Issues
Today’s recommendation is a small company, and there are no analysts following the stock. But it has big clients for which its products are absolutely critical. The stock has been on a wild ride this week. I have a hunch I know why, and we’re going to step in and to try and grab shares at a discount, starting with half a position.
This month’s Cabot Value Model contains a diversified list of high-quality Buy recommendations. Many of these companies have been neglected by investors in 2017 and are now poised to rise dramatically. Buying blue-chip companies seems prudent when the stock market is noticeably overvalued!
In tonight’s Cabot Growth Investor, we review all our stocks and highlight some names we’re watching, including one that’s set up very well ahead of earnings. We also dive into some details about how we run our ship—we’ve gotten a few questions about this lately, and we think this will clear up any questions you may have.
In choosing today’s recommendation, I returned to a sector that was white-hot a few years ago, bringing big profits to investors who got out before the sector collapsed. But now the sector is back in favor and my selection is the leading Chinese stock in the industry.
We have two new additions to the portfolios in today’s issue, one of our stocks has changed its name, and one stock is now rated Sell.
Current Market OutlookIndividual stocks have been somewhat tricky in recent weeks, with some doing great and others chopping around, while earnings season has done its usual job of helping some names while cutting others off at the knees. Even so, there are far more stocks in good shape than not, and the market itself is in fine shape, with all the major indexes we track above intermediate-term support. Things can always change, but with most of the evidence we see bullish, we’re sticking with a positive stance. Moreover, we see a ton of setups out there (especially among growth-oriented stocks and sectors that have consolidated during the past two months or longer) that should do well if the market continue to push higher.
This week’s list has a solid collection of recent earnings winners from a variety of different groups. There are many strong names to choose from, but our Top Pick is Align Technologies (ALGN), which has a great long-term growth story and a strong chart. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Align Technology (ALGN) | 316.20 | ||
| Brink’s (BCO) | 0.00 | ||
| Caterpillar Inc. (CAT) | 0.00 | ||
| Expedia Group (EXPE) | 0.00 | ||
| First Solar (FSLR) | 83.74 | ||
| iRobot (IRBT) | 103.17 | ||
| Lending Tree (TREE) | 411.51 | ||
| Novocure (NVCR) | 0.00 | ||
| Proofpoint (PFPT) | 113.79 | ||
| YY Inc. (YY) | 0.00 |
Our market timing indicator is positive and our stocks are doing well. We’re heading into earnings season with a powerful wave of momentum providing the power. In this issue I do a little basic review of earnings season and list all the firm dates for companies we own. I also have a new/old stock that boasts very strong numbers and will be reporting in a couple of weeks.
I’m adding a 31-year dividend payer to the Safe Income Tier, and cover all our stocks that have reported earnings so far. You’ll also find some important information on REITs at the end of the issue which you should find valuable if you bought last month’s High Yield Tier addition.
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
Today’s move pushed our Cabot Tides back into a negative stance, so we’re raising our cash position to around 40%.
Twilio (TWLO) sold off in a big way this morning because late last Friday, the company announced that it will sell shares in a secondary offering—but it didn’t say how many!
Smith, A.O. (AOS 51.25) reached its Minimum Sell Price of 51.36 today, October 6, and should be sold.
Special Bulletin on BorgWarner (BWA), E*Trade (ETFC), General Motors (GM) and WellCare Health Plans (WCG)
Sell CVS Health (CVS). Dividend Growth Tier holding CVS Health (CVS) broke through support yesterday, and we’re going to cut our loss today.
Cognizant Technologies (CTSH 46.00) dropped 16% this morning on news that the company is conducting an internal investigation into whether some payments in India violated the U.S. Foreign Corrupt Practices Act.
Chemtura (CHMT) is Up 15% on Buyout Offer and Carnival (CCL) Reports Earnings Beat
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.