Issues
The market looks great today. The correction is over and buyers are back in control, so I recommend heavy investment in stocks that meet your portfolio’s goals.
Last week I made a slew of ratings changes to our portfolio to get back in synch with the market, but today all looks well so there are no changes at all—though of course that will change!
As for this week’s recommendation, it’s a bit unusual, in that it’s a recent IPO that got very little notice (unlike giant Uber for example), but it has a good growth story, and could even thrive in the next recession.
Last week I made a slew of ratings changes to our portfolio to get back in synch with the market, but today all looks well so there are no changes at all—though of course that will change!
As for this week’s recommendation, it’s a bit unusual, in that it’s a recent IPO that got very little notice (unlike giant Uber for example), but it has a good growth story, and could even thrive in the next recession.
Current Market OutlookWe’re still of the mind that going slow makes sense—following the vicious rotation of the past week or two, there’s still a chance of continued crosscurrents going forward, especially with the weekend news in Saudi Arabia and the usual batch of uncertainties that are out there (Fed this week, U.S.-China trade, etc.). But at the end of the day, most of the evidence out there is tilted to the bull case: The intermediate- and longer-term trends of the major indexes are up, the broad market is very strong (very few stocks hitting new lows every day) and, while leadership has definitely shifted, we’re seeing a good number of stocks and sectors that are under strong accumulation. We still favor starting with smaller-than-normal positions and holding some cash, but we also wouldn’t be in your storm cellar as the buyers are (mostly) in control.
This week’s list features stocks where the buying has been concentrated of late—and these aren’t beaten-down names, as many are at or near new-high ground. Our Top Pick is Floor & Décor (FND), a mid-sized building-related retailer that has tightened up nicely.
| Stock Name | Price | ||
|---|---|---|---|
| ACADIA Pharmaceuticals (ACAD) | 47.84 | ||
| Arconic (ARNC) | 17.00 | ||
| Elastic (ESTC) | 86.17 | ||
| Floor & Décor (FND) | 68.03 | ||
| Lam Research (LRCX) | 268.47 | ||
| Medpace (MEDP) | 76.28 | ||
| Micron Technology, Inc. (MU) | 43.31 | ||
| Shake Shack (SHAK) | 92.08 | ||
| Teladoc, Inc. (TDOC) | 127.95 | ||
| Teradyne (TER) | 82.83 |
The market has been wild in recent days, giving investors very mixed messages—on one hand, many leading growth stocks have broken down, but on the other, the broad market is strengthening, with our Cabot Tides actually flashing a new green light. Given the crosscurrents, we’re taking things on a stock-by-stock basis, selling stocks that are cracking support and looking for new buys among fresh leadership.
The gathering at our Cabot Wealth Summit last month was lively, accompanied by markets exhibiting some pretty intense volatility. That was primarily due to the Chinese tariff issue, but with little net change. Our subscribers—as well as individual investors—continue to be bullish. The economy remains strong, but Fed watchers are calling for another 25 basis points rate cut at the September 17-18 meeting, due to the global outlook as a result of the U.S./China trade war.
And yet, the fundamentals look sound, and as you’ll see in our Market Views section, our contributors continue to be positive in their outlook.
And yet, the fundamentals look sound, and as you’ll see in our Market Views section, our contributors continue to be positive in their outlook.
The good news is that fears of China tariffs have passed, and our Chinese stocks look better. The bad news is that formerly leading growth stocks are now being sold, while new leadership, like juggernaut Citigroup (C), comes to the fore. And additional good news is that all our Cabot market-timing indicators are once again positive, telling us the wind is at our back.
Bad news. Good news. The important thing is to watch each of your stocks carefully, nourish the ones that are doing what you hired them to do and fire the ones who don’t measure up.
This week, thanks to the big shifts in the market, we have an unusual number of rating changes, six! Details in the issue.
Bad news. Good news. The important thing is to watch each of your stocks carefully, nourish the ones that are doing what you hired them to do and fire the ones who don’t measure up.
This week, thanks to the big shifts in the market, we have an unusual number of rating changes, six! Details in the issue.
