Issues
Investment management companies, which manage mutual funds and other investments on behalf of individuals, pensions and other clients, have fallen sharply out of favor. As contrarians, we think there is still good value in these companies.
In this issue, we cover eight managers whose weak shares offer attractive valuations and dividend yields.
In this issue, we cover eight managers whose weak shares offer attractive valuations and dividend yields.
The market has been acting in a near picture-perfect manner for the past few weeks, and we’ve responded by steadily adding to our exposure—we put 15% of our cash to work in early January, another 20% last week when our Cabot Tides turned positive, and tonight we’re adding one new (but familiar) name to the Model Portfolio, leaving us with around 35% on the sideline. There are still headwinds (like our Cabot Trend Lines being negative), so we’re not flooring the accelerator, but as the evidence has improved, we’ve grown more optimistic. Tonight’s issue goes over all our current stocks (including tonight’s new addition), and details a better way to “buy low” than most investors use.
The past month has been very profitable for investors in the sector, as stocks rallied off their December lows and climbed strongly through January, with several hitting new highs as I write. In general, I recommend that you enjoy the trend; the long-term prospects remain bright.
But short-term, there are opportunities for fine-tuning and risk reduction, and thus I have a few recommended changes in today’s issue, as well as one new addition, a company thriving in the booming CBD market.
But short-term, there are opportunities for fine-tuning and risk reduction, and thus I have a few recommended changes in today’s issue, as well as one new addition, a company thriving in the booming CBD market.
In this issue I identify a fast-growing biopharmaceutical company that will benefit as the changing population demands better healthcare than ever before. It is well established with a high dividend yield and poised in front of the wave at the cutting edge of medical innovation.
Market trends remain quite positive, and I continue to recommend that you work to get more invested. Months from now, the market will be higher.
As for today’s recommendation, it’s a dirt-cheap dividend-payer in the energy industry that may not get going right away, but downside risk looks minimal and all the fundamentals argue that it will eventually be higher.
As for today’s recommendation, it’s a dirt-cheap dividend-payer in the energy industry that may not get going right away, but downside risk looks minimal and all the fundamentals argue that it will eventually be higher.
Current Market OutlookToday’s news centered around earnings duds from a couple of big names (Caterpillar and Nvidia), causing the major indexes to take some hits. But stepping back a bit, we’re not seeing anything abnormal—since the start of last week, the major indexes have slipped 1.5% (ballpark) and most leading stocks are acting just fine. Of course, further dips in the short-term are certainly possible given that the Nasdaq ran 1,000 points from its Christmas Eve low, earnings season is revving up and most stocks have plenty of overhead to battle. Even so, the intermediate-term trend remains pointed up and, in general, the market and leading stocks continue to act how they “should” if the sellers have run out of ammo. We remain optimistic, and think many names will be good buys if we do see some more retrenchment.
Tonight’s list has a great batch of mostly growth stocks, albeit from a variety of industries. Our Top Pick is Lululemon (LULU), which, after a great six-month run and fourth-quarter correction, is showing terrific strength. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Ciena (CIEN) | 44.25 | ||
| EPAM Systems (EPAM) | 188.24 | ||
| Exact Sciences (EXAS) | 116.91 | ||
| Lululemon Athletica (LULU) | 304.69 | ||
| Mirati Therapeutics (MRTX) | 104.98 | ||
| ServiceNow (NOW) | 341.86 | ||
| Shopify (SHOP) | 585.00 | ||
| Splunk (SPLK) | 207.67 | ||
| Tencent Music Entertainment (TME) | 18.41 | ||
| Xilinx (XLNX) | 134.50 |
The Emerging Markets Timer held and slightly improved its position and is sitting right at its 50-day moving average, which is both constructive and bullish.
We would like to see a stronger uptrend before moving ahead to put much more cash to work but we do have a new recommendation from Brazil—a market that has moved up 20% in the last month.
