While the market slid on Thursday, which put the recent rally in question, the bulls took the opportunity to buy that dip in a big way on Friday. When it was all said and done it was another strong week for the market as the S&P 500 gained 1.3%, the Dow rallied 0.65%, and the Nasdaq added 2.3%.

The markets had a very good week, and so far, we are also seeing momentum in the first couple of trading days this week. These upward moves have taken the Dow Jones Industrial Average to just about where we started at the beginning of 2023.

The market has been highly unpredictable over the last several years. Things are too uncertain to make bets on the current outlook. Timing the market and betting on sector rotation is a riverboat gamble. I’d rather bank on prevailing trends that will transcend short-term market gyrations.

There is a strong prevailing positive trend in the energy industry, particularly American energy.

Clean energy is the future, but not the near future. The world will continue to rely overwhelmingly on fossil fuels for at least the rest of this decade and probably much longer. But the world has underinvested in oil and gas exploration and production over the last decade and a half. Global supplies are straining to meet growing demand. The dynamic will last for some time.

Investors are realizing the value of companies and stocks in a sector that had been neglected for many years until recently. While commodity prices will go up and down based on several circumstances, energy companies should benefit over time going forward.

In this issue, I highlight the largest American oil refiner. The stock has been a stellar performer. And the company will continue to benefit from cheaper American oil and a reduced number of refineries.

Ahead of the long holiday weekend the market had yet another good week. The S&P 500 gained 1.75%, the Dow rallied 1.5%, and the Nasdaq rose another 1.9%.

This week in an attempt to diversify the portfolio we are adding an energy play.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the November 2023 issue.

We discuss recent earnings from our companies and move shares of Sensata Technologies (ST) from Buy to Hold given the company’s lower overall quality compared to our initial understanding.

We also include some thoughts on the current stock market and how rising interest rates and other factors have led investors to unload shares of most companies and riskier companies in particular.

We’ve been writing for a few weeks that many secondary indicators were near levels normally associated with the market lows, so if something actually went right in the world, the market could respond powerfully—and we’re optimistic that process is now underway as interest rates have fallen off and the market popped beautifully last week. In response we’re bumping up our Market Monitor ... but only to a level 5 at this point, as the intermediate-term trend still isn’t up. Long story short: We’re OK throwing a couple more lines in the water, but we want to see constructive action from here (tame pullbacks, more breakouts, etc.) before turning truly bullish.

This week’s list has charts in a few different places (some coming off the lows, some near new highs, etc.), but a ton of them reacted well to earnings and most should do well if the market follows through on its rally. Our Top Pick is a stock that, after many months of tedious action, appears to be ready to resume its major upmove.

Stocks had their first legitimately good week since July, thanks to declining bond yields, improving earnings and – surprise! – Jerome Powell. Can the market keep the momentum going? I’m betting yes, even if it’s not a straight line. Market bottoms frequently occur in October, and this year will be no exception. Therefore, today I’m adding more growth to the portfolio in the form of a mid-cap name that’s little known to the masses but is essentially the Google search engine for big corporations. It’s a new recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

Enjoy!

We took our first loss since early July and, admittedly, I thought we were in for a nice return. The five-day, snapback rally of 6%+ last week caught everyone off-guard. Yes, we all knew we were in short-term oversold territory, so a push higher was anticipated, but certainly not on the magnitude of 6%+.

At the time of the trade, with 21 days left until expiration, our probability of success on the trade was 86.76%.

Oh boy, if things hold at current levels, or even push back a tad, we are in store for some nice returns across the board. In fact, this could be one of our more profitable periods over the next few weeks.

I intend to add one more position to the mix this week, so be on the lookout for a trade alert or two coming your way early this week.

Sometimes the best trade is the one not placed. While we’ve seen a few slow earnings cycles for trading, we never want to force trades. As always, opportunities will pick up. Until then, I still expect, well hope, that we will have 6 to 7 trades under our belt before the earnings season is behind us in a few weeks. And this week is a slow one, with DIS and WYNN at the top of the list. But the following week, the last “big” week of earnings, brings on big retail as Home Depot (HD), Walmart (WMT), Target (TGT), among several others, report. The potential opportunities are there, it’s just a matter of what the market is giving us at the time and if it’s enough to meet our criteria.

How quickly the market can change directions as one week we are on the verge of a steep decline, and the next week the indexes explode higher. This last week fell into the big winner camp as the S&P 500 gained 5.35%, the Dow rallied 5.07% and the Nasdaq added 6.61%.

How quickly the market can change directions as one week we are on the verge of a steep decline, and the next week the indexes explode higher. This last week fell into the big winner camp as the S&P 500 gained 5.35%, the Dow rallied 5.07% and the Nasdaq added 6.61%.

This week’s update includes commentary on earnings from Adient (ADNT), Berkshire Hathaway (BRK/B), Brookfield Reinsurance (BAMR), Elanco Animal Health (ELAN), TreeHouse Foods (THS), Viatris (VTRS) and ZimVie (ZIMV).

The market boomed today after a tamer-than-expected inflation report, with the Dow exploding higher by nearly 1,200 points (3.7%) and the Nasdaq surging 761 points (7.3%).

