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I correspond with investors who know all of the sound rules of growth stock investing but do not follow them.

Adherence to a system or strategy is one of the best predictors of investing success, but before you can find the right system, you need to know what kind of investor you are.

Extreme sector rotation has been the story of the last week as red-hot growth sectors came under some pressure, while out of favor value stocks finally found some buying. This is a fine situation for our diversified portfolio as we are selling expensive calls that help offset any short-term stock/sector weakness. This brings me to our pick of the week, which is in a red-hot sector and recently reported very strong earnings.

Stocks moved lower again this week, though we will say the buyers have at least put up a little bit of a fight, with both Wednesday and (so far) this morning showing some buying.

Micro-cap stocks can sometimes be volatile due to lower trading volumes, but these three companies are built for the long term.

With this morning’s broad selling, the intermediate-term of the market is now down—but the long-term trend is still up! How you handle this depends partly on your own risk tolerance and partly on how your stocks are acting. If your stocks look good, I favor holding, but if they’re falling, I recommend selling.

In this advisory, the only immediate change is the sale of one stock, LGI Homes (LGI) to create room for our new one.



And that new one, by the way, comes from a sector that is definitely outside our usual hunting ground. But fundamental trends look good, so this just might turn into a great investment!



Full details in the issue.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the September 2023 issue.

We do a deep-dive into what ails Citigroup (C) shares and remain steadfast in our conviction.

Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.

I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the July 2023 issue.

Almost like an annual rite of passage, major banks reported their Federal Reserve stress test results last week. All major banks passed, in that their capital levels were in excess of the minimum requirements under the Doomsday Scenario conditions outlined in the test assumptions. We’re not the biggest fans of these tests, for reasons outlined in our monthly letter.

Citigroup remains a riskier bank relative to other majors, but also has a higher return-potential share valuation, plus a 4.5% dividend yield to reward patient investors.

If you’re like most of us, chances are good that much of your retirement money is held in a 401(k) or other tax-deferred retirement plan that is allocated to stock markets and bond funds.

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 8^th decimal place.

You may have seen that a relatively new Explorer idea, Fisker (FSR), was up 38% yesterday. It turns out that my analogy of comparing the company to Apple’s relationship to Foxconn was truer than even I could imagine. The news yesterday was that Foxconn will be making a future Fisker model electric vehicle, and even better, it may be doing so in my home state of Wisconsin.

Here’s an introduction to stock chart reading, something that’s key to my growth stock methodology.

Continue to play things halfway. The market has made solid progress during the past two weeks, increasing the odds that a low has been formed. That said, few growth stocks have kicked into gear, and the longer-term trend is still down. We continue to fine-tune our watch list, but tonight, we’re standing pat in the Model Portfolio with five stocks and a cash position near 52%.

The Emerging Markets Timer is doing just fine, as the iShares EM Fund has rebounded from its May 17–18 dip.

Short selling is complicated and risky, and we don’t recommend it for inexperienced investors, but those who consider it should keep the following strategies in mind.

The major indexes continue to act well in the wake of our Cabot Tides buy signal, which is clearly a good thing. That said, the vast majority of action remains in stocks that are buried on their charts, while those that acted resilient in recent months are mostly just sitting around.

As we near the end of the second week of 2021 and approach inauguration day, the market is barreling full steam ahead, seemingly unaware of the dung piles that are consistently thrown in its path.

After trading as low as 1139 on May 12 the S&P 600 Small Cap Index has staged a modest recovery, crossing back above the January and February lows of around 1230 two weeks ago.

Two of our stocks—Reynolds American (RAI) and U.S. Bancorp (USB)—reported earnings this morning (details are below). So far, earnings season is off to a good start, with the big banks and Netflix (NFLX) beating estimates in recent days.