Issues
This has been a week for the history books with record-breaking volatility and uncertainty.
My advice? Stay on the conservative side, leaning to blue-chip dominating stocks not tied to U.S.-China trade. Buy more gold. Since early 2022, gold has strongly outperformed inflation-protected Treasurys, so gold is now the world’s preferred safe-haven asset by many investors.
The President Trump reversal yesterday as Treasury bond market yields jumped and the U.S. dollar fell sent markets soaring. The U.S. raised China tariffs and China responded in kind. Unfortunately, both sides remain on a collision course.
My advice? Stay on the conservative side, leaning to blue-chip dominating stocks not tied to U.S.-China trade. Buy more gold. Since early 2022, gold has strongly outperformed inflation-protected Treasurys, so gold is now the world’s preferred safe-haven asset by many investors.
The President Trump reversal yesterday as Treasury bond market yields jumped and the U.S. dollar fell sent markets soaring. The U.S. raised China tariffs and China responded in kind. Unfortunately, both sides remain on a collision course.
The S&P crashed more than 5% on consecutive days last week for the first time since the onset of the pandemic. The index came within a whisker of a bear market, down 20% from the high on a closing basis.
It’s easy to get spooked out of the market these days. Few people believe the market has hit bottom when it does. Unheeded warnings play over in your mind as Judgement Day seems to have arrived. Stocks were overvalued. The trade war will cause a global recession. Excesses of the last several decades are being called. It’s time to get out of the market and save yourself.
Markets are emotionally driven in the short term. Fear and greed tend to be the dominant forces. But over time, emotions take a back seat to money and profits. When the market tanks, our emotions tell us to run for the hills. But history tells us it’s the best time to invest.
There are some truly stellar stocks in the portfolio that have generated returns comparable to the most successful stocks on the market. The problem is that these stocks are rarely cheap. But the recent market has put these phenomenal investments back within reach.
The recent panic has provided a rare entry point. Even if prices fall further before they rise, these stocks can easily make up for lost time when they move higher again. In this issue, I highlight two of the best stocks in the market to own at valuations not seen in years.
It’s easy to get spooked out of the market these days. Few people believe the market has hit bottom when it does. Unheeded warnings play over in your mind as Judgement Day seems to have arrived. Stocks were overvalued. The trade war will cause a global recession. Excesses of the last several decades are being called. It’s time to get out of the market and save yourself.
Markets are emotionally driven in the short term. Fear and greed tend to be the dominant forces. But over time, emotions take a back seat to money and profits. When the market tanks, our emotions tell us to run for the hills. But history tells us it’s the best time to invest.
There are some truly stellar stocks in the portfolio that have generated returns comparable to the most successful stocks on the market. The problem is that these stocks are rarely cheap. But the recent market has put these phenomenal investments back within reach.
The recent panic has provided a rare entry point. Even if prices fall further before they rise, these stocks can easily make up for lost time when they move higher again. In this issue, I highlight two of the best stocks in the market to own at valuations not seen in years.
A quick note: we have several stocks that are near our stops, or broke below them last week as the market quickly fell 10% following the tariff announcements. For now, I am going to give these trades a bit more time, though if conditions worsen again, we will be exiting these trades very quickly.
It was a historic week for the market, and not for any positive reasons as the S&P 500 fell 9.1%, the Dow lost 7.9% and the Nasdaq declined by 10%. Perhaps the weekend gave traders a bit of time to better digest the tariff news and the market will stabilize this week after an up-and-down Monday (futures are up big on Tuesday, but that can change quickly in these tariff times). It’s also possible that the uncertainty is just too much for traders to digest.
It was a historic week for the market, and not for any positive reasons as the S&P 500 fell 9.1%, the Dow lost 7.9% and the Nasdaq declined by 10%. Perhaps the weekend gave traders a bit of time to better digest the tariff news and the market will stabilize this week after an up-and-down Monday (futures are up big on Tuesday, but that can change quickly in these tariff times). It’s also possible that the uncertainty is just too much for traders to digest.
It doesn’t take a proprietary timing system to know the trend is down—we’ve been cautious and defensive since late February when the market and leaders first went over the falls, and we remain so today. That said, we’re also students of the market, and there’s no question we’re in the midst of an outright panic, with some truly extreme readings (north of 1,000 new lows on the NYSE on Friday and today; 95% of the S&P 1500 below their 50-day lines, etc.) that have a history of showing up near some sort of market low. That’s not a reason to turn bullish—again, the trends are clearly down—but it’s best to keep your head up and stay alert should some actual “good news” hit the wires. We’ll leave our Market Monitor at a level 3.
