Some weak economic numbers and political uncertainty about Hong Kong roiled markets a bit but emerging and international stocks rebounded a bit today. China stocks are getting some scrutiny in Washington amidst U.S.-China rivalry. Nevertheless, our new recommendation today is from the Middle Kingdom and is centered on a high growth theme that has a lot of momentum behind it.

Texas is booming and has the nation’s second-largest economy behind California would be the world’s tenth largest if it were a stand-alone country. Yet not every company in the Lone Star State is doing well.

In this issue, we cover seven companies there that we believe have appealing turnaround potential.

There are five growth stocks in our Cabot Undervalued Stocks Advisor portfolios that offer dividend yields in excess of 5%. That’s crazy! Stocks with rising profits in combination with very large dividend yields are generally uncommon, and can indicate an extreme undervaluation of those companies’ share prices. Dividends can tell you a lot about a company, or about the broader stock market. I cover the dividend topic in more detail in today’s issue.

The market remains healthy, with all major indexes in uptrends and no major signs of divergence, and thus I continue to recommend heavy investment in stocks that meet your portfolio’s goals.

However, the recent market rotation has seen growth stocks struggling while high-yielding safe stocks thrive—and our portfolio has been adjusting accordingly, week by week. And this week the trend continues, as we sell two more growth stocks.

This week’s recommendation is a small company with a valuable piece of the world’s mobile communications infrastructure, as its trading symbol makes so clear.

Current Market Outlook


Impeachment talk stole the headlines last week, and China trade issues remain one of the chief economic concerns, but overall, the market remains healthy, with all major indexes in uptrends and most just a couple of weeks off their recent highs. Nevertheless, making money remains difficult, as the forces of rotation have been sending old leaders to the locker room and trotting out fresher new leaders to take their place. This is actually good for the health of the bull market, but it does make investing more difficult, so you should continue to tread carefully, in particular by choosing low-risk entry points and being ruthless at cutting loose your worst performers. As for the market monitor, we’ll stand pat this week, as the flurry of selling late last week has created some decent entry points.

This week’s list includes a great variety of stocks, and our Top Pick is a lower-risk insurance stock, Arthur J. Gallagher (AJG), which has been building a base over the past couple of months and looking ripe to resume its uptrend.

Stock Name	Price	Buy Range	Loss Limit
Arthur J. Gallagher (AJG)	89.27	87-91	84-86
Chubb Group (CB)	153.34	156-164	150-152
Entegris (ENTG)	48.08	46-48	41-42
Garmin (GRMN)	97.45	81-87	77-78
Insulet (PODD)	175.69	154-168	145-147
Jabil Inc. (JBL)	41.50	34-36	31-32
MasTec, Inc. (MTZ)	66.65	62-65	59-61
Synnex Corp. (SNX)	129.70	110-113	105-108
Taylor Morrison Home (TMHC)	27.51	24-26	22-23
Weight Watchers International, Inc. (WW)	35.33	35-38	30-32

The cannabis sector remains in a correction, weighed down in part by fears of vaping illness, but many stocks are doing considerably better than the sector and our challenge is to own the right ones—so that we can succeed both short-term and long-term.

The majority of the evidence when it comes to the overall market remains positive, but the environment for individual growth stocks remains very challenging—many are still holding up well, but no real money is being made as waves of selling pressures show up every couple of days. We’re still holding our resilient names and aren’t opposed to new buying here or there, but it’s important to hold some cash and keep new buys small until the bulls step up to the plate for more than a few hours at a time.

A huge new industry is being born in American energy exports. Because of new technologies in fracking and horizontal drilling, America has gone from being hopelessly dependent on energy imports to the world’s preeminent energy powerhouse and the number one producer of both oil and gas in less than ten years. In order to export natural gas across the oceans, it needs to be converted to liquid form (LNG), loaded onto tankers and shipped overseas. Until recently, the US did not have the facilities necessary to do that. But one company was the first to have such facilities and it’s up and running. And business is booming with no end in sight. This month’s “featured buy” operates the first and largest US LNG terminal, while LNG is the fastest growing commodity in the world. The stock has blown away the returns of the S&P 500 at a time when stocks in the energy sector were the worst performing on the market. Yet the stock is still reasonably valued and pays monstrous and growing 5.15% yield.

The market remains healthy, with all major indexes in uptrends and no major signs of divergence, and thus I continue to recommend heavy investment in stocks that meet your portfolio’s goals.

This week’s recommendation is an American apparel company whose stock is cheap and thus has great capital gains potential. Plus it pays a 5.8% dividend!

As for the current portfolio, most of our stocks are performing fine; a few are hitting record highs; and one or two stocks have become worrisome, but not enough to cause me to take action.

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.

Analysts are forecasting higher earnings for this medical device company, which has recently announced to acquisitions, boosting its product offerings.

This morning, the company reported third quarter earnings per share of $0.41 vs. the consensus estimate of $0.42 (August year-end), and revenue of $1.2 billion vs. the expected $1.29 billion.

This oil company beat analysts’ estimates by $0.04 last quarter, and eight analysts have increased their EPS estimates for the company in the past 30 days.

This agriculture company turned in a stellar quarter, with adjusted EBITDA of $61.9 million in 1Q18, a 38.4% increase, year over year.

This largest manufacturer of iron-ore pellets in North America may see renewed interest due to steel tariffs.

This fintech company beat earnings estimates by $0.03 last quarter, and it is forecasted to grow 22.3% this year.

This semiconductor measurement systems company was recently recommended by Zacks, based on an 84% estimated earnings growth rate for this year.

The following is a brief unscheduled update—not only on developments in the marijuana investing sector but also on my thinking about the investment prospects in the industry going forward. I hope you find it useful.

This restaurant business beat analysts’ earnings estimates by $0.07 last quarter.

This morning, our longest and most-profitable holding, came under attack by Muddy Waters, a firm that specializes in publishing negative research on a company and selling its stock short.

The top three sectors for this fund are: Real Estate, 52.83%; Financial, 24.8%; and Consumer Cyclical, 14.17%.

The top five holdings are in the ETF mentioned today.

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.