Issues
In tonight’s issue we write about one stock that’s at the top of our Watch List, as well as the value of letting a stock make decisions for you. We also give you our latest thoughts on the market, our stocks and some new ideas.
We start this month with our Spotlight Stock, a company that operates in the Oil Services area. Beaten down by low oil prices, this company is pulling out all the stops to cut costs and expand into new geographical arenas—efforts that are attracting some very interesting institutional interest in its stock. My Feature article further explores the strategies that the company and its new management team are applying to manage—and expand—the company’s footprint.
Today’s stock is a name you’ll know. The company was born in the early days of the internet and today it’s all grown up—a major player in the world of financial transactions.
Current Market OutlookFollowing last week’s selling storm, today’s big rebound was encouraging; three of the five major indexes we track (S&P 500, Nasdaq, NYSE Composite) bounced back above their 50-day lines today, and many leading stocks did the same. Ideally, last week’s decline, which was spurred on by obvious news (North Korea), was a sharp shakeout that cleared the decks and set the stage for a new upmove. But we’ll need to see more evidence before going there. As we stand now, the intermediate-term trend is sideways-to-down, and many stocks have either cracked or are testing support. There’s no need for wholesale selling, but we are knocking our Market Monitor down a notch; you should keep new positions on the small side and honor your stops until we see further evidence that the bulls are back in control.
This week’s list does have a bunch of good growth stories, which is encouraging after the recent selling. We’re going with Vantiv (VNTV) as our Top Pick—it’s not the most volatile stock, but it just blasted out of a long period of lackluster action following a game-changing acquisition.
| Stock Name | Price | ||
|---|---|---|---|
| Autohome (ATHM) | 98.65 | ||
| CBOE Holdings (CBOE) | 0.00 | ||
| Chegg (CHGG) | 74.21 | ||
| Exelixis (EXEL) | 27.35 | ||
| Planet Fitness (PLNT) | 0.00 | ||
| Royal Gold, Inc. (RGLD) | 129.66 | ||
| Take-Two Interactive (TTWO) | 123.32 | ||
| Teledyne (TDY) | 0.00 | ||
| Trade Desk (TTD) | 468.02 | ||
| Vantiv (VNTV) | 0.00 |
Markets sold off slightly on Wednesday, but really got into it on Thursday, with the iShares MSCI ETF falling a full 2%. Despite the blood-letting, the Cabot Emerging Markets Timer is still flashing a green light, indicating that the medium-term trend of the market is still up.
This month I start covering a bank for the first time in many years. The balance sheets of many U.S. banks have strengthened significantly during the past few years, and present low risk buying opportunities. Citizens Financial, based in Rhode Island, stands out from the crowd and is a solid pick for steady performance during the year ahead.
Stocks have continued to zoom higher, and our contributors have found a very nice variety of investments for your consideration this month, beginning with our Spotlight Stock—a company that has been in existence since 1879.
The market remains strong and cohesive and thus I remain bullish. However, numerous indications remind me that the market is overdue to deliver a painful shock to investors, so today I’m leaning back to the conservative side, recommending a dividend-paying stock that has solid long-term prospects and minimal downside risk.
Current Market OutlookToday was a welcome day for leading growth stocks, with many bouncing nicely after nearly two weeks of sliding steadily (despite the Dow’s advance during that time). Overall, the situation remains mostly bullish, but tricky—the major indexes are in uptrends and many stocks are in good shape, but we’ve also seen quite a few breakdowns among Top Ten stocks during the past couple of weeks, while many stocks moving to new highs have quickly found selling pressure. All told, we’ll leave our Market Monitor in bullish territory because the majority of evidence remains on the positive side of the ledger, but we’ll be watching to see if today’s strength in leading stocks continues or the choppy conditions return.
This week’s Top Ten has a bunch of impressive charts (including some multi-year breakouts) from a variety of industries. Our Top Pick is GrubHub (GRUB), whose story has improved and whose stock has exploded out of a two and a half year consolidation. Try to buy on weakness.
| Stock Name | Price | ||
|---|---|---|---|
| Aaron’s (AAN) | 74.35 | ||
| Ameriprise Financial, Inc. (AMP) | 0.00 | ||
| Arista Networks (ANET) | 0.00 | ||
| Baidu (BIDU) | 0.00 | ||
| Baozun (BZUN) | 44.24 | ||
| GrubHub (GRUB) | 140.03 | ||
| Lumber Liquidators Holdings, Inc. (LL) | 0.00 | ||
| Rockwell Collins (COL) | 0.00 | ||
| Spirit AeroSystems (SPR) | 92.54 | ||
| WTW (WTW) | 100.47 |
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
Several of our portfolios stocks are rising this week, so I want to reiterate some trading suggestions in case the stocks reach price targets before the next weekly update of Cabot Undervalued Stocks Advisor.
E*Trade Financial (ETFC) reported blowout earnings yesterday afternoon.
Sell Reynolds American (RAI). The company received a $56.50 per share takeover offer from British American Tobacco this morning, a 20% premium to RAI’s closing price yesterday.
Today, Goldman Sachs Group (GS) reported a tremendous third quarter, with earnings per share (EPS) of $4.88 vs. Wall Street’s consensus estimate of $3.82, and up 47% vs. $2.90 EPS a year ago (December year-end).
Shares of Aerohive (HIVE) plummeted at the open today but have come back relatively strong and are now down just 2%. I’m moving the stock from Hold to Sell today.
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.