This week’s list is chock-full of defensive growth stocks—firms that have steadier growth stories that shouldn’t be affected by the tariff or economic headwinds. Our Top Pick is showing great relative strength and has a huge runway of growth ahead.
This week’s list is chock-full of defensive growth stocks—firms that have steadier growth stories that shouldn’t be affected by the tariff or economic headwinds. Our Top Pick is showing great relative strength and has a huge runway of growth ahead.
There’s no sugarcoating it: This is a historic market collapse, and it’s no fun for anyone. Volatility, fear and uncertainty are as palpable as they’ve been on Wall Street since perhaps the Covid crash in 2020. Unlike Covid, however, tariffs can be reversed, or at least mitigated, by a policy change, comment or tweet from the person who enacted them. That adds to the uncertainty. But it also means that it is very much a day-to-day, and even hour-to-hour, situation.
Given how fluid things are, it’s a good time to add as safe a stock as possible to the Stock of the Week portfolio. So this week I called upon Cabot Turnaround Letter Chief Analyst Clif Droke to offer up one of his most reliable potential turnaround stories. It’s a company that sells a lot of products that everyone needs all the time – regardless of tariffs or the state of the economy.
Details inside.
Given how fluid things are, it’s a good time to add as safe a stock as possible to the Stock of the Week portfolio. So this week I called upon Cabot Turnaround Letter Chief Analyst Clif Droke to offer up one of his most reliable potential turnaround stories. It’s a company that sells a lot of products that everyone needs all the time – regardless of tariffs or the state of the economy.
Details inside.
It was a historic week for the market, and not for any positive reasons as the S&P 500 fell 9.1%, the Dow lost 7.9% and the Nasdaq declined by 10%. Perhaps the weekend will give traders a bit of time to better digest the tariff news and the market will stabilize this week, OR, it’s also possible that the uncertainty is just too much for traders to digest.
It was a historic week for the market, and not for any positive reasons as the S&P 500 fell 9.1%, the Dow lost 7.9% and the Nasdaq declined by 10%. Perhaps the weekend will give traders a bit of time to better digest the tariff news and the market will stabilize this week, OR, it’s also possible that the uncertainty is just too much for traders to digest.
Today’s addition is a play on the growing shift toward healthier eating habits and nutritional supplements. It’s a small, U.S.-based natural foods grocery chain that’s growing, profitable, pays a dividend and has very little exposure to tariffs.
It offers considerable upside potential but also should have decent downside protection. In other words, a good stock for the current environment!
It offers considerable upside potential but also should have decent downside protection. In other words, a good stock for the current environment!
The market’s brief rally ran into a wall last week, and while the major indexes found some support near their March lows initially, today’s tariff-induced plunge put an end to that. While the headlines and news items are hitting the wires fast and furious, we urge you to stay focused on the evidence--doing so is why we were nearly 60% in cash the day after the market’s February top and why we’ve been north of 80% cash in recent weeks, shielding the portfolio from the worst of the decline. Tonight, we are forced to sell one of our remaining small positions, which will boost our cash hoard to the upper-80% range.
For now, we’re comfortable remaining in our storm cellar, but while the news and action is awful now, there are some rays of light out there (like falling Treasury rates), as well as many stocks that are etching higher lows right now while the market does the opposite (see more in tonight’s issue). Eventually, this down period will give way to a great money-making opportunity, so keep your head up--but stay defensive for now.
For now, we’re comfortable remaining in our storm cellar, but while the news and action is awful now, there are some rays of light out there (like falling Treasury rates), as well as many stocks that are etching higher lows right now while the market does the opposite (see more in tonight’s issue). Eventually, this down period will give way to a great money-making opportunity, so keep your head up--but stay defensive for now.
U.S. stocks remain paralyzed by tariff fears, but not energy stocks. They’re the best-performing S&P 500 sector by far this year, more than doubling the return of any other sector. And yet, they remain the most undervalued sector by virtually every measure. So this month, we add a large-cap energy stock to the Cabot Value Investor portfolio that has a yearslong history of not only outperforming the market, but blowing it out of the water. But after a slow start to the year, it’s trading at a rare discount. We think it has immediate upside – and a high dividend yield should hold us over until it gets there.
Details inside.
Details inside.
The S&P 500’s rally of 1.8% last Monday was quickly washed away as the bears once again sold into strength last week. By week’s end the S&P 500 had lost 1.5%, the Dow had declined by 1% and the Nasdaq had fallen by 2.6%.
