Markets have been resilient driven by earnings, hopes of a Hormuz deal, and a ramping up of share buybacks by big tech this year.

Explorer stocks had a good week. Brookfield Renewable (BEP) shares were up 7.5% this week as attention was riveted on clean energy in the wake of the Middle East conflict.

Small businesses drive a lot of U.S. job growth – yet many can’t get the loans they need from paper-bound, cautious banks.

Today’s featured company aims to change that. It is a digital lending specialist that’s transforming into a full-scale bank. By leveraging over two decades of data, it is capturing market share while maintaining impressively low default rates.

All the details are inside the May issue of Cabot Small-Cap Confidential.

Soaring oil prices ground airline stocks to a halt in March, and most of them have yet to recover as crude oil remains in the triple-digit range. And yet, most airlines are still on track for another year of record sales and passenger numbers. That includes this month’s new addition to the Cabot Value Investor portfolio, which expects double-digit revenue and triple-digit earnings growth this year, and yet the stock trades 37% below its 2017 highs. Shares had momentum before the Iran war. Now they’re trading at a rarely seen discount. That spells opportunity and perfectly fits our growth-at-value-prices mandate.

Details inside.

The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.

We continue to see and hear about many uncertainties, not the least of which is the continued back-and-forth in the Middle East—but despite that, stocks have continued to handle themselves very well, oftentimes actually advancing despite the supposed fundamental headwinds. Of course, near term, some sort of pothole is possible, and the next two weeks are actually prime time when it comes to earnings season for growth stocks, so we’ll see how it goes. But we’ll bump our Market Monitor to a level 8 given the positive evidence.

This week’s list features a lot of recent earnings winners as well as some good setups. Our Top Pick has solid growth and free cash flow, and the stock just emerged from a huge base after earnings.

Booming earnings vs. a damaging war. That’s the tug-of-war investors are grappling with right now.

In March, the sudden war in Iran sent stock prices tumbling; in April, stocks rebounded with a fury, thanks in part to double-digit earnings growth and hopes of peace. Where the market goes in May will depend on how long the war drags out – and how long the Strait of Hormuz remains closed. In the meantime, though, artificial intelligence is clearly back in favor, so today we add a new AI name courtesy of Cabot Early Opportunities Chief Analyst Tyler Laundon. It’s a name that’s hitting fresh all-time highs as I write this – with potentially much greater upside ahead.

Details inside.

The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.

The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.

The bulls had another strong week as the Magnificent Seven reported mostly strong earnings, the Fed held steady (as expected), Q1 GDP came in at a solid 2.0%, and Apple capped the week with a top- and bottom-line earnings beat that sent shares up more than 3% on Friday. The one fly in the ointment? Inflation — the PCE price index surged at a 3.5% annualized rate in Q1, a sharp acceleration driven by elevated energy costs tied to the Iran conflict.

The past month has gone about as well as any bull could have hoped, with the market stampeding off the late March low -- and with nearly all of the top-down evidence looking positive today. Individual stocks have been a bit trickier, with leadership concentrated in AI names and with earnings season causing some gyrations; we’re standing pat and holding our still-large cash position tonight because of that. But don’t get us wrong -- we’re optimistic, and looking to extend our line as more leaders (preferably outside of AI) emerge during earnings season.

Back on April 23 at the market close, I suggested buying cannabis stocks in the sharp pullback that day right after the federal government announced cannabis rescheduling.

From opening prices the next day, cannabis stocks were recently up 18%. Not only that, but for the moment, cannabis stocks seem to have found a stable footing.

For investors in UnitedHealth Group (UNH), the last 18 months have probably felt like an eternity. After hitting a lifetime high north of 600 a share in late 2024, a rapid succession of shocks—ranging from leadership turmoil to compressed margins to Medicare policy changes—combined to crush the company’s stock over the next year-and-a-half, cutting its value by more than half.

But after the seemingly endless turbulence of that period, the stock has begun to stabilize while UnitedHealth’s turnaround is gaining significant traction, with the firm’s recent financial results showing better-than-expected recovery signs. For this and other reasons I’ll describe here, the stock appears worthy of our consideration.

