Issues
Despite some troubling signs under the surface of the market, mega-cap tech once again led the indexes’ charge higher. And because of the heavy weighting of these tech stocks in the S&P 500 and Nasdaq, those indexes gained 1.8% and 3.75%, respectively, while the Dow fell 0.4% on the week.
Despite some troubling signs under the surface of the market, mega-cap tech once again led the indexes’ charge higher. And because of the heavy weighting of these tech stocks in the S&P 500 and Nasdaq, those indexes gained 1.8% and 3.75%, respectively, while the Dow fell 0.4% on the week.
In the June Issue of Cabot Early Opportunities, we continue to lean into AI themes while taking a swing at a speculative space communications company. We’re also trying to keep things real here on earth with a picks-and-shovels-type infrastructure play, and we pull back the curtain on a real rarity in 2024, a software stock with a nice chart!
As always, there should be something for everybody.
As always, there should be something for everybody.
Explorer stocks had a good week led by Super Micro (SMCI) up 20% and Cloudflare (NET), up 9%, as PayPal (PYPL) has struggled a bit as it launches a new, higher-margin digital ad business. The S&P 500 is up 14% so far this year but the 10 biggest stocks recently represented almost 37% of the index’s total value, the highest since September 2000, according to FactSet. Use caution and take partial profits if you have some of these in your portfolio.
We have been discussing some great companies and breakthrough technologies, but it is easy to overlook that energy is the foundation of economic and technological development. It is also at the core of how countries secure and project national power.
So today, we add a U.S. renewable energy company that is a leader in an alternative energy source that’s making a comeback.
We have been discussing some great companies and breakthrough technologies, but it is easy to overlook that energy is the foundation of economic and technological development. It is also at the core of how countries secure and project national power.
So today, we add a U.S. renewable energy company that is a leader in an alternative energy source that’s making a comeback.
Despite some troubling signs under the surface of the market, mega-cap tech once again led the indexes’ charge higher. And because of the heavy weighting of these tech stocks in the S&P 500 and Nasdaq, those indexes gained 1.8% and 3.75%, respectively, while the Dow fell 0.4% on the week.
On the one hand, there are still a decent number of stocks that act well and are generally advancing, but on the other hand, more and more names across a variety of areas are hitting air pockets or simply falling by the wayside. To us, the divergence tells us the risk of a big character change is elevated, and that’s why we continue to advise holding a decent chunk of cash—but with plenty of stocks still acting well, we’re also OK with selective buying in names that are under strong accumulation. We’ll again leave our Market Monitor at a level 7, though we remain flexible and will adjust exposure if need be.
This week’s list is another eclectic one, with an increasing number of turnaround-type stories. Our Top Pick is a bigger outfit that’s very cheap but is starting to see some AI benefits—and the stock has shown exceptional power of late.
This week’s list is another eclectic one, with an increasing number of turnaround-type stories. Our Top Pick is a bigger outfit that’s very cheap but is starting to see some AI benefits—and the stock has shown exceptional power of late.
Stocks keep rising to new highs, though only a handful of sectors are truly participating in the rally. That will need to change if the market is to sustain its recent momentum, but for now, we’ll go with the tides and lean into one of the new-age subsectors that’s been attracting major sponsorship: GLP-1, a.k.a. weight-loss drugs. They’re all the rage these days and have driven portfolio holdings Eli Lilly (LLY) and Novo Nordisk (NVO) to great heights. And today, we add a more under-the-radar, indirect play on the trend in the form of a mid-cap health food upstart that was recently recommended by Tyler Laundon to his Cabot Early Opportunities audience.
Details inside.
Details inside.
Markets have been sideways in the past month, affected by wars, upcoming elections, and analysts see-sawing on the possibility of a Fed rate reduction. The Federal Reserve is meeting this week, and predictions for a rate cut this year are all over the board: none, one, or two.
I expect we’ll have more volatility as we near the fall election cycle.
In the meantime, economic stats look good! Manufacturing continues to climb, jobs are still being added at a rapid pace (272,000 vs. the estimate of 190,000), and the unemployment rate—at 3.9%—remains steady.
