Everybody is talking about the potential of generative AI. But a lot of organizations haven’t yet organized their digital data in such a way that they can leverage it for AI, let alone protect it once AI applications gain access.

Today, we’re jumping into a steady-growth software company that helps solve this problem.

Ahead of the long weekend, and the unofficial end of summer for the trading community, it was a mostly quiet and mixed week as the S&P 500 was unchanged, the Dow gained 0.9%, and the Nasdaq fell 0.7%. Though that quickly changed Tuesday when the market got hit hard.

Ahead of the long weekend, and the unofficial end of summer for the trading community, it was a mostly quiet and mixed week as the S&P 500 was unchanged, the Dow gained 0.9%, and the Nasdaq fell 0.7%.

Ahead of the long weekend, and the unofficial end of summer for the trading community, it was a mostly quiet and mixed week as the S&P 500 was unchanged, the Dow gained 0.9%, and the Nasdaq fell 0.7%.

Last week had a few potential potholes for the market’s nascent rally, including some influential big-cap earnings releases and an inflation report before the long weekend—but despite some selling that popped up here and there, the market and fresh leaders handled themselves well. Stepping back, we’re definitely encouraged by the market’s snapback and the numerous upside moves in individual, growth-oriented stocks during the past month; we think the odds favor the next major, sustained move is up. That said, a lot of stocks have set up (but not broken out), old leaders (chip names in particular) look suspect and it’s a fact that defensive areas continue to ramp higher, which is a sign that big investors are hunting for some safety. Again, we’re encouraged overall, but continue to think going slow makes sense, especially now that some selling pressures are beginning to emerge, stickign with mostly small positions and keeping some cash on the sideline. We’ll keep our Market Monitor at a level 6 today.

This week’s list is a bit of a hodgepodge, with some recent earnings winners, some fresh names and a few stodgier types. Our Top Pick is Rocket Cos. (RKT), which is basically a cyclical (mortgage lending) company that should be lean and mean after the multi-year dry period—meaning its earnings power should be big as rates head lower.

September selling is already underway. Just remember that it’s almost always temporary. The S&P 500 has been down at least 4% after Labor Day in each of the last four years, with a bottom coming sometime in October. All four times, it has eclipsed pre-Labor Day levels by the third week of November. Thankfully, our portfolio enters September in very good shape, with 12 stocks up double-digit percentages and four others up by at least triple digits. To help weather another potential September storm, today we add a “safer” dividend stock recently recommended by Chief Analyst Tom Hutchinson to his Cabot Dividend Investor audience.

Details inside.

While there are a lot of healthy signs of growth out there, stocks that do not meet high expectations are being punished.

Super Micro Computer (SMCI) was off 29% this past week after some allegations of faulty accounting by short sellers was followed by the company reporting yesterday that it was postponing filing of its annual report with the SEC to assess “internal controls over financial reporting.”

Given the uncertainty, we have little choice but to sell the stock. We took some profits earlier this year, and the stock is still up 43% so far this year. My guess is that we will be back to Super Micro at some point, and I will watch this stock carefully.

Talk about a terrible week for cannabis investors. The Drug Enforcement Agency (DEA), on Monday, torpedoed the sector by announcing a move that will significantly delay favorable legal reform.

What happened: The DEA now wants to hold a formal hearing on the Biden administration’s proposal to reschedule cannabis, before deciding what to do. The move dashed all hopes of rescheduling before the election – which many analysts had expected – since the hearing is set for December 2.

After the tumultuous sell-off in the broad equity market last month, the S&P 500 Index is back to within a few points of its all-time high as of this writing in what has been one of the fastest comebacks in recent memory.

New technology is driving huge demand growth in old technology. The growth of artificial intelligence, electric vehicles, and semiconductor manufacturing will generate huge growth in electricity.

After being stagnant for most of the last two decades, electricity demand is soaring. Most of the increasing electricity demand (from data centers, EVs, and chip manufacturing) is coming from climate-conscious technology companies that will likely try to secure carbon-friendly power sources whenever possible.

Companies that can provide low-carbon electricity generation should be the primary beneficiaries of this increasing electricity demand. Opportunity is being created for certain companies that also tend to be very recession-resistant at a time when the economy is slowing.

But there is one utility that stands above all others in terms of the current opportunity. And it is highlighted in this month’s issue.

Note: Due to the Labor Day market holiday next Monday, you will receive your next Cabot Profit Booster issue on Wednesday, September 4.

Before we dive into this week’s covered call idea, we need to address our four August positions that expired a week ago.

The market’s rebound has been very impressive, though there are a couple of flies in the ointment (we’re not huge fans of defensive sectors rallying strongly) and this week looks like a good test for a couple of reasons: First, there are some key quarterly reports coming out in key technology areas, and trend-wise, many growth-oriented measures are closing in on five-week highs, which could turn the intermediate-term trend up … if all goes well. For now, nothing has officially changed: If we see more breakouts and further upside, it would obviously be bullish, but while some retrenchment from here wouldn’t necessarily be bearish, it would be a sign the market likely needs more time to set up. We’ll leave our Market Monitor at level 6 this week.

This week’s list is a bit more diversified than the past two weeks, and for our Top Pick, we’re going with a name that’s very strong following quarterly results, has triple-digit growth and a great story—if you enter, be sure to keep it small and use a loose stop.

It’s earnings season again! And this one should be more important than most.

Earnings are, of course, a big deal for the individual company. But in addition to company-specific fundamentals, Wall Street will be carefully watching what company earnings indicate about the macro environment.

Earnings season has arrived, and with it could be a recalibration of investor expectations for stocks broadly.

