In the December Issue of Cabot Early Opportunities, we continue to lean into the market’s bullish trend. We dig into five modest growth companies with exposure to AI, social media/advertising, footwear, HR software and the exciting world of road paving.

As always, there’s something for everybody!

In terms of the market, with the Federal Reserve signaling that the interest rate hiking cycle is over and that there may even be rate cuts in 2024 the bulls cheered this news as the S&P 500 gained 2.5% last week, the Dow rallied 2.9%, and the Nasdaq added 2.85%.

The market has had seven consecutive higher weeks. And the positive momentum should continue into the new year.

The S&P 500 is up 12.5% in the last seven weeks and 23% for 2023. But those returns are deceiving. Until the market rally broadened out recently, only seven large technology company stocks accounted for nearly all the gains.

Many stocks are still in a bear market. In fact, certain more interest rate-sensitive stocks recently fell to the lowest level since the trough of the pandemic market more than three years ago, although they have rebounded with falling interest rates recently.

Buying stocks in the throes of a bear market has proven to be a winning strategy over time. Buying stocks after they have already started to climb out of the lows has proven to be a winning strategy sooner.

The timing may be perfect for a rare opportunity to generate much higher returns than can normally be expected from stocks of defensive companies. In this issue, I highlight a defensive stock that had been a stellar performer before inflation and rising interest rates took hold. It is priced near the lowest valuations in its history and has recently been generating upward momentum.

Note: We will have a Movers & Shakers update later this week, but just a heads up, there will be no Top Ten issue next week (December 26), as it’s the second of our two weeks off all year. For those that celebrate, we hope you have a very, very Merry Christmas!

On to the market, things can always change, but after two years of rate hikes and hawkishness, it looks like the Fed is finally “officially” off the market’s back. Interest rates have been the tail that’s wagged the market for two years, so that’s obviously good, and it’s no surprise that stocks (especially the broad market) catapulted on that news. With all of that said, it’s important to keep your feet on the ground; we’re not expecting a major dip, but it’s certainly possible stocks could wobble a bit or we could see some rotation now that the good news is out. Even so, the rubber-meets-the-road evidence is strongly positive; we’re moving up our Market Monitor to a level 8.

This week’s list is a balanced one, with some growth, some cheap names coming back from the depths, some cyclicals and more. Our Top Pick is a Bull Market stock that should do very well if this advance continues. Try to buy on dips.

In our final issue of 2023, we try and capitalize on the red-hot, Fed-fueled (for once) market by adding a growth play that is resurgent in a post-Covid world. It’s a brand-new recommendation from Mike Cintolo in Cabot Top Ten Trader. It should be a nice addition to a Stock of the Week portfolio that has plenty of shiny objects as we close out the year. Enjoy – and happy holidays!

We currently have one open position, a SPY bear call spread due to expire in the January 19, 2024, expiration cycle. My hope is to add one, if not two more trades for the January 31, 2024, expiration cycle. The challenge is finding a highly liquid ETF or stock with a decent IV rank, and therefore, at least in most cases, some decent options premium. If premium just isn’t there, we might have to extend the duration on the trade, possibly going out to the February 16, 2024, expiration cycle. Either way, I intend on adding an iron condor, and hopefully a bull put spread to the mix. Of course, a slight pullback would make things easier.

We allowed our PFE calls to expire worthless at expiration last Friday, locked in some decent premium and plan to sell more call premium early this week. Expect to see a trade alert either today or tomorrow.

We also allowed our DKNG puts to carry through expiration and as a result, per our income wheel approach, we were assigned shares of DKNG. Now that we are in the covered call phase of the income wheel approach in DKNG, like PFE, we plan to sell calls against our newly acquired shares today or tomorrow.

Additionally, I intend on introducing a new position in WFC, or another fairly low-priced big bank stock, by selling puts early this week. My hope is we get a short-term pullback before entering a new position.

We have officially entered the earnings doldrums, but that certainly doesn’t mean that opportunities won’t present themselves. For instance, this week Micron (MU), FedEx (FDX) and Nike (NKE) announce earnings and offer a decent opportunity for an iron condor. I’ve gone over a detailed iron condor example in the “Weekly Trade Ideas” section below.

We’ve made 39 trades in total with a win ratio of 76.9% (30 out of 39 winning trades).

With the Federal Reserve signaling that the interest rate hiking cycle is over, and there may even be rate cuts in 2024 the bulls cheered this news as the S&P 500 gained 2.5%, the Dow rallied 2.9%, and the Nasdaq added 2.85%.

With the Federal Reserve signaling that the interest rate hiking cycle is over, and there may even be rate cuts in 2024 the bulls cheered this news as the S&P 500 gained 2.5%, the Dow rallied 2.9%, and the Nasdaq added 2.85%.

The Fed’s actions (holding rates steady) and words (seeing three rate cuts next year) has supercharged the broad market this week, keeping our market timing indicators positive while most leaders are in fine shape. We will say that, with the good news out, sentiment has picked up, so we’re still content to move gradually and pick our spots with new buying. Tonight, we’re filling out our position in one name while starting a half-sized stake in a new leader, leaving us with around one-quarter in cash.

Well, I’d call November a pretty good month! The Dow Jones Industrial Average soared by around 2,000 points since our last issue. Wall Street seems positively optimistic that the Fed will begin to lower interest rates mid-year, according to a recent CNBC survey. Also, the risk of a recession continues to decline, with Goldman Sachs saying the probability is now around 15%.

Both of those instances may create a very good market in 2024.

We’re only a week into the new year, but it’s been a good start for your value stocks. On average, prices of the stocks on the recommended list (excluding ARCO, which we sold last week) have increased nearly 7%. This is a favorable start, both in absolute terms and relative to the 3% jump in the S&P 500 Index.

