While it’s pretty clear that the world isn’t going to calm down or stop giving investors heart attacks every week or so, it’s also clear that investors are ready and willing to put money into growth stocks. That’s what’s driving the buy signal from the Cabot Emerging Markets Timer and the performance of our portfolio.

In today’s issue, I add a mid-cap tech stock to the Dividend Growth tier, provide updates on all our holdings, and share some of my favorite investment resources.

Today’s recommended stock is a niche medical provider whose risk is substantially outweighed by reward, both fundamentally and technically. As to our current portfolio, most stocks are acting well and there are no ratings changes.

Current Market Outlook


The market’s rebound since its sharp one-day selloff on Wednesday, May 17, has been impressive and encouraging—the Nasdaq and leading growth stocks spiked to higher highs, and even the S&P 500 nosed out above its March 1 peak. It’s certainly a good sign and pretty much brings us back to where we stood two weeks ago. On the positive side, most growth-oriented stocks are in good shape and most indexes are either at, or just a couple of percent off, all-time highs. But much of the broad market (and many indexes) is just marking time and the number of stocks hitting new lows is at unhealthy levels. Even so, the long-term trend and leading stocks are the most important pieces of evidence, and they’re both bullish. Thus, you should be, too.

This week’s list has another crop of very strong names from many strong sectors. For our Top Pick, we’re going with a big-cap turnaround play—Best Buy (BBY) has surprisingly strong earnings figures, a big share buyback program and the stock just gapped up after its quarterly report.

Stock Name	Price	Buy Range	Loss Limit
Alibaba (BABA)	254.81	120-124	111-112
Best Buy (BBY)	0.00	57-60	52-54
Domino’s Pizza (DPZ)	339.47	200-205	187-190
FMC Corp. (FMC)	0.00	73.5-76	69-71
MercadoLibre, Inc. (MELI)	980.83	272-282	248-254
MuleSoft (MULE)	0.00	25.5-28	22.5-24.5
Regeneron Pharmaceuticals (REGN)	512.96	435-455	400-410
Wayfair (W)	167.03	60-64	57-58
West Pharmaceutical (WST)	210.25	94-97	88-90
Wynn Resorts (WYNN)	121.08	123-127	114-117

In tonight’s Cabot Growth Investor, we dive into all our stocks and highlight our current batch of ideas (including an intriguing recent IPO with a great cookie-cutter story) and discuss the good and bad of mental versus in-the-market stops.

In choosing today’s stock, I selected one that’s not only undervalued but also at a low-risk entry point, technically. It’s a company you’ve never heard of, and I think you’ll like the story. As to the current portfolio, most of our stocks still look great! But I’m recommending taking profits in two.

Current Market Outlook


Last Wednesday’s huge decline was a shot across the bow—most indexes threatened the lower end of their three-month trading ranges and even the strong Nasdaq showed some abnormal action. But few leading stocks broke down, and the action since then has been encouraging, with the indexes snapping back toward their highs. Overall, we remain more bullish than not, but given Wednesday’s action and the continued sideways action for most of the market, we’ll nudge our Market Monitor down a notch to level 7 and watch the next few days closely. Another big bout or two of distribution would darken the intermediate-term outlook, but the longer the market can hold up (or advance) from here, the greater the odds that last Wednesday was a news-driven shakeout.

In the meantime, we continue to find a variety of great charts and stories in a few different sectors. We’re sticking with the big-cap theme with our Top Pick this week—Global Payments (GPN) isn’t a barnburner but it has surged out of 13-month base on great earnings.

Stock Name	Price	Buy Range	Loss Limit
Adobe Inc. (ADBE)	315.23	136-139	127.5-129
Boyd Gaming Corporation (BYD)	0.00	24-25	22-23
Deere & Company (DE)	0.00	116-120	110-112
Global Payments Inc. (GPN)	0.00	88-91	82.5-84.5
MiMedx Group (MDXG)	0.00	13.5-14.5	12-12.5
Parexel Corp. (PRXL)	0.00	77-80	72-74
RingCentral (RNG)	238.73	31.5-33.5	29-30
Teladoc, Inc. (TDOC)	127.95	27.5-29.5	24.5-26
Vertex Pharmaceuticals (VRTX)	230.36	114-120	106-1090
Yum China (YUMC)	0.00	34.5-36.5	31.5-33

It’s the same basic market story as it has been for the last four months. Technology is floundering while other sectors are killing it. But a couple of events occurring this week could potentially change the dynamic.

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.

Twilio (TWLO) sold off in a big way this morning because late last Friday, the company announced that it will sell shares in a secondary offering—but it didn’t say how many!

Smith, A.O. (AOS 51.25) reached its Minimum Sell Price of 51.36 today, October 6, and should be sold.

Special Bulletin on BorgWarner (BWA), E*Trade (ETFC), General Motors (GM) and WellCare Health Plans (WCG)

Sell CVS Health (CVS). Dividend Growth Tier holding CVS Health (CVS) broke through support yesterday, and we’re going to cut our loss today.

Cognizant Technologies (CTSH 46.00) dropped 16% this morning on news that the company is conducting an internal investigation into whether some payments in India violated the U.S. Foreign Corrupt Practices Act.

Chemtura (CHMT) is Up 15% on Buyout Offer and Carnival (CCL) Reports Earnings Beat

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.