On the one hand, there are still a decent number of stocks that act well and are generally advancing, but on the other hand, more and more names across a variety of areas are hitting air pockets or simply falling by the wayside. To us, the divergence tells us the risk of a big character change is elevated, and that’s why we continue to advise holding a decent chunk of cash—but with plenty of stocks still acting well, we’re also OK with selective buying in names that are under strong accumulation. We’ll again leave our Market Monitor at a level 7, though we remain flexible and will adjust exposure if need be.

This week’s list is another eclectic one, with an increasing number of turnaround-type stories. Our Top Pick is a bigger outfit that’s very cheap but is starting to see some AI benefits—and the stock has shown exceptional power of late.

Stocks keep rising to new highs, though only a handful of sectors are truly participating in the rally. That will need to change if the market is to sustain its recent momentum, but for now, we’ll go with the tides and lean into one of the new-age subsectors that’s been attracting major sponsorship: GLP-1, a.k.a. weight-loss drugs. They’re all the rage these days and have driven portfolio holdings Eli Lilly (LLY) and Novo Nordisk (NVO) to great heights. And today, we add a more under-the-radar, indirect play on the trend in the form of a mid-cap health food upstart that was recently recommended by Tyler Laundon to his Cabot Early Opportunities audience.

Details inside.

Markets have been sideways in the past month, affected by wars, upcoming elections, and analysts see-sawing on the possibility of a Fed rate reduction. The Federal Reserve is meeting this week, and predictions for a rate cut this year are all over the board: none, one, or two.

I expect we’ll have more volatility as we near the fall election cycle.

In the meantime, economic stats look good! Manufacturing continues to climb, jobs are still being added at a rapid pace (272,000 vs. the estimate of 190,000), and the unemployment rate—at 3.9%—remains steady.

The market remains a mixed bag, with some big-cap indexes moving up, but just about everything else still stuck in a trading range, while leading growth stocks remain hit or miss. That said, there are some encouraging signs, including some fresher leadership and resilient action among a bunch of names we’re watching and own, so we continue to play things in the middle--we’re holding some strong names and actually averaging up on one of our stocks tonight, but we’re also holding a chunk of cash and being selective.

Despite some selling pressures early last week, the indexes rebounded nicely on nearly every small dip, and by week’s end the S&P 500 had gained 1%, the Dow was mostly unchanged, and the Nasdaq had risen by 1.8%.

Despite some selling pressures early last week, the indexes rebounded nicely on nearly every small dip, and by week’s end the S&P 500 had gained 1%, the Dow was mostly unchanged, and the Nasdaq had risen by 1.8%.

The market has been terrific. And it will probably finish the year higher than it is now. But there is reason for caution.

Because of sticky inflation, interest rates remain near the highest levels in 20 years and may continue to stay high or go higher, until they drive the economy down. A hugely contentious presidential election is about to take place. And there are two significant global wars going on.

Steep selloffs are common even in markets that rise over time. The S&P 500 doubled over the last five years. But it crashed 30% in record time at the onset of the pandemic in 2020. There was also a bear market in 2022 during which the S&P fell over 20% and the Nasdaq plunged well over 30%. Of course, most stocks were down a lot more than the indexes. If you targeted some of the very best stocks at fire sale prices you could have gotten amazing returns.

In this issue, I highlight a way to target the purchase of the very best stocks at fire sale prices amid market turmoil that may occur from the potentially market-roiling issues this year or next. Most investors don’t buy when the market is crashing because it’s natural not to want to try and catch a falling knife. But there’s a way to take emotion out of the equation and calmly plot a way to fantastic returns.

Despite some selling pressures early last week, the indexes rebounded nicely on nearly every small dip, and by week’s end the S&P 500 had gained 1%, the Dow was mostly unchanged, and the Nasdaq had risen by 1.8%.

It’s now been a couple of months since the market’s April low, but instead of a firm uptrend that’s telling you big investors are diving in or adding to positions, we’re seeing lots of split action. Whether this is a fresh launching pad for most stocks or near-term toppy action that will lead to a summer slump is anyone’s guess—right now, we’re just following along with the evidence, which means holding and targeting stocks that are fresher and under accumulation, raising stops and dumping names that crack and holding a chunk of cash given the sloppiness seen in the broad market. We’ll leave our Market Monitor at a level 7, but once again, it’s mostly about what you own.

