Investors’ jitters about the dog fight in Washington, D.C. caused a sharp market correction this week that included emerging market stocks. Our portfolio also sustained a little damage, but, so far at least, it’s under control. The major uptrend in emerging markets has been dulled, but not blunted. In this issue, I look at the performance of emerging vs. developed market stocks. I also bring back a stock from last year that will give us a different take on Chinese retail.

We are still bullish, and as you can see from our Advisor Sentiment Barometer and Market Views section, so are most investment pros. And that’s great news, as it means our contributors continue to find an array of stocks with excellent potential.

Recognizing the risk in today\'s hot market, today’s selection is not a hot stock; it’s a slower grower, a big stock with a heathy and growing dividend that’s technically in the leisure services business.

Current Market Outlook


Nothing about the market really changed last week—small- and mid-cap indexes are lagging and most indexes are still trading tightly with in 10-12 week ranges, but the Nasdaq is in a firm uptrend and leading Top Ten stocks are acting great. The question now is whether the recent push higher that began in mid-April will broaden out; the S&P 500 has been knocking on the door of new highs (above 2,400) and the small- and mid-cap indexes found support at their 50-day lines today. If we see buying pressures strengthen, it could lead to another batch of leaders emerging in the weeks ahead and be a big feather in the bulls’ cap. It’s something to watch for, but right now, we’ll stick with our current stance, keeping our Market Monitor at level 8.

This week’s list has a ton of very attractive growth stories; it was hard to select just one as our Top Pick. But with big-cap growth stocks in favor, we chase Nvidia (NVDA), which has exploded out of a four-month consolidation following a great earnings report.

Stock Name	Price	Buy Range	Loss Limit
Atlassian (TEAM)	182.16	34.5-36.5	32-33
Electronic Arts (EA)	0.00	105-110	97-100
Five Below (FIVE)	134.58	49.5-52	46-47.5
HubSpot (HUBS)	582.89	68-71	63-65
IPG Photonics (IPGP)	0.00	132-138	123-126
NVIDIA Corporation (NVDA)	242.42	127-134	117-120
Ryanair DAC (RYAAY)	0.00	97-101	89.5-91.5
Tesla, Inc. (TSLA)	818.87	307-319	282-289
Trade Desk (TTD)	468.02	48-52	42-45
XPO Logistics (XPO)	0.00	52.5-55	48-49.5

This month, I introduce a new stock that has outshined most stocks in the retail sector. The company will add 100 new stores in 2017, which will surely add significant growth, but there’s much more to the story. Today’s issue describes how this specialty retailer has thrived in a difficult sector.

Our Spotlight Stock this month became a common household name to many investors during the tech revolution. The Internet/mobile chip provider not only managed to survive the boom and bust, but has come out on top of the growing semiconductor sector for low-cost chips for the exploding biometrics identification industry. Nancy’s Feature further explores the tremendous demand for biometrics around the world.

The overall market is just OK here, as most indexes are still stuck in 10-plus week trading ranges. Our market timing indicators are positive, but it\'s hard to say the bull market is overly powerful here. However, the action among leading growth stocks has been fantastic since mid-April, with most of the stocks we own or are watching racing up the charts.

In choosing today’s stock, I leaned toward the growth side, because that’s what’s working best today. Then, to get an element of safety—because somewhere, sometime, a nasty correction is likely to hit the market—I chose a stock with very strong and growing institutional sponsorship, the kind of stock that has the potential to be the last stock standing when this bull market eventually ends.

Current Market Outlook


The broad market suffered some wobbles last week, mostly due to energy stocks taking some outsized hits. And we still want to see most of the major indexes lift out of their post-March 1 trading ranges as the Nasdaq is the only index to have achieved that. Even so, while those are factors to watch, the majority of evidence remains bullish—the long-term trend is up, many Top Ten stocks are performing well and the indexes are all at least a bit above their 50-day moving averages. All in all, then, we’re bullish, though it’s important to keep your feet on the ground by looking for solid entry points and taking some partial profits as your stocks advance.

This week’s list has many great stocks to choose from, most of which have recently reacted well to earnings. For our Top Pick, we’re going with a stock we’ve watched on and off for months that finally appears to be getting going—Zillow (Z) has come alive after a nine-month rest, and the story is as big as ever.

Stock Name	Price	Buy Range	Loss Limit
CoStar Group (CSGP)	589.55	240-250	223-228
MasTec, Inc. (MTZ)	66.65	44.5-47	41-43
Paycom Software (PAYC)	0.00	61-64	56-58
Sanderson Farms (SAFM)	149.54	110-114	102-104
SiteOne Landscape Supply (SITE)	98.49	47-51	43.5-46
Square, Inc. (SQ)	91.04	18.5-20	17-17.5
Summit Materials (SUM)	0.00	26.5-28	25-25.5
Universal Display (OLED)	187.54	107-115	94-97
WellCare Health Plans, Inc. (WCG)	271.83	163-168	152-154
Zillow (Z)	76.64	41.5-44	37-39

Hello from sunny Florida!

I am on vacation with my family this week, taking a much-needed break from the harsh, snowy Vermont winter (and narrowly making it down here ahead of the latest blizzard to dump another foot or two of snow on the Northeast). But with so much going on in the market – tariffs rejected! GDP growth slowing! AI panic! – I wanted to provide an update on everything that’s going on with our stocks.

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%.

Tonight, we’re going to sell Amazon (AMZN), which doesn’t look awful but hasn’t been able to get going during the past couple of months. We’ll sell at about breakeven and hold the cash. We’ll also place Abiomed (ABMD) on Hold

Despite the continuing Buy signal from the Cabot Emerging Markets Timer, one of our stocks, Telkom Indonesia (TLK), is not pulling its weight and is now rated Sell.

USA Technologies (USAT) reported a mixed bag of quarterly results this morning. I think buying here has a relatively high probability of working out within a 30-day window.

We will place ProShares S&P 500 Ultra Fund (SSO) on Hold to respect the message from our Tides.

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.