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There is a doom-and-gloom quality to much of the talk about the subprime crisis. The reasoning is that this wad of bad debt is hanging like an enormous boulder over the stock market highway, and that when it falls, the world as we know it will essentially end. In this regard, it’s a lot like assertions that the U.S. national debt (or current account balance or poor educational system or declining manufacturing base, etc.) will ruin everything forever.

Legendary investor J.P. Morgan was often asked what the stock market would do. “It will fluctuate,” replied the taciturn Morgan.

The psychology of the markets can be puzzling. On Wednesday, the Federal Reserve, America’s Central Bank, raised its benchmark interest rates 75 basis points, the most since 1994. And the market liked it because it was way overdue and will hopefully help stem inflationary pressures in the economy. Will it slow growth, housing sales, consumer spending, and raise the carrying cost of U.S. debt? Yes, of course.

We don’t spend much time thinking about the news. Instead, we look at the market itself.

The market’s slow, steady improvement continues, with our Cabot Tides turning positive last week and some more stocks starting to shape up. That said, we still think it’s best to go slow here, partially due to more time being needed for setups to emerge, and partly because so many names we’re watching actually report earnings in the next week or two; the reactions will go a long way toward telling us if this rally has legs. Right now, we’re cautiously optimistic--we have no more buys tonight but could in the days ahead if things go well.



In tonight’s issue, we write about our new additions, review some other top ideas (including one that’s shown repeated huge-volume buying over the past many months) and remind you that the market is very capable of getting going despite the bad economy.

In the April issue of Cabot Early Opportunities, we take a quick look at what to expect from portfolio positions set to report in the coming weeks and dive into fresh opportunities that are shaping up nicely now.

At the top of the buy list is a software name we just added to our Watch List last month. We also take a position in a cosmetics stock that looks superb, pull back the curtain on a rising biotech star, tour an enterprise software name based in Canada and revisit a MedTech stock that’s finally getting some respect from the Centers for Medicare and Medicaid Services (CMS).

Enjoy!

Calm has been restored to the stock market, at least for now. A week ago – when the VIX briefly spiked as high as 66(!) – it was the opposite of calm. So even if stocks don’t suddenly go straight back up again, this is a welcome return to pre-August form. With that in mind, we have no new sells or downgrades (several of our stocks are hitting new highs!), and we add a very normal-looking growth stock that’s been sailing along just fine despite the many headwinds of the last few weeks. It’s a recent recommendation from Mike Cintolo in Cabot Top Ten Trader.

Details inside.

In December’s Issue of Cabot Early Opportunities we look back at one of the strangest years in decades and discuss the seemingly counterintuitive strategy that drove huge portfolio gains.

Then we look at a fresh batch of names that seem ripe for the picking now and which could serve us well in the beginning of 2021. Our new stocks span clean energy, PC gaming, biotech, industrial supplies, and payment processing. As always, there should be something for everyone!

After a sluggish start to the year, stocks have broken to new highs, with not even diminished expectations of Fed rate cuts able to slow them. Is it the next leg up in this still-nascent bull market? Perhaps. But in case there’s some earnings season turbulence ahead, today we add a low-risk value stock that’s been a favorite of Cabot Value Investor Chief Analyst Bruce Kaser for quite some time.

Details inside.

The end of the year is a time for friends, family, holidays, and celebrations of all stripes. It’s also (unfortunately) a time to do some year-end clean up of your portfolio, harvest some tax losses, and get started on planning for 2024. So, to give you a head start before you have to meet your accountant, this month we’re exploring tax credits, including some you may have never heard of, and the most important numbers you need to know when planning for the year ahead. Plus, we’ll highlight some tax-efficient investments to save you money next year.

The markets traded sideways through most of April. But since then, the choppiness has returned—along with worries about the uncertainty regarding the debt ceiling, the expiration of the immigration-limiting legislation, and ongoing debate about the possibility of a recession.

Yet, economically speaking, the trends are still healthy. Manufacturing has held up, employment continues to rise, and job openings are still underutilized (as you can tell if you’ve been in a restaurant lately!).

