Dear Fellow Investor,
At Cabot we are unabashed bulls. We believe in the stock market as a way to create wealth, perhaps the best way for most of us. In our 55 years in business, that belief has led us to a lot of great stock picks, and to our subscribers making money. A lot of money.
Then along came 2025.
Uncertainty abounds as tariffs and trade policies swirl in the heads of corporate executives and investors. Market and supply chains have been disrupted. Unemployment rates are being questioned by the administration but have pretty clearly underperformed. The possibility of political interference at the Fed is growing. The impact on GDP, if any, has yet to be seen, but concern is in the air. The enormous $7 trillion in money markets has grown to nearly $8 trillion. That is A LOT of money sitting on the sidelines.
In spite of all of this, the stock market has remained amazingly resilient, regaining the sharp losses experienced earlier in the year.
The stock market almost always offers opportunities for you to make money. And I’m not talking about shorting. (I’ve previously written about short selling before and why we avoid that.) Even in the worst of times, in the most out-of-favor sector, there can be profits to be made.
More importantly, there are some sectors and strategies where volatility like what we’ve been experiencing doesn’t have the same negative impact. And may even be helpful for investors looking to profit.
Suffice to say, there are plenty of investing strategies you can be leveraging right now to make solid and even outstanding returns. I’m going to talk about several of those today.
The first I’ll discuss is value investing.
Value Investing
Throughout most of the 2010s, value investing didn’t get a lot of respect. It may even be a foreign concept to many newer investors who have exclusively built investing experience since the 2008 meltdown, which was followed by a growth-fueled decade-plus of enormous wins from Apple, Amazon, Tesla and others.
At this point, those massive growth stocks (think the Magnificent 7 plus a few more) are at a bit of a plateau. Their prices are up so much that the top 10 stocks currently account for about 40% of total U.S. market capitalization. Ten companies!
Don’t get me wrong. I don’t think they’re bad companies to own. It’s just that with their high multiples, it is difficult to see a path for continued growth comparable to the past 15 years without some kind of significant correction.
By comparison, the uncertainty driving stock market volatility can create opportunity for value investors. Looking at assets, market opportunity and discounted projected cash flows and comparing that to the share price enables you to identify undervalued stocks where the probability of gains is high. Again, since the big gains in recent years have been disproportionately in the top tier of stocks, there have been plenty that were left behind to varying degrees. That’s too bad, but it’s an opportunity if you can find them.
I was talking about this with Chris Preston, the Chief Analyst of our Cabot Value Investor advisory. He was saying that between straight value stocks and the growth-at-reasonable-prices (GARP) stocks that have lagged the general market, there are some strong opportunities. The year-to-date performance of the portfolio at 15.6% bears that out.
Early-Stage Investing
Another area where we see opportunity now and in the foreseeable future is in smaller and early-stage companies.
Many of these stocks haven’t been lifted the way the large caps have. In addition, as is always true with early-stage companies, many just aren’t yet on the radar of investors and institutional buyers. And because of that, the valuation multiples of these companies can be very attractive for investors.
One of the big challenges for finding and analyzing these companies is that their smaller footprint means they don’t get the attention of Wall Street analysts that the big and high-flying companies do. Getting reliable information about them takes more work—reading the footnotes on the financial statements, participating in the calls with the CEO and CFOS, and independently researching the market opportunity and the management teams
That’s what Tyler Laundon does as Chief Analyst for two advisory services, Cabot Early Opportunities and Cabot Small-Cap Confidential (“Confidential” because many of the smaller companies have low enough trading volume that we have to limit access since it’s not possible to share these recommendations to a large, broad audience).
This small-cap and early-opportunity expert has continued to find promising rising stars even through the tumult of 2025 and shows no signs of slowing down.
Options Trading
The last area that I want to discuss where volatility can help create profits is options trading.
Because of the built-in leverage of options trading, the ability to hedge risk, and the ability to play both bearish and bullish trades, options are a remarkably versatile investing strategy. While the number of investors who recognize the power of options continues to grow, there are still many who miss out on their ability to deliver profits.
Most importantly for this discussion, not only is market volatility not a barrier to profiting with options, it’s a requirement. A completely stable market would have very little options trading profit potential.
Part of investor resistance to options trading simply stems from the jargon, which is different from regular equity investing and may be unfamiliar or even intimidating to many. And the other thing is, many people who have traded options without a proven and disciplined strategy have lost money on them. That is totally avoidable when you have an expert, veteran trader and analyst to identify and coach you on high-probability trades.
At Cabot, we are fortunate to have such a person in Jacob Mintz, a former CBOE market maker and longtime Chief Analyst of Cabot Options Trader and the Cabot Options Trader Pro service for more advanced traders. Jacob’s track record this year has remained strong and produced some big wins.
Because options trading inherently has lower volume than stocks, we have to limit the number of subscribers to these services, but even when they are “closed,” we keep waiting lists that we go to when spaces open up.
To be clear, I’m not saying there’s no risk in investing right now, or any time. Investing always involves risk. Anyone who tells you otherwise is lying to you or doing something nefarious. Risk vs. reward. Any business owner or investor knows they travel together.
But well-researched stocks, analyzed by real experts, and recommendations based on disciplined application of proven strategies can help you produce more winners and cut your losses while they’re small and redeploy that capital more profitably.
That’s what Cabot Wealth Network has been doing for 55 years and plans to continue to do for many years to come.
For your investing success,
Ed Coburn
President, Cabot Wealth Network
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