The market had what amounted to a halfway decent eight-day rally, but the sellers pounced on that move, with most major indexes testing or reaching new correction lows today. From here, we’ll be watching to see how this short-term retest phase goes—given the very negative sentiment and obvious reason for the selling (tariffs), a super-powerful rally from here would be intriguing, especially if some resilient stocks (those that are holding well above their lows from a couple weeks ago) take flight. Over time, this decline will set the stage for a buoyant advance with lots of new leadership, but until that payoff arrives, continue to practice patience. As always, though, we just go with the here and now; we’ll yank our Market Monitor back down a notch to a level 3.
This week’s list is again very well rounded, though not surprisingly, there’s fewer go-go growth names, as more well-situated outfits are favored. Our Top Pick has both growth and defensive characteristics, and the stock is holding up very well.
This week’s list is again very well rounded, though not surprisingly, there’s fewer go-go growth names, as more well-situated outfits are favored. Our Top Pick has both growth and defensive characteristics, and the stock is holding up very well.
Updates
The rally since the election continues as Bitcoin reached $90,000 for the first time. Tesla (TSLA) has climbed more than 40%, and the KBW Nasdaq Bank Index, which tracks shares of some of the nation’s largest lenders, is surging.
Dutch Bros (BROS) shares jumped 36% this week as it beat analysts’ expectations on the top and bottom lines while offering improved guidance for the remainder of 2024. Sea Limited (SE) soared 10.3% as the Singapore-based company reported overall net income that beat estimates at $153.3 million, with a better-than-projected 31% rise in revenue for the September quarter.
Dutch Bros (BROS) shares jumped 36% this week as it beat analysts’ expectations on the top and bottom lines while offering improved guidance for the remainder of 2024. Sea Limited (SE) soared 10.3% as the Singapore-based company reported overall net income that beat estimates at $153.3 million, with a better-than-projected 31% rise in revenue for the September quarter.
The honeymoon phase for a second Trump term continues on Wall Street. Stocks are up 3.5% in the week since Trump won the election, with all three of the major indexes advancing to new all-time highs. The reaction is being framed as specific to Donald Trump and his potential influence on stock prices – the so-called “Trump Trade” – but in reality, this is nothing new.
In recent years, there’s always been a honeymoon phase for stocks after a presidential election – regardless of which party or candidate won. And it typically lasts until the newly elected president’s inauguration in late January.
In recent years, there’s always been a honeymoon phase for stocks after a presidential election – regardless of which party or candidate won. And it typically lasts until the newly elected president’s inauguration in late January.
Donald Trump was elected President last Tuesday, and the market posted the best week of the year. The S&P 500 soared about 5% in the three days following the election.
Investors perceive his election will deliver stronger economic growth, primarily through deregulation and tax cuts. Although interest rates spiked higher on the expectation of a stronger economy, the market views the revised prognosis as overwhelmingly bullish, so far.
Investors perceive his election will deliver stronger economic growth, primarily through deregulation and tax cuts. Although interest rates spiked higher on the expectation of a stronger economy, the market views the revised prognosis as overwhelmingly bullish, so far.
In today’s note, we discuss a number of earnings results and new developments for several of our portfolio positions, including Alcoa (AA), Atlassian (TEAM), Barrick Gold (GOLD), Viatris (VTRS), and Pan American Silver (PAAS).
Continued strong earnings reactions this week bode well for several of our recent portfolio additions.
Continued strong earnings reactions this week bode well for several of our recent portfolio additions.
WHAT TO DO NOW: Remain bullish. The market has reacted well to the election and took today’s Fed decision in stride; both of our trend-following indicators are bullish and leading growth stocks remain in good shape. Today, we took partial profits in AppLovin (APP) via a special bulletin after it went vertical on earnings. But tonight, we’re putting that and a bit more money back to work via two new positions—starting half-sized stakes in Samsara (IOT) and the ProShares Ultra Russell 2000 Fund (UWM), leaving us with a cash position around 18%.
The cannabis sector is taking a severe body blow because of election outcomes.
The big negative: Florida voters rejected Amendment 3, which would have legalized recreational use. Voters in North Dakota and South Dakota also rejected cannabis legalization.
The big negative: Florida voters rejected Amendment 3, which would have legalized recreational use. Voters in North Dakota and South Dakota also rejected cannabis legalization.
The election is over. The biggest risk, a disputed outcome, has been avoided. The new President is being viewed by markets as generally good for business and stocks. The market is thrilled today and rallying substantially.
It’s all about the election right now.
The massive political event is sucking all the oxygen away from everything else. It’s worth noting that the Fed will meet and likely cut the Fed Funds rate this week. That will be the focus after the election is resolved, if it’s resolved.