From solar to chips to biotech to aerospace, this week’s list is another that has something for everyone. Our Top Pick is a turnaround-type chip player whose stock has decisively blasted off in late April as business is set to turn up.

It’s another week of inflation data, Fed speak and interest rate angst, but you shouldn’t let any of it influence what stocks you’re buying and selling. Stock of the Week is a long-term stock portfolio, and one week of parsing CPI data and Jerome Powell’s words isn’t going to alter the trajectory of your best stocks. Meanwhile, the major indexes are at all-time highs, despite some under-the-surface churn. So today, we take a big swing in the form of a small-cap, Canadian-based rare earths company that’s been in Carl Delfeld’s Cabot Explorer portfolio for months.

Details inside.

In 2000 a small company began selling a proprietary surgical adhesive to seal up arteries. Over the next two decades that company would acquire several highly specialized products for patients undergoing heart surgery.

Today, the company is hitting its stride as surgeons and patients (and the FDA) see how much better its solutions are.

This month’s Issue has all the details.

Renewable energy stocks have never lived up to their considerable promise, having peaked more than 16 years ago. And yet, there’s rarely been a bigger gap between the stocks’ value and the industry’s growth in the wake of the Inflation Reduction Act. Renewable energy projects – solar in particular – have taken off since President Biden signed that bit of eco-friendly legislation, in August 2022. Most solar companies are reporting record revenues these days. But the stocks haven’t followed suit, trading at 2018 levels.

That seems like a pretty extreme divergence between the industry and its companies’ share prices. So in this month’s issue of Cabot Value Investor, we add a solar company that’s capitalizing on the global investment in alternative energy, but is still woefully undervalued, trading at a mere 0.18x record sales.

Details inside.

It seems like only yesterday when winter/spring faded and summer rolled in. Our kids wrapped up their classes, reminding me of Alice Cooper’s timeless classic “School’s Out.” As Van Halen wrote, “Summer’s here and the time is right, for dancin’ in the streets.”

The stock market did some sweet dancing with an 11% surge from Memorial Day through early August. Unlike the cold, narrow winter at the start of the year, in which seemingly only the Magnificent Seven stocks ran higher, most stocks thrived in the summer sun. From the official start of the season, the average stock in the S&P 500 sprouted a 10% gain.

The market tends to be lackluster in the late summer. But that goes double for the last week of the summer.

Unless there is a riveting headline, the overall market is likely in a holding pattern until the rubber hits the road next week after Labor Day. Sobered up investors back from vacation will take a fresh look at things after they wrap up the summer and come back from vacation. What will they see?

We include our comments on earnings from Macy’s (M) and Kohl’s (KSS). Duluth Holdings (DLTH) will report on August 31.

Earlier this week, due to circumstances beyond our control, we suspended our rating on shares of Kopin Corporation (KOPN). This means that the shares have no rating: They are not a Buy, Sell, Hold or any other rating, but are in essence unrated. We apologize for this unusual situation.

After three rough weeks in August, small caps have finally begun to stabilize around their 200-day moving average line.

I’d like to say blame for the weak performance rests fully on the shoulders of small-cap financials due to rising yields, commercial real estate mortgage default risk, etc.

But the truth is most sectors have been weak. Small-cap health care looks downright awful, with the Invesco S&P Small Cap Healthcare ETF (PSCH) hitting a new low for the year late last week.

Today August 23 will be my last day as the author of Cabot Micro-Cap Insider.

After a fabulous first seven months of 2023, stocks are pulling back so far in August. What can we expect from here?

A pullback or consolidation in the market at this point is normal and even healthy. And that’s what this will have been if the market gets back on track. There are also two potential catalysts to reignite the rally this week: Nvidia (NVDA) earnings and Jackson Hole.

It was the May Nvidia earnings report that triggered the artificial intelligence tech rally that added another leg to the bull market. Another positive earnings report could reinvigorate technology stocks after a rough August so far. The Fed will also deliver comments this week at the annual Jackson Hole thing. Dovish remarks would be positive for the market.

