Stocks continue to rise to new heights as the miserable March recedes further in the rearview mirror. With the war in Iran still ongoing, however, oil and gas prices remain elevated, and this week we’ll find out how much that translates to rising inflation, with CPI and PPI data due out Tuesday and Wednesday. In the meantime, let’s keep our foot on the growth pedal, with a twist: Today we go outside U.S. borders for a mid-cap miner that’s taking full advantage of the AI and data center craze. It’s a new stock recommended by Cabot Explorer Chief Analyst Carl Delfeld.

Details inside.

The bulls made it six straight winning weeks, powered by a semiconductor surge that has shown no signs of slowing down. Also helping the mood: the April jobs report blew past expectations Friday, with the economy adding 115,000 jobs against a forecast of just 65,000.

The bulls made it six straight winning weeks, powered by a semiconductor surge that has shown no signs of slowing down. Also helping the mood: the April jobs report blew past expectations Friday, with the economy adding 115,000 jobs against a forecast of just 65,000.

The bulls made it six straight winning weeks, powered by a semiconductor surge that has shown no signs of slowing down. Also helping the mood: the April jobs report blew past expectations Friday, with the economy adding 115,000 jobs against a forecast of just 65,000.

Markets have been resilient driven by earnings, hopes of a Hormuz deal, and a ramping up of share buybacks by big tech this year.

Explorer stocks had a good week. Brookfield Renewable (BEP) shares were up 7.5% this week as attention was riveted on clean energy in the wake of the Middle East conflict.

Small businesses drive a lot of U.S. job growth – yet many can’t get the loans they need from paper-bound, cautious banks.

Today’s featured company aims to change that. It is a digital lending specialist that’s transforming into a full-scale bank. By leveraging over two decades of data, it is capturing market share while maintaining impressively low default rates.

All the details are inside the May issue of Cabot Small-Cap Confidential.

Soaring oil prices ground airline stocks to a halt in March, and most of them have yet to recover as crude oil remains in the triple-digit range. And yet, most airlines are still on track for another year of record sales and passenger numbers. That includes this month’s new addition to the Cabot Value Investor portfolio, which expects double-digit revenue and triple-digit earnings growth this year, and yet the stock trades 37% below its 2017 highs. Shares had momentum before the Iran war. Now they’re trading at a rarely seen discount. That spells opportunity and perfectly fits our growth-at-value-prices mandate.

Details inside.

The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.

We continue to see and hear about many uncertainties, not the least of which is the continued back-and-forth in the Middle East—but despite that, stocks have continued to handle themselves very well, oftentimes actually advancing despite the supposed fundamental headwinds. Of course, near term, some sort of pothole is possible, and the next two weeks are actually prime time when it comes to earnings season for growth stocks, so we’ll see how it goes. But we’ll bump our Market Monitor to a level 8 given the positive evidence.

This week’s list features a lot of recent earnings winners as well as some good setups. Our Top Pick has solid growth and free cash flow, and the stock just emerged from a huge base after earnings.

Booming earnings vs. a damaging war. That’s the tug-of-war investors are grappling with right now.

In March, the sudden war in Iran sent stock prices tumbling; in April, stocks rebounded with a fury, thanks in part to double-digit earnings growth and hopes of peace. Where the market goes in May will depend on how long the war drags out – and how long the Strait of Hormuz remains closed. In the meantime, though, artificial intelligence is clearly back in favor, so today we add a new AI name courtesy of Cabot Early Opportunities Chief Analyst Tyler Laundon. It’s a name that’s hitting fresh all-time highs as I write this – with potentially much greater upside ahead.

Details inside.

The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.

The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.

The market hit another new high this week. But earnings season is mostly over, and the war just won’t go away.

While there is still headline risk, investors are looking beyond the war. The earnings season has been great. According to FactSet, the average S&P 500 earnings growth rate, with 89% of companies having reported, is 27.7%.

If you have the feeling that this year’s boom in the tech sector—and the corresponding record highs in the major averages—isn’t being felt on a market-wide basis, you’re not imagining it.

As it turns out, the record lift in the Nasdaq and S&P is being driven by a troublingly small number of stocks. The result of this narrowing market is that value-focused investors like us have been forced to exercise patience while waiting for the boom to visit our corner of the market (more on that in a minute).