Last week was a quiet one for the major indexes, but many individual stocks had big moves ... mostly on the upside. We don’t have much to add from our last few commentaries—our Market Monitor remains bullish, and most stocks and sectors are in good shape, so you should be thinking positively and sticking to the bullish game plan. That said, be sure to keep your feet on the ground and be prepared for a pickup in volatility; we’re not predicting anything, but it’s been three months since the market low and seven weeks of nearly straight-up action, so it only makes sense to be prepared for some hiccups sooner or later.

One very hopeful event of the past two weeks is that many growth stocks, which had been lagging the market, are beginning to perk up. Our favorite this week is NXP Semiconductors (NXPI), a good-sized chip stock with a few irons in the fire and a stock that recently lifted off from a huge base. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Qihoo 360 (QIHU)	0.00	31-32.5	-
Oasis Petroleum (OAS)	12.57	36-38	-
NXP Semiconductors (NXPI)	0.00	30.5-32	-
Nationstar Mortgage (NSM)	0.00	38-40.5	-
Medicines Company (MDCO)	56.98	29-30.5	-
Masco (MAS)	0.00	18.5-19.5	-
Lazard (LAZ)	0.00	35-38	-
Michael Kors Holdings Limited (KORS)	73.22	61-64	-
Hertz Global Holdings, Inc. (HTZ)	0.00	18-19.5	-
First Solar (FSLR)	83.74	32-34	-

In October’s Issue of Cabot Early Opportunities we zero in on four software and internet companies that are benefiting from a variety of tailwinds, including two that are finding success after years of less-than-stellar performance. We also revisit an old MedTech friend that helps deliver drugs and vaccines around the world.

Enjoy!

After a nearly 5% drop in September, investors once again stepped in, bought the dip, and have managed to push the market higher for a fourth straight week.



Stocks added to recent gains this past week, driving the Dow and S&P 500 to fresh highs. The S&P 500 rose 1.3%, the Dow climbed 0.4%, and the Nasdaq added 2.7%. And the bullish ways continued Monday as all of the major indexes piled on to recent gains.



Year-to-date the S&P 500, Dow and Nasdaq are up 22.6%, 17.0% and 20.3%, respectively.



And to put things into an even greater perspective the last three years have seen the S&P 500 up 29% in 2019, 16% in 2020 and over 22% in 2021.



The talking heads would have you believe a variety of different reasons for the prolonged rally, but ultimately it comes down to simple supply and demand. Over the past 18 months daily net inflows are triple what they were prior to the pandemic.



And right now, the firepower used to buy the dips, including FOMO (“fear of missing out”) and/or TINA (“there is no alternative”) seem to be enough ammunition to keep pushing the market higher.

Monday after the close, sources close to the Senate banking committee said the panel will delay its vote on key cannabis banking reform known as the SAFE Banking Act. Some investors had expected the vote to happen next week. This update probably helps explain sector weakness Tuesday.

There are a lot of high-quality stocks trading at value prices out there. For next week’s recommendation, I’m looking at semiconductor companies worldwide and will try to pick the stock with the most upside and lowest downside risk. This is as Congress wrangles over the $52 billion CHIPS act to support the domestic semiconductor supply chain.

Tech has started off 2023 hotter than any year in the past 20, and this bear call spread is a play on that rally losing steam.

It still remains to be seen if the company will turn out to be a good place for your money.

The big news this week was, of course, the swearing in of President Biden and all the associated stories about the transition. Fun fact – portfolio holding Everbridge (EVBG) supplied its Mass Notification system to help keep Washington, D.C. area residents and visitors safe and tuned in during, and leading up to, the Presidential Inauguration.

My system is simple: buy high-quality stocks when they are undervalued, and sell when the stocks become overvalued.

Disney (DIS) is known and generally respected by every American (75% of revenues come from the U.S. and Canada). And its stock is known to every investor. But DIS to me looks ripe for a major fall. Since the 2009 market bottom, the stock has appreciated 494% (and that’s after the recent plunge). In the process, it’s gone from deeply undervalued to overvalued.