Issues
Things are looking up for emerging market equities. They’re not fully healthy, yet, but there has been definite improvement since the August 16 low. In today’s issue, I have some thoughts about whether or not this is a bottom in emerging markets, and how we will know one when it appears. I also have an intriguing new IPO for you to consider.
The market’s main trends remain up, and thus I remain bullish. In fact, I think the challenging action of the past few weeks has cleared the air a bit and set the stage for a renewed advance.
Current Market OutlookNot much has changed with the market’s tenor during the past week. The major trends are still positive, but not powerful, with many indexes not making much headway during the past two months. And for individual stocks, again, there’s more good than bad, but the advance is narrow and news driven, and we’re seeing more buying of defensive stocks. Overall, we’re still more positive than not because most of the evidence favors the bull side—and it’s worth noting that it wouldn’t take more than a couple of good days to get all the major indexes to all-time highs! But we also think it’s a good idea to go slow, look for solid entry points and, of course, honor your stops. We’re keeping our Market Monitor at a level 7.
This week’s list has a nice mix of solid stories from a few different industries. Our Top Pick is a stock that’s been a leader all year—Coupa Software (COUP), which has tightened up after a couple of months of consolidation. Start small and see what comes on earnings early next month.
| Stock Name | Price | ||
|---|---|---|---|
| CenturyLink (CTL) | 22.88 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| Coupa Software (COUP) | 262.20 | ||
| Dexcom (DXCM) | 421.36 | ||
| Five9 (FIVN) | 78.35 | ||
| The Flowserve Corporation (FLS) | 54.70 | ||
| Ligand Pharmaceuticals (LGND) | 267.14 | ||
| Sendgrid (SEND) | 33.32 | ||
| Trade Desk (TTD) | 468.02 | ||
| Trex Company (TREX) | 117.56 |
The market is positive, but it’s not powerful, with a generally choppy, narrow and rotational environment in recent weeks. Even so, we’re encouraged by the action in some growth stocks, so after getting knocked out of a few names during earnings season, we’ve begun to put some money back to work.
The market’s main trends remain up, and thus I remain bullish. But there are some serious crosscurrents out there making investing a bit more challenging.
Our Spotlight Stock, a company that is taking the market of used cars to places that no one expected. The growth of the company is tremendous! In my Feature article, I report on the company’s stunning second quarter, as well as the catalysts keeping this market growing at significant rates.
Current Market OutlookTurkey’s currency crisis is the latest of what seems like a never-ending string of worries this year (volatility implosions, trade wars, rate hikes, etc.) that have hit the market to some extent. That said, we’re relatively encouraged by what we’ve seen during the past couple of weeks, with the major indexes holding and bouncing off important support, some new leadership emerging on earnings and other leading names forming solid bases. It’s still a tricky, narrow and choppy environment, which is a good reason to pick your spots, honor your stops and hold some cash. But we’re nudging our Market Monitor up another notch, as we see a healthy number of good-looking leading stocks and the market’s major trends remain up.
For the second week in a row, we have a growth-oriented list, a positive sign after the late-July selloff. Our Top Pick is Roku (ROKU), a very volatile name with a very big story. Keep it small, try to buy on dips and expect plenty of wiggles.
| Stock Name | Price | ||
|---|---|---|---|
| Alteryx (AYX) | 132.78 | ||
| Carvana (CVNA) | 82.90 | ||
| CF Industries (CF) | 45.23 | ||
| CyberArk (CYBR) | 111.74 | ||
| Match (MTCH) | 0.00 | ||
| Michael Kors Holdings Limited (KORS) | 73.22 | ||
| Roku, Inc. (ROKU) | 150.46 | ||
| Seattle Genetics (SGEN) | 150.85 | ||
| Teladoc, Inc. (TDOC) | 127.95 | ||
| Wingstop (WING) | 121.52 |
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
A new dividend payment makes our Top Pick very attractive, and our contributor has added a new Mid-Year Top Pick.
A new dividend payment makes our Top Pick very attractive, and our contributor has added a new Mid-Year Top Pick.
Based on new data and improved prospects, I have raised my Min Sell Price for Gilead Sciences to 79.79 from 71.83.
This micro-cap tech company is speculative and trading at a discounted level, but the shares tend to rise rapidly on good news.
We’re waiting on a gold rebound with this Top Pick.
Whirlpool Corp. (WHR 187) is falling today after London investigators concluded that the Grenfell Tower fire started in a Hotpoint fridge freezer, manufactured by a subsidiary of Whirlpool.
A refrigerator made by Whirlpool (WHR) is being cited as the source of the Grenfell Tower fire in London. This kind of disaster can easily punish a stock price for a prolonged period of time.
Both of these Top Picks beat analysts’ estimates in the recent quarter; the first by $0.08 and the second by $0.07.
Both of these Top Picks beat analysts’ estimates in the recent quarter; the first by $0.08 and the second by $0.07.
Oracle (ORCL) has reached its Minimum Sell Price and should be sold. Kroger (KR) is expected to flounder in the 21.5 to 23 area for an extended period of time so it’s a Sell too.
Weibo (WB) shares are down around 10% in pre-market trading. The stock plummeted after news out of China that a regulator had ordered Weibo to shut down its audio and video services.
Here’s an update on the three exchange-traded funds, designed for a rising interest rate scenario.
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.