Search

Getting older often means doing what we love, but taking fewer risks, like pickleball instead of tennis, or pairing stocks with an ETF portfolio.

McDonald’s isn’t the dominant growth story it was. But McDonald’s stock continues its steady performance - and a breakout may be coming.

Officially, nothing much has changed with the overall evidence—the major indexes are a split verdict, with the Nasdaq hitting nine-month highs and the S&P 500 testing breakout levels, while the broader indexes remain mostly stuck in the mud while lagging groups (like financials) bounce into resistance. As for individual names, there remain plenty of air pockets, too.

The IPO market is still well below its pre-pandemic pace, but the breakout performance of Circle (CRCL) may inspire more underwriters and early-stage investors to test the waters.

The best stocks typically share this common trait - a trait that’s been driving American innovation and growth for the past couple decades.

Popular stocks are easily identifiable, but many of them have already peaked. Here’s why you should pay closer attention to less popular stocks.

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.

A new day, and maybe a new term for some of us. That is, “rolling recession.” After expectations of a hard landing, then soft landing, then pushing a possible recession further down the line, economists have now decided we may just be having a rolling recession, which affects just a few industries at a time.


So, I guess, currently, that could possibly mean that the following sectors which are negative so far in 2023 may be in a recession,

Interest rates are heading higher.

In normal and efficient markets, a strong economy and steeply rising prices would drive interest rates much higher. But rates have been held down and distorted by the Fed’s hyper-aggressive accommodation.



The Fed dismissed inflation in the early stages as “transitory” and now realizes it missed the boat and inflation is getting out of hand. Behind the curve and embarrassed, the Central Bankers will have to make up for lost time by reversing course, ending its bond buying program and raising the Fed Funds rate.



The main force preventing economic growth and rising prices from pushing interest rates higher is about to be removed, and perhaps quickly. Under the circumstances, it is quite reasonable to expect interest rates to move higher.



In this issue, I highlight an investment in the financial sector. Many companies in the sector benefit from higher rates as they earn higher spreads and profits. This company stands to benefit not only from higher interest rates but a change in consumer behavior as well.

The market situation is changing. Amidst persistent high inflation and concerns about future economic and earnings growth, investors are adjusting. Energy is up nearly 40% YTD as that sector benefits from inflation. Utilities and Consumer Staples are also thriving as investors focus on value, defense, and income in the market uncertainty.
Many stocks in the CDI portfolio have performed well and are likely to continue doing so. But because of the high prices they are rated a HOLD. However, there are two standout positions. In this month’s issue, I highlight two stocks that have what it takes in this market. They both benefit in the current environment, sell at reasonable valuations, and pay sky-high yields.


The market situation is changing for the worse overall. But there are still great opportunities if you know where to look.

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.

The economy is showing some mixed signals. But it certainly does not appear to be near a recession now. That could change. But it keeps not coming.


At the same time, the Fed is near the end of the rate hiking cycle. Sure, there’s speculation about another rate hike in the June meeting or the next one. But it is still close to the end of the hiking cycle. Inflation appears to be moderating (for now). Unless there is a big surprise with that number, the market can soon stop worrying about the Fed.

A debt ceiling deal appears imminent, though that’s ultimately up to our ever-dysfunctional Congress. If it does get done, another Fed interest rate hike may be right behind it. So, the long-awaited rally may be on hold a while longer. But that doesn’t mean individual stocks (see artificial intelligence and semiconductors) can’t get a move-on, so today we add a small-cap MedTech stock that’s showing a lot of promise in addressing a very common – and thus very lucrative – health problem. It’s a new recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

So far, this has been a positive year for the market. But an enormous amount of uncertainty remains.

The painful high inflation/hawkish Fed conundrum that caused last year’s bear market appears to be ending. But a high risk of recession is taking over. It will be difficult for stocks to rally into the next bull market without knowing the timing, severity, or duration of a possible recession.

Inflation could remain sticky. A recession could hit in any of the next three quarters. A recovery may be lame when it finally arrives because the Fed may have to keep interest rates high. We don’t know if six months from now we will face more inflation, a recession or even stagflation.

While there’s a very possibility of a good market bounce after last week’s washout, the overall picture is still very weak and thus continued defensiveness is still advised.
This week’s recommendation is the world’s largest manufacturer of industrial robots, yet most U.S. investors don’t even know its name. It looks like a great low-risk buy here.


As for the portfolio, we’re selling one stock, a small company in the beleaguered technology sector.


Details inside.

The market is enjoying a big bounce today, but that’s not unexpected given last week’s washout; the main trend is still down.

And that means continued caution is the prescription, which is filled this week with an old-school vehicle parts company that pays a solid dividend and has a nearly bulletproof business.



As for the current portfolio, which is 25% in cash, there’s one Sell and a couple of downgrades to Hold.


Details in the issue.

Note: Because of the Juneteenth Holiday, which will close all markets next Monday, next week’s issue of Cabot Stock of the Week will be published on Tuesday June, 21.
And I think the market will likely be higher then, because the selling has been so pervasive in recent days that a bounce is overdue.


In the meantime, in continuing to manage our portfolio, we are selling Intel (INTC) today, mainly because it’s our biggest loss and the trend looks bad.


As for today’s recommendation, it’s a Chinese stock in the EV space that has fallen 76% from its high of last year and is ripe for a rebound.


Details in the issue.

While the market officially remains in a downtrend, various indicators in recent weeks, combined with terrible news and sentiment, tell us the market bottom may have passed. But until we see real strength, continued caution is advised.
Today’s recommendation may be too aggressive for some readers (it’s a semiconductor company, and we all know they can be volatile) but it has a good story and chart and I think it’s worth the risk.


As for the portfolio, there are no sales, just one downgrade to Hold.


Details in the issue.

These are crazy times. This pandemic-riddled year isn’t done with us yet. In fact, Covid cases are rising and many states are reinstating new batches of lockdown restrictions. At the same time, we’re less than a week away from an election with a high risk of a contested result and the ensuing uncertainty.

At some point, we will get past the election and the pandemic. The economy should boom and the market will be free to rise. But things could still get awfully dicey in the weeks and months before we get to the Promised Land.



In this issue, I highlight a high-income stock that is ideal for the current situation. The business is benefitting mightily from the pandemic. It’s a defensive stock that should continue to perform well amidst the volatility. Yet, it should also be a star in the post-pandemic market.



Not only does this stock pay a high dividend, but it attracts high call premiums as well. It is one of the very few stocks that is well worth buying in the current situation.

The market has been rallying furiously over the past several days on earnings. Is this the Promised Land or more false hope?

It’s just the kickoff of the third-quarter earnings season and the nation’s major banks have reported. These banks are considered bellwethers for the U.S. economy and numbers are better than expected. The results are reviving hope among investors.