I don’t get into the business of predicting political outcomes. That’s not my horserace. As of now, the markets seem to be leaning toward a Trump victory. That appears to be the more likely bet. But all that stuff favored Hillary even more so in 2016. We’ll see what happens.
The massive political event is sucking all the oxygen away from everything else. It’s worth noting that the Fed will meet and likely cut the Fed Funds rate this week. That will be the focus after the election is resolved, if it’s resolved.
I don’t get into the business of predicting political outcomes. That’s not my horserace. As of now, the markets seem to be leaning toward a Trump victory. That appears to be the more likely bet. But all that stuff favored Hillary even more so in 2016. We’ll see what happens.
In today’s note, we discuss a flurry of key news developments for several of our portfolio positions, including Agnico Eagle Mines (AEM), Atlassian (TEAM), Intel (INTC) and Janus Henderson Group (JHG).
Two strong earnings reactions after Thursday’s market close bode well for two of our recent portfolio additions.
Two strong earnings reactions after Thursday’s market close bode well for two of our recent portfolio additions.
The broad market has been resilient up until today when we see Microsoft (MSFT) leading the Nasdaq lower.
That said, small caps are hanging tough and are almost exactly flat over the last week.
The darn 10-year yield is still up, which signals the market thinks the Fed did not need to cut by 50bps in September. I’m increasingly dubious about a rate cut next Thursday, even though the market is saying there’s a 95% probability of a cut.
That said, small caps are hanging tough and are almost exactly flat over the last week.
The darn 10-year yield is still up, which signals the market thinks the Fed did not need to cut by 50bps in September. I’m increasingly dubious about a rate cut next Thursday, even though the market is saying there’s a 95% probability of a cut.
We need to begin with some bad news. Super Micro Computer (SMCI) stock tumbled 32% yesterday after its audit firm, Ernst & Young, resigned. The auditor said it had recently learned of information “which has led us to no longer be able to rely on management’s and the audit committee’s representations, and to be unwilling to be associated with the financial statements prepared by management.”
As you read this, I am likely fortifying my house in preparation for the 400-500 Trick-or-Treaters that are sure to descend on our place in Vermont in a few hours. That’s no exaggeration – we live on a crowded street that draws kids from all over town, and even adjoining towns, trying to maximize their Halloween hauls. The 1,000 pieces of candy I buy every year and the countless ghouls, skeletons, smoke-emitting jack-o’-lanterns and giant spiders I’ve accrued the last few years to adorn our lawn are almost like an annual tax.
Living in such a bustling Halloween hotbed is fun, and it’s certainly a blast for our two kids. But it’s a lot of work, and we’re always happy when the calendar flips to November. And in that way, it reminds me a bit of the market every October.
Living in such a bustling Halloween hotbed is fun, and it’s certainly a blast for our two kids. But it’s a lot of work, and we’re always happy when the calendar flips to November. And in that way, it reminds me a bit of the market every October.
Alerts
WHAT TO DO NOW: Do a little more selling. We’re seeing another round of selling in growth stocks, with some more abnormal action among a few names. To be fair, most of the action is mixed at this point, whether looking at the overall market (Tides on the fence, etc.) or individual stocks, but the increasing number of air pockets out there has us paring back a bit more today—we’re going to sell one-third of AppLovin (APP), which is our largest position, as well as cut bait on Toast (TOST), which is our biggest loser. Our cash position will now be around 36%.
WHAT TO DO NOW: The market’s rally has run into trouble, and while there are more than a few growth stocks that look fine (if not great), air pockets are reappearing in many issues. Today, Nutanix (NTNX), which looked picture-perfect heading into its earnings report, is getting mauled along with most other software stocks. We’re going to sell the rest of our stake today, thinking today’s meltdown after a prolonged run isn’t likely to lead to good things in the intermediate term. We’ll have more details (and likely other changes) in tonight’s issue of Cabot Growth Investor.
WHAT TO DO NOW: Remain bullish, but continue to prune weak names and hold/buy stronger ones. In the Model Portfolio, we’re letting go of the rest of our small position in DraftKings (DKNG), which is breaking down further today after bad news on the tax front. We’ll hold the cash for the moment, leaving us with around 28% on the sideline.
Cannabis sector negativity and weakness persists, so the group continues to be a buy.
Now it is time to continue to average in at current prices, ahead of the next catalyst-induced move up.
Now it is time to continue to average in at current prices, ahead of the next catalyst-induced move up.
Back on May 8, I suggested getting long cannabis as a contrarian trade because sentiment had turned dark, and there was a potential catalyst on the horizon.
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.
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.
Portfolios
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Quant Trader.
Strategy
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.