Issues
The sharp market break of 2008 has made it clear that the bears are in control, which means you should remain in a highly defensive position. But money has to flow somewhere, and it appears that, for the moment, pharmaceutical and metal stocks are in favor. This week’s Top Ten sports three pharmaceutical stocks, two other medical names and two precious metal stocks – and most of them have good-looking chart patterns. Just be aware that even strong stocks can get hit in bearish environments, so your emphasis should be on building your watch list, holding cash, and making just token new buys until the storm passes. Our favorite pick this week is Pharmaceutical Product Development (PPDI), a steady company whose bottom line is set to accelerate this year. The stock just broke free from a long consolidation after a bullish outlook, which should offer support on any retreat.
| Stock Name | Price | ||
|---|---|---|---|
| AUXL (AUXL) | 0.00 | ||
| BMRN (BMRN) | 0.00 | ||
| CPHD (CPHD) | 0.00 | ||
| DV (DV) | 0.00 | ||
| GOLD (GOLD) | 0.00 | ||
| LKQX (LKQX) | 0.00 | ||
| MATK (MATK) | 0.00 | ||
| MLNM (MLNM) | 0.00 | ||
| PAAS (PAAS) | 0.00 | ||
| PPDI (PPDI) | 0.00 |
We all prefer rising markets to declining markets, but there is a silver lining to a weak tape – when most stocks are heading south, it becomes easy to spot abnormal strength. That’s what OptiMo, our proprietary stock screening system, has been doing in recent weeks; if big investors aren’t selling shares in this market, they’re likely to buy with abandon during the next bull move. Of course, with the bears in control of most stocks, you should stick with a defensive stance for now – no use investing a ton of money when the odds are against you. But nibbling on a couple of leaders and readying your watch list should pay off when the bulls return. This week’s Top Ten contains another batch of commodity, solar and emerging market stocks. Our favorite of the week is ICICI Bank (IBN), an Indian bank that’s directly leveraged to that country’s tremendous growth. The stock broke out last week, and Indian stocks are acting well.
| Stock Name | Price | ||
|---|---|---|---|
| ABX (ABX) | 0.00 | ||
| ASTI (ASTI) | 0.00 | ||
| CF (CF) | 0.00 | ||
| CHU (CHU) | 0.00 | ||
| HOLX (HOLX) | 0.00 | ||
| IBN (IBN) | 0.00 | ||
| ILMN (ILMN) | 0.00 | ||
| JASO (JASO) | 0.00 | ||
| KGC (KGC) | 0.00 | ||
| SWN (SWN) | 0.00 |
Investors came back from the holidays in a selling mood last week, driving the indexes and leading stocks sharply lower. And while everyone hopes that this is the final push lower before the bulls truly re-take control, the fact is nobody knows what the future holds. What we do know is that the sellers are punishing most stocks, and the narrow list of leaders that were holding up are now going along for the ride. Conclusion: You should be playing defense, mostly sitting on the sideline and waiting for the storm to pass. As for new buying, a small buy or two is still OK, especially in areas that are actually pushing ahead during this down market. This week’s Top Ten, for instance, features many commodity-related names to examine. Our favorite is Barrick Gold (ABX), which spiked to new peaks last week on its biggest volume in years, as institutions anticipate more good times for gold prices as the Fed cuts rates and the U.S. dollar sinks. It’s worth a nibble here.
| Stock Name | Price | ||
|---|---|---|---|
| ABX (ABX) | 0.00 | ||
| ADM (ADM) | 0.00 | ||
| ATW (ATW) | 0.00 | ||
| BMRN (BMRN) | 0.00 | ||
| CMED (CMED) | 0.00 | ||
| CTCM (CTCM) | 0.00 | ||
| FCN (FCN) | 0.00 | ||
| MON (MON) | 0.00 | ||
| MTL (MTL) | 0.00 | ||
| UTHR (UTHR) | 0.00 |
It’s been a fun, interesting and profitable year for readers of Cabot Top Ten Report, and it would be easy to recap the highlights … like Baidu, First Solar, Intuitive Surgical and Research in Motion. But you’re not paying us to look back, you’re paying us to look ahead. So here’s what this week’s stocks tell us we should watch going forward. First is the trend toward solar power; investors in these stocks are looking for major revenue and earnings growth in the years ahead. Second is the strength of commodities; from coal to steel to silicon, basic materials are getting more expensive … and profitable. Third is the continuing strength of well-managed foreign companies. Part of their appeal comes from a weak dollar, but the bigger and more important part comes from the greater growth opportunities in developing countries. You’ll find three stocks in this category in this issue; our Editor’s Choice today is good old Baidu, the Google of China. The stock has been knocking on the ceiling at 400 for two months and we’re confident it will break through eventually.
