Issues
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.
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.
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.
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.
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.
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.
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.
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.
Updates
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).
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.
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.
Alerts
In today’s Daily Alert Upside Editor Richard Moroney recommends a chemical company with excellent earnings growth and stock price momentum.
“American Pacific Corp. (APFC, Nasdaq), a leading maker of specialty chemicals, is leveraged to the pharmaceutical industry and new drug approvals. The company’s ingredients are typically used by drugmakers focused on...
“American Pacific Corp. (APFC, Nasdaq), a leading maker of specialty chemicals, is leveraged to the pharmaceutical industry and new drug approvals. The company’s ingredients are typically used by drugmakers focused on...
Today Top Stock Insights Editor Tyler Laundon recommends a new, little-known manufacturing company with some good catalysts for growth.
“Today we’re going to jump on board with a small manufacturing company that has an attractive mix of exposure to both stable and rapid growth markets.
“The company is Tredegar (TG, NYSE). It...
“Today we’re going to jump on board with a small manufacturing company that has an attractive mix of exposure to both stable and rapid growth markets.
“The company is Tredegar (TG, NYSE). It...
June 28 Investment Digest Daily Alert Today Forbes/ISA Closed End Fund and ETF Report Analyst Jack Colombo recommends an ETN (exchange traded note) to use as a short- to medium-term hedge.
“The recent volatility in the market seems to revolve around what the Federal Reserve is going to do next...
“The recent volatility in the market seems to revolve around what the Federal Reserve is going to do next...
In today’s Daily Alert Shortex Market Letter Editor Jospeh Parnes recommends a low-profile growth stock that is resisting the market’s downtrend.
“Mattress Firm Holding Corp. (MFRM, Nasdaq) -- Market Cap: $1.30 billion, EPS: 1.24, P/E: 31.84. This specialty bedding retailer reported FY/Q1 sales increased 31.5% [and] EPS of $0.38 per share,...
“Mattress Firm Holding Corp. (MFRM, Nasdaq) -- Market Cap: $1.30 billion, EPS: 1.24, P/E: 31.84. This specialty bedding retailer reported FY/Q1 sales increased 31.5% [and] EPS of $0.38 per share,...
In today’s Daily Alert, Cabot Stock of the Month Editor Timothy Lutts recommends a growth stock that is resisting the market’s downward pull, and The Energy Strategist Analyst Igor Greenwald advises selling an underperforming position.
“Yelp, Inc. (YELP, NYSE) launched its business in San Francisco in 2004, creating its name by...
“Yelp, Inc. (YELP, NYSE) launched its business in San Francisco in 2004, creating its name by...
JOY was recommended by The Energy Strategist at $76.32 in Investment Digest issue 684, dated December 1, 2010.
“We are selling Joy Global, Inc. (JOY, NYSE). JOY has continued to sink, giving every indication that it’s a value trap rather than a bargain at the current levels. And the entire commodity...
“We are selling Joy Global, Inc. (JOY, NYSE). JOY has continued to sink, giving every indication that it’s a value trap rather than a bargain at the current levels. And the entire commodity...
Today’s new idea comes from the Argus Weekly Staff Report, and is followed by two sell alerts from Cabot Top Ten Trader.
“We are initiating coverage of Mattel, Inc. (MAT, Nasdaq) with a near-term BUY rating and a target price of $51. Mattel is successfully navigating changing tastes in the global...
“We are initiating coverage of Mattel, Inc. (MAT, Nasdaq) with a near-term BUY rating and a target price of $51. Mattel is successfully navigating changing tastes in the global...
Today’s new idea comes from Leeb Income Performance.
“This issue we recommend Exxon Mobil Corp. (XOM, NYSE), one of the largest corporations in the world and the largest publicly traded international oil and gas company. Long-term, the company expects global energy demand to grow by about 35% before 2040. That means...
“This issue we recommend Exxon Mobil Corp. (XOM, NYSE), one of the largest corporations in the world and the largest publicly traded international oil and gas company. Long-term, the company expects global energy demand to grow by about 35% before 2040. That means...
Today The MoneyLetter contributor John Stephenson recommends a stock that is benefitting from the housing market rebound.
“With the U.S. housing market solidly turning the corner, the best bets will be in lumber and building materials suppliers that are poised to benefit from an uptick in residential real estate. [Building products...
“With the U.S. housing market solidly turning the corner, the best bets will be in lumber and building materials suppliers that are poised to benefit from an uptick in residential real estate. [Building products...
Today Global Investment Strategist Analyst Benjamin Shepherd recommends a turnaround play for patient investors.
“For many technology investors, Infosys Ltd. (INFY, NYSE) is a portfolio staple. The company is one of the world’s leading offshore IT services company, but its results recently have been disappointing as businesses delay technology spending and...
“For many technology investors, Infosys Ltd. (INFY, NYSE) is a portfolio staple. The company is one of the world’s leading offshore IT services company, but its results recently have been disappointing as businesses delay technology spending and...
Today’s Daily Alert brings you two mutual fund recommendations from No-Load Fund Analyst.
“Oakmark I (OAKMX) and Oakmark Select I (OAKLX)—Year to date through May, the iShares Russell 1000 Value Index has gained 16.7%, whereas Oakmark Fund has gained 16.9% and Oakmark Select has gained 14.6%. While both funds have lagged...
“Oakmark I (OAKMX) and Oakmark Select I (OAKLX)—Year to date through May, the iShares Russell 1000 Value Index has gained 16.7%, whereas Oakmark Fund has gained 16.9% and Oakmark Select has gained 14.6%. While both funds have lagged...
Today Dow Theory Forecasts Editor Richard Moroney recommends a growth stock that may benefit from the ongoing swing away from defensive names in occurring in the market.
“B/E Aerospace, Inc. (BEAV, Nasdaq) equips the cabins of commercial and business jets with electrical components, fasteners, lavatories and even coffee makers. Growth in...
“B/E Aerospace, Inc. (BEAV, Nasdaq) equips the cabins of commercial and business jets with electrical components, fasteners, lavatories and even coffee makers. Growth in...
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.