At the close of the August expiration cycle, back on the 19^th, the SPDR S&P 500 ETF (SPY) was trading for 422.14. Now it’s trading 3.7% lower at 406.60.

For the year the S&P 500 (SPY) is down 14.7%, while the tech-heavy Nasdaq 100 (QQQ) and small-cap Russell 2000 (IWM) indexes are lower by 22.8% and 15.7%, respectively.



Nothing has changed from last month’s issue. I still expect to see bouts of volatility going forward. I would like to say that most of the weakness is behind us, but unfortunately, I don’t have a crystal ball. Although, I will say that barring any real setbacks in inflation data or ongoing geopolitical concerns, I expect the market to hold the 2022 lows and potentially rally, particularly if inflation data subsides.

The portfolio continues to do well in what has been a very difficult market for most traders and their respective portfolios. While I would love to have more trades on, I’m perfectly fine keeping our level at five open trades per expiration cycle with the understanding that as opportunities arise, I will add more. But with a widely vacillating market and a host of bearish crosscurrents I plan on maintaining a fairly conservative approach. That being said, I also plan to add a hedging position to the mix for those that want a little portfolio insurance just in case the market pushes sharply lower. This will also allow us to add a few shorter-term trades to the mix.

I just wanted to remind everyone that starting September 12 our weekly issues will be released on Mondays instead of Fridays. This should allow me to give all of you more thorough weekly reviews and prep heading into the following week.

I just wanted to remind everyone that starting September 12 our weekly issues will be released on Mondays instead of Fridays. This should allow me to give all of you more thorough weekly reviews and prep heading into the following week.

There’s little doubt the market’s evidence has worsened of late, with our Cabot Tides and Two-Second Indicator re-joining the Cabot Trend Lines on the bearish side of the fence; thankfully, we went slow on the buy side in July and early August, and today, stand with about 65% in cash. But we’re also not completely in the storm cellar, as we still see signs the market could be in a bottoming effort (and in-between phase between bear and bull), so we’re happy to hold onto some resilient stocks and aim to nibble on potential leaders if the market can find its footing.


In tonight’s issue, we dive further into our thoughts on the market, but spend most of the time writing about future leaders, including a few from one sector that’s clearly in pole position to do well if the bulls can step up to the plate

Thank you for subscribing to the Cabot Undervalued Stocks Advisor. We hope you enjoy reading the September 2022 issue.

We’re not in the predictions business, so we have little use for predictions or forecasts. Our commentary includes perspectives from Warren Buffett and Yogi Berra.



This past month we covered a complicated earnings season and added two new stocks (State Street Corporation and Gates Industrial Corporation) while selling our position in The Coca-Cola Company.



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.

The traditional last week of summer on Wall Street went out with a whimper, as the market fell for a third straight week. The numbers weren’t pretty for the bulls as the S&P 500 fell 3.3%, the Dow declined 3%, and the Nasdaq fell another 4.2%.

The traditional last week of summer on Wall Street went out with a whimper, as the market fell for a third straight week. The numbers weren’t pretty for the bulls as the S&P 500 fell 3.3%, the Dow declined 3%, and the Nasdaq fell another 4.2%.

The traditional last week of summer on Wall Street went out with a whimper, as the market fell for a third straight week. The numbers weren’t pretty for the bulls as the S&P 500 fell 3.3%, the Dow declined 3%, and the Nasdaq fell another 4.2%.

We’re still thinking there’s a decent chance that the market’s action since May and June is part of a big bottoming process, but it’s also pretty clear that, even if that’s true, the market has more work to do—the selling of the past three weeks has erased many of the positive top-down signals from the prior month or two, with the intermediate-term trend of the major indexes pointed down, the broad market unhealthy and growth stocks in general again underperforming. We’re still aiming to hold onto resilient names, but having plenty of cash is also a must, as is staying flexible.


This week’s list has a bunch of good charts, reflecting the fact that many nooks and crannies of the market are still looking somewhat solid. Our Top Pick is a leader in a commodity niche that has a good launching pad and has come under strong accumulation.

The selling continued on Wall Street this past week, which has us trimming two more positions in the Stock of the Week portfolio. But most of our stocks are holding up well, and two in particular – Centrus Energy (LEU) and Ulta Beauty (ULTA) – are thriving. Today, we add a stock that not only insulates us a bit from all the selling, but also broadens our international exposure. It’s a value play, courtesy of Bruce Kaser, that’s also growing – up 24% this year!

