Of course, it’s always more fun when the market is doing well, and we are continuing our upward trend, supported by robust earnings growth. For quarter 2, 80% of the companies in the S&P 500 index reported earnings higher than estimated, and 73% posted higher revenues than analysts had forecast. That’s a record—the highest number of surprises since FactSet begin gathering the data in the third quarter of 2008.

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’s main trends remain up, and thus I remain bullish, while continuing to remind you that a balanced portfolio with attention to risk management is always smart.

Current Market Outlook


Not surprisingly, we saw some selling come into the market last week, as many stocks and indexes were stretched to the upside and some near-term sentiment measures (put-call ratios, etc.) showed complacency. In the short-term, such wobbles could easily continue, as we’re seeing some bigger names get hit on decent volume. Intermediate-term, though, we’ve seen very little abnormal action among individual stocks and the trends of the major indexes are pointed up. It’s still a good idea to go slow and look for solid entry points, and don’t forget to book some partial profits on the way up. But with the evidence still bullish, we’re remaining heavily invested.

This week’s list is centered on growth ideas, including a few that have emerged after nice rest periods. Our Top Pick is Okta (OKTA), an early-stage leader that just busted loose from a three-month zone on huge volume.

Stock Name	Price	Buy Range	Loss Limit
BJs Wholesale (BJ)	36.69	29-31	27-28
Glaukos Corp. (GKOS)	67.84	59-64	51-53.5
HubSpot (HUBS)	582.89	146-152	134-137
Match (MTCH)	0.00	50-52	45-46.5
NuVasive (NUVA)	66.00	67-69.5	61.5-63
Okta, Inc. (OKTA)	148.41	68-72	58-60
Palo Alto Networks (PANW)	236.92	229-236	210-214
Ulta Beauty (ULTA)	331.95	272-283	249-254
United Continental Holdings (UAL)	96.76	84-86	78-79
Yext Inc. (YEXT)	21.32	24.5-26	21.5-22.5

Today’s Cabot Small-Cap Confidential addition isn’t a cloud-based software provider. But it is a perfect example of what I’ve been talking about – a company in an established industry that’s shaking things up largely because cloud-based technologies are at the center of its DNA. The company’s platform is helping it grow roughly 10 times faster than its industry average, while delivering profits.
It’s an exciting story that I’ve been looking forward to sharing with you. Enjoy!

The general trend in emerging market stocks has gone from bad to worse, and we have responded by moving heavily into cash. And although this isn’t as much fun as picking out the big winners from among a stampeding herd of strong stocks, it’s the price we have to pay to play profitably in a volatile market. Today we’re featuring a relatively conservative stock that sports strong fundamentals and a tidy dividend.

The market’s main trends remain up, and thus I remain bullish, while continuing to remind you that a balanced portfolio with attention to risk management is always smart.

Current Market Outlook


After what was basically a straight-up move for the major indexes and many leading stocks during the past three weeks (including a few names that got out of trend on the upside), big investors came back from the beach today and took some profits. And short-term, further retrenchment is possible, so don’t be surprised to see a few potholes or rotation show up. But bigger picture, the trends of the indexes are pointed up, leading stocks are acting well and we’re pleased to see buying pressures broadening (more new highs) and selling pressure fading (relatively few new lows). It’s still a good idea to pick your spots and take a partial profit or two on the way up, but we remain bullish and see the odds favoring higher prices in the weeks ahead.

This week’s list has a wide mix of stocks and sectors, reflecting the broadening of the market’s advance. Our Top Pick is Semtech (SMTC), a smaller chip maker with a pretty chart and excellent growth.

Stock Name	Price	Buy Range	Loss Limit
Allison Transmission (ALSN)	51.79	48-50	44.5-45.5
Ciena (CIEN)	44.25	30-32	26.5-27.5
DSW Inc. (DSW)	31.82	31-32.5	28-29
Exact Sciences (EXAS)	116.91	71-75	62-64.5
HCA Healthcare (HCA)	137.60	125-132	115-119
iRobot (IRBT)	103.17	107-111	94-96
NVIDIA Corporation (NVDA)	242.42	273-284	252-258
Semtech (SMTC)	51.09	56.5-60	50-52
Veeva Systems (VEEV)	180.23	98-102	89-91
Wayfair (W)	167.03	133-137	117-120

We’re up to 31 stocks in the portfolios, and that’s too many! I’m hoping for a surge in the broader market so that half a dozen of our stocks reach their target prices, and I can then pare back the portfolios a bit.

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.

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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.

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.

My research for September is complete, and my computer-generated price targets for two of our stocks will increase.

This Chinese hospitality company beat analysts’ earnings estimates by $0.12 last quarter, and eight analysts have boosted their forecasts in the past 30 days.

This beverage company is changing focus, selling its manufacturing business and reforming itself into a water, tea and coffee home/office delivery business.

One of our stocks closed below our mental stop of 58 on Friday so we’ll book our small profit today.

This consumer products company beat analysts’ estimates by a penny last quarter, posting EPS of $0.87 per share.

The market is having a mixed day so far, with the Dow up slightly, the Nasdaq down slightly and with many individual growth stocks in the red.

One of our stocks is down 12% this morning after reporting another mixed-but-good quarter yesterday afternoon.

One of our stocks reported earnings last night, and although sales were stronger than expected, EPS fell one cent short of estimates.

This trucking company beat analysts’ estimates by $0.02 in its last quarter, and Wall Street is expecting double-digit growth next year.

Two of our stocks reported strong quarterly results.

Wall Street believes this healthcare stock is going to produce double-digit growth over the next five years. The shares were recently upgraded by Morgan Stanley to ‘Overweight’.

The earnings forecasts for this pharma company were just increased by 14 analysts, and the stock has received two upgrades.

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.