Issues
Today’s opportunity is a cloud software stock that’s recovered nicely from its December lows and is moving back up near its 2018 high.
The company is growing quickly, mainly because of an acquisition-led growth strategy. Evidence is building that organic growth is starting to kick in too now that the company has acquired enough solutions to start bundling them into product suites.
This M&A growth strategy is a slightly different one than pursued by the other cloud software vendors in our portfolio. I think it’s compelling. And if I’m right that organic growth will be steadier moving forward, we should see shares perform very well in 2019 and beyond.
The company is growing quickly, mainly because of an acquisition-led growth strategy. Evidence is building that organic growth is starting to kick in too now that the company has acquired enough solutions to start bundling them into product suites.
This M&A growth strategy is a slightly different one than pursued by the other cloud software vendors in our portfolio. I think it’s compelling. And if I’m right that organic growth will be steadier moving forward, we should see shares perform very well in 2019 and beyond.
Already the S&P500’s crisp 20% peak-to-trough drop ending on December 24th seems like a distant memory. Since last quarter, over 90% of all S&P500 stocks have advanced. Being contrarians, this prompted us to look at stocks that haven’t fully participated in the upturn.
In this issue, see the seven stocks whose shares remain well below their two-year highs, yet might have latent recovery potential.
In this issue, see the seven stocks whose shares remain well below their two-year highs, yet might have latent recovery potential.
The latest issue of Cabot Marijuana Investor is now available, with my current advice on the sixteen stocks in the portfolio.
The gains so far this year, in both the sector and the portfolio, have been absolutely spectacular, but they won’t continue. Already I detect signs of a rolling correction and there’s the possibility that short-term, it could get worse. So in this issue, I have some sell recommendations, for investors who are working to develop maximum gains.
For longer-term, more patient investors, however, doing nothing is fine. The long-term prospects for both the industry and the sector remain bright.
The gains so far this year, in both the sector and the portfolio, have been absolutely spectacular, but they won’t continue. Already I detect signs of a rolling correction and there’s the possibility that short-term, it could get worse. So in this issue, I have some sell recommendations, for investors who are working to develop maximum gains.
For longer-term, more patient investors, however, doing nothing is fine. The long-term prospects for both the industry and the sector remain bright.
The market has slowed down just a touch in recent days, with the major indexes hesitating near some resistance. But the trends remain strongly up (our Cabot Trend Lines has joined the bull camp) and individual stocks are acting well, including many reacting well to earnings. Of course, pullbacks are definitely possible, so now’s not a time to jump in with both feet. But we continue to be bullish and to put money steadily to work.
In tonight’s issue, we discuss all our stocks, and take a peek at one of the market’s leading themes, which looks like it could go far as the bull market picks up speed.
In tonight’s issue, we discuss all our stocks, and take a peek at one of the market’s leading themes, which looks like it could go far as the bull market picks up speed.
In this issue, I identify the bluest of blue chip energy infrastructure stocks at a dirt cheap price with a 6% yield. Business is booming and it is only a matter of time until the market starts rewarding the stock.
All Cabot’s market timing indicators have now flashed green lights, so I continue to recommend that you work to get more invested.
With today’s recommendation, we return to the U.S. with a medical technology stock that addresses a mass market and is growing fast—though it’s not booking profits yet.
With today’s recommendation, we return to the U.S. with a medical technology stock that addresses a mass market and is growing fast—though it’s not booking profits yet.
Current Market OutlookLast week made it nine weeks in a row for most major indexes, and also brought another bullish “blastoff” signal (90% of NYSE stocks rose above their 50-day line), which portends nicely higher prices three to nine months down the road. As for the question on everyone’s mind (when will we get a pullback?), there is a growing chance of a short-term dip, partially due to lots of good news hitting the wires (such as today’s tariff delay). That said, pinpointing short-term moves is a tough game and rarely helps you make good money over time—the key is sticking with the major trend (up) and focusing on leading stocks and proper setups. Overall, we remain open to anything, but just going with the evidence, you should be mostly bullish.