| Stock Name | Price | ||
|---|---|---|---|
| BIDU (BIDU) | 0.00 | ||
| BUCY (BUCY) | 0.00 | ||
| ENER (ENER) | 0.00 | ||
| JASO (JASO) | 0.00 | ||
| MA (MA) | 0.00 | ||
| MBT (MBT) | 0.00 | ||
| MELI (MELI) | 0.00 | ||
| MICC (MICC) | 0.00 | ||
| SID (SID) | 0.00 | ||
| WFR (WFR) | 0.00 |
Sometimes, the market’s outlook is clear – either the buyers are clearly in control, and the leading stocks are surging on huge volume … or the sellers are driving things lower, as everyone’s favorite stocks get taken out and shot. Today, however, we’re somewhere in the middle. Many leaders are hanging in there, with some showing great volume trends, but a few are breaking down, and the broad stock market is in horrible shape. Thus, while it’s not a full-fledged bear market, the odds aren’t heavily in favor of the bulls, either. Your best strategy is to hold some cash on the sideline, and restrict your new buying to only the best stocks at logical, sound entry points. Our favorite of this week is Massey Energy (MEE), a big, liquid stock from the suddenly powerful coal (yes, coal!) sector. We advise buying on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| OXPS (OXPS) | 0.00 | ||
| WFR (WFR) | 0.00 | ||
| ARD (ARD) | 0.00 | ||
| BEAV (BEAV) | 0.00 | ||
| CYBS (CYBS) | 0.00 | ||
| JASO (JASO) | 0.00 | ||
| MEE (MEE) | 0.00 | ||
| MELI (MELI) | 0.00 | ||
| NDAQ (NDAQ) | 0.00 | ||
| OSIP (OSIP) | 0.00 |
Though the current market rally is just two weeks old, we’re already beginning to see some big-volume upmoves in the most fundamentally and technically attractive stocks in the market … a sure sign that institutional investors are getting active on the buy side. While this week’s Fed meeting will almost certainly have a big say in the market’s near-term direction, the evidence right now tells us the bulls are re-taking control. And that means you should be putting some money to work! The last couple of Top Ten Reports have highlighted many leaders, and this week’s batch has plenty of interesting stories, big and small, new world and old world. Our favorite of the week is Gafisa (GFA), a Brazilian homebuilder that came public just a few months ago. It’s just now lifting from its first basing structure on good volume, but be aware the shares are somewhat thinly traded, so the stock can be choppy.
| Stock Name | Price | ||
|---|---|---|---|
| BIDU (BIDU) | 0.00 | ||
| BUCY (BUCY) | 0.00 | ||
| CCC (CCC) | 0.00 | ||
| DE (DE) | 0.00 | ||
| EDU (EDU) | 0.00 | ||
| FCSX (FCSX) | 0.00 | ||
| GFA (GFA) | 0.00 | ||
| MLNM (MLNM) | 0.00 | ||
| RTP (RTP) | 0.00 | ||
| WDC (WDC) | 0.00 |
We’re not ready to declare an end to the market’s correction, despite last week’s encouraging action. After all, a horrendous November (the Nasdaq was down more than 10% for the month before last week’s rally) was bound to lead to some type of bounce; what happens from here will be key. Regardless, there’s no question that many stocks improved their standing, finding big-volume support and, in some cases, shooting to new peaks. These are the names you want at the top of your watch list; the first groups out of the gate usually lead the ensuing bull move. For now, we advise continued prudence – buying just small amounts, keeping some cash on the sideline – but you should also be ready to turn bullish if the market follows-through powerfully in the days ahead. This weeks’ Top Ten contains an eclectic mix of names, some conservative, some high-flying. Our favorite: Turkcell (TKC), the leading wireless service provider in Turkey, which is registering strong bottom-line growth. We love the big-volume upside of late, a sign big investors will support the stock on any pullback.
