This morning, from Normandy to Washington, D.C., there will be ceremonies honoring the 80th anniversary of D-Day. Now, we are amidst a different type of struggle, and semiconductor chips are at the heart of it all. And today’s new Explorer recommendation is one of the more important cogs in that global struggle.

It was a down week for the market as the Dow initially led the indexes lower early in the week, then was followed by the Nasdaq later in the week. Though on a positive note, the market rebounded nicely from its lows on Friday afternoon.

By week’s end the S&P 500 was down marginally, while the Dow and Nasdaq both lost 1%.

It was a down week for the market as the Dow initially led the indexes lower early in the week, then was followed by the Nasdaq later in the week. Though on a positive note, the market rebounded nicely from its lows on Friday afternoon.

By week’s end the S&P 500 was down marginally, while the Dow and Nasdaq both lost 1%.

It was a down week for the market as the Dow initially led the indexes lower early in the week, then was followed by the Nasdaq later in the week. Though on a positive note, the market rebounded nicely from its lows on Friday afternoon.

By week’s end the S&P 500 was down marginally, while the Dow and Nasdaq both lost 1%.

After a sharp correction in early April, the market posted a nice, but not powerful, rebound for four weeks but the past two weeks have definitely hurt the near-term evidence, whether you look at the overall market or leading stocks, where some abnormal action has appeared. There’s still more positive evidence than not, but at this point it’s very much a mixed bag, with some stocks acting fine, some coming under the gun and lots of up-and-down action. We’ll leave our Market Monitor at a level 7, but it’s vital to be in the right names and sectors.

This week’s list has many resilient names, including a few that have been out of the spotlight for a while. Our Top Pick is a small medical device outfit that, thanks to a good-sized acquisition of late, looks like a major player in the spinal surgery area, with new products and technology selling well.

Most stocks have barely budged the last two and a half years, but the Magnificent Seven and a handful of large-cap artificial intelligence-related leaders have picked up the slack, resulting in a 22% gain in the S&P 500 since the start of 2022. So, we’ve tried to play the hits here at Stock of the Week, adding a couple Mag. Seven names to the portfolio and several AI plays. All of them are up double-digit percentages (and one triple-digit winner!) in little more than a year. Now, with the market’s tides starting to shift away from AI and the Mag. Seven and toward other, long unloved sectors, we pivot toward one of the new favorites – retail – by adding a recent recommendation from Mike Cintolo to his Cabot Growth Investor readers.

Details inside.

The market’s rally has run into trouble, with our Cabot Tides and Two-Second Indicator effectively back on the fence. When it comes to growth stocks, most are acting more resiliently than the broad market, but even there it’s hit and miss, with lots of air pockets though many names that are acting well, too. Because of the divergent action, we’ve had a flurry of moves since the last issue, paring back or selling three names, but putting money to work in two names (including a new addition last week). All told, we’ll still have about 27% in cash and have a few stocks that look great, but are also keeping a close eye on a couple that remain iffy.

In tonight’s issue, we go over all our thoughts on the market and our various moves, as well as write about the solar sector that may be getting going after a long slumber, as well as small caps in general, which could finally get going ... if interest rates behave themselves.

Cannabis stocks remain unloved by investors. This makes the group buyable because catalysts are on the horizon.

The tricky part now is that it is more difficult to predict that we may see a catalyst near term, or even when the next one will occur. Patience is required.

Here is a look at the four main potential catalysts.

Sizing up a merger arb opportunity requires more than just garden variety equity analysis. In his famous letter to Berkshire Hathaway shareholders in 1988, Warren Buffett laid out four questions to answer regarding arbitrage situations:

1. How likely is it that the promised event will indeed occur?
2. How long will your money be tied up?
3. What chance is there that something still better will transpire – a competing takeover bid, for example?
4. What will happen if the event does not take place because of anti-trust action, financing glitches, etc.?

Today, we add a new Cabot Turnaround Letter recommendation that we think comes close to answering all four.

In an effort to keep the Profit Booster portfolio as diversified as possible, today we are adding an emerging broker play that is coming off a strong quarter, and just last night announced a large buyback.

All in all, the good-not-amazing environment remains in place, with intermediate-term uptrends intact for the major indexes and a solid amount of good-looking leadership out there. That said, there also remain a fair number of potholes out there, and most broader indexes tested their 50-day lines late last week. All told, there are plenty of stocks in a variety of sectors that are working, so we’re bullish, but picking strong names, targeting decent entry points and booking a few partial profits on the way up are advised. We’ll leave our Market Monitor at a level 8.

This week’s list has something for everyone, and we like how many of them have shown excellent power of late. Our Top Pick looks like an institutional way to play the energy transition trend. Aim to enter on dips.

It’s a great time for income. The market is at an all-time high. The May through November period is historically a more lackluster period for stocks. Income generation is an ideal way to generate positive returns when stocks aren’t rising. But not if the stocks generating the income get knocked down by rising rates.

There is a great answer: midstream energy stocks. These are companies that transport and store oil and gas for a fee. The subsector is among the highest yielding of all income-generating stocks. And unlike many dividend stocks, they have thrived over the last few years of rising interest rates. For the most part, these stocks are not interest rate sensitive and can endure inflation or recession. They have proven to be the perfect sector to generate a high income in this market environment.

In this issue I highlight a stock that has been the very best income generator in the Cabot Income Advisor portfolio. It has been held profitably in the portfolio on three past occasions. Each time it delivered a positive total return along with several covered calls for huge income. It’s a tested and true income-generating superstar.

Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.

The rally is floundering in August.


A pullback of sorts isn’t unusual or unexpected, especially in the waning days of summer. Many investors are focused on squeezing in more summer before it slips away and they aren’t paying attention to the market.

In terms of micro-cap news, we had four updates that I want to highlight (more details below):

1) 2seventy bio (TSVT) reported earnings and hosted an earnings call. I still believe in the stock’s long-term outlook.
2) Unit Corp (UNTC) announced a $2.50 dividend and strong earnings.
3) P10 (PX) announced a strong quarter.
4) Medexus (MEDXF) announced a strong quarter.

Earnings season is about over. And the end of the summer is upon us.

This is a weird time of year for the market. Investors tend to pay less attention because many of them are focused on trying to squeeze in the last bit of summer fun and laxness before it slips away. The market tends to do whatever it was doing before people stopped paying attention.

It was going sideways, and that is what it will likely continue to do for the next several weeks. Of course, a major headline could certainly change that. But most often these waning days of summer tend to be less eventful.

Last week, our opening comments chastised the U.S. Government for such profligate spending that the most likely path as forecast by the Congressional Budget Office is for remarkably high and steady budget deficits into the distant future. We hesitated to write such a gloomy note – and didn’t mention that this is perhaps the greatest risk that long-term investors face (making blips like the next Fed rate decision or Amazon’s next earnings report seem irrelevant).

We worried that we were taking a grim outlier perspective after so many others had dismissed the Fitch credit rating downgrade. However, recent articles in The Wall Street Journal and other high-quality media outlets vindicate our math and view. This is little comfort – I wish that I were totally wrong and that my math or outlook was missing some key facts.

We comment on earnings from Bayer AG (BAYRY), Berkshire Hathaway (BRK/B), Brookfield Reinsurance Ltd (BNRE), Elanco Animal Health (ELAN), Kopin Corporation (KOPN), L.B. Foster (FSTR), Six Flags Entertainment (SIX), TreeHouse Foods (THS), Tyson Foods (TSN) and Viatris (VTRS).

The last two weeks have been a lot less fun than June and most of July. But big picture, a pullback is not remotely surprising.

Through yesterday’s close, both the large and small-cap indices were down about 2.6% from their recent highs. The Nasdaq was down almost 5%.

What is a little surprising is the rapid change of tone out there. This can be squarely blamed on Fitch’s downgrade of U.S. debt and Moody’s bearish notes on those 10 banks they think don’t look so hot.

At least four states posted record cannabis sales in June and July, Illinois, Maryland, Massachusetts and Missouri.

These sales trends and ongoing legalization around the world are why global cannabis sales will hit $104 billion a year by 2030, says a recent report from Vantage Market Research. That would represent an annual growth of 26% a year from 2023 to 2030.

Despite these positive trends, cannabis stocks are being held back by delays in reform efforts in Washington, D.C.

As most everyone knows, last week, Fitch Ratings downgraded the credit rating of U.S. Long-Term Foreign-Currency Issuer Default Rating (IDR) to AA+ from AAA. This follows by a decade a similar downgrade by Standard & Poor’s.


The response by politicians, media, capital markets participants and commentators was a big yawn at best, with more than a few sharp dismissals and denials of the report’s relevance, timeliness and accuracy.


In the real world, which is outside of the publicity bubble, what does the downgrade actually mean? In the near term, almost nothing. The ability of the U.S. government today to attract capital on respectable terms and repay its debts on time and in full is rock solid. Few if any sovereign debt has a repayment track record and underlying fundamentals that are as sturdy as that of U.S. government debt.

Stocks are starting the week back in business after last week’s dip over the credit downgrade. The credit downgrade doesn’t appear to be having much effect on the market at this point. Unless that changes, the market appears poised to continue to forge higher, at least for the time being.

Meanwhile, it’s still earnings season and the past couple of weeks have been busy for the portfolio. Earnings had been very kind to the portfolio two weeks ago with Digital Realty (DLR), AbbVie (ABBV), and Intel (INTC) all getting sizable boosts with better-than-expected results. But the season soured on the portfolio last week as both Qualcomm (QCOM) and Star Bulk Carriers (SBLK) laid eggs.

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

WHAT TO DO NOW: The market mostly remains in the middle, but we’ve seen a continued slow bleed of late—defensive stocks are perking up, financial stocks are testing their lows and growth stocks are sagging, with more fading below support and failing to bounce. We’re not selling wholesale given our big cash position and the fact that many of our stocks act well, but today we are going to cut bait on our half-sized stake in Allegro Microsystems (ALGM), which continues to give ground following Tesla’s disappointing quarter last week. The sale will leave us with around 55% in cash.

I want to add some downside exposure; so with DIA trading for 338.15, I want to place a short-term bear call spread going out 53 days and outside of the expected range to the upside, or 350. My intent is to take off the trade well before the June 16, 2023, expiration date.

We currently own the JPM January 17, 2025, 100 call LEAPS contract at $46.20. You must own LEAPS in order to use this strategy.

With 30 days left until the May 19 expiration cycle ends, we have the ability to lock in roughly 75% of the original premium sold.

Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.

The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.

We currently own the GLD January 19, 2024, 145 call LEAPS contract at $37. You must own LEAPS in order to use this strategy.

I will be exiting the American Express (AXP) trade today. I will discuss the trade in greater detail in our subscriber-exclusive webinar at noon ET tomorrow, April 21.

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.