Issues
The latest issue of Cabot Marijuana Investor is now available, with my current advice on the twelve stocks in the portfolio, as well as one new addition and profit-taking advice on one of our early investments.
As the fastest-growing industry in America, marijuana presents many exciting investment opportunities.
But I do want to caution you, especially if you’re one of my newer readers; for all the potential, there is also substantial short-term risk in all these stocks, as they tend to be lower-priced and more volatile than our typical recommendations. So take care to understand the risks before you act.
My goal is to make you a successful long-term investor in the sector, and the best way to do that is to get off on the right foot.
As the fastest-growing industry in America, marijuana presents many exciting investment opportunities.
But I do want to caution you, especially if you’re one of my newer readers; for all the potential, there is also substantial short-term risk in all these stocks, as they tend to be lower-priced and more volatile than our typical recommendations. So take care to understand the risks before you act.
My goal is to make you a successful long-term investor in the sector, and the best way to do that is to get off on the right foot.
Today I wrote about a company that announced a new CEO! I then went back and added to the story. My conclusion remains unchanged: I expect the stock to perform poorly through year-end and possibly quite a ways into 2019.
The market’s main trend remains up, but the crosscurrents are getting fierce! So today I’m selling four stocks (two for good profits and two for small losses), all in an effort to keep the portfolio full of stocks whose potential upside justifies their potential downside.
As to this week’s recommendation, I’m happy to say that it’s a company headquartered in India, which is relatively free of the political turmoil that’s gripped the U.S. recently. Furthermore, given that foreign stocks have underperformed dramatically this year, I’m optimistic about getting on board somewhere near the beginning of a renewed uptrend.
As to this week’s recommendation, I’m happy to say that it’s a company headquartered in India, which is relatively free of the political turmoil that’s gripped the U.S. recently. Furthermore, given that foreign stocks have underperformed dramatically this year, I’m optimistic about getting on board somewhere near the beginning of a renewed uptrend.
Current Market OutlookThe big-cap indexes started strong today on news of a new NAFTA deal, but under the surface, we’re seeing continued rotation and signs of degradation. Small- and mid-cap indexes took hits today and remain below their 50-day lines, while most growth stocks continue to act iffy. To be fair, the start of a new quarter often sees many crosscurrents, and most leading stocks, while choppy, remain in uptrends. But we’ve now seen funky action and lots of rotation for over a month, which has our antennae up. We’re moving our Market Monitor to a level 6 and feel the next few days will be telling—if leaders are OK, we expect to see support show up, but if not, the odds of a longer pullback will increase.
As for our screens, we’re still finding a good number of good charts, albeit in a variety of sectors. Our Top Pick today is Allegheny Technologies (ATI), a specialty metals firm that is showing signs of getting going after months of base-building.
| Stock Name | Price | ||
|---|---|---|---|
| Alarm.com (ALRM) | 71.33 | ||
| Allegheny Technologies (ATI) | 27.78 | ||
| Ecopetrol (EC) | 22.17 | ||
| Intelsat (I) | 25.46 | ||
| Paycom Software (PAYC) | 0.00 | ||
| PetIQ (PETQ) | 30.82 | ||
| Teladoc, Inc. (TDOC) | 127.95 | ||
| Vale S.A. (VALE) | 15.40 | ||
| WPX Energy (WPX) | 0.00 | ||
| Zendesk (ZEN) | 82.19 |
September has been tricky and tedious for growth stocks, with lots of volatility and some high-volume selloffs. It’s fair to say the evidence has worsened a bit, and we’ve placed a couple of stocks on hold and raised some mental stops.
That said, the majority of evidence is still bullish, very few growth stocks have actually broken down and the market’s trends are still positive. Net-net, then, we’re still mostly bullish, but are keeping our eyes open should things change.
In tonight’s issue, we introduce our new Real Money Index, which is replacing the Two-Second Indicator on page 8; we think it will help us lean against the wind in many circumstances. (We’ll still be following the Two-Second Indicator in house.) And we also take a deep dive into all of our stocks, letting you know what we’re thinking as many have consolidated of late.
