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One of the most important investing lessons—letting winners run and cutting losses short—is often the downfall of investors. Many disobey this rule, leaving them with a portfolio of losing stocks. Novatel Wireless (a losing stock that had to be cut) and First Solar (a winning stock that’s been allowed to run) are used to illustrate this lesson.

Oil and gasoline prices, as you likely have noticed, have been easing lately, even as we’re in the midst of what energy industry hands call “the summer driving season.” I bring up gas prices because as editor of the Cabot Green Investor, I have noticed that there is a fairly popular--and false--idea about the correlation between gas prices and Green stocks. The idea is that as the prices of oil products drop, there must be a decrease in interest in hybrid cars, solar panels and the like. I contend it’s false for one simple reason: the daily fluctuations of a commodity aren’t going to affect whether someone chooses to go ahead with a capital intensive purchase of a geothermal heating system or an electric car. Yet some people trade Green stocks each day against the price of oil, surrendering longer-term gains.

As an investor and editor of Cabot Green Investor, I separate my personal feelings from investment analysis, relying instead on sound fundamental analysis I developed at Forbes and Dow Jones and the unique and time-tested technical analysis performed here at Cabot, publisher of the Cabot Green Investor. If you follow the stock market, you already know the stock of Whole Foods Market (WFMI) has been a big winner for much of this decade. In fact, in recent years, sales of organic products overall were rising 25% a month (!) until the economic turmoil of last autumn. Naturally, because organics are generally pricier, that rate of growth dropped. Yet while pundits expected the recession to be the death knell of the widespread move to organics, it hasn’t been.

Two fundamental analysis systems that can be used to find great stocks.

Many companies became extinct in the 1930s, but the companies that survived helped to build the U.S. into the greatest industrial nation to date. It is surprising how many of our current U.S. companies were founded more than 150 years ago.

The iShares EM Fund (EEM) is holding above its moving averages, which keeps the Cabot Emerging Markets Timer a bright green. But the weakness in Chinese stocks is hitting the portfolio hard. In response, we have six moves today.

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%.

We’re focused on seeing how the market and leading growth stocks act following the Friday/Monday wave of selling; so far, there’s been some abnormal selling but most stocks are holding key support. The overall market is also still in good shape, and thus, we’re generally standing pat, with around 22% in cash.

Our trend following indicators remain bullish and most growth stocks are still in good shape, so we’re sticking with our current stance. Our only change tonight is that we’re placing one of our stocks on Hold.

Amid all the debate around health care, and despite the on-again-off-again repeal-and-replace effort, small-cap healthcare is still the number-one performing sector this year. Our two medical device stocks are rated Buy, and both are trading at or near 52-week highs.

Emerging markets (EEM) and Chinese stocks in particular continue to struggle a bit this week. The EEM is trading right at its 200-day moving average and below its 50-day moving average so the portfolio remains in a defensive stance.

The market got a nice bounce off the Christmas Eve lows. It’s up about 10% since then. But the bounce back is leveling off. If the market continues to recover here, it will be in a guarded and cautious state for another year or two. Beyond that, there will be fantastic opportunities to get aggressive. But, for now, I will remain cautious but not fearful.

The overall market remains in good shape, with both of our trend-following indicators—the Cabot Tides (intermediate-term) and Cabot Trend Lines (longer-term)—currently pointing up. We’re still keeping an eye on small-cap indexes, which have still not eclipsed their late February peaks, as well as the Nasdaq, which has found repeated resistance near 8,000. But overall, there’s no question that the trends are up.

The market’s bounce off support last week was encouraging, and while we remain in a news-driven, choppy environment, our current cash level is too high given the mostly positive evidence. Thus, tonight, we’re adding two new stocks leaving us with a cash position of 20%.

Blackbaud (BLKB), Mitek (MITK) and Primo Water (PRMW) announce earnings . BLKB is now rated Sell.

Investors are always looking for the latest and greatest trading strategy. Unfortunately, many overlook my favorite options strategy to generate premium regardless of market direction.

Cannabis stocks continue to get weighed down by the SAFE banking debacle. As you recall, late last year legislators failed to approve cannabis sector banking reform called the SAFE Banking Act that would have made it easier for banks to serve cannabis companies.

The first two weeks of 2024 have been a bit sloppy with the markets down the first week, strengthening a bit this week then back down again today as this morning’s inflation numbers (CPI) came in a little higher than expected.

Thus far small caps have lagged large caps this year at the index level, though it’s not worth overthinking it too much just 11 days into the year.

Small caps are having a very nice week as a lot of rate-sensitive areas of the market zoom higher following the Fed’s meeting and Jerome Powell’s press conference yesterday.

I’ve been saying I think small caps are very attractive lately, so the directional move here isn’t a surprise, though the pace of this week’s gains is rather eye opening. The S&P 600 Small Cap index is up about 7% over the last two days through midday Thursday!

In today’s note, we discuss the earnings reports from Wells Fargo (WFC). Please note that our comments on Well’s earnings didn’t make it into the podcast.