Issues
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!
Part of what makes turnaround mutual funds an inefficient and therefore profitable investing niche is that most investors avoid these securities. Managers of this small group of funds are comfortable with the contrarian approach of owning stocks that are avoided by more conventional mutual fund managers.
In this issue, we highlight seven of these turnaround-oriented mutual funds we’ve watched over the years.
In this issue, we highlight seven of these turnaround-oriented mutual funds we’ve watched over the years.
Today’s recommendation is another company tapping into the explosive growth in genomic testing. It makes diagnostic tests, which pits it against larger rivals like Illumina (ILMN) and Gardant Health (GH). But this small company plays in three very specific markets where its next-gen products are emerging as market leaders. And new collaborations with the likes of Johnson and Johnson (JNJ) and Loxo Oncology, now part of Eli Lilly (LLY), are further evidence that it’s on the right path. All the details are inside. Enjoy, and Happy 4th of July!
Current Market OutlookIt’s not perfect, but from a top-down perspective, the market remains in good shape—today’s stretch toward new highs for many indexes (the S&P 500 made it, though most others didn’t) keeps the intermediate- and longer-term trends pointed up. That said, under the surface, things are a bit disjointed, with selling on strength seen in some extended growth leaders and buying picking up in names that are either cyclical (oils, financials) or fresher (those that haven’t had huge runs). That doesn’t mean you should chase every stock and sector that’s moving and ditch those that are wobbling, but it is important to avoid complacency with your winners (honor stops and take partial profits when offered) and, on the buy side, focus on stocks showing outstanding accumulation in recent weeks.
Those are just the type of charts we’re honing in on these days, and this week’s list has another batch of (mostly) newer names showing excellent action. Our Top Pick is Anaplan (PLAN), which looks like a new leader in the software space.
| Stock Name | Price | ||
|---|---|---|---|
| AGCO Corporation (AGCO) | 76.24 | ||
| Anaplan (PLAN) | 47.52 | ||
| eHealth (EHTH) | 122.74 | ||
| Inphi (IPHI) | 120.16 | ||
| Kratos Defense (KTOS) | 24.08 | ||
| Novocure (NVCR) | 0.00 | ||
| Roku, Inc. (ROKU) | 150.46 | ||
| Shake Shack (SHAK) | 92.08 | ||
| Smartsheet (SMAR) | 44.12 | ||
| Snap Inc. (SNAP) | 16.68 |
The latest issue of Cabot Marijuana Investor is now available, with my current advice on the fourteen stocks in the portfolio.
The cannabis sector is currently in a correction, with both marijuana and CBD stocks trending lower, giving up some of their early-year gains—and perhaps building a bottom here.
In fact some of the biggest stocks, those supported best by institutional investors, are already looking stronger, though it will take time to know if they are in real uptrends. In the meantime, I continue to build cash, which will come in handy when it’s time to buy again.
Last week we sold a portion of three stocks and this week we’re selling portions of two more, raising the portfolio’s cash level to about 33%.
The cannabis sector is currently in a correction, with both marijuana and CBD stocks trending lower, giving up some of their early-year gains—and perhaps building a bottom here.
In fact some of the biggest stocks, those supported best by institutional investors, are already looking stronger, though it will take time to know if they are in real uptrends. In the meantime, I continue to build cash, which will come in handy when it’s time to buy again.
Last week we sold a portion of three stocks and this week we’re selling portions of two more, raising the portfolio’s cash level to about 33%.
Markets are hoping for some sort of breakthrough from the Xi-Trump meeting on the sidelines of the G-20 meetings in Japan over the weekend. Most likely there will be some positive face-saving news with most key issues kicked down the road. The Chinese want no new tariffs and Huawei sanctions pulled back. Emerging market signal is still positive and we remain cautiously optimistic.
So far, the market has had a fantastic year with the S&P up 16.38% at the halfway point. It’s also been a stellar June as the index has climbed 7.3% this month alone. Now, the market is perched near all-time record highs. In this issue, I highlight a stock that is cheap in an expensive market that has a great chance of moving higher in the quarters ahead. It is the best run American refiner that has been knocked back because of temporary conditions in an environment otherwise ideal for American refiners.
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.
Current Market OutlookThe market’s intermediate-term trend turned back up last week after the major indexes tacked on more gains following the Fed’s dovish words. Combined with a bullish longer-term trend and many indicators that suggest investors remain hesitant, the path of least resistance for stocks remains up. That said, the market rarely makes it easy, and on that note, we’ve seen a fair amount of rotation in recent days out of some of the strong (and in many cases, extended) growth stocks and into other areas of the market. Overall, we remain bullish, but you should take things on a stock-by-stock basis—if you own something at a good profit, consider booking partial profits and trailing a stop for the rest, while honoring loss limits on any recent purchases. On the flip side, many “fresher” names look poised for higher prices as they’ve only recently emerged from multi-month slumbers.