That said, the majority of evidence is still bullish, very few growth stocks have actually broken down and the market’s trends are still positive. Net-net, then, we’re still mostly bullish, but are keeping our eyes open should things change.
In tonight’s issue, we introduce our new Real Money Index, which is replacing the Two-Second Indicator on page 8; we think it will help us lean against the wind in many circumstances. (We’ll still be following the Two-Second Indicator in house.) And we also take a deep dive into all of our stocks, letting you know what we’re thinking as many have consolidated of late.
The market continues to make progress, despite the dramatic headlines gracing the front page every day (and popping up online throughout the day). Today I’m adding a well-known restaurant stock to the Dividend Growth tier of our portfolio, to take advantage of rising consumer spending and the strong American economy. I also have updates on all our stocks, most of which are rated Buy, and at the end of the issue I take a look at the importance of diversification.
This week’s recommendation is a low-risk financial stock with decent prospects that is temporarily low because it lost what investors mistakenly believed was a key client. If you buy now you can get capital appreciation plus a modest dividend.
Current Market OutlookThe third week of September brought another bout of sharp rotation, with leading growth stocks trading lower while other areas of the market firmed up. To this point, the action has been acceptable given the big runs in so many stocks during the summer, but some indexes and many stocks are approaching key levels—if the buyers show up here, all could be well, and we wouldn’t be shocked to see another leg up develop. But if not, the odds that a deeper and longer retreat among leading stocks will increase. Today, we’ll keep our Market Monitor at a 7 (out of 10), and it’s good to see some new leaders emerge. But the next few days will likely be important for the intermediate-term outlook.
This week’s list is still heavy on growth ideas (though some are turnaround-type plays), but our Top Pick is Rowan Drilling (RDC), which is showing great strength by lifting out of a big bottoming area.
| Stock Name | Price | ||
|---|---|---|---|
| Aaron’s (AAN) | 74.35 | ||
| Atlassian (TEAM) | 182.16 | ||
| CF Industries (CF) | 45.23 | ||
| Dave & Buster’s (PLAY) | 57.01 | ||
| Omnicell (OMCL) | 81.03 | ||
| Pacira Biosiences (PCRX) | 54.85 | ||
| Paylocity (PCTY) | 97.34 | ||
| Rowan Drilling (RDC) | 15.52 | ||
| Wingstop (WING) | 121.52 | ||
| Yelp (YELP) | 41.30 |
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
The shares of this big-box retailer were just upgraded to ‘Outperform’ at Raymond James. The company beat estimates by $0.09 last quarter, and seven analysts have boosted their earnings forecasts in the past 30 days.
This credit card marketer beat analysts’ estimates by $0.10 in its most recent quarter.
Legg Mason and Total exceeded all analysts’ earnings per share (EPS) estimates and Invesco reached the highest analyst estimate. Boise Cascade fell short of the consensus estimate, although the stock broke out on the upside today.
In the last 30 days, four analysts have boosted their EPS forecasts for this industrial company. But the shares are still trading at bargain levels.
Two of our stocks report second-quarter earnings beats, one stock moves from Buy to Hold, and a good buying opportunity.
The shares of this cosmetics company were initiated at Jefferies as a ‘Buy’ last month. In the company’s recent quarter, it beat analysts’ estimates by $0.04.
One of our stocks reported a second-quarter earnings beat, there’s strength in steel stocks today, and one stock moves from Buy to Hold.
This payments company beat analysts’ estimates by $0.09 last quarter. Wall Street expects the company to grow by double-digits in the next five years.
Estimates are rising for this cyber security company, and the valuation remains attractive.
Our first idea is a tech company whose shares just crossed over their 50-day moving average—a bullish indicator. Our second recommendation is profit-taking on a previous pick.
Our second recommendation is profit-taking on a previous pick.
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.