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Less than two years removed from the dual implosions of Silicon Valley Bank and Signature Bank, the U.S. banking industry is thriving again, boosted by a resilient economy, declining inflation, and lower borrowing costs. No sector has reported better earnings growth in the fourth quarter than financials, with banks leading the way. And yet, bank stocks remain cheap. So today, we add a big name in the banking industry to our Growth/Income portfolio – one that’s growing fast, and cheaper than most of its peers. I think it could reach new all-time highs within a matter of months.

Details inside.

The market’s rebound from the August 5 mini-panic has been unusual—in a good way, with a straight-up advance that’s recouped most of its prior decline, given up very little of its gains along the way, and has been led by a gaggle of growth stocks that have powered ahead on earnings. Now, we’re not totally free and clear here, and some short-term wobbles could easily come; by our measures, the intermediate-term trend is sideways and defensive stocks are percolating, so there’s more work to do. All in all, we’re putting a little more money to work tonight but will still be holding just shy of 40% in cash as we see if the market can further confirm a new uptrend.

We wrap up a fruitful year with a December Issue of Cabot Early Opportunities highlighting five names spanning everything from bottled water to social media to bitcoin mining.

I like the diversity of this Issue, which has something for everyone.

The market is in the midst of a short-term consolidation, which usually dishes out some pain and offers tedious action, which is what we’re seeing so far—earlier this week, we cut bait with one stock and have tight leashes on a couple of others. Further near-term shenanigans are possible, even likely, so we’re taking things on a stock-by-stock basis, but we’re also not opposed to putting money to work in resilient leaders—which we’re doing tonight, starting a half-sized position in a name we’ve long thought has the characteristics of a future winner.

After a sharp correction in early April, the market posted a nice, but not powerful, rebound for four weeks but the past two weeks have definitely hurt the near-term evidence, whether you look at the overall market or leading stocks, where some abnormal action has appeared. There’s still more positive evidence than not, but at this point it’s very much a mixed bag, with some stocks acting fine, some coming under the gun and lots of up-and-down action. We’ll leave our Market Monitor at a level 7, but it’s vital to be in the right names and sectors.

This week’s list has many resilient names, including a few that have been out of the spotlight for a while. Our Top Pick is a small medical device outfit that, thanks to a good-sized acquisition of late, looks like a major player in the spinal surgery area, with new products and technology selling well.

It’s been a rough year for stocks. And things may get worse before they get better. Meanwhile, money markets pay barely anything, and you never know when the market will turn.
Dividends are a great answer for a market like this.


They provide an income and lower volatility in turbulent markets and make it easier to stay invested ahead of the next bull market. Dividends account for most of the market returns during flat and down markets and excel during times of inflation.


In this issue, I highlight a company in one of the most defensive and recession-resistant industries on the market that currently pays a massive 8% yield. The stock is already cheap and likely near the trough of its own bear market with far more upside than downside over time to complement the high dividend.

The market and growth stocks have had a couple of wobbles so far in September, and given the heady run from leading stocks in August, some further shakeouts are possible. If the selling pressure intensifies enough to turn our Cabot Tides negative, we’ll trim our sails, but right now, the trends of the major indexes and the vast majority of leading stocks are pointed up, so we remain positive.

The market remains very strong, with the trends of the major indexes and the vast majority of stocks pointed up, both of which keeps us mostly bullish. But really, we’re looking at things mainly on a stock-by-stock basis now; some names are extremely extended and vulnerable to air pockets, while others are just a few weeks into what look like new, sustained advance. With that in mind, we’re actually taking partial profits on one stock today, while averaging up in another — all in all, we’ll still be around 18% in cash.

Elsewhere in tonight’s issue, we write about some of our favorite cookie-cutter stories out there at the moment; we own one great one, but we’d like to have another. And we also review all our stocks, present some new ideas and talk a bit how to handle the speculative, super-hot names in the proper fashion.

The market has done a good job of holding its strong early-May upmove, and that’s kept both of our trend-following market timing indicators in positive territory. That said, what we really want to see going forward is upside follow through from the major indexes and leading growth stocks, which would go a long way toward telling us the three-month correction is over.