Current Market OutlookThe major indexes continue to show improvement, putting together their second straight week and, for some, rising to their highest levels since late July; our own intermediate-term trend model, in fact, is close to turning positive! That’s a good thing, no doubt, but we don’t (usually) buy the indexes—we buy leading stocks. And the evidence on that front is actually worsening: Many leading growth titles have actually been flashing abnormal intermediate-term action, especially in the software and cybersecurity areas, and we advise taking action when need be. (We have a number of sells on page 12.) That said, many recently strong names, especially turnarounds and some more cyclical-oriented stocks, are acting just fine. All told, it’s a very mixed environment with lots of crosscurrents, so the goal is to ditch stocks that are acting abnormally, and on the buy side, being picky, looking for stocks showing recent power that are near decent entry points.
This week’s list reflects what we’re seeing in the market, with some fresher growth-oriented names as well as some turnarounds with big projected growth. Our Top Pick is ASML Inc. (ASML), which looks to be leading a group upmove in the chip equipment space.
| Stock Name | Price | ||
|---|---|---|---|
| Ambarella (AMBA) | 52.79 | ||
| ASML Holding (ASML) | 350.01 | ||
| DocuSign (DOCU) | 107.98 | ||
| Fastly (FSLY) | 39.31 | ||
| Lululemon Athletica (LULU) | 304.69 | ||
| Medicines Company (MDCO) | 56.98 | ||
| Novocure (NVCR) | 0.00 | ||
| RH Inc. (RH) | 252.93 | ||
| Sanderson Farms (SAFM) | 149.54 | ||
| Western Digital Corporation (WDC) | 0.00 |
What happens when you implement a digital marketing platform within secure online banking and mobile banking channels? Is that even possible?
The short answer is yes, it’s possible … if you can get banks to sell you their transaction data, host your platform and accept the revenue share agreements you propose for all the deals that consumers accept while logged in.
This month’s Cabot Small-Cap Confidential stock has created such a platform, and it’s taking off.
The story, and potential, of what happens when digital marketing and fintech walk down the aisle together is inside.
The short answer is yes, it’s possible … if you can get banks to sell you their transaction data, host your platform and accept the revenue share agreements you propose for all the deals that consumers accept while logged in.
This month’s Cabot Small-Cap Confidential stock has created such a platform, and it’s taking off.
The story, and potential, of what happens when digital marketing and fintech walk down the aisle together is inside.
Emerging markets are seeing a boost from positive news out of Hong Kong and on the U.S.-China front. Our Emerging Markets Timer has raced higher in recent days, putting it within striking distance of a new buy signal. Our new recommendation comes from an unexpected country, but a well established semi-monopoly industry.
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
This tech company is expected to grow by 35% on average, in the next five years.
One stock reports a slight first quarter earnings beat; and another moves from Strong Buy to Hold.
This small-cap stock has a number of catalysts that should boost revenues and profits in the near-term.
One Stock reports great first quarter results; and two more will report first quarter results on April 17 and 18.
Despite this social media giant’s recent data privacy scandal, there are lots of reasons why the company is here for the long-term. Buy it now at discounted prices.
The shares of this restaurant company were recently upgraded by Deutsche Bank to ‘Buy’.
Two stocks move from Strong Buy to Hold and there is bullish price action another.
Both Citigroup and UBS recently initiated coverage of the shares of this financial behemoth with a ‘Buy’ rating.
The top five holdings in this fund are: Medy-Tox Inc (086900.KS, 2.83%); Cavium Inc (CAVM, 2.58%); Copart Inc (CPRT, 2.35%); Trex Co Inc (TREX, 2.27%); and Knight-Swift Transportation Holdings Inc A (KNX, 2.17%).
This tech services company beat analysts’ estimates by $0.06 per share last quarter.
Our first idea is a company’s whose earnings estimates have been boosted by six analysts in the past 30 days, with estimates increasing $1.28 a share 30 days ago, to $1.66 today.
Our second recommendation is a partial sale of a previous idea.
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.