WHAT TO DO NOW: Big picture, the market and most leaders look great, and our market timing indicators are in fine shape. Near-term, though, there’s little doubt things have gotten a bit giddy, with many names and indexes extended to the upside. Tonight, we’re placing Cava (CAVA) on Hold as that stock has been caught up in some group weakness; we’ll hold our 45% cash position for now, but stay tuned, as we’d like to add some new names (or add to existing names) in the near future.

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.

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.

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.”

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.

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.

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.

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 30^th. 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

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.

With more than 240,000 water main breaks per year in the United States, it’s easy to see why today’s pick has tremendous potential. Adding in its exposure in the mining, oil and gas industries, investors have an opportunity to participate in two rapidly-expanding industries.

Layne Christensen Company (LAYN)
from The Turnaround Letter

Operating...

You’ll receive your new Investment Digest issue later this afternoon, but first we have a quick technical buy idea to pass on from Investors Intelligence. The company is a major U.S. manufacturer of recreational vehicles.

Winnebago Industries (WGO)
from Investors Intelligence

BUY IDEA: Winnebago Industries (WGO) looks to be resuming uptrends following a shallow consolidation....

Today’s buy idea is a very low-priced value play with a seasonal component. The new recommendation is followed by a sell alert on United Stationers (USTR).

Iridium Communications (IRDM)
from Crisis & Opportunity

Buy Iridium (IRDM:NASDAQ) as a bounce back play on space communications.

Iridium is a global leader in providing satellite communication services....

Sell

United Stationers (USTR)
from 2 for 1 Stock Split Newsletter, recommended at $71 in Investment Digest issue 693, dated April 20, 2011.

When United Stationers was recommended in April, 2011, I wrote “This is not a wildly profitable or fast growing business but...” In retrospect, the “buts” were not enough to...

Today’s buy idea is a company with a $1.8 billion market cap that makes streaming video technology. The stock’s price is depressed following a disappointing earnings announcement, but Fidelity Investor Editor Taesik Yoon thinks this reaction was short-sighted and presents a buying opportunity. The Fidelity Investor excerpt is followed by...

Sell

Ocwen Financial (OCN)
from Cabot Market Letter, recommended at $44 in Investment Digest issue 743, dated May 22, 2013.

Ocwen collapsed after earnings last week after a bad quarter; sales and earnings missed projections and worries have cropped up about future deal flow. Shares look to have formed a double top—we sold,...

Sell

Hertz Global (HTZ)
from Dow Theory Forecasts, recommended at $26 in the May 22, 2013 Daily Alert and Investment Digest issue 743.

Hertz shares have shown some life, regaining most of the ground they lost after a disappointing September-quarter report. The stock looks cheap at 11 times estimated 2014 earnings. But...

Today’s recommendation is a growth-and-value buy from the recovering housing sector.
Try to buy on a pullback of a couple points.

Meritage Homes Corp. (MTH)
from AlphaProfit Sector Investor

Meritage Homes shares are a housing play. In the third quarter, Meritage’s EPS rose over
400% as home prices increased 22% and gross margin widened to...

Today’s buy idea, from Richard Moroney, is for growth investors. This small company ($311 million market cap) has growing revenues and earnings, and the stock is showing accelerating momentum. Moroney is also taking profits on a recommendation from last August.

Shiloh Industries (SHLO)
from Upside

Founded in 1950, Shiloh Industries ($15; SHLO) is...

Sell

BofI (BOFI)
from Upside, recommended at $24 in the August 30, 2012 Daily Alert and in Investment Digest issue 726.

BofI is being dropped to Sell based on its sharp run-up and stretched valuation. The stock has gained 139% this year and trades at 22 times trailing earnings — well above its...

Today’s buy idea is a fast-casual restaurant chain with super strong momentum. We also have a sell alert from Dow Theory Forecasts.

Chipotle Mexican Grill (CMG)
from Argus Weekly Staff Report

We are maintaining our BUY rating on Focus List selection Chipotle Mexican Grill Inc. (NYSE: CMG) and raising our target price by...

Sell

Varian Medical Systems (VAR)
from Dow Theory Forecasts, recommended at $67 in the April 22, 2013 Daily Alert and Investment Digest issue 741, and, before that, at $53 in Investment Digest issue 667, dated March 17, 2010.

Varian Medical Systems ($73; VAR) is being removed from the Long-Term Buy list. Shares slumped...

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.