Issues
Current Market OutlookThere are a still a couple of flies in the market’s ointment, but the past week or two has seen the market broaden out—the Nasdaq and growth stocks are still leading the way, but the S&P 500 and NYSE Composite have joined them in new high ground, and even the lagging small- and mid-cap indexes have perked up. Market-wise, then, the evidence has improved, so we’re nudging up our Market Monitor to a level 9. Just as important, though, is handling your stocks correctly—right now, many are extended to the upside, though some are just emerging while others look like great buys on any dips. Long story short, you should remain bullish, but honor your stops and continue to pick your spots on the buy side.
This week’s list has another batch of strong growth stocks. Our Top Pick is JD.com (JD), which catapulted to all-time highs a month ago on earnings and has calmly consolidated since.
| Stock Name | Price | ||
|---|---|---|---|
| Autodesk (ADSK) | 229.00 | ||
| Bob Evans Farms (BOBE) | 0.00 | ||
| Broadcom Limited (AVGO) | 266.26 | ||
| Graco Inc (GGG) | 0.00 | ||
| JD.com (JD) | 39.58 | ||
| Lumentum (LITE) | 87.00 | ||
| Marriott Vacations (VAC) | 0.00 | ||
| Marvell Technology Group (MRVL) | 36.88 | ||
| ServiceNow (NOW) | 341.86 | ||
| Weibo (WB) | 98.16 |
This month, we’re going back to what’s served us well, small business software. The company has a cloud-based software solution tailor-made for property managers. It’s growing revenue by more than 30%, has no debt, and is on track to become profitable this year. The chart is solid. And I believe the company will ultimately be sold, hopefully at a nice premium to where shares trade today.
While it’s pretty clear that the world isn’t going to calm down or stop giving investors heart attacks every week or so, it’s also clear that investors are ready and willing to put money into growth stocks. That’s what’s driving the buy signal from the Cabot Emerging Markets Timer and the performance of our portfolio.
In today’s issue, I add a mid-cap tech stock to the Dividend Growth tier, provide updates on all our holdings, and share some of my favorite investment resources.
Today’s recommended stock is a niche medical provider whose risk is substantially outweighed by reward, both fundamentally and technically. As to our current portfolio, most stocks are acting well and there are no ratings changes.
Current Market OutlookThe market’s rebound since its sharp one-day selloff on Wednesday, May 17, has been impressive and encouraging—the Nasdaq and leading growth stocks spiked to higher highs, and even the S&P 500 nosed out above its March 1 peak. It’s certainly a good sign and pretty much brings us back to where we stood two weeks ago. On the positive side, most growth-oriented stocks are in good shape and most indexes are either at, or just a couple of percent off, all-time highs. But much of the broad market (and many indexes) is just marking time and the number of stocks hitting new lows is at unhealthy levels. Even so, the long-term trend and leading stocks are the most important pieces of evidence, and they’re both bullish. Thus, you should be, too.
This week’s list has another crop of very strong names from many strong sectors. For our Top Pick, we’re going with a big-cap turnaround play—Best Buy (BBY) has surprisingly strong earnings figures, a big share buyback program and the stock just gapped up after its quarterly report.
| Stock Name | Price | ||
|---|---|---|---|
| Alibaba (BABA) | 254.81 | ||
| Best Buy (BBY) | 0.00 | ||
| Domino’s Pizza (DPZ) | 339.47 | ||
| FMC Corp. (FMC) | 0.00 | ||
| MercadoLibre, Inc. (MELI) | 980.83 | ||
| MuleSoft (MULE) | 0.00 | ||
| Regeneron Pharmaceuticals (REGN) | 512.96 | ||
| Wayfair (W) | 167.03 | ||
| West Pharmaceutical (WST) | 210.25 | ||
| Wynn Resorts (WYNN) | 121.08 |
In tonight’s Cabot Growth Investor, we dive into all our stocks and highlight our current batch of ideas (including an intriguing recent IPO with a great cookie-cutter story) and discuss the good and bad of mental versus in-the-market stops.
In choosing today’s stock, I selected one that’s not only undervalued but also at a low-risk entry point, technically. It’s a company you’ve never heard of, and I think you’ll like the story. As to the current portfolio, most of our stocks still look great! But I’m recommending taking profits in two.
Updates
WHAT TO DO NOW: Big picture, the market and most leaders look great, and our market timing indicators are in fine shape. Near-term, though, there’s little doubt things have gotten a bit giddy, with many names and indexes extended to the upside. Tonight, we’re placing Cava (CAVA) on Hold as that stock has been caught up in some group weakness; we’ll hold our 45% cash position for now, but stay tuned, as we’d like to add some new names (or add to existing names) in the near future.
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.
Alerts
PFSweb (PFSW) reported a better-than-expected quarter with revenue up 22%. Let’s keep it at Hold until we can assess the stock’s reaction
We’re selling Ligand Pharmaceuticals (LGND), which, despite reporting a fine quarter last week, has come under severe selling pressure and broken down decisively. We’ll cut the loss tonight. That move will leave us with three empty slots and a cash position of around 23%. That seems high given the market environment, so we will add one stock—Amazon (AMZN).
Tonight I’m recommending selling National Storage Affiliates (NSA) (ideally tomorrow on a bounce), and redeploying the profits into one of my other buy-rated stocks.
NanoString (NSTG), Aerohive (HIVE) and Q2 Holdings (QTWO) reported earnings.
Blackbaud (BLKB), Mitek (MITK) and Primo Water (PRMW) announce earnings . BLKB is now rated Sell.
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.