The latest earnings reports were mixed but generally encouraging.

The S&P 500 exceeding the 5,000 mark reminds us that while our dynamic economy leads to disruptions in companies and markets, and Fed interest rate moves can impact the market, it is revenue and earnings growth that really drives stock returns over time. Companies normally become more profitable over time, and that’s what leads to higher stock prices. Staying in the market and leveraging the power of compounding returns is important to successful investing.

So today, we expand our portfolio by starting a small position in a brand new asset class.

A year from now we could be in a raging bull market or bounding toward a recession. Interest rates could be high or much lower. And we have to see what will happen with these wars and who will be elected president in November. Nobody knows the answers to these questions.

But a year from now there is at least one thing we can bank on: The population is already older than ever before in history and will continue to get still older at warp speed. Between 2011 and 2029, about 76 million boomers born in the U.S. between 1946 and 1964 will turn 65. That’s about 3.6 million per year. There will be tens of millions more older people running around in the years ahead.

The inescapable fact about older people is that they spend much more than any other segment of the population on healthcare. That’s just how we’re built. Boomers control about 70% of this nation’s wealth and the aging population has enormous implications for businesses and markets.

Certain healthcare companies and stocks are positioned ahead of a megatrend and a massive wave of spending. In this issue, I highlight two “BUY”-rated portfolio healthcare stocks. If you don’t own them already, they are well worth considering.

Despite some under-the-surface concerns, it was another strong week for the market as the S&P 500 gained 1.5%, the Dow was mostly unchanged and the Nasdaq added 1%.

Housekeeping: Just a heads up that next week’s issue will come after the close on Tuesday, February 20 due to the Presidents’ Day holiday.

The story remains the same as it has for a couple of weeks now: The trends of the indexes remain up and the action of leading stocks (especially leading growth stocks) remains excellent, but most of the market has just sat around since the start of the year (though we are seeing some broadening out of buying pressures the past couple of days) and, for some of the tech/AI names, the action is definitely short-term frothy. We’re leaving our Market Monitor at a level 7, holding our winners but also a little cash, while focusing on fresher names (both inside and outside of tech) that are emerging with some power.

This week’s list has a bunch of fresh ideas in a variety of areas—dips in many of them would be tempting. For our Top Pick we’re going to go with a zinger in the AI space—a liquid name with a great, leading position that’s just gotten going on earnings. If you enter, use a loose leash, as the stock is bound to be super volatile.

Stocks keep hitting new highs, riding a stronger-than-expected earnings season and multiple red-hot trends (artificial intelligence, semiconductors, weight-loss drugs), all of which we have heavy exposure to in the Stock of the Week portfolio. It’s possible stocks in those sectors are due for a pullback, but tech as a whole is clearly thriving at the moment, so today we split the difference by adding a dividend-paying technology stock that’s been a long-time favorite of Cabot Dividend Investor Chief Analyst Tom Hutchinson.

I plan on ramping up the positions in our actively managed portfolios (Buffett and Growth/Value) over the next expiration cycle. My goal is to have a minimum of 5 positions per portfolio, but I’m not going to race to get there. I’ll continue to pounce when the opportunity presents itself. We’ve taken our time adding positions since initiating our portfolio and, so far, our patience has served us well.

Volatility continues to remain low as a result of the seemingly never-ending market rally. While all of our bullish positions in our other Cabot Options Institute services (Fundamentals, Income Trader, Earnings Trader) continue to thrive in this environment, anything with a bearish-leaning or hedge-based trade has struggled. But as I’ve stated numerous times in the past, that’s why we always want to diversify our strategies when approaching the market.

The plan remains simple. I continue to focus on balancing out the overall deltas of our current positions by adding a trade, most likely a bull put spread. I’ll be concentrating on sector ETFs and individual stocks as the major indices continue to see low levels of volatility.

We should be able to add to our total return of 124.9% at the end of this week as our GDX and DKNG positions are due to expire. The jump in our total return should be notable as we have the potential to add 17.1% through our DKNG position and 1.6% in GDX.

I plan to add one more position next week so stay tuned for a trade alert, possibly two as we move through the week.

Despite some under-the-surface concerns, it was another strong week for the market as the S&P 500 gained 1.5%, the Dow was mostly unchanged and the Nasdaq added 1%.

Despite some under-the-surface concerns, it was another strong week for the market as the S&P 500 gained 1.5%, the Dow was mostly unchanged and the Nasdaq added 1%.

We made our fourth straight successful trade for this earnings cycle late last week. We were thankful to take quick profits in Amgen (AMGN) Wednesday morning. All went as planned as AMGN opened well within the chosen range of our iron condor and, as a result, we were able to take off the trade for a nice one-day gain of 5.6%. Our total return for this earnings cycle stands at 28.8%, one of our best performing earnings cycle since we initiated Earnings Trader back in mid-July 2022, smack dab in the middle of the most recent bear market.

The market’s primary evidence remains in good shape, and that’s especially true for leading growth stocks continue to act very well, and after two-plus years in the wilderness, we’re optimistic that the best names can continue to do well. That said, near-term, risks are rising for some sort of change in character (pullback, rotation, etc.) as there’s a growing divergence and some of the action out there is frothy. Because of that, we’re mostly riding our winners, but we sold a couple of laggards earlier this week and--for now--are holding about 30% in cash.