| Stock Name | Price | ||
|---|---|---|---|
| ANR (ANR) | 0.00 | ||
| DV (DV) | 0.00 | ||
| FOSL (FOSL) | 0.00 | ||
| ISRG (ISRG) | 0.00 | ||
| OSIP (OSIP) | 0.00 | ||
| SLT (SLT) | 0.00 | ||
| SOHU (SOHU) | 0.00 | ||
| TKC (TKC) | 0.00 | ||
| VRSN (VRSN) | 0.00 | ||
| WFR (WFR) | 0.00 |
With the market in a defined downtrend, the odds are against the bulls; buying a bunch of stocks, even if they have tremendous Top Ten-type relative strength, will usually cost you money. Thus, you should be focusing on building your watch list of resilient stocks with top-notch growth stories; doing that today will prepare you to pounce once the market gives us a green light. This week’s (and last issue’s) Top Ten is a great place to begin building – you’ll find a wide array of stocks here, from different industries with different prospects. Many are familiar names, which we view as a good thing; big investors are still sitting tight with many leaders, giving them a shot at racing ahead once the bulls re-take control. Our favorite of the week is Chicago Bridge & Iron (CBI), partly due to its chart (some recent high-volume buying suggests good support on any weakness) and partly due to the ongoing boom in oil and gas infrastructure.
| Stock Name | Price | ||
|---|---|---|---|
| AG (AG) | 0.00 | ||
| BIDZ (BIDZ) | 0.00 | ||
| BUCY (BUCY) | 0.00 | ||
| CBI (CBI) | 0.00 | ||
| CNX (CNX) | 0.00 | ||
| FLS (FLS) | 0.00 | ||
| FSLR (FSLR) | 0.00 | ||
| MA (MA) | 0.00 | ||
| STP (STP) | 0.00 | ||
| UTHR (UTHR) | 0.00 |
Last week’s sharp market break on huge volume brought down many leading stocks, and dropped the major indexes through key support. That means the intermediate-term market trend is now down, so you should be selling your losers and poor performers, holding on to plenty of cash, working on a watch list, and possibly making a few token buys here and there. Overall, we know the next bull move will bring many profit-making opportunities (they always do!), so your goal should be to get from here to there with as much of your capital (and confidence) as possible. This week’s Top Ten contains many interesting stories and solid charts, and buying a little on weakness is fine as long as you have cash stowed away. Our favorite of the week is LG Philips (LPL), a cyclical stock in a high-tech industry (LCD screens). Business is improving rapidly, and the stock’s huge-volume breakout means any retreat should be arrested just a little below today’s level.
| Stock Name | Price | ||
|---|---|---|---|
| LPL (LPL) | 0.00 | ||
| NUVA (NUVA) | 0.00 | ||
| ONXX (ONXX) | 0.00 | ||
| PCLN (PCLN) | 0.00 | ||
| GFA (GFA) | 0.00 | ||
| GOLD (GOLD) | 0.00 | ||
| ANR (ANR) | 0.00 | ||
| BVN (BVN) | 0.00 | ||
| DNR (DNR) | 0.00 | ||
| FSLR (FSLR) | 0.00 |
This has been one of the wildest earnings seasons we’ve ever seen. Plenty of leading stocks, including a few in this week’s Top Ten, have reacted strongly to their quarterly reports … but there have been a large number of stinkers, too. All these cross currents tell us one thing: Not everyone is rowing in the same direction, and there’s no need for you to take unnecessary risks until that changes. The good news about such a volatile market is that you can easily spot what stocks are resisting the sellers; should the market resume its uptrend, these are the issues that are likely to put on a spectacular show. For now, you should be holding a little cash on the sideline, while making a couple of purchases here and there during weakness. Our favorite stock of this week’s bunch is MasterCard (MA), which, admittedly, has become well known since coming public eighteen months ago. But last week’s huge earnings-related breakout bodes well, and with the market favoring big-cap, liquid stocks, MA should attract plenty of money.
