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A very promising start to the trading week, which saw the indexes surge higher by 5%, was somewhat washed away by Friday’s post Jobs Report sell-off. And while the steep declines Friday were worrisome, big picture the S&P 500 still managed to gain 1.5% on the week, the Dow rallied 2%, and the Nasdaq added 0.7%.

Tonight, we’ll continue to stand pat in the Model Portfolio (though we are placing one stock on Hold) with eight stocks and a cash position near 20%.

The overall market is in good shape, with all three of our market timing indicators still bullish, though individual growth stocks still have a bit more to prove as we move through the heart of earnings season. We have no changes today (the Model Portfolio is 20% in cash), but are ready to move to a fully invested stance should earnings season go well.

The tide is changing. The recent perception was that of sputtering economic growth in a market that was panicking about the possibility of a near-term recession. Many of our defensive positions have gone gangbusters in the past turbulent year but I’ll be watching the situation closely but for now I will bow to strong momentum.

We’re all familiar with the story about the frog. If you drop him in boiling water, he’ll jump right out. But if you put him in cold water and then heat it to boiling, he’ll adjust gradually to the increasing temperature, be lulled into inaction, and die. It’s not true; the frog will eventually jump out. But as a cautionary tale, it reminds us that we should be wary of inaction in response to gradual changes in our environment. In other words, as change happens--and it happens every day--you must adapt. If not, you’ll fail to thrive. So today I want to mention six major changes in our own environments, and discuss how we might adapt to them, and profit from them.

The situation looks bright in 2021. Several high dividend paying stocks and sectors have had a big move higher after the vaccine announcements.

The economy is already rebounding, and at a stronger pace than was expected. But it still has one arm tied behind its back with the remaining restrictions and lockdowns. Plus, with the indexes not far from all time highs, the market had likely risen as much as it was going to before the next phase of the recovery came into view.

The big-picture story out there continues to be the battle between bad news (rising infections, high unemployment, too many crumbling businesses) and good news (progress toward vaccines, therapeutics, etc.; accommodative policies from the Fed; improving fundamentals for some businesses arising from the pandemic). Then there’s all the uncertainty around the upcoming election that further confounds the mind.

Despite some weakness early in the week, the indexes bounced back in a big way, closing at new all-time highs. For the week the S&P 500 gained 1%, the Dow added 1.07%, and the Nasdaq soared higher by 2%.

Despite some weakness early in the week, the indexes bounced back in a big way, closing at new all-time highs. For the week the S&P 500 gained 1%, the Dow added 1.07%, and the Nasdaq soared higher by 2%.

Despite all the current issues, the market is doing gangbusters.

The S&P 500 is up over 12% YTD. And the year isn’t even half over. The index has also rallied more than 20% from the bear market low in October. That’s the definition of a bull market.

But things aren’t as rosy as they seem. This is the thinnest rally I’ve ever seen. Just ten stocks account for the entire YTD rise in the S&P 500 index. The other 490 stocks have collectively gone nowhere.

The pandemic induced profound changes in the short term and will permanently alter things to at least some degree for a long time. Such change can create great investments.





One industry that is benefitting from the altered world is shipping. Seaborne shipping stocks have had their best year in well over a decade. Shipping rates have soared amidst the rapid recovery and pent-up consumer demand as well as supply chain disruptions that have limited the number of ships available.





These changes should be long lasting for one industry subsector, container shipping. The torrid rise of e-commerce and technological efficiency should permanently increase demand for container shipping at a time when supply is limited and will remain so for a while.





In this issue I highlight a container shipping company that is growing earnings at better than a 100% annual clip, sells at a still cheap valuation, and currently yield 6.7% with a dividend that should continue to rise in the years ahead. The stock could have a lot further to rise in the year ahead.

This year’s strong market has surprised most pundits. Hopefully, the good times last. Anything is possible.

I don’t want to get into the business of trying to predict what the market will do over the rest of the year. Even if you get things right, some stupid headline can come out of nowhere and change all the math. There’s a much better way than market timing.