I expect we’ll have more volatility as we near the fall election cycle.
In the meantime, economic stats look good! Manufacturing continues to climb, jobs are still being added at a rapid pace (272,000 vs. the estimate of 190,000), and the unemployment rate—at 3.9%—remains steady.
The market remains a mixed bag, with some big-cap indexes moving up, but just about everything else still stuck in a trading range, while leading growth stocks remain hit or miss. That said, there are some encouraging signs, including some fresher leadership and resilient action among a bunch of names we’re watching and own, so we continue to play things in the middle--we’re holding some strong names and actually averaging up on one of our stocks tonight, but we’re also holding a chunk of cash and being selective.
Despite some selling pressures early last week, the indexes rebounded nicely on nearly every small dip, and by week’s end the S&P 500 had gained 1%, the Dow was mostly unchanged, and the Nasdaq had risen by 1.8%.
Despite some selling pressures early last week, the indexes rebounded nicely on nearly every small dip, and by week’s end the S&P 500 had gained 1%, the Dow was mostly unchanged, and the Nasdaq had risen by 1.8%.
The market has been terrific. And it will probably finish the year higher than it is now. But there is reason for caution.
Because of sticky inflation, interest rates remain near the highest levels in 20 years and may continue to stay high or go higher, until they drive the economy down. A hugely contentious presidential election is about to take place. And there are two significant global wars going on.
Steep selloffs are common even in markets that rise over time. The S&P 500 doubled over the last five years. But it crashed 30% in record time at the onset of the pandemic in 2020. There was also a bear market in 2022 during which the S&P fell over 20% and the Nasdaq plunged well over 30%. Of course, most stocks were down a lot more than the indexes. If you targeted some of the very best stocks at fire sale prices you could have gotten amazing returns.
In this issue, I highlight a way to target the purchase of the very best stocks at fire sale prices amid market turmoil that may occur from the potentially market-roiling issues this year or next. Most investors don’t buy when the market is crashing because it’s natural not to want to try and catch a falling knife. But there’s a way to take emotion out of the equation and calmly plot a way to fantastic returns.
Because of sticky inflation, interest rates remain near the highest levels in 20 years and may continue to stay high or go higher, until they drive the economy down. A hugely contentious presidential election is about to take place. And there are two significant global wars going on.
Steep selloffs are common even in markets that rise over time. The S&P 500 doubled over the last five years. But it crashed 30% in record time at the onset of the pandemic in 2020. There was also a bear market in 2022 during which the S&P fell over 20% and the Nasdaq plunged well over 30%. Of course, most stocks were down a lot more than the indexes. If you targeted some of the very best stocks at fire sale prices you could have gotten amazing returns.
In this issue, I highlight a way to target the purchase of the very best stocks at fire sale prices amid market turmoil that may occur from the potentially market-roiling issues this year or next. Most investors don’t buy when the market is crashing because it’s natural not to want to try and catch a falling knife. But there’s a way to take emotion out of the equation and calmly plot a way to fantastic returns.
Updates
This week’s note includes our comments on earnings from 10 of our companies. The deluge continues next week.
The note also includes the monthly Catalyst Report and a summary of the November edition of the Cabot Turnaround Letter, which was published on Wednesday. We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.
The note also includes the monthly Catalyst Report and a summary of the November edition of the Cabot Turnaround Letter, which was published on Wednesday. We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.
It’s said that the market climbs a wall of worry. It’s been a slippery wall lately, and this was the week when the bear case for the stock market really seemed to gather momentum.
The short list of bear case arguments includes the following:
The war between Israel and Hamas could easily expand into a broader conflict and draw the U.S. (and Iran, among others) deeper into a situation with no clear exit ...
The short list of bear case arguments includes the following:
The war between Israel and Hamas could easily expand into a broader conflict and draw the U.S. (and Iran, among others) deeper into a situation with no clear exit ...