We would like to see a stronger uptrend before moving ahead to put much more cash to work but we do have a new recommendation from Brazil—a market that has moved up 20% in the last month.
Last week I mentioned that two of our trend-following indicators had turned positive (the Cabot Emerging Markets Timer and the Cabot Tides), and now we can add one more indicator, the Blastoff Signal—a rare but powerful signal that occurs when the NYSE daily advance-decline line averages twice as many advancers as decliners over a 10-day span. As a result, I continue to advise you to get more heavily and aggressively invested. Months from now, the market will be higher.
Current Market OutlookWe’ve now seen four constructive weeks in a row for the overall market, not just because the major indexes are rallying, but also due to the amazing breadth during the advance (a good longer-term sign and indicative of a vacuum of selling pressure) and the action of individual stocks, a ton of which are setting up good-looking launching pads. That said, it’s not all peaches and cream—the intermediate-term trend is still on the fence (could turn up this week, but hasn’t quite yet), most indexes and stocks are below longer-term moving averages and, after four good weeks, some shakeouts and potholes (possibly on earnings) could emerge. Overall, we’re optimistic and are bumping up our Market Monitor to a level 6, but it’s best to step (not plunge) into stocks and keep looking for lower-risk entry points.
This week’s list contains another batch of great stories, with a variety of strong charts (some coming off lows, others at new highs, others setting up). Our Top Pick is Coupa Software (COUP), which is in a strong group and has seen superb buying volume in recent days.
| Stock Name | Price | ||
|---|---|---|---|
| Alarm.com (ALRM) | 71.33 | ||
| Bilibili (BILI) | 28.71 | ||
| Coupa Software (COUP) | 262.20 | ||
| Cronos Group (CRON) | 17.62 | ||
| HubSpot (HUBS) | 582.89 | ||
| Lending Tree (TREE) | 411.51 | ||
| LPL Financial Holdings (LPLA) | 85.22 | ||
| Novocure (NVCR) | 0.00 | ||
| Pinduoduo (PDD) | 87.53 | ||
| Veeva Systems (VEEV) | 180.23 |
Updates
What a difference a month can make! What an April! The S&P rose 9.6% in April, 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 some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.
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 some skirmishes. While there is still headline risk, investors have moved beyond this war and are focusing on earnings. And for good reasons.
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.
Alerts
This supplier to the construction industry beat Wall Street’s earnings forecasts by $0.06 per share last quarter. Analysts are expecting 40%+ growth from the company this year.
One of our stocks reported third-quarter results that met Wall Street’s estimates, two stocks move from Buy to Hold, and there’s new price action on another.
This mega-bank beat analysts’ earnings projections by $0.03 last quarter, leading Wall Street to beat its drums. In the past 30 days, 21 analysts have increased their 2017 forecasts for the company and 13 have boosted their earnings outlook for 2018.
Two of our stocks reported third-quarter earnings beats; another reported third-quarter earnings in line with estimates.
This once out-of-favor designer brand is now being touted by Wall Street. The shares have received lots of analyst attention lately including: upgraded by Canaccord Genuity to ‘Buy’, initiated at Barclays to ‘Equal-Weight’, and upgraded by Oppenheimer to ‘Outperform’.
New FDA approvals are giving this stock some momentum.
Two financial stocks reported earnings beats; sell one and buy the other.
This entertainment company beat analysts’ estimates by $0.12 last quarter, and Wall Street is forecasting growth north of 70% annually over the next five years for the company.
This supermarket company’s shares recently crossed over their 50-day moving average, a bullish sign. The company will announce third quarter earnings on November 15.
One of our stocks beat earnings estimates, another’s rating changes to Buy, plus updates on eight other stocks.
The shares of this recent IPO were just initiated at both Oppenheimer and William Blair with an ‘Outperform’ rating.
Our first idea is a tech stock whose earnings estimates have been increased by 31 analysts in the past 30 days.
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.