Issues
Short-term, the market remains under pressure, and this corrective phase could easily go longer (I don’t sense enough pain yet), but long-term, the market’s main trend remains up, so I continue to recommend that you be heavily invested in a diversified portfolio of stocks that are performing well.
Today’s recommendation is a recent IPO, but it’s not Uber or Pinterest or any of the big popular names. I think you’ll like it, but be careful; volatility is to be expected.
As for the portfolio’s current holdings, several are hitting new highs—and none are performing so badly that they deserve to be sold. So this week we’ll stand pat. Details in the issue.
Today’s recommendation is a recent IPO, but it’s not Uber or Pinterest or any of the big popular names. I think you’ll like it, but be careful; volatility is to be expected.
As for the portfolio’s current holdings, several are hitting new highs—and none are performing so badly that they deserve to be sold. So this week we’ll stand pat. Details in the issue.
The market correction continues, and we’re now seeing the selling pressures broaden, with many resilient growth stocks beginning to come under pressure. The longer-term evidence remains positive, so this is still an overall bull market, but our intermediate-term Cabot Tides are clearly negative, so we advise being cautious—cutting back on new buying, holding a chunk of cash and keeping losers and laggards on tight leashes.
Short-term, the market remains under pressure, notwithstanding today’s strength, so certain defensive measures remain appropriate. But long-term, the market’s main trend remains up, so I don’t recommend any wholesale changes, just minor fine-tuning.
Today, that involves upgrading one strong stock to buy, while selling two stocks that have weakened in face of growing fears of tariffs on China.
As for today’s new recommendation, it’s a high-risk stock with great long-term potential—if we can just get on board at the right time! Details in the issue.
Today, that involves upgrading one strong stock to buy, while selling two stocks that have weakened in face of growing fears of tariffs on China.
As for today’s new recommendation, it’s a high-risk stock with great long-term potential—if we can just get on board at the right time! Details in the issue.
Current Market OutlookThe market and many growth stocks had a solid three-day rally in the middle of last week, but the intermediate-term trend never turned up and the past couple of days tell us the sellers are still active—all major indexes we track are below their 50-day moving averages, with some (like the S&P 600 SmallCap) dipping to new correction lows. Stepping back, the longer-term trends are still positive, and the relatively resilient trading of many leading stocks is also a plus. But with the intermediate-term trend down and with the market having just enjoyed four months up without any pullback, it’s best to practice some caution—limiting new buying, not letting losses getting away from you and holding some cash makes sense. It wouldn’t take all that much strength to produce a new green light, and when one comes, we’ll adjust. But the evidence remains iffy here, and we think you should respect that.
Encouragingly, for the second straight week, the list is heavy on growth-oriented ideas that have held up pretty well. Our Top Pick, though, is Blackstone (BX), the huge Bull Market stock that’s benefiting from a company-specific change and the overall longer-term uptrend in asset values.
| Stock Name | Price | ||
|---|---|---|---|
| AAXN (AAXN) | 87.11 | ||
| Blackstone Group (BX) | 49.12 | ||
| Insulet (PODD) | 175.69 | ||
| Lending Tree (TREE) | 411.51 | ||
| Mercury Systems Inc. (MRCY) | 68.92 | ||
| Paylocity (PCTY) | 97.34 | ||
| SolarEdge Technologies Inc. (SEDG) | 124.37 | ||
| Twilio (TWLO) | 183.39 | ||
| Zoom Communications (ZM) | 155.83 | ||
| Zscaler (ZS) | 126.22 |
U.S.-China turbulence led to a rollercoaster week for global stocks with some recovery during the past couple of days. Our Emerging Market Timer has turned negative, as EEM has fallen below both its 25-day and 50-day moving averages.
Several of our portfolio companies posted strong earnings this week and the portfolio is already in a conservative stance. We have a new recommendation today that will diversify the portfolio and give us exposure to a country with a youthful population and a robust economy.
Several of our portfolio companies posted strong earnings this week and the portfolio is already in a conservative stance. We have a new recommendation today that will diversify the portfolio and give us exposure to a country with a youthful population and a robust economy.