Details inside.

I’m going to push back my hedge trade for next week as I plan on buying back most of our current positions and immediately selling more premium. Once I have a better idea of the premium we are able to bring in by selling more premium, most likely for the October expiration cycle, I will send out an alert with my hedge-based trade followed by a detailed explanation of how the trade will work going forward.

This week a number of Explorer stock retraced last week’s gains, with a major exception being the explosive 45% surge in Virgin Galactic (SPCE) on top of its previous week’s 25% surge. It appears that key test flights are forthcoming as well as more space mania and space ETFs.

The market is down today with the Dow falling 400 points so far. It might get uglier before the day is over.

Intel’s recently publicized struggles with its own chip production highlight the trajectory of this story. The company has been unable to successfully transition to leading-edge manufacturing technologies, and is seriously considering outsourcing to companies like Taiwan Semiconductor. Intel has long been the industry’s torch-bearer in chip self-reliance – with a strong aversion to using third party producers – so its change in mindset is a watershed event.

As I mentioned last week, the stock market is off to a great start with the S&P 500 at an all-time high. However, it’s important to remember that usually the market is choppy in February and March in the first year of a new party in the White House as shown below.

This week we had two companies reporting earnings, one reports next week, and the earnings deluge starts the following week with at least seven companies reporting.

The big news this week was, of course, the swearing in of President Biden and all the associated stories about the transition. Fun fact – portfolio holding Everbridge (EVBG) supplied its Mass Notification system to help keep Washington, D.C. area residents and visitors safe and tuned in during, and leading up to, the Presidential Inauguration.

Not much has changed with the market’s picture—most stocks (especially cyclical stocks) are very strong, and we’re happy that the Model Portfolio is off to a good start this year after a great 2020. However, things are also quite frothy, few stocks are at attractive entry points and there remains a bunch of crosscurrents (day-to-day rotation, etc.) that’s making timing trickier.

The market is off to a good start this year and anticipating wonderful things for 2021.

As value investors in a remarkably robust (exuberant) stock market, full valuation impels us to want to sell a stock. Such is the case with General Motors. On most conventional metrics, the stock is fairly priced. Through the courtesy of several friends, we’ve seen some of the math that Wall Street analysts use to justify prices well over $100/share and find them laughable, at best. As GM shares burst again through our price target, we were on the razor’s edge of selling.

The broader stock market continues to perform well. In fact, the S&P 500 has gained 12% since the election. This is the most ever (starting date 1950), according to Ryan Detrick of LPL Financial.

The positions remaining in the portfolio will benefit if the market continues to move higher.

This week we had two companies reporting earnings, one reports next week, and the earnings deluge starts the following week with at least seven companies reporting.

Marijuana stocks exploded higher this morning as investors speculated that the solid Democratic federal government resulting from yesterday’s Georgia election would be favorable to this fast-growing industry.

This tech behemoth is forecasted to grow at an annual rate of 18.76% over the next five years.

Included are the top five holdings in this technology ETF.

What is the one investment that is shunned and denigrated as a waste for your money? Cash. No one advises owning cash or short-term U.S. T-bills because they provide little in the way of interest income.

The top five countries in which this fund invests are: United States, 45.11% of assets; Mexico, 10.73%; Argentina, 8.27%; Brazil, 5.26%; and Cayman Islands, 5.05%. The fund has a current dividend yield of 8.07%, paid monthly.

This biotech is on the list of the top 10 IPO performers for 2020. It is expected to grow by more than 34% next year.

This pharmacy/clinic chain continues to struggle, but the shares are undervalued and pay a current annual dividend yield of 4.72%, paid quarterly.

Six hedge funds have recently purchased shares of this biotech.

This Real Estate Investment Trust is forecasted to grow its earnings at an annual rate of 17.47% over the next five years. The shares have a current dividend yield of 3.47%, paid quarterly.

Marijuana stocks as a whole remain very strong as we head into the holiday season, where trading is expected to be lighter and news announcements few. Today I have no recommended changes in our portfolio, though I do have a few updates, as well as a little advice on buying and selling.

This gold miner is expected to grow at an annual rate of 43.05% over the next five years.

This social media company beat EPS estimates by $0.10 last quarter. It is forecasted to grow by l52.3% annually, 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.