| Stock Name | Price | ||
|---|---|---|---|
| APOL (APOL) | 0.00 | ||
| CBI (CBI) | 0.00 | ||
| IBN (IBN) | 0.00 | ||
| KGC (KGC) | 0.00 | ||
| MA (MA) | 0.00 | ||
| MOS (MOS) | 0.00 | ||
| SWN (SWN) | 0.00 | ||
| SYNA (SYNA) | 0.00 | ||
| UTHR (UTHR) | 0.00 | ||
| WG (WG) | 0.00 |
There remain a few hundred leading stocks that are in great shape – they’ve reacted well to earnings, are in powerful sectors and find buying support just a couple of weeks after beginning normal corrections. However, there are also plenty of stocks that are languishing, or have been taken out and shot during earnings season, leaving investors scratching their heads. The bottom line is that stock selection is very important in this environment, as the leaders are putting on outstanding displays … but there are still plenty of potholes. Thus, holding a little cash as earnings season continues isn’t a bad idea; this week’s Top Ten, for instance, contains a couple of big earnings winners that look ripe for buying. Our favorite of the week is Nasdaq Stock Market (NDAQ), a pure “Bull Market stock” that’s going to benefit from both the strong equity markets and consolidation in the industry. Look to buy on a pullback of a couple of points.
| Stock Name | Price | ||
|---|---|---|---|
| CNX (CNX) | 0.00 | ||
| CYBS (CYBS) | 0.00 | ||
| DECK (DECK) | 0.00 | ||
| DV (DV) | 0.00 | ||
| IBN (IBN) | 0.00 | ||
| NDAQ (NDAQ) | 0.00 | ||
| NUVA (NUVA) | 0.00 | ||
| SGR (SGR) | 0.00 | ||
| STLD (STLD) | 0.00 | ||
| STP (STP) | 0.00 |
We’ve been writing that the recent straight-up move in leading stocks, combined with signs of speculation in early October, all happening right in front on earnings season, was a recipe for lower prices in the short-term. And voilà! Stocks got hit hard last week and early this morning, as the sellers gained traction. At this point, the major market trends are up, so we believe this correction will eventually lead to higher prices … but we’d still be a bit cautious in the short-term, as selling pressures usually don’t disappear after just one week. This week’s Top Ten contains a few earnings winners from last week (always good candidates for further upside), as well as a few new names. Our favorite of the week is New Oriental Education (EDU), a Chinese firm that gapped up on strong earnings last week, but has pulled back with the market in recent days. It’s a bit thinly traded, and thus jumpier, but we think buying a little here will work out.
| Stock Name | Price | ||
|---|---|---|---|
| ANR (ANR) | 0.00 | ||
| AUO (AUO) | 0.00 | ||
| BIDU (BIDU) | 0.00 | ||
| EDU (EDU) | 0.00 | ||
| ISRG (ISRG) | 0.00 | ||
| LIFC (LIFC) | 0.00 | ||
| LULU (LULU) | 0.00 | ||
| MTL (MTL) | 0.00 | ||
| SA (SA) | 0.00 | ||
| SPWR (SPWR) | 0.00 |
Updates
WHAT TO DO NOW: It’s not 2008 out there, but the market environment remains very challenging, especially for growth, where most indexes, funds and stocks are struggling. That said, we have started to see some growth names emerge on the upside, and our watch list is growing—if we can see more than a day or two of strength, we’d like to put some money to work. But until then, we’re content to stay close to shore and patiently wait for growth stocks to get moving. In the Model Portfolio, we’re placing Axsome Therapeutics (AXSM) on Hold tonight; our cash position is still just above 50%.
It’s been an interesting week here in Rhode Island, where most people are finally dug out from the roughly three feet of snow that fell across the state Sunday night and into Monday.
Growing up in Vermont, major snowstorms were certainly disruptive. But more often than not, it was all about how we would get to the ski resort without going off the road.
Growing up in Vermont, major snowstorms were certainly disruptive. But more often than not, it was all about how we would get to the ski resort without going off the road.
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.
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.
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%.
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%.
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.
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.
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.
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%).
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%).
Alerts
Portfolios
Strategy
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.