Artificial intelligence has moved past the experimentation phase and is being rapidly deployed at scale, forcing companies to rethink how their IT infrastructure actually handles data flow.

Today’s company sits at the intersection of network performance and protection, helping the world’s largest organizations manage this new wave of traffic, while also maintaining reliability. Its networking platform is becoming increasingly critical as AI workloads scale.

All the details are inside the June Issue of Cabot Small-Cap Confidential.

Healthcare is a universal need. It’s also a growing one.

The aging of the U.S. population is such that healthcare spending is expected to make up 20% of total economic spending by 2033. And yet, healthcare stocks are having a rough year, retreating more than 10% since the Iran war began. The evergreen nature of the sector (everyone needs healthcare!) means that it rarely stays down for long, and it appears a bottom has already been put in. That spells opportunity!

So today, we add a big-name healthcare stock to our portfolio that does 90% of its business in the U.S. Trading nearly 30% off its February highs, it’s a bargain right now – and one that has grown sales and earnings by double digits the last three years.

Details inside.

AI stocks are a little unsettled as Broadcom (AVGO), the sixth-most valuable stock in the S&P 500, fell short of revenue expectations, and the stock looks like it is going to open weakly and have a tough day. Bitcoin is in a slump, down about 25% this year and having lost about half of its value since reaching a peak above $126,000 in early October.

The market is also getting impatient with the on-and-off Hormuz story as energy stockpiles dwindle and oil prices react to the daily news cycle.

The bulls made it nine straight winning weeks, though the holiday-shortened four-day stretch (markets were closed Monday for Memorial Day) required a burst of earnings firepower to keep the streak alive. Dell Technologies (DELL) and Snowflake (SNOW) both posted blowout results, sparking sympathy rallies across AI-adjacent tech names and giving software stocks in particular a much-needed shot in the arm.

Overall, nothing has changed when looking at the big picture of the market and leadership—that said, we are seeing a bunch of extended, hot names begin to take on a little water, and we’ve even seen a few names that have had long runs flash some intermediate-term iffy action. That’s not a death knell, but it’s a reminder to continue trailing stops, and for new buying, focus on either powerful, fresh breakouts or leaders that pull in to higher-odds points. We’ll leave our Market Monitor at a level 8 this week.

This week’s list has something for everyone, though after highlighting a few zingers of late, this week’s Top Pick is on the cyclical side of things, with shares emerging from a multi-month rest period.

Stocks are at record highs, but after two straight months of relentless gains, a pullback of some sort – at least in the short term – seems likely. Still, not every sector is stretched to the moon, and that includes biotech. Cabot Early Opportunities Chief Analyst Tyler Laundon recently uncovered a fast-growing biotech that looks primed for a big run, so today we add this intriguing name to our portfolio.

Details inside.

The bulls made it nine straight winning weeks, though the holiday-shortened four-day stretch (markets were closed Monday for Memorial Day) required a burst of earnings firepower to keep the streak alive. Dell Technologies (DELL) and Snowflake (SNOW) both posted blowout results, sparking sympathy rallies across AI-adjacent tech names and giving software stocks in particular a much-needed shot in the arm — the IGV, which we own, broke decisively above its 200-day moving average for the first time this year on Friday.

The bulls made it nine straight winning weeks, though the holiday-shortened four-day stretch (markets were closed Monday for Memorial Day) required a burst of earnings firepower to keep the streak alive. Dell Technologies (DELL) and Snowflake (SNOW) both posted blowout results, sparking sympathy rallies across AI-adjacent tech names and giving software stocks in particular a much-needed shot in the arm — the IGV, which we own, broke decisively above its 200-day moving average for the first time this year on Friday.

The bulls made it nine straight winning weeks, though the holiday-shortened four-day stretch (markets were closed Monday for Memorial Day) required a burst of earnings firepower to keep the streak alive. Dell Technologies (DELL) and Snowflake (SNOW) both posted blowout results, sparking sympathy rallies across AI-adjacent tech names and giving software stocks in particular a much-needed shot in the arm — the IGV, which we own, broke decisively above its 200-day moving average for the first time this year on Friday.

It’s been a great couple of months for the market and growth stocks, but despite the big run, the vast majority of evidence points to nicely higher prices down the road for the market, and for early-ish stage growth stocks. Near-term, though, it’s hard not to think things have gotten a bit giddy--that’s no reason to sell, but we are picking our spots on the buy side. We still have one-third in cash, but tonight we’ll stand pat and look to put that to work as some better entry points could arise in the next week or two.

As spring turns into summer, cannabis investors will increasingly focus on Department of Justice (DOJ) and Drug Enforcement Administration (DEA) hearings to consider whether they will reschedule recreational-use cannabis.

I expect cannabis stocks will rise as the June 29 hearing launch gets closer, due to elevated expectations that the rescheduling of medical cannabis creates momentum that will follow through to rec-use cannabis.

I’ll admit to having a bias in favor of precious metals miners. As both an analyst and an investor, I’ve been heavily involved with gold and silver for some 30 years when both metals were widely ignored and trading at multi-decade lows.

I was buying physical gold near its low in the $200s-per-ounce range circa 1997, which later proved to be one of my first successful long-term “turnaround” investment successes. Since that time, I’ve been hooked on the metal as an investment vehicle, not only because of its currency hedging capabilities, but because I view the current phase of the long-wave economic cycle as being quite favorable for the price appreciation potential in gold and other metals.