One thing you can count on in the markets is change! Just when we were moving along nicely, Trump threw a wrench in the works with his new war on China tariffs. That caused a few down days, but we did have a bit of recovery yesterday.
The economy continues to sail smoothly, however, with unemployment and inflation low, and the housing market is doing well. As a result, and as you’ll see in our Market Views and our Market Sentiment Barometer, sentiment remains bullish, but with a dose of caution.
The economy continues to sail smoothly, however, with unemployment and inflation low, and the housing market is doing well. As a result, and as you’ll see in our Market Views and our Market Sentiment Barometer, sentiment remains bullish, but with a dose of caution.
As of yesterday, the market’s intermediate-term trend is now negative, so certain defensive measures are now appropriate. These might include lowering your overall risk profile by holding cash when possible, taking profits when stocks are extended, and being less tolerant of poor behavior.
Current Market OutlookThe market’s meltdown today cracked the intermediate-term uptrend that got going back in January, with all major indexes (and many leading stocks) closing well below their 50-day lines today. Big picture, we still see this as a bull market, so we’re still OK holding most of your shares in your strong, profitable stocks; encouragingly, despite taking on water, many stocks are still hanging in there. That said, you also shouldn’t be complacent—after four months with no meaningful pullbacks, it’s likely (not for sure, but likely) the market needs more than six trading days to consolidate the January-April advance. In a nutshell, you should keep tight stops in place on losers and laggards, give your profitable names a bit more rope and, on the buy side, be very selective and/or keep positions small. We’re moving our Market Monitor down to a level 5.
Interestingly, this week’s list is very heavy on growth-y names despite the market’s plunge. Our Top Pick is Match.com (MTCH), which has a great long-term story, and the stock has re-emerged after earnings.
| Stock Name | Price | ||
|---|---|---|---|
| Avalara (AVLR) | 102.00 | ||
| HubSpot (HUBS) | 582.89 | ||
| Lithia Motors Inc. (LAD) | 146.30 | ||
| Match (MTCH) | 0.00 | ||
| PayPal (PYPL) | 147.00 | ||
| Roku, Inc. (ROKU) | 150.46 | ||
| Tandem Diabetes (TNDM) | 74.77 | ||
| Teradyne (TER) | 82.83 | ||
| TopBuild (BLD) | 111.00 | ||
| Woodward (WWD) | 111.91 |
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
In the past 30 days, seven analysts have increased their earnings forecasts for this drug maker.
In the past 30 days, 11 analysts have increased their earnings forecasts for this homebuilder.
The top five holdings of this mutual fund are: Abiomed Inc (ABMD, 3.31%); Seattle Genetics Inc (SGEN, 3.23%); Eli Lilly and Co (LLY, 3.08%); Alibaba Group Holding Ltd ADR (BABA, 2.84%) and American Airlines Group Inc (AAL, 2.80%).
The shares of this medical device company were just upgraded by JP Morgan to ‘Overweight’, and eight analysts have increased their earnings estimates for the company in the past 30 days.
Comments on one of our stocks, one stock rejoins the Growth Portfolio, and one of our companies reported a fourth-quarter earnings beat.
The top five sectors in this fund are Financials (42.66% of assets); Communications (18.77%), and Consumer Cyclical (13.32%).
Updates on three of our stocks that reported quarterly earnings, plus updates on two stocks with Strong Buy ratings.
In the last few weeks, this energy company has also attracted Wall Street’s attention, with coverage of the shares initiated at both Credit Suisse (Outperform) and Citigroup (Buy).
Analysts expect growth of 70% for this industrial company next year.
These two banks are a great entrée into participating in the ADR markets.
The shares of this automotive systems supplier just hit their 52-week high. The company beat analysts’ estimates by $0.05 last quarter, perhaps a harbinger of growth to come as it takes on a leading role in autonomous vehicles.
The shares of this optical sensor company were just initiated at Dougherty, with a ‘Buy’ rating.
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.