This week’s list has a mix of stocks and sectors, from retail to medical to Internet. A bunch of the names look good, but for our Top Pick, we’ll go with Trade Desk (TTD), which looks like a real leading glamour stock. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Avalara (AVLR) | 102.00 | ||
| Boot Barn (BOOT) | 43.24 | ||
| Dine Brands (DIN) | 93.05 | ||
| Invitae (NVTA) | 32.06 | ||
| iRhythm Technologies (IRTC) | 51.15 | ||
| Match (MTCH) | 0.00 | ||
| SS&C Technologies Holdings, Inc. (SSNC) | 63.56 | ||
| Trade Desk (TTD) | 468.02 | ||
| Wayfair (W) | 167.03 | ||
| Yeti Holdings (YETI) | 42.80 |
We’ve had an up and down week for emerging markets with a big day yesterday followed by weakness today. Our EEM signal stays positive so we are adding a half position today and moving one stock from buy to hold.
Updates
For value-focused investors, this year’s prologue has been a welcome change from the turmoil experienced in early 2025.
In just the past few weeks, some of last year’s most ignored or underappreciated laggards have posted outsized gains, with rallies that have made even momentum-driven tech stock traders envious. Even more remarkable is the fact that much of that strength has been concentrated in ultra-defensive areas of the market like consumer staples, utilities and healthcare.
In just the past few weeks, some of last year’s most ignored or underappreciated laggards have posted outsized gains, with rallies that have made even momentum-driven tech stock traders envious. Even more remarkable is the fact that much of that strength has been concentrated in ultra-defensive areas of the market like consumer staples, utilities and healthcare.
The market rotation continues to be the main story out there this week, though rumblings of a potential strike on Iran, an update from the January FOMC meeting, and a slew of earnings reports and economic data releases have been giving investors plenty to think about.
In terms of the rotation, the equal‑weight S&P 500 ETF (RSP) is up 5.5% so far this year, illustrating that leadership is broadening beyond the narrow group of mega‑cap stocks that drove much of last year’s performance.
Year to date, the S&P 600 SmallCap Index is up 8.3% and the S&P 400 Mid‑Cap Index is up 7.9%. Both are comfortably outperforming the S&P 500, which is up just 0.1%, and the Nasdaq, which is down 2.1%.
In terms of the rotation, the equal‑weight S&P 500 ETF (RSP) is up 5.5% so far this year, illustrating that leadership is broadening beyond the narrow group of mega‑cap stocks that drove much of last year’s performance.
Year to date, the S&P 600 SmallCap Index is up 8.3% and the S&P 400 Mid‑Cap Index is up 7.9%. Both are comfortably outperforming the S&P 500, which is up just 0.1%, and the Nasdaq, which is down 2.1%.
Happy Chinese New Year! The year of the horse is upon us.
China is expecting an incredible 9.5 billion trips to be made during the 40-day Lunar New Year travel period. Chinese automakers are also on the move as the country’s numerous brands sold nearly 200,000 vehicles in Britain last year, doubling their market share to almost 10%.
China is expecting an incredible 9.5 billion trips to be made during the 40-day Lunar New Year travel period. Chinese automakers are also on the move as the country’s numerous brands sold nearly 200,000 vehicles in Britain last year, doubling their market share to almost 10%.
As U.S. investors have shifted from risk-on to risk-off mode in recent months, a clear disparity between the “haves” and the “have-nots” has materialized.
Let’s start with the “have-nots.” Financials have fared the worst so far this year (-4.7%), followed by technology (-3.1%), communication services and consumer discretionary (-2.8% each). The downturn in the two tech-related sectors in particular is a stark departure from recent years, when technology led the charge of the current bull market.
Let’s start with the “have-nots.” Financials have fared the worst so far this year (-4.7%), followed by technology (-3.1%), communication services and consumer discretionary (-2.8% each). The downturn in the two tech-related sectors in particular is a stark departure from recent years, when technology led the charge of the current bull market.
Cyclical stocks are soaring and technology is floundering in the transformed market.
The bull market is turned upside down. For most of the first three years, technology, and particularly AI stocks, soared while most other stocks did very little. Now, previously meandering stocks are killing it while technology sinks.
The bull market is turned upside down. For most of the first three years, technology, and particularly AI stocks, soared while most other stocks did very little. Now, previously meandering stocks are killing it while technology sinks.
Strong fourth-quarter earnings are confirming what the market was already doing.
Current estimates based on earnings reported so far are for 13.2% overall S&P earnings growth for the quarter. It’s a solid quarter and the fifth straight quarter of double-digit earnings growth. In terms of sector performance, cyclical companies are killing it, and technology is floundering, just like before earnings.
Current estimates based on earnings reported so far are for 13.2% overall S&P earnings growth for the quarter. It’s a solid quarter and the fifth straight quarter of double-digit earnings growth. In terms of sector performance, cyclical companies are killing it, and technology is floundering, just like before earnings.
