Issues
The market remains all over the place, with news- and rumor-driven action pushing the indexes and individual stocks around every day. Our biggest thought remains that, while there’s plenty of evidence that tells us the next major move is probably up, the current environment remains extremely choppy with few stocks hitting new highs and little real money being made. Thus, we remain cautious, holding plenty of cash and going slow on the buy side—although we’re always keeping our eyes open for a sustained turn higher. In the Model Portfolio, we’re a bit more than half in cash and are building our watch list for the next advance.
The market is no longer as healthy as it was, but the bull market is not dead, either, just going through a change of character—a change that helps some of our stocks and hurts others. That’s investing!
As for this week’s stock, it’s a name you may not have heard of yet—it’s young—but lots of Chinese have, as it serves the mass market.
And in the portfolio, there are two changes—one simple sell and one “retirement” of a stock that has achieved its short-term potential but that might still be kept around for the long term.
Details in the issue.
As for this week’s stock, it’s a name you may not have heard of yet—it’s young—but lots of Chinese have, as it serves the mass market.
And in the portfolio, there are two changes—one simple sell and one “retirement” of a stock that has achieved its short-term potential but that might still be kept around for the long term.
Details in the issue.
Current Market OutlookThe market cracked its intermediate-term uptrend last week, with all the major indexes diving below their 50-day lines decisive fashion, and it appeared they could be ready to go over the falls. But as has been the case for months, the market reversed, with a decent-looking bounce to end the week. Overall, the trend of the major indexes remains effectively sideways, with no net progress for five-plus months at this point. And for individual stocks, it’s mostly the same story—we’re still seeing many that are holding up well, but few are going up, so no real money is being made. We’re still game for holding your strong, resilient stocks, especially if they’ve already taken some hits and held support. But we also think it’s best to mostly lay low, holding plenty of cash and being choosy on the buy side until the buyers flex their muscles. We’re dropping our Market Monitor down to level 5.
This week’s list has a good number of names that have recently shown strong accumulation and have held most of their gains, despite the soft environment. Our Top Pick is RingCentral (RNG), which announced a game-changing deal last week that lit a fire under the stock. Dips would be tempting.
| Stock Name | Price | ||
|---|---|---|---|
| Coupa Software (COUP) | 262.20 | ||
| Edwards Lifesciences (EW) | 228.06 | ||
| Lennar (LEN) | 61.85 | ||
| Medicines Company (MDCO) | 56.98 | ||
| Proofpoint (PFPT) | 113.79 | ||
| RH Inc. (RH) | 252.93 | ||
| RingCentral (RNG) | 238.73 | ||
| Seattle Genetics (SGEN) | 150.85 | ||
| Visteon (VC) | 89.82 | ||
| ZTO Express (ZTO) | 28.84 |
It was 2007 when James Morales first realized he had sleep apnea. For over a decade he frequently stopped breathing at night, struggled in life and at work due to chronic fatigue, and his wife was always worried about what could happen if he didn’t get help.
Today, James sleeps like a baby. He rocks out of bed, attacks the day doing house projects and in his job. The best thing is he’s not relying on a CPAP machine – complete with hoses and a face mask – to deal with the sleep apnea.
What was his solution?
It’s all laid out in the October Issue of Cabot Small-Cap Confidential.
Today, James sleeps like a baby. He rocks out of bed, attacks the day doing house projects and in his job. The best thing is he’s not relying on a CPAP machine – complete with hoses and a face mask – to deal with the sleep apnea.
What was his solution?
It’s all laid out in the October Issue of Cabot Small-Cap Confidential.
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.
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.
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.
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.
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.
In this issue, we cover seven companies there that we believe have appealing turnaround potential.
Current Market OutlookImpeachment 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 | ||
|---|---|---|---|
| Arthur J. Gallagher (AJG) | 89.27 | ||
| Chubb Group (CB) | 153.34 | ||
| Entegris (ENTG) | 48.08 | ||
| Garmin (GRMN) | 97.45 | ||
| Insulet (PODD) | 175.69 | ||
| Jabil Inc. (JBL) | 41.50 | ||
| MasTec, Inc. (MTZ) | 66.65 | ||
| Synnex Corp. (SNX) | 129.70 | ||
| Taylor Morrison Home (TMHC) | 27.51 | ||
| Weight Watchers International, Inc. (WW) | 35.33 |
Updates
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.
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.”
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.
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.
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.
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 30th. 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.
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 30th. 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
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.
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.
Despite all the headline noise lately we’re marching deeper into first‑quarter earnings season with the market’s path of least resistance still pointing higher.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
The old saying, “History doesn’t repeat itself, but it rhymes,” is an apt one for the stock market these last two years.
In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.
In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.
The market turned on the afterburners. The S&P 500 made up all the March losses and catapulted to a brand new high in a remarkably short time. It’s a market that sure looks like it wants to go higher. But stocks are being held back this week by more war uncertainty.
The current ceasefire with Iran expires on Wenesday night. Talks may not happen, and war talk is growing. The resumption of the war will almost certainly prompt a decline in the market. Aside from that near-term threat, investors are clearly looking past this war. Hopefully, it won’t last much longer.
The current ceasefire with Iran expires on Wenesday night. Talks may not happen, and war talk is growing. The resumption of the war will almost certainly prompt a decline in the market. Aside from that near-term threat, investors are clearly looking past this war. Hopefully, it won’t last much longer.
The market came roaring back to new highs last week after a tough March. But the war isn’t over yet, and there could be more bouncing around in the weeks ahead.
Investors are clearly already looking past this war, as there is a high degree of optimism that hostilities will soon end. There is probably still a big rally or two left in the tank when the war actually ends. Sure, there is still headline risk in the meantime. But the war is clearly fading as the biggest market catalyst and giving way to earnings.
Investors are clearly already looking past this war, as there is a high degree of optimism that hostilities will soon end. There is probably still a big rally or two left in the tank when the war actually ends. Sure, there is still headline risk in the meantime. But the war is clearly fading as the biggest market catalyst and giving way to earnings.
Alerts
Apple (AAPL) has a good earnings report and a stock moves from Hold to Strong Buy.
Coverage of the shares of this global payments processor was just initiated by Bernstein with an ‘Outperform’ rating.
The market had another volatile day, with a big dip early but then with buyers showing up in the afternoon. The Model Portfolio has been holding a good-sized cash position recently, and came into this week with a cash position of 44%. And tonight we’re making a couple more moves that will boost our cash position further.
One of the stocks in our portfolio is involved in a merger. I virtually always advise investors to sell upon receiving buyout offers. However, I admit that owning a debt-free oilfield service company in today’s stock market is enticing. I’ll make my recommendation within a few days.
Today’s pick is a leader in recycling systems for the food retail industry in Europe and the U.S.
One of our portfolio stocks reported a huge earnings beat and moves from Strong Buy to Hold.
This cloud software company’s shares have been receiving Wall Street attention for the past couple of months: BTIG Research upgraded the shares to ‘Buy’.
CNBC is reporting that Boeing (BA) is close to announcing that KLX Inc. (KLXI) is agreeing to be acquired.
Yesterday’s $83 run-up in the share price of this stock outpaced analysts’ projected increase in 2018 and 2019 earnings, which resulted from the strong first quarter earnings report.
Wall Street is forecasting annual growth of 19.98% over the next five years for this homebuilder.
Four of the stocks in our portfolio reported first quarter results today. There are two rating changes.
This manufacturer of leisure boats beat analysts’ estimates by $.09 per share last quarter, and the company is expected to grow 22.3% this year.
Portfolios
Strategy
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.