Stocks are finally showing signs of life. After a miserable six-week stretch, stocks – with an assist from cooler inflation numbers – appear to be getting in gear. How long the new rally will last may depend on things like Q4 earnings, the early days of Donald Trump’s second term, and what Jerome Powell says next week. But for now, let’s strike while the iron is hot, or at least warm, and add a growth stock whose name you might recognize since so many people use their platform these days. It’s a new recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

Details inside.

The market rose nicely last week as the bond market worries eased. By week’s end the S&P 500 and Nasdaq had rallied 2.9%, and the Dow had gained 3.8%.

The market rose nicely last week as the bond market worries eased. By week’s end the S&P 500 and Nasdaq had rallied 2.9%, and the Dow had gained 3.8%.

In theory, and often as we prefer, in practice, corporate profits drive stock prices.

J.P. Morgan’s (JPM) booming profits are a testament to this, but what’s behind the profits?

It seems that recently, and perhaps even more in 2025, macro issues will drive the direction of markets and sector trends.

Identifying trends and allocating money to the right sectors and picking the leaders in these sectors is increasingly important. Those that follow the Fed and try to predict the direction of interest rates are one example of this macro-oriented strategy.

Our first Issue of 2025 highlights a variety of solid growth names that have been acting well despite the recent dip in the market. As always, this Issue should have something for everyone.

*Note: Your next issue of Cabot Profit Booster will arrive next Wednesday, January 22 due to the market holiday next Monday, January 20 in observance of Martin Luther King, Jr. Day.

Interest rate worries continued to weigh on the market last week as the S&P 500 lost 1.6%, the Dow fell 1.5%, and the Nasdaq declined by 2.3%. This week will have plenty of market-moving events, including the start of earnings season, so expect continued volatility.

The market and some growth stocks held their own around year-end and popped to start the year, but last week was a bad one, with the sellers hitting most everything. There are tons of crosscurrents out there, and we’re starting to see some oversold measures really get stretched, so we’re not hibernating in a bear cave. But the bottom line is that the intermediate-term trend of most indexes, sectors and stocks are down so we continue to favor being cautious. Our Market Monitor now stands at a level 5.

This week’s list has something for everyone, with a lot of good setups for if/when the market does turn up. Our Top Pick has hung in there very well in recent weeks despite the market’s tumble.

The market is in a tough spot, and has been for about a month and a half. It doesn’t mean the bull market is on borrowed time – remember, we had a much deeper correction in July and August, only to have stocks roar to all-time highs by Labor Day – but it does make for a tricky environment in the short term. A news-heavy week (inflation data, the start of earnings season, two big industry conferences) could potentially help turn the tide. But right now, the bears are in control. One subsector that has mostly avoided the recent selling is the airlines. So today, we add one of the stronger airline stocks, courtesy of Cabot Turnaround Letter editor Clif Droke.

Details inside.

Interest rate worries continued to weigh on the market last week as the S&P 500 lost 1.6%, the Dow fell 1.5%, and the Nasdaq declined by 2.3%. This week will have plenty of market-moving events, including the start of earnings season, so expect continued volatility.

Interest rate worries continued to weigh on the market last week as the S&P 500 lost 1.6%, the Dow fell 1.5%, and the Nasdaq declined by 2.3%. This week will have plenty of market-moving events, including the start of earnings season, so expect continued volatility.

Welcome to our 2025 TOP PICKS issue! Our Cabot analysts have kindly shared their top stock ideas for this year. And you’ll find that they include a variety of companies that should be attractive to investors of all styles—growth, value, dividend payers, and companies on the cusp of turning around—as well as small, mid, and large-cap stocks. I hope you’ll find one or more to your liking!

But first, let’s take a look at the economy and the markets and talk about what’s in store for this year.

It’s not 2022 or 2008, of course, but the vast majority of stocks out there are in correction mode, and that includes the growth arena, which after a huge run began to hit turbulence in early December and has generally been under pressure since. Now, there are some rays of light out there, which we discuss in this issue, and we’re not having trouble keeping a full-ish watch list for the next upmove, but we’ve been favoring a cautious stance for a while now and think that remains the right move, as we’ve trimmed further this week and now have 60% on the sideline.

In tonight’s issue, we do write about one big positive factor out there (no strength in defensive stocks), talk about the allure of buying former winners “cheap” and, of course, write about all of our names and a bunch we’re watching for when the buyers retake control.

The week was ticking along pretty well until this morning’s first read of GDP (1.6% vs. expectations of 2.2%) came out and shot a small hole in the “at least the economy is doing well” argument that’s helped the market hold up despite persistent inflation data.

Embedded in the GDP report were Q1 core and headline PCE inflation, both of which were a little hotter than expected and up from Q4 of 2023. March PCE data will be out tomorrow and is expected to be the biggest macro news event of the week.

Just when things were getting seriously ugly, the market started having a great week.