This week’s list contains all types, but includes a few of those fresher-looking charts. Our Top Pick this week is Iqvia (IQV), a steady, reliable medical play that just blasted off from a good-looking rest period.
| Stock Name | Price | ||
|---|---|---|---|
| Agnico Eagle Mines (AEM) | 79.05 | ||
| AAXN (AAXN) | 87.11 | ||
| CoStar Group (CSGP) | 589.55 | ||
| Exact Sciences (EXAS) | 116.91 | ||
| Insulet (PODD) | 175.69 | ||
| IQVIA Holdings (IQV) | 157.93 | ||
| Rapid7 (RPD) | 63.52 | ||
| Sea Limited (SE) | 132.86 | ||
| Tempur Sealy (TPX) | 85.53 | ||
| Under Armour, Inc. (UAA) | 26.82 |
Updates
What a difference a month can make! What an April! The S&P rose 9.6% in April, making it the best single month for the market in six years. It hit an all-time high on Friday.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.
The results are in for the month of April. It was fabulous. The S&P rose 9.6%, making it the best single month for the market in six years. It hit an all-time high on Friday.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of minor skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings.
Sure, the war isn’t over. But the market doesn’t really seem to regard it as a war anymore, more like a blockade situation with the possibility of minor skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings.
Now before you call me crazy concerning today’s newsletter headline, hear me out.
Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”
Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”
The market is digesting the push and pull of higher oil prices, a deeply divided Federal Reserve, prospects for a prolonged blockade of the Strait of Hormuz and fading momentum from the AI trade that helped push markets to all‑time highs earlier this month.
Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.
Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.
Yesterday, four tech giants, Alphabet, Amazon, Meta and Microsoft, representing 22% of the S&P 500’s market value, reported strong quarterly earnings that highlighted the importance of AI.
You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.
You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.
It’s been a glorious April following a miserable March for the market. What happens in May may determine which direction stocks are headed for the rest of the year.
That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.
That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.
What war? This market is moving on. We may not be out of the woods yet, but investors are looking beyond the Iran war.
Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.
Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.
The other day I was paid a visit by a roving ISP salesman who was pitching his company’s fledgling internet service over the local monopoly’s. We struck up a conversation and he asked what I did for a living. When I told him, his eyes lit up and he asked, “Got any good stocks you can recommend?”
Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation
Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation
Note: I’m out of town this week, so I’ll be a bit briefer on the update today—but I’m still checking my laptop a couple of times a day if you have any questions or comments. I’ll be back at my desk come Monday. Cheers.
WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.
WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.
Despite all the headline noise lately we’re marching deeper into first‑quarter earnings season with the market’s path of least resistance still pointing higher.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
The old saying, “History doesn’t repeat itself, but it rhymes,” is an apt one for the stock market these last two years.
In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.
In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.
The market turned on the afterburners. The S&P 500 made up all the March losses and catapulted to a brand new high in a remarkably short time. It’s a market that sure looks like it wants to go higher. But stocks are being held back this week by more war uncertainty.
The current ceasefire with Iran expires on Wenesday night. Talks may not happen, and war talk is growing. The resumption of the war will almost certainly prompt a decline in the market. Aside from that near-term threat, investors are clearly looking past this war. Hopefully, it won’t last much longer.
The current ceasefire with Iran expires on Wenesday night. Talks may not happen, and war talk is growing. The resumption of the war will almost certainly prompt a decline in the market. Aside from that near-term threat, investors are clearly looking past this war. Hopefully, it won’t last much longer.
Alerts
Our first idea is a retailer with a lot of momentum and 10 analysts who have recently raised their EPS forecasts.
Our second recommendation is profit-taking on a recent pick.
This fitness equipment maker is due to release earnings tomorrow, now estimated at $0.31 per share. The company beat estimates last quarter, by three cents.
The shares of this real estate company were recently upgraded by Raymond James to ‘Outperform’ and seven analysts have raised their EPS estimates for the company in the past 30 days.
This oil producer just announced a merger deal with SandRidge Energy, Inc., which should result in one of the largest oil players in the Mississippian Lime shale formation.
A small-cap jumps on earnings and a second has announced a voluntary cash offer to acquire all shares of another company.
There are several rating changes today due to earnings.
Five analysts have increased their EPS estimates for our first pick, a midwestern bank, and our second recommendation is the sale of a previous idea.
Our second recommendation is the sale of a previous idea.
This trucking company handily beat analysts’ earnings estimates, and forecasts are for double-digit growth this year.
This airline manufacturer has seen fantastic results, beating analysts’ earnings estimates by $0.17 last quarter.
Right now, my advice is to continue to deploy cash into your favorite stocks.
Portfolios
Strategy
A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.
A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.
Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.
Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.
Our Cabot Top Ten Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Top Ten features.