While the broad stock market reaches for new all-time record highs, companies that produce oil and natural gas remain heavily out-of-favor. Yet, with Big Oil stock prices down by as much as 60% since oil prices peaked at over $100/barrel in mid-2014, they look like high-yielding bargains.

In this issue, we outline our bullish outlook for six major oil companies.

Have you noticed that the chatter concerning the U.S.-China trade deal has gone down considerably? It probably reflects a good reset of expectations.
Our emerging markets timer is positive so it pays to be optimistic and keep investing in outstanding companies with strong fundamentals.

Today’s new recommendation has steadily rising net revenues, strong market position, a robust pipeline of products, an extensive family of patents as well as a strong cash flow and a strong balance sheet.

One year ago, soon after marijuana sales became legal in Canada, investors were throwing money at the sector, anxious to get a piece of the action. Today, the opposite is true—getting money for a cannabis business takes real work!

At a new all-time high, this is a tough market to navigate. Sure, the market could stay good for a while. But at this late-stage of the bull market and recovery, how much is left in the tank?

It’s hard to muster the enthusiasm to take on risk to get the last drop of this late stage bull market before the next downturn. While defensive stocks make a lot of sense here, most are very expensive. But there is one place where stock prices are still cheap, value stocks.

Investors have been rotating toward the long-neglected value stocks and they are starting to perk up. These stocks represent a way to get bargains in an expensive market as well as protection from the next downturn. And some stocks even have momentum.

In this issue, I highlight a stock that is one of the best healthcare companies in the world that is perfectly positioned ahead of the world’s most pronounced megatrend. It also offers great value in an expensive market and has recently found upward momentum.

Many major indexes have hit new highs in recent days, and all Cabot’s market timing indicators are currently positive. Conclusion: it’s a bull market and you need to be heavily invested.

But, as always, you need to manage your portfolio. In our own portfolio, eight of our stocks have hit new highs in the past week, which is great. But two of the others are being downgraded to hold because their prospects are less secure.

As for today’s new recommendation, it’s a young, fast-growing company in a high-risk/high-potential market sector. It’s certainly not for everyone, but for aggressive investors, it could be fun.

Current Market Outlook


The market had another constructive week, and today, the S&P 500 actually nosed out to new highs, with the Nasdaq close behind. While small- and mid-cap indexes are still further behind, the tenor of the overall market continues to improve—it’s likely not up and away, but the odds continue to favor the next big move being up. Individual stocks remain far trickier, with rotation occurring daily, but our thoughts from last week haven’t changed much: Given the many solid setups out there, a positive earnings season could launch a bunch of new leaders we can hop on (we think we’ve already highlighted some of them), but it’s still up to the bulls to produce a bunch more powerful breakouts in the indexes and individual stocks.

This week’s list is a mix of recent earnings winners and others that are set up nicely ahead of reports this week. Our Top Pick is Vertex Pharmaceuticals (VRTX), which might finally be getting going after years of ups and downs. Earnings are due Wednesday evening so handle with care.

Stock Name	Price	Buy Range	Loss Limit
ACADIA Pharmaceuticals (ACAD)	47.84	40-42.5	35-36.5
Allegiant Travel (ALGT)	170.65	164-168	151-153
Fortune Brands Home & Security (FBHS)	81.02	58-60	53.5-54.5
Lam Research (LRCX)	268.47	260-270	240-245
Pinduoduo (PDD)	87.53	39.5-41.5	35-36
Reliance Steel & Aluminum Co. (RS)	117.45	114-118.5	103-105
Seattle Genetics (SGEN)	150.85	99-103	89-91
Teladoc, Inc. (TDOC)	127.95	69-72	62-63.5
Valero Energy (VLO)	97.40	95-98.5	86-88
Vertex Pharmaceuticals (VRTX)	230.36	191-196	178-180

The overall market continues to chop sideways, with some cyclical areas finding buyers. But growth stocks have just suffered another sharp leg lower, led by the former leaders of this year (cloud software, etc.) but spreading to other areas, too. We’ve been holding cash for a while and have sold stuff that’s broken down, including Snap, Coupa and RingCentral, and are now sitting on a massive 66% cash position.

The economy is humming, interest rates are falling, and stocks are rising. All in all, therefore, conditions are great, and our diversified portfolio—currently weighted toward lower-risk dividend-payers—is doing well.

This week we sell one growth stock, downgrade two portfolio stocks to hold—because they’ve done so well—and add a new growth stock, a high-tech communications company whose name harkens back to an earlier era.

Details in the issue.

Current Market Outlook


The market had another decent week, with the major indexes finishing above key moving averages, though all are still stuck in multi-month ranges. But the calm action hid another round of vicious rotation beneath the surface, with most growth-oriented stocks at least taking on water, if not unraveling altogether. With few stocks in sustained uptrends and the major indexes effectively trending sideways, we continue to advise a mostly cautious stance, with small new positions and plenty of cash on the sideline. That said, you shouldn’t stick your head in the sand, either—we continue to see a good number of setups out there, and we believe a lot will come down to earnings season. A spate of breakouts would be encouraging, but as usual, we have to see it first.

This week’s list is mostly full of the steady growers and special situations that the market is favoring these days. Our Top Pick is Tempur Sealy (TPX), which looks like a solid turnaround situation, with surprisingly big growth numbers to boot.

Stock Name	Price	Buy Range	Loss Limit
Arconic (ARNC)	17.00	26-27	24-24.5
Cabot Microelectronics (CCMP)	156.17	143-148	129-131
Fastenal (FAST)	37.08	35-36	32-32.5
Kansas City Southern (KSU)	176.54	140-144	129-131
Nike (NKE)	89.77	92.5-94.5	85-86
Taiwan Semiconductor (TSM)	78.41	48-50	44-45
TAL Education (TAL)	50.49	38-39.5	34.5-36
Target (TGT)	124.77	109-112	100-102
Tempur Sealy (TPX)	85.53	79-82	71.5-73.5
TJX Co. (TJX)	59.24	58-60	53.5-54.5

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.

I’m excited to share a couple of enhancements to Cabot Early Opportunities —improvements designed to sharpen our focus and better help you stay on top of the stocks we own.

This low-cost optical component maker beat analysts’ earnings by $0.04 last quarter and is forecast to grow 44.4% this year.

Our second update is an online automobile services company that beat analysts’ EPS estimates by $0.08 last quarter.

Our first Top Pick update is a Chinese cloud company whose shares were recently initiated at Guggenheim with a ‘Buy’ rating.

Our new Top Pick makes cutting-edge medical devices to prevent surgical burns.

Our first Top Pick beat analysts’ estimates by $0.02 last quarter, and Wall Street expects the company to grow at a rate of 112.5% next year.

Analysts expect this health care technology company to grow by more than 12% next year.

This infrastructure construction company beat Wall Street’s estimates by $0.14 last quarter, and analysts expect the company to grow by 15.71% annually over the next five years.

This bank’s shares have recently been upgraded by Wedbush, to ‘Outperform’ and by PiperJaffray to ‘Overweight’.

The shares of this bank holding company were recently upgraded to ‘Buy’ by Compass Point.

This gold royalty company is adding to its coffers with small acquisitions and a strong pipeline.

Our article today begins with why investing in stocks is the best way to increase your wealth.

This owner of financial exchanges beat earnings estimates by $0.03 last quarter, and four analysts have increased their EPS forecasts for the company in the past 30 days.

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.