WHAT TO DO NOW: The market cave-in continues, with some sacred cows and resilient stocks catching up on the downside now. The trend clearly remains down, and while we’re not craving more cash (69% coming into today), have only smaller positions and see some legitimate oversold signs out there, we’re also not going to just hold and hope with things that are caving in. Tonight, then, we’ll sell the rest of our ProShares S&P 500 Fund (SSO) and one-third of what we have left in Uber (UBER), which will leave us with just over three-quarters of the portfolio on the sideline. Details below.
Over the past month Tesla (TSLA) has struggled as continued price cuts have boosted sales but narrowed profit margins. It is also failing to live up to its brand as more than just a maker of electric cars (EVs).
Higher interest rates are eating into EV demand. Competition is catching up as Tesla last launched a new passenger vehicle in 2020. In October, BYD (BYDDY) outsold Tesla for the first time.
Higher interest rates are eating into EV demand. Competition is catching up as Tesla last launched a new passenger vehicle in 2020. In October, BYD (BYDDY) outsold Tesla for the first time.
The market has lost all the October gains. Despite the strong economy and optimistic earnings, interest rates continue to cast a shadow.
The economy is killing it (for now). Third-quarter GDP is expected to exceed 5%. That’s an economy nowhere near recession. And earnings should reflect that economic strength. Strong earnings can lift many stocks higher.
The economy is killing it (for now). Third-quarter GDP is expected to exceed 5%. That’s an economy nowhere near recession. And earnings should reflect that economic strength. Strong earnings can lift many stocks higher.
The S&P 500 index, of course, is the most widely used benchmark for stock market returns. Individual investors, financial media and those overseeing complicated institutional portfolios use this metric as their core measure of absolute and relative performance.
Professional investment consultants may take umbrage with this statement. These highly trained analysts are well-versed in the intricacies of quantitative analysis and can parse portfolio returns, relative to potentially hundreds of alternative benchmarks, into dozens of marginally relevant categories down to the 8th decimal place.
Professional investment consultants may take umbrage with this statement. These highly trained analysts are well-versed in the intricacies of quantitative analysis and can parse portfolio returns, relative to potentially hundreds of alternative benchmarks, into dozens of marginally relevant categories down to the 8th decimal place.
This week’s note includes our comments on earnings from Nokia (NOK). Next week, the deluge starts, with earnings from as many as ten companies.
After a very difficult September during which the S&P 600 SmallCap Index fell back to the May lows, things have finally stabilized in small-cap land over the last two weeks.
Energy stocks have been one of the main contributors lately, as have consumer staples and discretionary stocks. These guys have helped offset weakness in small-cap healthcare and tech.
Energy stocks have been one of the main contributors lately, as have consumer staples and discretionary stocks. These guys have helped offset weakness in small-cap healthcare and tech.
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
Cabot Options Institute Income Trader is focused exclusively on the creating consistent income through a variety of options selling strategies. Whether you have questions about selling puts, covered strangles, jade lizards or our income wheel approach, Andy is more than happy to help you steepen your learning curve in this live event.
Alerts
August expiration is upon us, so we need to buy back the rest of August calls and immediately sell more premium in September or October. Expect to see quite a few alerts over the next few days.
I will be exiting the Home Depot (HD) trade today. I will discuss the trade in greater detail in our upcoming weekly issue.
With 35 days left until expiration, I’ve decided to go ahead and lock in our gains on the trade. As a result, our track record stands at 86.8% (33/38 winning trades) with a total return around 150%.
With the August 18, 2023, expiration cycle coming to a close in seven days, it’s time to start buying back the rest of our August 18 short calls and selling more premium going out 30 to 60 days. I’ll be sending out numerous trade alerts for the various portfolios over the next few days, including the potential for a few more new trades in our active portfolios.
It’s nice to see Duolingo (DUOL) responding well to another very solid earnings release. The company reported that Q2 revenue grew 43.5% to $126.8 million (beating by $3.1 million) while adjusted EPS of $0.08 improved from -$0.38 in the year-ago quarter and beat by $0.27.
It was a tale of two earnings responses with Eli Lilly (LLY) and Si-Bone (SIBN) yesterday.
Portfolios
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.