This month’s Cabot Value Model contains a diversified list of high-quality buy recommendations. Many of these stocks have been neglected by investors in 2017 and are now poised to rise dramatically. Buying blue-chip companies is prudent when the stock market is noticeably overvalued!

We’re trimming our portfolio a little further, and adding a healthy new financial stock to the Dividend Growth Tier.

We’re adding what we believe can be a leading glamour stock of the bull market. Elsewhere in tonight’s issue, we write about the recent long-term breakout by Chinese stocks.

Tonight’s Stock of the Week is little known among investors, but it has a national brand name and an excellent cookie cutter growth story. The stock recently reacted well to earnings and has tightened up a bit; we think the next big move is up.

Current Market Outlook


It’s the last week of August, and that means that many big investors (and more than a few small investors!) are at the beach and volume remains relatively light. Last week, though, was generally constructive for the market, but at this point, not much has really changed—the intermediate-term trend of the major indexes is sideways-to-down, the broad market is iffy and few stocks are pushing higher with any consistency. That’s not to say the bears are completely in control, either, but we continue to think a cautious stance makes sense—limiting new buying and holding some cash, but also giving your strong, profitable holdings a chance to catch their breath and resume their longer-term upmoves. We’re keeping the Market Monitor at a level 5 tonight.

Tonight’s list definitely has a more diverse feel to it, with a couple of materials stocks and some special situations. Our Top Pick is Alcoa (AA), which could morph into a leader if the recent strength in materials stocks is sustained. Shares just broke out from a nice base; try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
58.com (WUBA)	0.00	61-65	54-56
Alcoa (AA)	0.00	40-42.5	36.5-37.5
Alexion (ALXN)	0.00	134-139	125-128
Autodesk (ADSK)	229.00	109-113	103-105
CyrusOne Inc (CONE)	0.00	60-62.5	56-57.5
Live Nation Entertainment, Inc. (LYV)	0.00	38-40	35-36
Southern Copper (SCCO)	0.00	39.5-41.5	37-38
Supernus Pharmaceuticals (SUPN)	52.50	42-44.5	38.5-39.5
Westlake Chemical Corp. (WLK)	0.00	71.5-74	67-68.5
Yelp (YELP)	41.30	40-43	36.5-38

While U.S. indexes have been choppy-to-down during the past few weeks, emerging market stocks remain in good shape and our Emerging Markets Timer is positive. Our new recommendation tonight looks like one of the best ways to play the general boom in electric vehicle production in the years ahead.

Our pick this week is a resilient stock with great growth, a reasonable valuation and is part of a sector that\'s holding up well. We think it offers both low risk and solid returns, especially once the market resumes its longer-term advance.

Current Market Outlook


The repeated bouts of heavy-volume selling have driven the major indexes below their key 50-day moving averages, and that’s a clear sign that the bulls are not in control. We’re moving our Market Monitor down to a level 5 and advise you to hold a good chunk of cash on the sideline, cut back on new buying (keep any new positions much smaller than normal) and honor your stops. None of this is to say that we’re bearish—it’s certainly possible the market snaps back, as there’s plenty of pessimism and many liquid leaders are holding up well. But after weeks of sloppy action and distribution, the odds favor further downside in the near-term, and we’ll need to see a few strong days before concluding the overall uptrend is resuming.

This week’s list, though, has a bunch of resilient growth-oriented names, which is encouraging. Our Top Pick is DXC Technology (DXC), which is the product of a recent merger and sports giant cash flow.

Stock Name	Price	Buy Range	Loss Limit
Abiomed (ABMD)	0.00	148-152	139-141
Alibaba (BABA)	254.81	156-166	145-150
DXC Technology (DXC)	0.00	82-84	76.5-78
Insulet (PODD)	175.69	52.5-54.5	48.5-50
Kite Pharma (KITE)	0.00	120-127	105-109
Realpage (RP)	0.00	40-42	37-38
Red Hat (RHT)	0.00	99-102	94.5-95.5
Salesforce.com (CRM)	0.00	89.5-92	84-85
Stamps.com (STMP)	0.00	198-210	177-184
Weibo (WB)	98.16	85-89	77-79

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.

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.

Health care industry stocks are selling off today due to some negative earnings reports and, possibly more importantly, pessimistic management comments on earnings calls. Two of our portfolio holdings, Amgen (AMGN) and AbbVie (ABBV), are affected. Both reported earnings in the last 24 hours and we are lowering our ratings on both as a result.

Here are highlights of this week’s earnings as reported by companies within the Cabot Undervalued Stocks Advisor portfolios. In addition, Boise Cascade (BCC) moves from Buy to Hold, and Federated Investors (FII) declared a special dividend.

Shares of Mindbody (MB) are racing higher today after the company delivered revenue growth of 35.4%, and Shares of LeMaitre (LMAT) are also rallying over 10% after the company reported Q3 revenue growth of 22%

Abiomed (ABMD) and GrubHub (GRUB) snapped their uptrends and are now rated Sell.

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.