets bottomed last week. After months of heavy selling across a myriad of asset classes, BITO is up 10% today on heavy volume. We reiterate this ETF as a BUY and feel this is an attractive entry point to own Bitcoin.
In the coming months, we expect to be more aggressive in our portfolio allocation, gaining exposure to high-quality U.S. equities and crypto assets. The multi-month decline in prices have increased the expected return of these assets.

With the gold price just slightly above its lowest level of the year, it has been difficult to be upbeat on the gold mining stocks.

The PHLX Gold/Silver Index (XAU), the industry benchmark for the actively traded North American miners, is also near a multi-month low and still below its 50-day moving average. In fact, almost every actively traded U.S.-listed gold stock is under the 50-day line—a feat seldom achieved except in the most voracious of bear markets.

In this week’s update, I’ll focus on how ETFs are responding to the Federal Reserve minutes, released last week. These kindled some optimism in the stock market, as you see here on a chart of the S&P 500. One reason for the market uptick? The Fed gave no surprises, and the market doesn’t like surprises!

This week’s Friday Update includes a summary of the recent Cabot Turnaround Letter, and comments on earnings at Macy’s (M). We also summarize the podcast and include The Catalyst Report.

This home building retailer beat analysts’ earnings estimates by $0.52 last quarter, and 33 analysts have recently increased their EPS forecasts for the company.

Rivian (RIVN) reported its first quarter as a public company yesterday. Adjusted EBITDA loss was -$727 million, slightly below consensus of -$690 million, while revenue of $1 million was slightly above consensus. The company ended Q3 with $5.2 billion, but we need to add $13.5 billion from the IPO to get a more accurate balance. Minus cash burn since the close of Q3 Rivian probably has around $16 billion now.

This home building retailer beat analysts’ earnings estimates by $0.52 last quarter, and 33 analysts have recently increased their EPS forecasts for the company.

Tomorrow is the expiration of our December covered calls, and I’m not going to sugar coat it—this month has not been kind to our stocks/trades. As @StockCats sarcastically said on Twitter, “It’s a stock picker’s market as long as you only pick the 7 stocks holding up the indexes.”

We are moving shares of GCP Applied Technologies (GCP) to a Sell.

Broad market volatility spilled over into some of the precious and industrial metal markets this week, including copper. The red metal was unfortunately a victim of Wednesday’s Fed-related whipsaw, which knocked us out of our conservative trading position in our favorite copper-tracking ETF, the United States Copper Index Fund (CPER).

The major indexes are mixed today, but that’s mostly as investors hide in defensive names while again pouring out of growth stocks. As of 11:45 am EST, the Dow is up 145 points, but the Nasdaq is down another 218 points (1.4%).

While these shares are trading at a discount, some company insiders have been adding to their holdings. The company is expected to grow earnings by more than 22% next year.

I’ve been in the business of writing and publishing investment advice for 35 years and over that time I’ve become a dyed-in-the wool, card-carrying optimist about the market.

While these shares are trading at a discount, some company insiders have been adding to their holdings. The company is expected to grow earnings by more than 22% next year.

It’s another ugly day out there as the market remains in wait-and-hear mode pending commentary from Fed Chairman Jerome Powell, who will update us on his latest thinking tomorrow. While investors seem to be finding a certain level of comfort with data showing vaccines and treatments are effective against the Omicron variant, the wholesale inflation number from today and prospect of rate hikes is casting a bit of a pall over the market.

This preferred stock is issued by a telecom company whose earnings are expected to grow at an annual rate of more than 85% over the next five years.

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.