Interest rate disappointment is being replaced by earnings anticipation. The new earnings season came in the nick of time. After five straight up months, the S&P was having a terrible April. Last week was the worst week of the year so far and the index has fallen over 5% from the recent high.

Nokia (NOK) missed on revenue but beat on earnings yesterday, reporting EPS of $0.10/share, which exceeded estimates by over 50%. CEO Pekka Lundmark noted that 2024 will probably remain a weak year for the mobile RAN (radio access network) market, but reiterated expectations that it will likely pick up over the final two quarters. Declining demand for 5G equipment in the U.S./Canada, and a significant slowdown in China (also notably affecting AAPL) are the root cause, but economic data has only recently started to inflect.

The market continues to struggle with the rapid jump in interest rates (10-year at 4.63% after hitting 4.7% on Tuesday).

I think we’re still fluctuating somewhere between a code yellow and a code orange situation (was code green a few weeks ago!) so long as that yield doesn’t go over 4.7% and all hell doesn’t break loose in the Middle East.

When I started in this business as an institutional stockbroker, Peter Lynch, the portfolio manager for Fidelity’s Magellan fund, was seen as a master of the game. His forte was picking smaller growth stocks. Upon stepping down in 1990 after his fund became too big to make any small-cap stock pick meaningful, he had delivered, over a 13-year period, a 29% per annum return to investors.

His lessons still ring true today.

There’s a lot of noise out there. Sticky inflation and the Fed’s response to it; Iran getting involved in the Israel-Palestine war; war in Ukraine now in year three; a pivotal U.S. presidential election drawing ever closer; first-quarter earnings season underway, etc., etc. But the only thing that truly matters to the market, at least lately, is bond yields. Specifically, yields on the 10-year U.S. Treasury bonds. The last couple years, the inverse bond yield-stock market correlation has been undeniable.

After five consecutive up months for the market, April has been a bummer. Is this just an overdue end to the recent rally or something worse?

The S&P 500 is down 3.6% so far in April. But the more interest rate-sensitive sectors have faired far worse. Sure, the rally was long in the tooth anyway. But the narrative has also changed for the worse.

This market has been resilient. But that resilience is being severely tested. The next couple of weeks should tell us the near-term direction of stocks.

The S&P rallied higher for five straight months. That’s long in the tooth for any rally. The market is down so far in April and the story is changing for the worse.

Wells Fargo (WFC) kicked off the Cabot Turnaround Letter earnings season today, showing EPS of $1.26/share, which exceeded estimates by 17 cents. WFC also beat top-line revenue estimates by $710M, coming in at $20.86B. Despite the comfortable beats, WFC shares are essentially flat for the day.

The story of the week was yesterday’s slightly hotter-than-expected CPI report, which has shifted the rate cut narrative/speculation to only two cuts this year, down from three, and sent the 10-year yield north of 4.55% (it was below 4.4% last Friday).

While this morning’s better-than-expected PPI number has helped to soften the CPI blow, the debate from here is going to be just how long the Fed is willing to push its luck/try not to rock the boat and keep rates where they are.

Stocks have also been a bit stuck in the mud for the last month or so, partly because investor confidence in the Fed’s interest rate-slashing timetable has waned as inflation has remained stickier than expected. Wednesday’s CPI print didn’t help; March inflation came in at 3.5% year over year, a tad hotter than the 3.4% expected and up from 3.2% in February. The month-over-month increase was 0.4%, higher than the 0.3% bump that was anticipated. Stocks promptly sold off, with all three major indexes down more than 1% in early Wednesday trading.


Eventually, however, inflation will dip below that stubborn 3% threshold, and the Fed will start to cut short-term interest rates. We just don’t know when.

Sell ATI (ATI) For a Quick 15% Gain; Krystal Biotech (KRYS) Reports

I want to sell a bear call spread in SPY going out to the December 15, 2023, expiration cycle. As mentioned in our alert Friday and issue today, I want to take advantage of the current short-term oversold readings and two unclosed upside gaps from last week.

Well, we’ve seen five straight days of positive gains to the tune of 6%. While this may have helped all of our delta-positive poor man’s covered call positions in the Fundamentals service, the push higher wasn’t as kind to negative delta positions.

ATI, SHOP, DT Report

RELY and RCM Report

Well, there is no doubt that our SPY November 17, 2023, position has been a wild ride. We decided to leg into this one by selling the SPY November 17, 2023, 452/457 bear call spread. Several days after the market presented us the opportunity to leg into the other side of our iron condor. We sold the SPY November 17, 2023, 408/403 bull put spread. In total, we were able to bring in $1.32 worth of premium for our SPY November iron condor.

Repligen (RGEN) Beats in Q3

I want to sell a bear call spread in SPY going out to the November 17, 2023, expiration cycle. This is more of a protective play just in case we see a continuation of the current trend over the next week or so. By adding a bear call spread we are able to bring our deltas closer to a neutral state.

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.