Today’s stock candidate is a promising small-cap biotech with two high-potential drug candidates, each of which could develop into a billion-dollar asset.

The title of today’s issue is “Don’t Overreact”—the major trend of the market is still up, and there are many signs pointing to higher prices in the months ahead. Chloe adds a new stock to the Safe Income Tier and presents her view on the forces affecting interest rates and income investments today.

After a huge run, the market finally hit some turbulence this week, and it’s a 50-50 bet whether we see more profit taking going forward. Our focus is mostly on the bigger picture (still very bullish) and individual stocks, as the advance has gotten more selective and earnings season is revving up. We remain mostly bullish, but it remains important to take things on a stock-by-stock basis.

My recommendation this week is a high-quality Chinese growth stock that has just completed a normal pullback. In fact, while the market was down today, this stock was up!

Current Market Outlook


The market is coming off another very solid week, with the major indexes tagging higher highs on solid volume and the early returns from earnings season generally positive. It is fair to say the advance is becoming more selective, with some factors (bad earnings, rising interest rates, falling U.S. dollar) causing certain areas to stall out. Overall, we remain bullish, especially in the longer-term, as this recent unusual strength has historically portended good things down the road. In the near-term, though, you should be taking things on a stock-by-stock basis, ditching stocks that break their intermediate-term uptrends and looking for buying opportunities either on shakeouts (in established leaders) or earnings blastoffs.

This week’s list has everything from turnarounds to speculations to recent earnings winners—there’s a lot to like here. Our Top Pick is AbbVie (ABBV), which has been a steady liquid leader in the biotech space and just popped on earnings.

Stock Name	Price	Buy Range	Loss Limit
AbbVie Inc. (ABBV)	93.53	117-123	106-109
G-III Apparel (GIII)	45.25	37-39	33.5-35
Helmerich & Payne (HP)	63.68	70-74	63-65
Ligand Pharmaceuticals (LGND)	267.14	161-167	147-151
Neurocrine Biosciences (NBIX)	123.40	86-90	77-79
Shopify (SHOP)	585.00	122-128	108-112
Spectrum Pharmaceuticals (SPPI)	19.31	21.5-23	19-20
Sprouts Farmers Market (SFM)	19.00	26-28	24-25
Varian Medical (VAR)	118.33	122-126	113-115
Weibo (WB)	98.16	128-134	115-118

In this week’s issue, there’s good news about the portfolio’s performance in 2017 and great news about TAL Education. There’s also a new recommendation for a big energy company that’s emerging from the cloud of an enormous national scandal.

Today’s recommendation is a little-known but mature industrial company with great growth prospects. Chart risk is small, as the stock has been basing for months, but there is some liquidity risk—this is more thinly traded than any of the current stocks in the portfolio. So if you buy, buy carefully.

Current Market Outlook


The market’s story has remained the same since the new year began—the major indexes and most leading stocks are in firm uptrends, with many longer-term indicators and studies pointing to higher prices in the months ahead. That said, most stocks are extended to the upside (and, now, earnings season is getting underway), so be sure to keep your feet on the ground and look for good entry points. Right now, we’re mostly looking for pullback entries; if the market does relax, the odds are good that there will be opportunities in stocks that have recently gotten going. All in all, we remain bullish and heavily invested.

This week’s list again contains a wide mix of stocks (big, small, growth, commodity, turnarounds, etc.), which isn’t surprising given the market’s broad advance. Our Top Pick is ASML Holding (ASML), which was one of the first chip stocks to re-emerge following a great earnings report.

Stock Name	Price	Buy Range	Loss Limit
ASML Holding (ASML)	350.01	197-203	184-187
Canada Goose Holdings (GOOS)	46.21	30.5-32.5	27.5-28.5
Continental Resources (CLR)	66.19	53-56	49-50.5
Corcept Therapeutics (CORT)	16.06	22.5-24	20-210
Global Blood Therapeutics (GBT)	0.00	51-55	44-46
Kohl’s (KSS)	70.62	60.5-64.5	55.5-57.5
Lowe’s Companies (LOW)	98.15	99-103	91.5-94
ON Semiconductor (ON)	24.07	23.5-25	21.5-22.5
Teck Resources Limited (TECK)	26.07	27.5-29.5	24.5-26.
Wynn Resorts (WYNN)	121.08	184-192	168-172

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.

There’s no change in our overall market view from yesterday, as our market timing indicators are split, but many growth stocks are acting well.

I review hundreds of stocks on a regular basis for possible inclusion in the Cabot Undervalued Stocks Advisor portfolios. Many companies that didn’t previously make the grade will, at some point, gain a stronger balance sheet or earnings growth prospects. Such is the case with Chipotle, the restaurant chain.

More than three quarters of the analysts following this energy company rate it a ‘Buy’. In the midst of a turnaround, the company looks cheap.

Shares of Vertex Pharmaceuticals (VRTX) rose 22% this morning on reports of successful results of Phase III studies of VX-661, a cystic fibrosis combination treatment.

This tech giant continues to post double-digit growth, and with its unparalleled R&D chops, shows no sign of slowing down.

The recent rough patch in the market has taken a toll on two of our stocks. And while the Cabot Emerging Markets Timer is still positive, the iShares MSCI Emerging Markets ETF on which it is based experienced a reversal on March 21, and has been trading flat and tight for more than a week. Accordingly, we are going to sell one of our holdings that has buckled under selling pressure and put another on Hold.

This mining company’s EPS estimates are rising. Six analysts have increased their forecasts in the past month, and they expect the company to post triple-digit growth this year.

The stars don’t always spell success, as this foreign fund—our first idea today—demonstrates.

Our recommendation is a sale of a biotech with disappointing quarterly results.

We learned this morning that one of our holdings dismissed its auditing firm and hired another to take over. At the same time, the company’s CFO has resigned, citing “personal reasons.” I think that’s a load of bull.

Crista reviews the GameStop (GME) earnings report.

GameStop (GME) reported fourth-quarter and full-year 2016 results after the market closed yesterday.

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.