Buying good stocks cheap is perhaps the best way to assure good returns over time. Different market sectors go in and out of favor all the time. Technology stocks were out of favor at the beginning of this year. No one wanted energy stocks at the beginning of 2021.

You may not think there are a lot of bargains anymore. Sure, it’s a bull market for the indexes. But it is still the darkest days of the bear market in certain places. Defensive stocks in utilities and other sectors are wallowing near the lows of last October while the indexes are whooping it up.

In this issue, I highlight three defensive portfolio positions. These stocks are all selling near 52-week lows and, in some cases, multi-year lows. But operational results at these companies have been as strong as ever. And all these currently out-of-favor stocks have long histories of superstar performance that blows away the returns of the overall market.

Forget the Fed, and inflation, or the velocity of the landing. Buying some of the very best dividend stocks on the market near the lowest valuation at which they ever sell should be a money-making strategy regardless of what happens with all that other stuff.

The stock market is inherently unpredictable in the near term. That’s what makes it a market. But it has been especially hard to predict in recent years. And there might be more of the same going forward.

There could be continued economic growth with rising interest rates and inflation or an economy bounding toward recession in the next couple of quarters, or anything in between. Sure, the market could find the means to rally with a desirable in between scenario. But it is more likely that the market will just bounce around or move lower.

Amid such uncertainty, it makes sense to find stocks that can weather any scenario. Instead of placing a bet on what the Fed or inflation or the economy might or might not do, it makes sense to seek out an all-weather income generator.

In this issue, I highlight the stock of a company that operates in an incredible niche market that has provided earnings growth for 31 consecutive years and enabled the stock to consistently outperform the market in every kind of environment. The company is positioned for strong growth in the years ahead and is selling below its average valuations over the last five years despite the high-priced market.

The market remains quite weak, and thus ripe for a major rally at any time. But until we see real strength, continued caution is advised.
And today’s recommendation fits the bill, as it has a solid dividend and the prospect of real growth as the global energy industry adjusts to a world without Russian oil.


As for the portfolio, we’re selling one laggard, which is suffering as consumers cut back on discretionary spending.

“Resilient” is not a word that would have described stocks in 2022, but through the first quarter of 2023, that’s precisely what they’ve been in the face of a bank meltdown, more interest rate hikes and still-high inflation. It bodes well for the back half of the year when perhaps some – maybe all? – of those worries subside. In the meantime, we have to say goodbye to a couple underperforming stocks today, while adding a growth play that lies outside U.S. borders. It’s a Mexican consumer products stock that takes advantage of Mexico’s cheap manufacturing costs – and the stock is up 22% year to date!

It’s possible stocks are stretched, at least in the near term, and the just-underway earnings season will put that to the test in the coming weeks. The next big move may be to the downside, so today we’re adding some more portfolio protection in the form of a mega-cap health insurer that pays a modest dividend but has a history of beating the market. It’s the latest recommendation from Cabot Dividend Investor Chief Analyst Tom Hutchinson.

Stocks are the highest they’ve been since last summer, and with the debt ceiling in the rear-view mirror and the Fed sounding less hawkish these days, it’s possible they could keep rising as we enter Summer 2023. One sector that’s been unstoppable of late is artificial intelligence, so today we add some more AI exposure, which has already served us well with the performance of Microsoft (MSFT). The new addition is a lesser-known name but is equally red-hot. Mike Cintolo recently recommended it to his Cabot Top Ten Trader audience.

A week ago, it felt like a bull market in name only. Now, it feels like a full-fledged bull market, with participation coming from places other than just mega caps and artificial intelligence. That’s reflected in our portfolio, where roughly half our stocks are hitting or near 52-week highs. Still, there’s always a chance things could crater, especially with the S&P 500 up 14% year to date and the Nasdaq up 30%. So today we add some needed value, with the bonus benefit of giving us more overseas exposure, in the form of an undervalued U.K. life insurance company courtesy of Cabot Value Investor Chief Analyst Bruce Kaser.