Issues
Today’s recommendation is a fast-growing mass market stock that has the leading market share in the online food ordering business. The stock has been trading sideways for five weeks and I think it’s ready for a breakout.
Given the still-iffy broad market, we\'re not advising you to dive in with both feet, but we are adding one new stock to the Model Portfolio tonight and will look to put more cash to work should the bulls continue to make headway.
Current Market OutlookLast week was another constructive week, as the major indexes and leading stocks gave back just a smidgen of their prior two weeks of gains. Plus, of course, today’s action offered more encouragement, with the big-cap indexes spiking back toward all-time highs and many individual stocks notching good gains. We can’t conclude we’re completely out of the woods, especially as volume remains light (today’s volume on the Nasdaq was below average) and the broad market is still so-so (small- and mid-cap indexes are still in the middle of multi-month ranges). Still, the evidence has grown steadily more bullish recently, so we’re following along—we’re bumping our Market Monitor up to level 7 (out of 10), and continued strength would have us getting aggressively invested.
This week’s list is a mixed bag, with some special situations, many different sectors and a few recent breakouts. Our Top Pick is ST Microelectronics (STM), a fast-growing chip maker with a good story and chart. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| AbbVie Inc. (ABBV) | 93.53 | ||
| ASML Holding (ASML) | 350.01 | ||
| Guidewire (GWRE) | 90.60 | ||
| Ligand Pharmaceuticals (LGND) | 267.14 | ||
| Lumber Liquidators Holdings, Inc. (LL) | 0.00 | ||
| Owens Corning (OC) | 0.00 | ||
| Pure Storage (PSTG) | 25.64 | ||
| Barrick Gold (GOLD) | 27.20 | ||
| STMicroelectronics (STM) | 30.09 | ||
| Summit Materials (SUM) | 0.00 |
A few of our stocks have been taking a breather, but the Cabot Emerging Markets Timer remains resolutely positive. Investors have remained optimistic despite a truckload of negative news and the fundamentals are solid for the stocks in the portfolio. I also have an overlooked Indian stock to recommend that ties in with the recent improvement in commodity prices.
I add another Canadian company to the Model this month. Canadian stocks are more undervalued than U.S. stocks, and the Canadian economy is now improving noticeably for the first time in a long while.
With August in the rear-view window, it’s time for Wall Street to get back to full-time work. At present, trends continue to look good (but not great). Still, there are plenty of candidates to choose from, and this week’s comes from an emerging market that is not China; I think you’ll like it.
Today’s featured stocks include four companies that should benefit from the post-Hurricane Harvey rebuilding process.
Current Market OutlookAfter lots of sloppy and weak action in June, July and the first half of August, the past two weeks have certainly been an improvement—the major indexes have popped higher, often in the face of bad news and uncertainties, and many of the resilient growth stocks did the same. We can’t conclude the market is out of the woods, as the broad market is still iffy, the intermediate-term trend is mostly sideways and relatively few stocks have actually broken out on good volume. Still, this is probably the best action by growth stocks (which have led the way higher this year) since June, so we’re not complaining. We’re moving our Market Monitor up one notch to a level 6 (out of 10); you can put a little more money to work, though we need more upside confirmation before getting bullish.
This week’s list contains a mix of familiar and newer names, all of which are showing great strength. For our Top Pick, we’re going with Match Group (MTCH), which has exploded to new highs; it’s a bit thin, but we like the overall growth story and the recent power. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| BeiGene (BGNE) | 170.20 | ||
| Catalent Inc (CTLT) | 0.00 | ||
| Franco-Nevada (FNV) | 125.51 | ||
| Match (MTCH) | 0.00 | ||
| Shopify (SHOP) | 585.00 | ||
| SolarEdge Technologies Inc. (SEDG) | 124.37 | ||
| TowerJazz (TSEM) | 0.00 | ||
| Universal Display (OLED) | 187.54 | ||
| Werner Enterprises (WERN) | 0.00 | ||
| Wynn Resorts (WYNN) | 121.08 |
Today’s candidate provides at-home health care solutions to people with vascular disease. These are often chronic conditions, which account for up to 80% of every healthcare dollar spent in the U.S. The company is growing quickly, with average annual growth since 2013 is over 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
With the market remaining under intense pressure, you should remain cautious until the buyers show up. Today we’re selling one-third of one position, which will leave the Model Portfolio with nearly 60% in cash.
It’s been an interesting week for quarterly earnings reports. Today I’ll bring you up-to-date on seven companies. Three reported earnings way above estimates, three below estimates, and one exactly on target.
Today’s big-volume selloff has damaged Wynn Resorts (WYNN) in the short-term, so I’m switching the stock from Buy to Hold.
Primo Water (PRMW) reported solid Q3 results last night. The bottom line is that it was another good quarter and the acquisition of Glacial Water looks to be on track. In other news, LogMeIn (LOGM), Mindbody (MB) and LeMaitre Vascular (LMAT) are holding up well, while USA Technologies (USAT) and Mitek (MITK) are looking weak.
We came into this week with 50% cash in the Model Portfolio, and tonight, we’re going to raise a little more cash by selling our remaining shares of a long-time winner.
The downtrend in Chinese stocks is hitting many of our holdings, but has been especially hard on Baozun (BZUN), which we took a half position in on September 9. Sell BZUN.
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.