As the year winds to a close, we find ourselves in the grip of a mild but long bull market in emerging markets stocks, and the big question on all investors’ minds is whether the trend will continue into the new year. No one knows, of course, but the Cabot system says there’s no reason to fight the trend!

The year is poised to end on a high note, as the major indexes continue to hit new highs, with the Dow hitting a record number of new all-time highs this calendar year.

Bullish sentiment remains high, both for investors and advisors. And one contributor also believes that the market is becoming more attractive for gold investors. Our Spotlight Stock is a two-pronged recommendation, as the company is benefiting from owning and selling off its land holdings, which also happen to be in one of the most profitable oil regions in the country. As I explain in my Feature article, this oil basin is nowhere near depletion, so the profits should continue to roll in for many years.

As 2017 comes to a close, we all have a lot to be thankful for, as the bull market provided us with a great environment for stock picking. There’s always room for improvement (which we’ll probably write about in future issues), but coming into this week the Model Portfolio was sitting on a gain north of 40%. We’ll take it.

Looking ahead, we remain bullish, especially longer-term, as some big-picture indicators point toward higher prices. Near-term, though, it’s hard to ignore the optimistic sentiment, which we write about in today’s issue. It’s very inexact, so we don’t base trading decisions on it, but it’s good to remember to keep your eyes (and your options) open.

Today’s recommendation is a medical device company whose one product—an insulin delivery system for diabetics—is growing market share rapidly.

Current Market Outlook


The major indexes boomed again today, with three of the five we track (S&P 500, Nasdaq and NYSE Composite) all notching all-time highs. We would point out that today’s move came on obvious news (likelihood of corporate tax cuts), and that sentiment is getting hot and heavy, which increases the risk of a market pullback or a generally trickier environment (rotation, choppy trading, etc.). Thus, you want to keep your feet on the ground and be sure you’re looking for decent entry points and honoring your stops. But there’s no question the majority of evidence remains solidly positive, and until that changes, you should remain in a bullish frame of mind.

Not surprisingly, this week’s list has many strong charts in a bunch of different industries. Our Top Pick is Urban Outfitters (URBN), a solid turnaround situation in a newly leading sector. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Canada Goose Holdings (GOOS)	46.21	26-27.5	23.5-24.5
CF Industries (CF)	45.23	39-40.5	36-37
Cree, Inc. (CREE)	67.96	38-40	34.5-36
KB Home (KBH)	36.05	30-31.5	27.5-28.5
Lululemon Athletica (LULU)	304.69	72.5-75	66.5-68.5
MercadoLibre, Inc. (MELI)	980.83	312-322	285-290
PRA Health Sciences Inc. (PRAH)	96.08	87.5-90	82-84
Sage Therapeutics (SAGE)	0.00	155-165	125-132
SVB Financial Group (SIVB)	0.00	228-235	208-213
Urban Outfitters (URBN)	0.00	32-34	28-29

Since the last issue, five stocks have declined and 10 gained more than 10%. Many are now at or near fair value, and eight are rated Sell or Sell a Portion. Also in this issue, I recommend two new stocks and profile a new small-cap stock that’s on my watch list.

The Cabot Emerging Markets Timer is sitting firmly on the fence and some of our stocks are taking breathers. It’s not anything like a time to over-react, but we’re pulling in our horns in an appropriate way. We also have a new stock that does a brilliant job of balancing a national presence with thorough local focus.

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.

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.

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.”

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.

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.

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.

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 30^th. 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

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.

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.

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.

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.

Since the S&P 500 is reaching new highs and some of our stocks are making significant moves this week, I thought I’d review those with you today.

Here are some portfolio notes, for those of you who like to assess your stocks over the weekend. Energy stocks are having what appear to be normal pullbacks. Take advantage of the lower prices, and buy BP plc (BP), ExxonMobil (XOM), Total (TOT) and Tesoro (TSO).

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.