Issues
Our contributors are stock-picking experts, utilizing their various investment styles to offer investors a wide range of strategies through up and down markets. And their track records are impressive. While the market’s double-digit gains of 2017 were fantastic, our contributors did even better.
Now, we move ahead to 2018, and this issue is packed full of exciting opportunities among very diversified sectors and investing styles.
Now, we move ahead to 2018, and this issue is packed full of exciting opportunities among very diversified sectors and investing styles.
Today’s recommendation is a familiar name, not because I’ve recommended the stock before (I haven’t) but because the company’s creations are enjoyed by millions of Americans and a major new acquisition will only increase the company’s reach.
Current Market OutlookIt’s been a great start to the year, with most areas and indexes shooting ahead on solid volume in recent days. We’re still seeing some wild moves (up and down), which is par for the course for early January and you can expect volatility among individual names to remain elevated in the near-term. Our focus is always on the intermediate- to longer-term, so while there remain some near-term yellow flags (with many stocks extended to the upside and with sentiment bubbly, you should pick your spots on the buy side), the positive price and volume action keeps us bullish.
This week’s list is about evenly split between growth stocks and industrial/commodity stocks, which tells you how broad the advance has been. Our Top Pick is Commercial Metals (CMC), a mid-sized steel-related outfit that just catapulted out of a huge base on earnings. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Alcoa (AA) | 0.00 | ||
| Autohome (ATHM) | 98.65 | ||
| Commercial Metals (CMC) | 0.00 | ||
| Dycom Industries (DY) | 0.00 | ||
| Lear Corp. (LEA) | 0.00 | ||
| Lennar (LEN) | 61.85 | ||
| Netflix, Inc. (NFLX) | 423.92 | ||
| Splunk (SPLK) | 207.67 | ||
| Steel Dynamics (STLD) | 0.00 | ||
| Twitter (TWTR) | 40.37 |
This month’s candidate is another software stock—but not a high flyer. Rather, this company is still scooting just below the radar, and trades at a big discount to most of its peers. When you value it based on growth, it’s downright cheap—but valuation isn’t why we’re buying it.
The Model Portfolio is more than 90% invested and off to a good start this year. In tonight’s issue, we write about our newest addition and the excellent relative strength it’s shown in recent months; we think it’s a liquid leader of the new energy rally. We also write about some recent IPOs, other stocks we’re watching and, of course, dive into all of our recommended names.
Current Market OutlookThe calendar has flipped, but the market environment remains bullish, with the major trends of most indexes and leading stocks continuing to point up. Today saw some rotation back into a few of last year’s leading growth stocks, but we wouldn’t jump to conclusions quite yet—January is known for lots of volatility as big investors reposition their portfolios and, in a couple of weeks, as earnings season gets underway. You should keep your feet on the ground and honor your stops, but you shouldn’t get carried away with daily moves over the next few days; ideally, try to buy strong stocks on normal dips. For overall stance, you should remain bullish.
This week’s list has a nice mix of great stories and charts, ranging from a speculative biotech to a couple of strong energy stocks. Our Top Pick, though, is one of the largest copper miners in the world—Freeport McMoRan (FCX) appears to have blasted off and entered a sustained uptrend after forming a very long launching pad. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Adamas Pharmaceutical (ADMS) | 0.00 | ||
| American Woodmark (AMWD) | 0.00 | ||
| Burlington Stores (BURL) | 193.95 | ||
| Diamondback Energy (FANG) | 0.00 | ||
| Freeport-McMoRan Inc. (FCX) | 13.78 | ||
| Floor & Décor (FND) | 68.03 | ||
| Ollie’s Bargain Outlet (OLLI) | 103.94 | ||
| Penn National Gaming (PENN) | 45.38 | ||
| ProPetro (PUMP) | 23.30 | ||
| Warrior Met Coal (HCC) | 0.00 |
The bull market remains alive and well, with most stocks and sectors in good shape, so we\'re generally letting our winners run and staying heavily invested. That said, January is often a tricky month, so with the potential for potholes and volatility, tonight\'s Cabot Stock of the Week is a mega-cap growth stock that, by some measures, is undervalued.
There are many changes in today’s issue: we’re adding four new stocks and selling seven stocks.
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
UPS (UPS) opened 5.5% lower this morning after earnings missed expectations and the company issued disappointing 2017 guidance.
Biogen (BIIB) will spin off its hemophilia division to Biogen shareholders on February 1, 2017. For each share of Biogen, stockholders will receive two shares of the new company, called Bioverativ (BIVV).
Mattel (MAT) fell 17% yesterday after the toy company reported fourth-quarter and full-year earnings that fell short of every analyst estimate.
Sell Amazon.com (AMZN); Applied Materials (AMAT) moves from Buy to Hold; ASML Holding (ASML) moves from Buy to Hold; D.R. Horton (DHI) moves from Buy to Hold; Royal Caribbean (RCL) moves from Buy to Strong Buy; and quarterly and holiday earnings results for Mattel (MAT), Royal Caribbean (RCL), Vertex (VRTX) and Whirlpool (WHR).
Skyworks Solutions (SWKS 91.60) reached its Minimum Sell Price of 92.81 today and should be sold
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.