Search

There’s one thing that common stocks and the price of oil—and virtually all other investments—have in common: their price charts. The study of price charts is called technical analysis.

Welcome to the inaugural issue of Cabot Income Advisor. It is my pleasure to share investment ideas that can provide you with a high income in today’s low interest rate world.
In this issue I highlight three stocks that are great buying opportunities right now for income investors. The stocks are chosen for their high yields, ability to generate attractive call premiums and the likelihood of capital appreciation over time.


While the market indexes have rebounded strongly from the March lows, many individual industries and stocks are still dirt cheap and high yielding, In fact, this is the best market in over a decade in which to find high yields in quality stocks.


Of course, the market is still dangerous and many high yielding stocks are in a precarious financial condition. Many will have to cut the dividend and the price will likely fall. While quality high yields are out there, stocks must be chosen wisely.


These three stocks are a great way to lock in high income and start to build your high income portfolio. Now is the time to embark on your journey to higher income and a more rewarding financial future. I look forward to being your trusted partner.

I hope you had an enjoyable and relaxing summer. Wall Street is back to work this week, and Apple (AAPL) is launching a new product or two next week, so get ready for stocks to start moving again.

First, note that due to next week’s holiday (and the market being closed), your issue will be delivered one day later, on Tuesday, January 19.

Today, the market’s main trend remains up, and thus I continue to recommend that you be heavily invested. However, I also see a lot of potential for corrections from this dizzy height, so I’m selling one stock today (TSM) and downgrading two to hold (NUAN and QCOM).



As for today’s recommendation, it’s a low-risk dividend-paying stock we actually owned for two months last year—and did well with. And I think the portfolio can benefit from it again now.



Full details in the issue.

Today’s recommendation is a chain restaurant—a chain I’d never even heard of—but the company is growing fast and the chart is very constructive.

The broad market sold off today, but odds are it’s just a normal pullback in the renewed bull market. Overall, our market-timing indicators tell us the trends are up. However, eternal vigilance is the price of success in investing, so today I’m recommending selling two stocks that have recently broken down.

The main trend remains up, in both the broad market and the cannabis sector in particular. When these uptrends will end, no one knows, but I guarantee that they will someday.

Long-term, however, I remain very bullish on both the companies and the stocks in the industry and continue to adjust the portfolio’s holdings to optimize growth (with reasonable security.)

Current Market Outlook


We don’t want to repeat ourselves too much, but the environment has remained mostly the same during the past few weeks. First, overall, this is a bull market that’s likely to carry nicely higher when looking out a few months; there remains plenty of doubt and uncertainty, which is (contrarily) a good thing. Second, though, making money has become trickier—there are far more news-driven moves, buying pressures seem to come and go for many leading stocks (as opposed to the sustained upmoves seen earlier this year) and there’s no question most indexes are extended to the upside. That’s no reason to get overly worried (most stocks are still acting normally), and in fact, we’re nudging our Market Monitor up a notch this week as leading stocks have perked up a bit. But it remains important to look for good entry points, honor your stops and take some partial profits when the opportunity arises.

Encouragingly, this week’s list is very broad, with all different types of sectors, sizes and growth/value outlook represented. There are many good names to choose from, but our Top Pick is Horizon Pharmaceuticals (HZNP), which has huge earnings estimates and a tight chart.

Stock Name	Price	Buy Range	Loss Limit
Anaplan (PLAN)	61.25	59.5-62.5	53-55
Enphase Energy (ENPH)	77.23	72-76	64-66
FedEx (FDX)	219.84	206-213	184-188
Futu Holdings (FUTU)	32.17	30-32	26-27
Horizon Therapeutics (HZNP)	75.12	72-76	65-67
Lithia Motors Inc. (LAD)	248.96	238-250	215-220
Roku, Inc. (ROKU)	173.48	167-174	147-150
Salesforce.com (CRM)	272.65	263-273	233-239
Trupanion (TRUP)	62.73	60.5-63	53-55
Tupperware Brands (TUP)	16.29	14.5-15.5	12-12.5

A large number of our portfolio stocks are experiencing bullish price action right now. Unless something ugly hits news headlines in the next few days, we’re probably going to enjoy a strong stock market in the first half of July. I hope you’re not sitting on the sidelines!

A few nights ago, as I found myself sitting at a dinner table with a group of strangers, by way of making conversation (and doing research) I asked, “What do you think will happen with the real estate market?” Their answers: “It’ll come back” and “We’ve been here before.” Not wanting to be a wet blanket, I didn’t disagree. But I think they’re wrong. I think there’s a lot more downside ahead, and that getting there will take much longer than most people imagine today.

Now is a good time to review what Mike Cintolo considers the #1 rule for growth stock investors--cutting losses short.

One way we beat the averages is stock selection. We want you to own great stocks in bull markets, like NBTY (NTY).

Yesterday, the House Judiciary Committee approved the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act), which has Democratic Presidential candidate and former prosecutor Kamala Harris as one of its sponsors.

So maybe the title of this Cabot Wealth Advisory (The Portfolio Management Manifesto) is a bit much. But with the market in a pullback/correction/retreat/whatever-you-want-to-call-it, I wanted to review a few ways you can go about handling your stocks ... especially your winners. Any growth-stock investor worth his salt cuts all his losses short. Also, any investor who’s going to make good money in the market takes good-sized positions. So then the question becomes ... how do you handle your winning stocks? I’ve been thinking a lot about this subject in recent days and weeks, and I’ve concluded it comes down to a battle between drawdowns and profit potential. Let me explain.

WHAT TO DO NOW: Remain cautious, though remain flexible. The market’s initial bounce this week was good to see but it didn’t offset the recent weakness, and today’s Meta-inspired selloff didn’t help the cause. All told, our Cabot Tides remain negative, and most growth stocks are still in rough intermediate-term shape—though the long-term picture is still positive. After selling the rest of our Arista (ANET) position last Friday, our cash position is 44%—we’ll sit tight tonight with our remaining names and our cash and see how earnings season continues to play out.

This week’s note includes our comments on earnings from Walgreens Boots Alliance (WBA) and Wells Fargo & Co (WFC). Next Thursday, we get earnings from Nokia (NOK). The deluge starts the following week with eight companies scheduled to report.

Most automotive stocks are cheap these days. But they’re cheap for a reason - lack of future growth. That said, there are a few gems in the auto industry.

The potential for an accelerated timetable for the Fed to raise interest rates and the ongoing Russia-Ukraine situation led to volatility this week. As always, other events and news also moved stocks. In particular, Sea (SE), after bouncing back the previous two weeks, was off sharply on Monday following reports that India has banned its popular mobile hit “Free Fire”. The stock has since recovered half of this pullback to close Wednesday trading at 141.