The capital markets are always interesting, and seemingly more so now. A lot of trends are coming together that could drive some late-year turbulence.

Artificial Intelligence (“AI”) is this year’s hot topic. Following a remarkably strong outlook last quarter, chipmaker and AI beneficiary Nvidia (NVDA) is scheduled to report earnings on Wednesday. The company’s shares surged on Monday in advance of the report as speculators place bets for another blow-out report. Other Magnificent 7 tech stocks are riding the wave. If Nvidia’s revenues, earnings and guidance are uninspiring, tech stocks will have a rough year-end.

There were no earnings reports this week. Macy’s (M) is now scheduled to report earnings next Tuesday, August 22. Kohl’s (KSS) will report the following day, August 23. Duluth Holdings (DLTH) will report on August 31.

Today we are moving shares of four companies, Toshiba (TOSYY), Holcim AG (HCMLY), First Horizon (FHN) and ESAB Corporation (ESAB) from BUY to SELL.

Cabot Options Institute Quant Trader is focused exclusively on creating consistent returns using high-probability options strategies including bear call spreads, bull put spreads, iron condors and more. Whether you have questions about the strategies, or even about setting up your account, or how to make your own trades, Andy will answer all of your questions

Welcome to this week’s Cabot Macro Investor update.

I’m joking. We’re still all about small-cap stocks. But now that earnings season is over it’s all about the macro again. So we’ve got to address it.

In the second half of July, I felt like we were due for a pullback.

WHAT TO DO NOW: Remain cautious. The selling is spreading out now, so much so that our Cabot Tides have flipped to a sell signal as the number of new lows picks up. The odds still favor this being a correction, not a massive new downtrend, but most stocks (and especially growth stocks) remain under the gun. Tonight, we’re forced to sell our small remaining position in Shift4 (FOUR), which we gave every chance to hold up but has decisive broken down. We’ll also place ProShares S&P 500 Fund (SSO) on Hold given the Tides signal, though we’re holding onto what we own. All told, our cash position will be around 55%.

Beginning on a positive note, I’d like to remind you of the power of compounding returns when you stay in the stock market over time. For example, $100 invested in three-month Treasury bills in 1928 grew to only $2,141 by the end of last year while it became $46,379 invested in medium-grade corporate bonds and a stunning $624,534 if invested in a broad basket of stocks, according to data from New York University finance professor Aswath Damodaran.

China’s continued economic woes took center stage globally this week, as the country’s central bank unexpectedly cut key interest rates in a bid to spur economic growth, manage high debt in the property sector, and lower its 20% youth unemployment rate. An index of Chinese stocks traded in Hong Kong has fallen more than 9% this month.

HUBS, SITM and MSFT

Updates on NRDS, LUNG, TKR & ISEE

I will be exiting the Starbucks (SBUX) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET this Friday, May 5.

Sprout Social beat on the top and bottom lines after the close yesterday. Revenue rose 31% to $75.2 million (beat by $130K) while EPS of $0.06 improved from a loss of -$0.03 in the year-ago quarter and beat by $0.07.

As discussed in our weekly issue, and on our weekly call, I will be taking a position in Starbucks (SBUX) today. SBUX is due to announce earnings after the closing bell today (May 2). The stock is currently trading for 113.60.

Okay, it’s time to take some profits. Albeit on the small side, I’ve decided to lock in profits in our SPY iron condor and look to sell another iron condor after the Fed announcement tomorrow.

Terex reported Q1 2023 results that beat expectations after the close yesterday. The company also raised full-year guidance by more than the Q1 beat. The result should quiet some of the concerns of a slowdown and help the stock do well today.

I am buying back our short calls today and immediately selling more premium. Our May 5, 2023, 57 calls are essentially worthless, so let’s buy back our calls, lock in some profits and immediately sell more call premium.

There is little premium left in our May 19, 2023, 60 puts. As a result, I want to buy back our puts and immediately sell more put premium.

I will be exiting the Exxon Mobil (XOM) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET, today April 28.

Exxon Mobil (XOM) is due to announce earnings Friday before the opening bell.

Microsoft (MSFT) is due to announce earnings Tuesday after the closing bell.

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.