September has been tricky and tedious for growth stocks, with lots of volatility and some high-volume selloffs. It’s fair to say the evidence has worsened a bit, and we’ve placed a couple of stocks on hold and raised some mental stops.

That said, the majority of evidence is still bullish, very few growth stocks have actually broken down and the market’s trends are still positive. Net-net, then, we’re still mostly bullish, but are keeping our eyes open should things change.

In tonight’s issue, we introduce our new Real Money Index, which is replacing the Two-Second Indicator on page 8; we think it will help us lean against the wind in many circumstances. (We’ll still be following the Two-Second Indicator in house.) And we also take a deep dive into all of our stocks, letting you know what we’re thinking as many have consolidated of late.

The market continues to make progress, despite the dramatic headlines gracing the front page every day (and popping up online throughout the day). Today I’m adding a well-known restaurant stock to the Dividend Growth tier of our portfolio, to take advantage of rising consumer spending and the strong American economy. I also have updates on all our stocks, most of which are rated Buy, and at the end of the issue I take a look at the importance of diversification.

This week’s recommendation is a low-risk financial stock with decent prospects that is temporarily low because it lost what investors mistakenly believed was a key client. If you buy now you can get capital appreciation plus a modest dividend.

Current Market Outlook


The third week of September brought another bout of sharp rotation, with leading growth stocks trading lower while other areas of the market firmed up. To this point, the action has been acceptable given the big runs in so many stocks during the summer, but some indexes and many stocks are approaching key levels—if the buyers show up here, all could be well, and we wouldn’t be shocked to see another leg up develop. But if not, the odds that a deeper and longer retreat among leading stocks will increase. Today, we’ll keep our Market Monitor at a 7 (out of 10), and it’s good to see some new leaders emerge. But the next few days will likely be important for the intermediate-term outlook.

This week’s list is still heavy on growth ideas (though some are turnaround-type plays), but our Top Pick is Rowan Drilling (RDC), which is showing great strength by lifting out of a big bottoming area.

Stock Name	Price	Buy Range	Loss Limit
Aaron’s (AAN)	74.35	51.5-53.5	46-47.5
Atlassian (TEAM)	182.16	88-92	79-81
CF Industries (CF)	45.23	51-53	46-47
Dave & Buster’s (PLAY)	57.01	61-63	55-56.5
Omnicell (OMCL)	81.03	67-70	62-63.5
Pacira Biosiences (PCRX)	54.85	48.5-51	42.5-44
Paylocity (PCTY)	97.34	77.5-81	70-72
Rowan Drilling (RDC)	15.52	17.7-18.7	15.8-16.4
Wingstop (WING)	121.52	64-66	58-59
Yelp (YELP)	41.30	47-50	43-45

The world isn’t providing much good news for emerging market stocks to build on, but the stocks themselves are doing a good job of ignoring that. This doesn’t mean that we have a new buy signal, but there are a growing number of stocks that are putting in bottoming structures and even a few making some progress. With the market looking ahead, we could start to see new leaders emerge in the next few weeks or after EM companies report their quarterly results in a couple of months. There will be plenty of bargains when the turn comes, and we’re featuring an old friend that been in the doldrums for quite a while but boasts a huge story. Read on for all the details.

The markets—despite continued shenanigans in D.C.—were virtually unchanged since our last issue. Unemployment remains steady, the CPI is stable and consumer sentiment is very positive.

As you’ll see in our Advisor Sentiment Barometer and Market Views, market experts remain bullish, although we’ve seen a bit more selling this past week.

September is living up to its reputation as a tricky month, with lots of volatility among leading stocks and rotation and news-driven moves on a day-to-day basis. Still, just going with the evidence, the trends of the major indexes and most stocks are up, so I remain bullish. That said, finding stocks early in their overall uptrends that aren’t obvious to the crowd is vital—tonight’s Stock of the Week fills the bill, blasting off three weeks ago after a 14-month correction and consolidation.

Current Market Outlook


We’ve entered the third week of September, and today was another day of sharp rotation, with the market’s leading growth stocks and indexes taking hits while other areas declined modestly (if at all). Big picture, the intermediate-term trend of the major indexes is still up, and most leading stocks, while choppy, are in the same boat; hence, we remain optimistic. That said, we are nudging our Market Monitor down a notch today to respect the repeated waves of selling and, just as important, a bit more iffy action from leading stocks (including a few that are seeing wild swings up and down after a big run, which is often a sign of distribution). Thus, we’re being patient with our top performers, but it’s also a good idea to tread carefully, holding at least a little cash and booking some partial profits on any stocks that are showing wear and tear.

This week’s list is another growth-heavy list, which is encouraging to see given the bouts of rotation. Our Top Pick is CarGurus (CARG), which is aiming to be the TripAdvisor of car information and whose stock is under accumulation after a four-week dip.

Stock Name	Price	Buy Range	Loss Limit
Acxiom (ACXM)	0.00	46.5-48.5	42.5-43.5
Align Technology (ALGN)	316.20	372-382	345-350
CarGurus (CARG)	41.58	49-52	44-45
Centennial Resource Development (CDEV)	20.33	20.2-21	18.4-18.9
Guidewire (GWRE)	90.60	102-105	94-96
HealthEquity, Inc. (HQY)	70.70	90-93	82-84
Jacobs Engineering Group (JEC)	89.83	73-76	67.5-69.5
Sendgrid (SEND)	33.32	34-36	30.5-31.5
Spirit Airlines (SAVE)	57.03	46-48	42-43
Viper Energy (VNOM)	36.55	37-39.5	33.5-35

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.

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%.

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%.

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.

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.

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.

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%).

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.

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.

==

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.

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.

This mobile restaurant platform is catching Wall Street’s attention (upgrades from Morgan Stanly and Cowen) and analysts expect double-digit growth for the next five years.

This stock fund is changing its strategy to include stocks with higher earnings yields.

This pharmacy benefit management company beat analysts’ estimates by $0.03 last quarter. Three analysts have increased their EPS estimates for the company in the last 30 days.

In addition to Goldman’s upgrade of this auto manufacturer’s stock, these firms also raised their ratings: Barclays, to ‘Overweight’; Bank of America, to ‘Neutral’ and Kepler Cheuvreux, to ‘Buy’.

As a result of the selloff in financial stocks this week, we’re selling one stock and moving another to Hold. I also include a special update on another holding that issued a hurricane-related business update on Wednesday morning.

This company beat analysts’ EPS estimates by $0.38 last quarter.

Our first idea is a low-priced fund whose top five holdings are UnitedHealth Group Inc (UNH, 4.97% of assets), Seagate Technology PLC (STX.SI, 2.88%), Best Buy Co Inc (BBY, 2.82%), Ross Stores Inc (ROST, 2.80%) and Metro Inc (MTRAF.TO).

This is a sell of a previous recommendation.

This is a sell of a previous recommendation.

Jim Cramer is also forecasting a “lift across the board” for home building companies, including this one.

The shares of this recently IPO’d stock have just been initiated as a ‘Buy’ at Citigroup and Jefferies, and as ‘Outperform’ at Wells Fargo.

This infrastructure company has agreed to sell its Australian mining consumables business, Donhad Pty. Ltd., (acquired in 2010) to Moly-Cop.

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.