Like many coffee aficionados, I have something of a love/hate relationship with Starbucks (SBUX). My main gripe is that the company’s food and beverage offerings have always been pricey compared to the fare served in most fast-food restaurants and run-of-the-mill coffee houses.
The outperformance of small caps continues.
Through Tuesday’s close, the S&P 600 is up 10% year to date versus just 1.6% for the S&P 500.
All but three small-cap sectors are outperforming their large-cap counterpart. The strongest small-cap sectors are materials (+20%), energy (+23%), industrials (+17%), and tech (+11.4%).
Through Tuesday’s close, the S&P 600 is up 10% year to date versus just 1.6% for the S&P 500.
All but three small-cap sectors are outperforming their large-cap counterpart. The strongest small-cap sectors are materials (+20%), energy (+23%), industrials (+17%), and tech (+11.4%).
Let’s talk about the power of staying invested.
Sure, when the market turns south – and I’m not even sure last week’s mini-dip qualifies – it makes sense to pare back on your weakest stocks and put a larger portion of your portfolio in cash. But taking your ball and going home – selling out of all of your stocks when times are tough – is not a winning strategy. Here’s why.
Sure, when the market turns south – and I’m not even sure last week’s mini-dip qualifies – it makes sense to pare back on your weakest stocks and put a larger portion of your portfolio in cash. But taking your ball and going home – selling out of all of your stocks when times are tough – is not a winning strategy. Here’s why.
NOTE: We’re sending this a day early as I’m soon to embark on a trip with the kiddos over the next week. I will be working a good amount from the road, though, and will have updates if need be. Also, next week’s issue will be published as scheduled.
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WHAT TO DO NOW: The market remains very mixed, with growth measures still generally pointed sideways to down, while the broad market remains in solid shape. What’s interesting, though, is that we’re seeing more growth stocks kick into gear, along with some huge buying action in a few “cyclical growth” names. Tonight we’re making one move—adding a half-sized stake in Macom Tech (MTSI)—but are keeping our eyes open for a broader character change among growth stocks. Our cash position will be around 53%.
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WHAT TO DO NOW: The market remains very mixed, with growth measures still generally pointed sideways to down, while the broad market remains in solid shape. What’s interesting, though, is that we’re seeing more growth stocks kick into gear, along with some huge buying action in a few “cyclical growth” names. Tonight we’re making one move—adding a half-sized stake in Macom Tech (MTSI)—but are keeping our eyes open for a broader character change among growth stocks. Our cash position will be around 53%.
Today could be a big day for cannabis stocks.
The reason: We may get an important update on the rescheduling timeline.
Cannabis investors will be watching closely today to see whether Attorney General Pam Bondi offers a rescheduling update when she appears before the House Judiciary Committee. Upbeat comments could spark a sharp cannabis sector rally. The hearing starts at 10 a.m. EST.
The reason: We may get an important update on the rescheduling timeline.
Cannabis investors will be watching closely today to see whether Attorney General Pam Bondi offers a rescheduling update when she appears before the House Judiciary Committee. Upbeat comments could spark a sharp cannabis sector rally. The hearing starts at 10 a.m. EST.
I’m excited to share a couple of enhancements to Cabot Early Opportunities —improvements designed to sharpen our focus and better help you stay on top of the stocks we own.
Alerts
This banking group beat earnings estimates by $0.20 last quarter, and four analysts have increased their forecasts for next quarter.
This bank may be a sleeper, and the shares are beginning to take off.
Coverage of our first Top Pick’s shares were recently initiated at H.C. Wainwright with a ‘Buy’ rating.
Our second idea is profit-taking on a previous Top Pick.
Our market timing indicators remain positive, so we remain overall bullish, but we are seeing some wild moves both up and down among some of our stocks.
Despite weak analyst sentiment, this biotech is looking healthy for the new year.
This stock is up 30% since joining the Buy Low Opportunities Portfolio on November 7, and it has achieved my full price goal.
Analysts are expecting this travel company to grow by more than 15% annually over the next five years.
Estimates are rising for this oil services company.
One of our stocks moves from Hold to Buy, and moves from the Buy Low Opportunities Portfolio into the Growth & Income Portfolio; another stock moves from Strong Buy to Buy.
More than 214,000 shares have been purchased by the insiders of this biotech in the past three months. The shares are trading a very price, reflecting the company’s turnaround status.
Portfolios
Strategy
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.