Issues
Today’s recommendation is a classic steelmaker that has great growth prospects as the U.S. economy speeds along and protectionist measures improve our country’s competitive position. Also, the stock is cheap, so downside risk is limited.
Current Market OutlookThe answer to the question above is simple: Go up! And that’s what all of the major indexes have been doing in recent days, knocking out all-time highs amid a vacuum of selling pressure. Short-term, there are some signs of complacency, and of course earnings season is coming up, which always adds volatility to the mix. Both of those factors probably mean you shouldn’t buy stocks with both fists. But the big picture is clear: It’s a bull market, and while the below-the-surface action continues to show some rotation, the odds favor higher prices ahead. You should be holding your top performers and looking to grab shares of new leaders as opportunities arise.
This week’s list has a nice mix of growth, “old world,” big and small, reflecting the broad strength in the market. Our Top Pick today is HubSpot (HUBS), which is a bit thin and jumpy, but has a great fundamental story and recently broke out on excellent volume.
| Stock Name | Price | ||
|---|---|---|---|
| BeiGene (BGNE) | 170.20 | ||
| Five Below (FIVE) | 134.58 | ||
| HubSpot (HUBS) | 582.89 | ||
| LGI Homes (LGIH) | 86.04 | ||
| MyoKardia (MYOK) | 108.56 | ||
| RH Inc. (RH) | 252.93 | ||
| ServiceNow (NOW) | 341.86 | ||
| Tronox (TROX) | 0.00 | ||
| United Rentals, Inc. (URI) | 0.00 | ||
| Yelp (YELP) | 41.30 |
A year ago, college kids laid out the case for a Trump’s victory. And they did it with a mess of disparate data in just 20 hours, using a data prep platform by the little-known company that I’m recommending today.
Despite some nervous-making weakness last week, the Cabot Emerging Markets Timer has bounced back to regain its green-light status. And with our stocks acting well, the situation looks excellent, although we’re issuing the usual bull-market warnings that this can’t go on forever.
The market remains in a strong uptrend, and thus I continue to recommend that you be heavily invested in stocks that will help you meet your investment goals. At the same time, however, you need to manage risk, and it’s worth noting that the higher the market climbs, the greater the potential for loss once the uptrend ends.
Today’s featured stocks include two new additions to the portfolios, and there are a couple of rating changes after recent price run-ups.
Current Market OutlookThe market rebounded very nicely from last Monday’s big decline, with all of the major indexes shooting ahead and most notching new all-time highs. Thus, from a top-down perspective, the picture remains bright, with the intermediate- and longer-term trend of the market (and most stocks) pointed up. That said, it’s tricky out there—below the surface, the rotation is still vicious on a day-to-day basis, and many leading growth stocks remain stagnant. We’re still mostly bullish (we’re nudging the Monitor back up to 8 this week) and advise you to hold your strong stocks and look for new buys as they come. With the crosscurrents and earnings season (which is set to begin in a couple of weeks), it’s best to be selective and keep your feet on the ground.
This week’s list has a ton of very strong charts, with many showing persistent advances during the past few weeks. Our Top Pick is AbbVie (ABBV), which has come under extreme accumulation and looks like a new big-cap leader in the medical space.
| Stock Name | Price | ||
|---|---|---|---|
| AbbVie Inc. (ABBV) | 93.53 | ||
| Carpenter Technology (CRS) | 53.25 | ||
| E*Trade Financial (ETFC) | 0.00 | ||
| Eagle Materials Inc. (EXP) | 0.00 | ||
| Loxo Oncology (LOXO) | 186.59 | ||
| MKS Instruments (MKSI) | 109.43 | ||
| Meritor (MTOR) | 21.46 | ||
| Valero Energy (VLO) | 97.40 | ||
| Winnebago (WGO) | 48.56 | ||
| YY Inc. (YY) | 0.00 |
In tonight’s issue, we details our recent moves and our thinking, as well as update the track record of our most reliable market timing indicator. We also talk about one of our favorite growth stocks we don’t own which, after a four-year (!) consolidation, looks like it could be ready to turn.
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 momentum for emerging market stocks in general, and Chinese stocks in particular, has taken a big turn for the worse.
The Board of Directors of Harman International Industries (HAR) has come to a definitive agreement with Samsung Electronics, in which Samsung will acquire Harman for $8 billion. Harman’s shareholders will receive $112 per share in cash. The deal is expected to close in mid-2017.
Big gains in the stock market during the past week have pushed some stock prices to unsustainable heights. Benchmark Electronics (BHE) and Prudential Financial (PRU) have reached their Min Sell Prices and should be sold.
Sell Harman (Har) due to buyout offer from Samsung, plus other portfolio updates.
Harman International Industries (HAR) agreed to be acquired by Samsung, South Korea for $112.00 per share all cash.
Knight Transportation (KNX 33.85) reached its Minimum Sell Price of 33.84 on Friday, November 11.
It’s time to sell EMAN. I think eMagin remains a mediocre company that has excellent technology and which will continue to have modest success in its military markets. But I don’t think this is “the next big thing.”
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.