The market remains challenging, in that we really don’t know if growth stocks are cooked, or China is in trouble or housing has peaked—but uncertainty has always been part of the game. If you want certainty, buy a bond.

In doing this month’s research, I was struck by the preponderance of excellent investment opportunities within the banking industry – so many that I could fairly easily create a mutual fund entirely devoted to bank stocks!

Current Market Outlook


Leading stocks stabilized somewhat during the second half of last week, but we’re still seeing plenty of potholes (mostly on earnings reports) and a bunch of rotation out of fast-growing names and into more cyclical, defensive areas. That’s not to say all growth stocks look terrible—we’re still seeing a good number of positive earnings gaps, including a few in today’s issue—but there remain a bunch of crosscurrents on a day-to-day basis, making it difficult to latch onto top performers. As for the overall market, it’s in solid shape, with the intermediate-term trend tilted up. All in all, we don’t advise hiding in the closet, but it’s important to hold some cash and honor your stops, and on the buy side, to pick your entry points and focus on names that have shown recent, powerful buying.

This week’s Top Ten has a diverse mix of stocks, and happily, it includes a good number of stocks with solid growth stories. Our Top Pick is Paycom Software (PAYC), which staged a fantastic earnings gap (and follow-through) last week.

Stock Name	Price	Buy Range	Loss Limit
BJs Wholesale (BJ)	36.69	24.5-26	22-22.5
CarGurus (CARG)	41.58	42-45	38-40
Chart Industries (GTLS)	72.05	73.5-77	66-68
Greenbrier (GBX)	57.73	56.5-58.5	52-53
Illumina Inc. (ILMN)	289.74	320-330	295-302
Ingevity Corp. (NGVT)	99.98	96-100	87-90
Neurocrine Biosciences (NBIX)	123.40	110-114	100-102
Paycom Software (PAYC)	0.00	127-133	114-117
SodaStream (SODA)	142.91	111-116	98-101
Zendesk (ZEN)	82.19	59-62	53.5-55.5

With the market on edge we’re going with a slightly larger company than normal with this month’s Cabot Small-Cap Confidential selection. But we’re not being overly conservative. Shares of this software stock have been climbing steadily after a breakout move in May. The reasons? Growth is reaccelerating, profit margins are climbing, and the proportion of recurring revenue is going up.

The overall bull market remains in good shape, but the big event of the past two weeks has been the sharp selloff seen in many leading growth stocks that featured a bunch of abnormal selling. Could this dip be another shorter-term shakeout? Sure, and we’re certainly not sticking our heads in the sand. But the selling has been enough for us to trim our sails, raise some cash and see if the buyers can show some support.

Last week’s “surprise” failure by Facebook to meet growth expectations has kicked off a correction in growth stocks that will likely run for a while, while allowing other types of stocks to come to the fore. This is natural. Our job is to follow the leaders, and to discard stocks that are no longer doing what we hired them to do.

Current Market Outlook


The last week has been brutal, as the sellers have come out of the woodwork and driven most leading stocks down sharply. And this isn’t just a couple of bad days, either—the action since mid June has been spotty, with sharp pullbacks and low-volume, narrow rallies preceding this drop, which has seen a fair amount of abnormal action. The rest of the market isn’t nearly as bad off, and in fact we’ve seen rotation into beaten-down areas like industrials, financials and transports. But our focus is on the leaders, and given the widespread breakdowns, it’s vital to honor your stops and cut back on new buying. If the buyers return soon, we’re not ruling out this being one big shakeout, but the onus is on the bulls at this point, at least when it comes to leading stocks. We’re dropping our Market Monitor back to neutral.

Encouragingly, even amid the recent selling, we saw plenty of positive reactions to earnings and other pieces of news last week, many of which made it into this week’s list. Our Top Pick is Advanced Micro Devices (AMD), which is one of the strongest stocks in the market. Given the environment, start small and buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Advanced Micro Devices (AMD)	82.24	18.2-19	16-16.5
Atlassian (TEAM)	182.16	67-70	63-64
GrubHub (GRUB)	140.03	120-125	108-110
HCA Healthcare (HCA)	137.60	117-121	107-110
Hi-Crush Partners LP (HCLP)	12.18	14.5-15.5	12.5-13
IQVIA Holdings (IQV)	157.93	115-120	106-108
Robert Half (RHI)	78.58	72-74	66-68
Stitch Fix (SFIX)	36.79	28-30	25-26
USANA Health (USNA)	133.03	124-129	112-115
Yext Inc. (YEXT)	21.32	21.5-22.5	19-19.5

While the market mourns the misfortunes of poor Mark Zuckerberg, we actually have a little ray of light in emerging markets, as the Cabot Emerging Markets Timer is showing a very new green light. New buy signals are pretty delicate, but we’re taking this one seriously, doing a little new buying and shifting another stock from a Hold to a Buy rating. As the artillery of the trade war rumbles, it’s nice to have something to celebrate. Read on for details.

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.

The merger has been delayed for a review by the U.S. Committee on Foreign Relations; analysts believe the deal will still occur, which may give time for the stock to rise for a sweeter buyout.

Three of our stocks reported June quarter-end earnings results. Two beat all analysts’ estimates for the quarter, and one boosted full-year revenue expectations.

The top three sectors in this international fund are Technology (23.6% of assets); Financial Services (18.51%) and Healthcare, 15.89%).

Four of our stocks reported earnings, plus a new Buy, a Sell and a rating change.

Stronger than expected results have caused my Min Sell Price for August to rise, so hold your shares until the stock price rises to the new Min Sell Price.

Change has come to the weight loss industry, and this company is leading the way with 30% revenue gains in the past quarter.

Two of our stocks reported earnings and opened lower this morning. I’m keeping one on Hold and moving the other, which was rated Buy, to Hold as well.

Nine analysts have boosted their earnings outlook for this energy service company in the past 30 days.

Scripps Networks (SNI) will be acquired by Discovery Communications. SNI shareholders will receive $90.00 per share in the form of $63.00 cash plus $27.00 in Discovery Communications common stock. Sell SNI now.

The shares of this big-box retailer were just upgraded to ‘Outperform’ at Raymond James. The company beat estimates by $0.09 last quarter, and seven analysts have boosted their earnings forecasts in the past 30 days.

This credit card marketer beat analysts’ estimates by $0.10 in its most recent quarter.

Legg Mason and Total exceeded all analysts’ earnings per share (EPS) estimates and Invesco reached the highest analyst estimate. Boise Cascade fell short of the consensus estimate, although the stock broke out on the upside today.

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.