This week the cryptocurrency market is in absolute turmoil as one of the biggest exchanges, FTX, is insolvent. This is bleeding into equity markets too.

It’s been a tough market for covered calls. Although the market has rallied off the low, call premiums are subdued because investors are less willing to bet on higher prices in the future with still high inflation, a hawkish Fed, and a looming recession.

Many of the more successful positions were called away at options expiration as they exceeded the strike price. But in hindsight it was beneficial to take those profits as well as generate a high income. Many of the remaining portfolio positions left are more cyclical stocks that have fallen below the purchase price. Several more defensive positions have since been added to the portfolio.

Well over two decades ago, I oversaw the investment strategy for a large branch office of a major investment management firm. Our clients were flush with gains from a decade of tech mania – and highly reluctant to shift from their winning strategy. A major challenge was convincing clients to stay invested in stocks but step aside from high-flying dot-com stocks.

This week’s update includes commentary on earnings from Conduent (CNDT), ESAB (ESAB), Gannett (GCI), Goodyear Tire & Rubber (GT), Holcim (HCMLY), Ironwood Pharmaceuticals (IRWD), Kaman (KAMN), Molson Coors (TAP), Organon (OGN), Volkswagen (VWAGY), Warner Bros Discovery (WBD) and Western Union (WU).

Seatmaker Adient (ADNT) reported this morning with encouraging results – we’ll include more detailed commentary next week.

Next week, TreeHouse Foods (THS), Viatris (VTRS), Elanco Animal Health (ELAN), ZimVie (ZIMV), Brookfield Re (BAMR) and Toshiba (TOSYY) report earnings.

Centrus Energy (LEU) was steady this week as Congress seeks another $1.5 billion in a government funding bill to boost domestic supply of uranium to offset lost Russian fuel.

Ford (F) shares rose 7% this week as its October U.S. sales declined by 10% but electric vehicle (EV) sales rose nearly 120% year over year. It now claims to be the #2 EV seller in America behind Tesla.

It was a strong October in the market with the S&P 500 up more than 6% for the month. But the index was up over 8% in the second half of the month after recovering from the low.

What’s going on, and can it last?

Part of this rally is a bounce off the low, which is normal for bear markets and has already occurred several times this year. But there are glimmers of hope that the market may have already bottomed. That hope is largely predicated on the notion that we may be at the peak of the Fed’s aggressiveness. All eyes will be on the Fed this week for confirmation.

It’s all about the Fed right now. The recent rally in stocks may continue or abruptly end based on what the Central Bankers say today.

Today is the Fed’s November meeting where the way-late-to-the-party inflation tamers are widely expected to raise the Fed Funds rate another 0.75% for the fourth time this year. That’s baked into the cake. The main event today will be what the Chairman says about the future course of rate hikes.

The biggest news over the past couple of weeks has been the disappointing results from big tech.

This note includes the Catalyst Report, a summary of the November edition of the Cabot Turnaround Letter, which was published on Wednesday and earnings updates on 12 recommended companies.

Cleveland-Cliffs (CLF), North America’s largest flat-rolled steel and iron ore pellet maker, just reported mostly upbeat second-quarter earnings.

Procept BioRobotics (PRCT) beat expetations yesterday, delivering Q2 revenue of $16.7 million (+97%) and giving full-year upped guidance of $66 - $68 million (a $7 million increases and compares to consensus of $61.6 million).

Earnings Recap: ABNB, SPT, FSR, AXNX, ARIS

Ingles Market (IMKTA) reported Q3 results this morning with revenue rising 14% to $1.46 billion and diluted EPS (for class A shares) dipping 6% to $3.57. Management citied rising fuel and food costs, as well as supply chain issues and labor costs as crimping gross margin.

Sprout Social (SPT) beat Q2 expectations on the top and bottom lines. Revenue grew 37.4% to $61.4 million (beat by $1.09 million) while EPS of -$0.04 beat by $0.02. Full-year guidance of $253.9 - $254 million is slightly above $252.7 million and implies growth of over 35%.

It’s not 1999 out there, but the market and individual stocks continue to repair the damage from the past few months. Today, we’re going to add a half-sized stake in Enphase Energy (ENPH), leaving us with around 70% in cash.

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

TransMedics (TMDX) reported yesterday afternoon with revenue beating while EPS came in a little light. Revenue rose 150% to $20.5 million (beating by $4.2 million) while GAAP EPS of -$0.41 missed by $0.06. Big picture, this was a good quarter and adds to the positive momentum the company showed last quarter.

Starbucks (SBUX)
As discussed in our weekly issue last week, 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 (August 2). The stock is currently trading for 84.65.

I will be exiting the CAT trade today. I will discuss the trade in greater detail in our upcoming subscriber-exclusive webinar, at noon ET this Friday.

With 22 days left in the August 19, 2022 expiration cycle we are able to lock in well over 50% of the original premium sold in GLD back on July 8.

As discussed in our weekly issue last week, and on our weekly call, I will be taking a position in Caterpillar (CAT) today.

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.