This week, I’m pleased to bring you the first in a new series of interviews with the expert contributors to The Dick Davis Digests. Our first contributor is Vivian Lewis, the editor of Global Investing. Vivian is a Harvard graduate who worked as a financial journalist in Europe for 18...

“Investors steadily increased purchases of variable annuities with guaranteed benefits in recent years. These annuities clearly are striking the interest of a substantial number of investors. But they’re complicated, and I doubt most of the buyers fully understand them or know how to compare them to alternatives. There are several...

Stocks hopefully have settled down after facing a rough market in recent weeks fed by expectations that the Fed soon will embark on raising interest rates. This has led to sharp pullbacks for growth stocks with high valuations and no earnings. Quality and value are beating risk right now.

Over the weekend, the finance ministers of the eurozone decided on a bailout package for Cyprus. But why does this matter to us?

We’ve been able to enjoy a break in the earnings action this week (finally), and without a lot of company-specific updates, we’ll keep things short and sweet today.

The main message is that the broad market continues to rise on the back of rate cut expectations and a falling 10-year yield (down to 4.35% from over 4.7% a couple weeks ago).

It is reasonable to expect a significant market turnaround sometime next year. The market trends higher over time. And bear markets always give way to bull markets. Things should get a lot better in 2023. But there is a strong chance they get worse first given the current uncertainties regarding inflation, the Fed, and a recession.

Of course, a recovery and new bull market should reward the short-term pain handsomely over time. As a longer-term investor, which dividend investors should be, it should just be short-term noise on the way to long-term profits. But we can do better than just riding out the storm. We can exploit another possible market downturn to our advantage.

It’s a fact that many stocks that get hurt the worst in a bear market are the first to recover when the market turns. In this issue, I highlight a phenomenal cyclical stock that had been a market superstar but has been clobbered in this bear market. The stock is targeted at a low, low price that may be reached if the market falls to a new low. It could provide incredible upside leverage ahead of a market recovery.

The market advanced nicely today, continuing the bounce it’s enjoyed during the past week and a half. It’s encouraging action, and we’re not opposed to doing a little buying here or there given our large (76%) cash position.

That said, our trend-following indicators are still negative, telling us that, despite the nice rally, we need to see continued positive action before starting a major new buying spree. Right now, we’re mostly focused on fine-tuning our watch list, which we’re not having trouble doing given the many strong earnings gaps seen recently.

In tonight’s issue, we talk a bit about how markets usually bottom after a big decline, something that’s good to keep in the back of your mind. And we spend a lot of space discussing potential leaders of the next advance.

Mattel (MAT) reported revenue of $1.08 billion, down 0.7% from last year, and missing the consensus estimate of $1.09 billion by 1%. Earnings per share, however, exceeded the consensus estimate of $0.16 by 18.75%, coming in at $0.19. Key metrics showed mixed performance: Barbie sales fell 5.9% to $266.10 million, Fisher-Price dropped 17.5% to $135.90 million, while Hot Wheels rose 3.9% to $327.40 million, and other brands reached $471.90 million, beating estimates.

In my view, the best strategy for overseas markets is to play the trends with a contrarian value approach. For example, the Hang Seng China Enterprises index, a closely followed gauge of large Chinese listings in Hong Kong, has fallen about 11% so far this month after losing 14% last year. Foreign investors have sold about 90% of the $33 billion worth of Chinese stocks that they had purchased earlier in 2023 and have continued selling this year.

So today, we go against the grain on China.

Cannabis investors continue to await action by the Trump administration on rescheduling, the next potential major catalyst for the group.

In an August 11 news conference, President Donald Trump said that he’s still considering the change and he will have a decision within a few weeks.

I believe Trump will follow through on his promise to reschedule, but this is not a 100% certainty. The most likely outcome, in my view, is that the Department of Justice will cancel a planned rescheduling hearing and issue a final rule with a public comment period.

Even with the stock market near all-time highs, you should be buying stocks. Why? Because the 7.5% Rule says so. Here’s how it works.