If you have the feeling that this year’s boom in the tech sector—and the corresponding record highs in the major averages—isn’t being felt on a market-wide basis, you’re not imagining it.

As it turns out, the record lift in the Nasdaq and S&P is being driven by a troublingly small number of stocks. The result of this narrowing market is that value-focused investors like us have been forced to exercise patience while waiting for the boom to visit our corner of the market (more on that in a minute).

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.

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.

While the shares of this tech company have dropped on gross margin declines, this contributor thinks the pullback is an opportunity to buy low.

Finisar (FNSR)
from Top Stock Insights

Cisco’s 2013 VNI Mobile Forecast points to continued pressure on mobile device infrastructure:

Global mobile data traffic grew 81% in 2013; 526 billion mobile...

The shareholders of this tech company have just approved its “merger of equals” with TriQuint Semiconductor, Inc. (TQNT). The deal is estimated to close in the second half of this year.

RF Micro Devices Inc. (RFMD)
from Ford Equity Research Report

RF Micro Devices (RFMD) designs, develops, manufactures and markets radio frequency solutions...

This international payment company continues to grow at a double-digit pace, as credit transactions—and its global reach—rise.

MasterCard Incorporated (MA)
from Hendershot Investments

MasterCard Incorporated (MA) operates the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories.

In 2013, more than 60% of...

This company surpassed Wall Street’s estimates by $0.02 and its shares recently reached a 52-week high. But estimates are rising, which bodes well for the shares.


FleetCor Technologies (FLT)
from The Chartist

FleetCor Technologies (FLT) provides fuel cards and workforce payment products and services in North America, Latin America, Europe, Australia, and New...

This company just completed its acquisition of the largest Hispanic-owned drug store chain in the U.S., and is gaining investor attention for its decision to no longer sell cigarettes in its stores.

CVS Caremark (CVS)
from The Complete Investor

Health care is one area where expenditures grow, rather than decline, with age. And...

This financial company is a recent IPO, emerging from two businesses that fell on hard times during the recent financial crisis.

Ally Financial (ALLY)
from The Turnaround Letter

Ally Financial (ALLY) is one of the largest auto lenders and has an online bank called Ally Bank. The company was originally formed in 1919...

This financial tech company just beat earnings estimates by two cents per share, and estimates are being revised upward.

Financial Engines (FNGN)
from The Oberweis Report

Financial Engines (FNGN) is a provider of independent, technology-enabled portfolio management services, investment advice and retirement income services primarily to participants in employer-sponsored defined contribution plans, such...

United Natural Foods, Inc. (UNFI)
from Weiss Million Dollar Ratings Portfolio

Regardless of United Natural Foods (UNFI – Rated B)’s solid results and outlook, the stock pulled back recently in sympathy with peers in the natural foods distribution value chain. This created a buying opportunity in the shares. And I’m confident the...

This global staffing company beat earnings estimates by $0.02 in the most recent quarter and estimates have been revised upward by $0.12 in the past 90 days.

ManpowerGroup (MAN)
from Dow Theory Forecasts

Its shares down 12% for the year, ManpowerGroup (MAN) felt some growing pains as the global markets moved through the...

This REIT beat earnings and revenue projections for its second quarter. The stock is a two-for-one, with both growth and income.

American Tower Corporation (AMT)
from Blue Chip Growth


American Tower Corporation (AMT) is a real estate investment trust (REIT) that owns and leases wireless and broadcast communications real estate around the globe....

This Chinese retailer is growing on three fronts, and a recent pullback in shares provides an attractive entry point.

Jumei International (JMEI)
from Cabot China & Emerging Markets Report

Jumei International (JMEI) is a retailer of quality branded beauty products and apparel via its jumei.com website and its mobile platform. Jumei sells in...

Domestic auto sales are heating up, and this perennial favorite is stepping up its marketing. The shares are trading at a discounted P/E, just under 11.

Honda Motor ADRs (HMC)
from PAD System Report

Honda Motor ADRs (HMC) is ranked “1” for year-ahead performance, and “2” for Safety, and has 3-5 year appreciation...

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.