The S&P 500 Index seems reasonably priced at 19.5x estimated 2024 earnings. But nearly 30% of the index’s weight comprises Magnificent Seven stocks, whose average multiple is 33x. Estimated earnings growth rates for these Mag Seven stocks, which average 19% for each of the next five years, set a high bar. When high expectations meet less-high reality… well, investors know what can happen to stock prices. And, any wobbling in the largest stocks can send the market broadly lower. As Dennis Gartman, the legendary and now-retired writer of The Gartman Letter, frequently said, “When the generals leave the field, the rest of the army follows.”

The market surge has leveled off. The expectation debate about peak interest rates, inflation, and recession continues. And now, it’s another earnings season.

The S&P 500 pulled back during the first trading week of the year after a two-month, 15% spike. In the second week, the index gained back everything it lost the first week. He we are again on the cusp of the all-time high set about two years ago.

In today’s note, we discuss the earnings reports from Wells Fargo (WFC). Please note that our comments on Well’s earnings didn’t make it into the podcast.

The first two weeks of 2024 have been a bit sloppy with the markets down the first week, strengthening a bit this week then back down again today as this morning’s inflation numbers (CPI) came in a little higher than expected.

Thus far small caps have lagged large caps this year at the index level, though it’s not worth overthinking it too much just 11 days into the year.

A major challenge in 2024 for investors and analysts alike will be separating the artificial intelligence (AI) “pretenders” from the “contenders.” Super Micro Computer (SMCI), a recent Explorer recommendation, was up 23% this week, and Exscientia (EXAI) shares were up 13% yesterday.

Back on December 27 I suggested holding off on cannabis sector purchases given the group strength at the time. We had realized nice gains, and it did not make sense to chase the stocks. “I prefer to add on weakness rather than strength,” I wrote. I recommended adding on weakness of 2% to 4% or more in any of our portfolio names.

The AdvisorShares Pure US Cannabis (MSOS) and AdvisorShares MSOS 2X Daily (MSOX) exchange traded funds (ETFs) closed that day at 6.93 and 3.60, respectively, and went on to fall 4.5% to 9% over the next few trading days.

It’s been widely noted that the stock market’s sloppy start to 2024 is among the worst in a decade, or longer. Traders and TV commentators carry on about how the first trading day, or week, or month, sets the tone for the entire year. “How goes January, so goes the year” is a frequently bandied saying. It’s enough to make an investor toss in the towel and wait until 2025.

The longer I am in the investing world, the less I listen to this banter. It all sounds great, and maybe there are some years in which these ultra-short-term trends-as-predictors pan out, but they are so unreliable that they are worthless at best. Even if they had a 100% accuracy rate, why make a bet that this perfect record will continue?

The new year started with a whimper. Last week’s 1.5% down move ended a streak of nine consecutive up weeks for the S&P 500, the longest streak since 2004.

The streak had to end eventually. And a pullback after a 15% move higher is normal. Bull markets tend to have several 3% and 5% down moves. There may be more downside in the weeks ahead. But we are still in a market that is trending higher.

In today’s note, we discuss the recent earnings reports from Walgreens Boots Alliance (WBA). Our note also includes the monthly Catalyst Report and a summary of the January edition of the Cabot Turnaround Letter, which was published a week ago Wednesday.

Alphatec (ATEC) Releases Better Than Expected Preliminary Q3 Results

WHAT TO DO NOW: In yesterday’s update we wrote that the market still had a lot to prove, and indeed, the market is down further today despite a dip in interest rates—and more important to us is that some of the resilient names are getting hit with the market. One of those is Uber (UBER), which is cracking support on no news. We’re not craving more cash, but we’ll respect the action and sell one-third of our stake in Uber (UBER) this afternoon and see how it goes from here. Our cash position will now be in the upper 60% range.

Today I want to buy back our PFE October calls and immediately sell more call premium.

I will be exiting the JP Morgan (JPM) trade today. I will discuss the trade in greater detail in our upcoming weekly issue.

Okay, everyone, earnings season is finally upon us. I suspect we are in for an interesting earnings season, and to get us started, I will be holding a subscriber-only webinar tomorrow at 12 p.m. ET. Click here to sign-up. No worries if you can’t make it, we archive everything here at Cabot. You can find all the archived recordings here.

We have numerous positions to roll prior to the October 20, 2023. I’m going to start today with GOOGL an AMGN. I’ll be sending out several alerts over the coming days. Stay tuned!

After being tested on the upside and downside over the past month, we finally have an opportunity to close our October 20, 2023 iron condor in IWM for a nice profit. For those of you that wish to hold on for greater profits, please make sure you are fully aware of the risks.

With the SPDR S&P 500 ETF (SPY) trading for 429.69, I want to place a short-term bull put going out 42 days. As always, my intent is to take off the trade well before the November 17, 2023, expiration date. I’ll discuss the trade in greater detail in our upcoming weekly issue.

The broad market was taken down a notch yesterday, supposedly because job openings increased in August. I’m not buying it.

We’ll get average hourly earnings for September on Friday, which will probably show wage inflation continues to ease and the labor market isn’t as tight as yesterday’s market reaction implies.

WHAT TO DO NOW: The market’s action of late is encouraging for sure, but there’s still more work to do with our Cabot Tides and growth funds. Today we’re going to sell our small remaining position in DoubleVerify (DV) and hold the cash—with an eye toward redeploying the funds in the near future should the market and individual stocks continue to firm up. Our cash level will now be around 45%.

The broad market is getting whacked today after holding up relatively well in the face of rising bond yields. The reasons behind why bonds are selling off and yields are rising is beyond the scope of our discussion today. But suffice to say there are forces at work that are more complex and nuanced than a simple “Fed says higher for longer so yields are rising.” The recent spike in the 10-year yield may well have more to do with the federal deficit and supply/demand dynamics. So yeah, beyond the scope.

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.