All that said, stay tuned: We could put some money back to work in the days ahead as earnings season continues to roll on, but for now, we’ll stay a bit closer to shore than we have been and see how things play out.

BYD (BYDDY) reported great earnings, and Novo Nordisk (NVO) got a lift from the World Health organization this past week – but the big news is that Alibaba (BABA) surprised markets by announcing on Tuesday a plan to split the $220 billion goliath into six standalone units.

There’s a new worry in the market – recession. Just when the Fed is finally chilling out, investors are moving on to the next bummer. The market still stinks, just for different reasons.


Until a couple of weeks ago the main concern was a more hawkish Fed. But the banking situation has mellowed the Fed, and the Central Bank just indicated it is nearly done hiking rates. It’s a relief on the Fed front but the economy could be a problem now.

I’ve never liked gambling. I went to Las Vegas once with friends and had a blast. But that was because the weather was beautiful, and we sat by the pool during the days and then had some good nights out. Some of my friends loved to play blackjack. I enjoyed it for entertainment value, but I was only interested in playing at tables with low minimums. Why? Because I know that the house always wins! (Unless you are Edward Thorp, the famous card counter.)

Last Thursday evening, I was a guest at a friend’s regular poker game. It seemed friendly enough – the regulars were average players (like myself), pleasant to spend time with (no jerks), and the evening included a tasty dinner. Also, favorably to me as the newbie, the stakes were modest.

The games were straightforward: 5-card draw, 7-card stud high-low, while a few others included a small field of common cards similar to Texas Hold’em. Betting was reasonable, with limits on both the size and number of raises. So far, so good.

This week, amidst the fireworks in banks, the Fed and more market volatility, there were no earnings reports and we had no changes in ratings on our recommended stocks.


Next Wednesday, we publish the April edition of the Cabot Turnaround Letter. We’ll tip our hand on the first article – which will be on possible bargains in the banking industry.

Yesterday the FOMC decided to move ahead with another 25bps hike, bringing its federal funds target rate to a range of 4.75% to 5%. The statement was missing the phrase, “...ongoing increases in rates would be appropriate,” which was present in the eight previous statements, suggesting the Fed may be done hiking soon.

Fallout from the bank failures and the Fed meeting tomorrow make this a big week in the market.

Let’s deal with the banks first. After the two bank failures this week and the buyout of ailing Credit Suisse (CS) over the weekend, the spotlight is on potentially vulnerable small regional banks. Although Silicon Valley Bank and Credit Suisse are very different banks with different problems, the common denominator is the markets, particularly the bond market.

This week, all everyone cares about is the banking system, and so I’ve been thinking about it a lot. I continue to believe that this banking crisis is manageable and NOT systemic. Here’s how I see it…

Last Thursday evening, I was a guest at a friend’s regular poker game. It seemed friendly enough – the regulars were average players (like myself), pleasant to spend time with (no jerks), and the evening included a tasty dinner. Also, favorably to me as the newbie, the stakes were modest.

The games were straightforward: 5-card draw, 7-card stud high-low, while a few others included a small field of common cards similar to Texas Hold’em. Betting was reasonable, with limits on both the size and number of raises. So far, so good.

This is a big week in the market. Investors are grappling with the fallout from the banking crisis and the Fed meeting later this week.


The failure of two banks last week also turns a spotlight on the vulnerabilities of smaller regional banks. The situation so far has not caused major reverberations in the market, as the government backstopped the fallout so far. But the situation might not be over. There could be more bank failures and ugly days for the market ahead.

This week, we comment on the full earnings report from Volkswagen, which wraps up this earnings season. Walgreens Boots Alliance (WBA) is an off-cycle company and reports on March 28.

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

Moving Kraft Heinz (KHC) to Sell

Our BITO 12 calls for the December 30, 2022, expiration cycle are essentially worthless. As a result, I want to buy back our BITO calls, lock in our premium and immediately sell more premium going out 32 days.

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 VTI January 19, 2024, 145 call LEAPS contract at $54.50. You must own LEAPS in order to use this strategy.

We’ve had lots of good fortune over the past six months in the Quant Trader service. Our quant-based approach where probabilities lead the way has led to 18 out 19 winning trades since starting the service back in early June.

I’m rolling my December positions into January. We still have to roll our December SPY calls, but I’m going to hold them for a few more days to allow time decay to work its magic.

Okay, we just sold a bear call in SPY for the January expiration cycle back on 12/1 and got out of the trade on 12/6 for approximately an 11% return. But, we still have 38 days left in the January 20, 2023, expiration cycle and the ability to sell some decent premium with the VIX hovering around 23.50.

We currently own the EEM January 19, 2024, 30 call LEAPS contract at $11.50. You must own LEAPS in order to use this strategy.

There is almost no premium left in our PFE December 16, 2022, 45 puts. As a result, I want to buy back the 45 puts and sell more premium in January.

I’m going to lock in some nice profits today and as a result, our win ratio is now 18 out of 19 winning trades since starting the service back in June. I’ll also be adding a few new trades to the mix over the next day or two, so be on the lookout for an opening trade alert.

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.