A major economic narrative that took shape in recent years was the decline and (presumptive) inevitable death of the so-called “petrodollar,” as a growing number of countries diversified their foreign exchange reserves away from the U.S. dollar and toward gold and alternative currencies like the Chinese yuan.

WHAT TO DO NOW: The overall market remains in good shape, though we are seeing some exuberance on the upside and also a few leaders begin to act sloppy. Near term, then, it’s still a coin flip as to what comes, but the vast majority of intermediate-term evidence remains bullish. In the Model Portfolio, we took partial profits in Marvell (MRVL) earlier this week; tonight, we’re buying a half-sized position (5% of the account) in Bloom Energy (BE), which is extremely volatile but also strong and coming off a few weeks of rest. Our cash position will now be around 28%.

This market just keeps going higher.

Sure, there’s uncertainty out there. The war isn’t over. Inflation and interest rates are still too high. But stocks didn’t get the memo. After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30 and are continuing to make new highs this week.

Despite the negative headlines and volatility, stocks just keep going.

After a strong April, the S&P 500 rose 5% and the Nasdaq soared 8% in May. The indexes are up 20% and 30%, respectively, since March 30. It’s also worth noting that despite the ongoing Iran war, the price per barrel of West Texas Intermediate crude oil closed down 17% for the month of May.

This week’s Memorial Day observance marked the traditional onset of the summer vacation season for millions of Americans. It’s a time of traveling, sightseeing, picnics and parties. It’s also the peak season for enjoying cold, carbonated beverages like soda pop and energy drinks.

With this dynamic in play, I think it’s time that we give some attention to our holding in PepsiCo (PEP), which is entering a critical period of its sales year.

On the heels of a miserable March and a euphoric April, I wrote several weeks ago in this space that I thought May would determine which direction the market is truly headed, at least in the intermediate term. We have our answer, and it’s a definitive “up.”

All three major U.S. indexes are touching record highs as of this writing, with the S&P 500 up 4.3% in May, the Nasdaq up 7%, and the slower-moving Dow Jones Industrial inching higher by 1.6%. That’s despite the ongoing Iran war and the accompanying sky-high oil and gas prices, escalating inflation, bond yields at multi-year highs, possible Fed rate hikes later this year, and record-low consumer sentiment.

Stocks have largely shrugged off this week’s dust‑ups in the Middle East as investors continue to bet on a near‑term memorandum of understanding (MOU) that would reopen the Strait of Hormuz and push bigger sticking points between the U.S. and Iran down the road.

Yields have cooled off this week and continue to do so this morning, thanks to a slightly lower‑than‑expected core PCE reading. April core PCE rose 0.2% month over month, below both March’s 0.3% reading and consensus, giving the Fed some breathing room as policymakers weigh the competing forces of inflation and growth.

The $145 trillion global bond market is under some stress due to runaway debt. The 30-year U.S. Treasury bond yielded over 5% last week, up from 4.63% at the end of February. Americans are struggling to keep up with their debt payments, as the cost of borrowing money increases. This is a global story. In Japan, the 30-year government bond yield just hit a record of 4.15%, and U.K. government debt jumped to 5.85% earlier this month.

Nothing stops this market. The S&P 500 hit another new high this week.

The spectacular earnings season helped power the rally. Average earnings growth on the S&P 500 is over 28% in the first quarter. That is far better than the expected 13.1% and the highest level of growth for any quarter since 2021.

We’ve all seen it before: the owner of a home in dire need of structural repair decides to “flip” the house for a quick profit by contracting a restoration service. Instead of making sorely needed foundational repairs, the cleanup crew focuses on superficial fixes like painting, tiling, flooring, etc., in hopes that a shiny new veneer will hide the problems that exist beneath the home’s exterior.

Crude though the analogy may be, I think it’s an apt description of what we sometimes encounter as turnaround investors.

WHAT TO DO NOW: The market and especially most leaders have finally shaken out a bit in recent days, and there are some worries we’re watching, including the rise in Treasury rates and the health of the broad market (our Two-Second Indicator is now negative). Even so, the primary evidence remains in good shape, and while this rest phase could easily take longer if the worries persist, the odds favor higher prices down the road. Tonight we’re making one small move: Averaging up on Axsome Therapeutics (AXSM), buying another 3% position. Our cash position will be around 34%, which we’ll be looking to put to work should the market continue to act properly.

The war in Iran has not sunk the stock market the way it appeared it might in March, nor has it put a dent in the U.S. economy (yet), with first-quarter earnings growth among U.S. large caps coming in at 27.7%, a five-year high. But the bond market has been profoundly impacted, with yields on the 10-year Treasury up 17% since late February to top 4.6% for the first time in a year. Even more troubling? Yields on the 30-year note are now north of 5% for the first time since 2007.

WHAT TO DO NOW: After selling some Marvell Technology (MRVL) earlier this week, today we’re doing the same with Dell (DELL), taking partial profits by selling a third of our holdings, and aiming to give the rest plenty of rope to correct and consolidate. Our cash position will now be around 35%.

WHAT TO DO NOW: We’re still thinking many early-stage stocks (and the market) can see higher prices when looking months down the road—but there’s no doubt things have gotten a bit giddy with some names. Today we’re going to sell one-third of Marvell (MRVL) after the stock gapped up twice this week on no substantive news; we’ll book some of our great profit and hold the rest. Our cash position will be around 34% after the sale.

BBIO and WFRD to SELL. FROG to HOLD

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.