So far, I like 2023 a whole lot better than last year. At midday on Monday, the S&P 500 is up 3.7% and the Nasdaq is 4.5% higher so far this year. And it hasn’t even been five full trading days yet. Later this week, the December CPI number will come out, on Thursday. CPI is expected to be 6.6%, versus 7.1% in November. Assuming the number comes in at or better than expected, it could be very positive for the market. Falling inflation means the Fed won’t have to be as aggressive and investors could start sniffing out an end to this inflation/Fed conundrum later in the year.

With today’s note, we make changes to ratings on two stocks (Macy’s and GE Healthcare Technologies), discuss the earnings report from Walgreens Boots Alliance (WBA) and provide updates on several recommended stocks.

WHAT TO DO NOW: Remain defensive. Early January is often marked by crosscurrents, and this year is no different, with a few intriguing rays of light popping up—but the market’s trends are pointed down and there remain far more sinkholes than shooting stars among individual stocks. In the Model Portfolio, we’ve shielded most of our money from harm’s way in recent weeks, but a couple of our names have been getting hit with growth stocks of late. Tonight, we’re forced to sell our half position in Enphase Energy (ENPH), bringing our cash position up to 80%. Details below.

U.S. conglomerates, all the rage in the 1970s and into the 1980s, are still alive and kicking though investors prefer a more sector and global approach.

Yesterday, General Electric (GE) completed the spinoff of its healthcare business, GE HealthCare Technologies (GEHC). GE HealthCare, which makes MRI machines and other medical equipment, now trades on Nasdaq under the ticker symbol GEHC.

A terrible year in the market just ended and it is highly likely that this year will be much better. That’s good news. The bad news is that the first part of 2023 may be just like 2022.

The results are in. The indexes returned the following for 2022; S&P 500 (-19.4%), Dow Jones (-9%), and the Nasdaq (-33%). It was the worst year for stocks since the financial crisis year of 2008. Plus, many individual stocks were down far more than the indexes.

Happy new year! Hope you were able to take some time off to re-charge and get ready for the new year. I enjoyed my time off, but December has been a month of sickness for the Howe family. Covid, ear infections, colds – you name it, my family got it. Here’s to a (hopefully) healthier January! This week was another very slow week from a micro-cap news cycle perspective.

This year begins in 2022 form, lower. Although the calendar changed, the issues that have pressured stocks lower over the past month remain. There is still great uncertainty regarding inflation, the Fed, and a recession.

This note includes the Catalyst Report, a summary of the December edition of the Cabot Turnaround Letter, which was published on Wednesday, and earnings from Duluth Holdings (DLTH).

I hope you’ve been having a good holiday season and are looking forward to a New Year. I know I am, especially considering the rough year for the stock market. It’s time to move on!

Another year is coming to an end. It was a crummy year for the market. The current roughly -20% YTD return for the S&P 500 with two days left marks the worst yearly performance for the market since 2008.


Although it’s been a tough year for stocks, history strongly suggests that 2023 should be a lot better. In the last 42 years, there have only been 7 calendar years of negative market returns and 35 years of positive returns. Of those 7 negative years, 5 were followed by years when the market rebounded at least 20%.

For most people, investing during a bear market is a frustrating experience. Share prices keep going down, profitable positions erode in value, new purchases become money-losers. Short upward bursts in market sentiment bring hope for a new bull market, but these fade quickly. The temptation is to sell everything and wait for better times.

The market’s meltdown continues, with the buyers completely on the sideline as just about every stock and sector cracks. The Model Portfolio is already in a highly defensive stance (72% cash coming into today), so we’re not craving more cash, but we’re also not simply going to hold onto things as they melt away.

As part of the Income Wheel approach, we allowed our Coca-Cola (KO) puts to expire in-the-money at expiration last week. As a result, we were issued shares at our chosen put strike of 60.

With the market pulling back again today, our IWM iron condor is nearing our short put strike of 163. We’ve had a good start, with the Quant Trader service outperforming the market by a significant margin.

With the market continuing to have indigestion following the Fed’s 75bps rate hike and higher-for-longer messaging (regarding interest rates), we’re going to trim our position in Toast (TOST) today to reduce the risk of things getting away from us.

Before I get to our PFE trade, I wanted to let everyone know that, per our income cycle guidelines, we will allow our KO puts and WFC puts to expire today (unless we see a rally today). This means that on Monday we will be put shares of both stocks and begin the process of selling calls on both.

Like in our last alert for the All-Weather portfolio, we need to keep our deltas at reasonable levels, and with the recent pullback, we are a bit longer than we would like to be at the moment. Much of the premium has been taken out of our October expiration positions and with 29 days left in the October cycle, we still have plenty of time to add to our premium totals in October by selling more premium today.

We currently own the IEF January 19, 2024, 85 call LEAPS contract at $19.00. You must own LEAPS in order to use this strategy.

In last week’s issue of Cabot Stock of the Month, I introduced you to a new section of the newsletter—ETF Strategies, which combines the portfolios and strategies of the former Cabot ETF Strategist newsletter.

I also created Risk Tolerance classifications: A for Aggressive, M for Moderate, and C for Conservative, for both ETF Strategies and the investments in the Cabot Stock of the Month portfolio.

We’ve had TransMedics (TMDX) for just two months and the stock has traded up 45% - 50% in that time frame, with very little volatility.

With the market looking iffy, the Fed on tap next week and a new Issue slated for Wednesday, I’m going to reduce our exposure a little today by selling Samsara (IOT).

August and September have brought plenty of ups and downs for the stock market, and not surprisingly the Profit Booster also had its ups and downs. One of our trades didn’t work, two are good, and two will expire for full profits. Let’s dive in …

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.