California is burning and the rest of the country is in a deep freeze. It seems like a metaphor for the mixed messages we’ve been getting from the market in recent weeks, with stocks running very hot and cold since the start of December as the major indexes have mostly held near their highs but the under-the-surface action has been wobbly at best. The last six weeks have been rough on small caps in particular. As both a value investor and a contrarian, that spells opportunity!

So today, we add one of the highest-profile, more beaten-down small-cap stocks out there to our Buy Low Opportunities Portfolio. The stock is miles from its Covid-era highs, but it’s starting to build momentum for the first time in years: shares have tripled since bottoming five months ago. And it’s a name virtually everyone knows.

Details inside.

Editorial Note: With the market closed tomorrow, January 9, we’ve bumped up this week’s Issue to today.

At the end of 2024, we were in a “buy now to win tomorrow” type market. Now, we’re in more of a “buy now to win in the coming quarters” type market.

Given this backdrop, our first portfolio addition of the year is a lower-risk, high-quality software company specializing in digital banking solutions. It’s the fastest grower in its space and is on pace to deliver its first full-year profit in 2025.

Like a lot of stocks in both the software and financial arenas, shares of this company have been a little weak lately. I think that’s good – we can step in at a price modestly lower than just a few weeks ago.

While the outlook for 2025 is positive, things are changing.

Sure, this bull market has driven the S&P 500 nearly 70% higher. But most of the gains are from technology stocks. Until this past summer, nearly all the bull market returns were driven by technology. The rest of the market had done very little.

But the rest of the market is waking up. While artificial intelligence (AI) will likely continue to be a powerful growth catalyst, its dominance over everything else might not be as pronounced in 2025 as it has been in the past. Earnings for other stocks are catching up.

The earning growth difference between the “Magnificent 7” companies and the other 493 S&P 500 companies is expected to plummet from 27.8% last year to 8.3% this year. The rest of the market is cheap, has momentum, and will likely get hot this year as stocks experience an earnings growth spike that could last for years.

In this issue, I highlight a healthcare stock that looks highly promising in 2025. It is poised in front of the aging population megatrend, which makes a successful pick so much easier, and it will likely experience a sizable earning spike in the years ahead. It is an existing portfolio stock of which half the shares were sold last year. It’s a great time to buy back the other half.

With the calendar flipping to 2025 and the long holiday weeks/weekends behind us, most traders will be back at their desks starting yesterday. Let the fun begin!

The new year is off to a good start, with many of the areas that took lumps during December (namely the broad market and growth stocks) showing strength through three days—and, just as important to us, many individual stocks have perked up, with some resilient names pushing to new highs and others that dipped to support bouncing. That’s a good thing, but we’re also keeping in mind the fact that early January is often tricky (lots of sharp moves in both directions), that the intermediate-term trend of most indexes and measures is still neutral-to-negative and that there remain lots of crosscurrents among individual stocks, with some selling off while others strengthen. As we wrote above, we are encouraged and will nudge our Market Monitor up to a level 6, but, while this is a good first step, we want to see the action continue to conclude that the December air pockets are a thing of the past.

For the third straight issue, this week’s list is heavy on growth stocks, which remains a sign that big investors aren’t hunting for safety. Our Top Pick is a name we love fundamentally and whose stock has held up relatively well in recent weeks despite a huge run. If you enter, use a loose stop given its volatility.

In the wake of a rare down December, stocks have come roaring back to kickstart 2025, up more than 2% through the first three trading days. It’s early yet, but perhaps the bulls are taking control again after a sluggish end to an otherwise very productive 2024.

Still, there were enough yellow flags under the surface to close out the year that it’s worth taking a cautious approach for now. So today, we add a mega-cap, high-yield dividend stock that’s been a staple of Tom Hutchinson’s Cabot Dividend Investor portfolio for some time.

Details inside.

With the calendar flipping to 2025 and the long holiday weeks/weekends behind us, most traders will be back at their desks starting today. Let the fun begin!

With the calendar flipping to 2025 and the long holiday weeks/weekends behind us, most traders will be back at their desks starting today. Let the fun begin!

Happy New Year to everyone and wishing you all the best investing in 2025.

Let’s keep in mind this year the merit in legendary global investor Sir John Templeton’s sage advice:

“Diversify. In stocks and bonds, as in much else, there is safety in numbers.”

With this in mind, I see four big trends out there that offer us the opportunity to take a contrarian approach to make some money and lower risk.

It’s been a good year for the market and an even better year for the Stock of the Week portfolio, with the average year-to-date gain on open positions of 52%. Let’s hope the good times keep rolling in 2025. While I doubt the S&P 500 and Nasdaq will be able to maintain their torrid pace of the last two years, there are scores of under-loved sectors and stocks out there, and the bull market remains intact, ready to propel them forward in the New Year. Today, we add a little-known growth stock that just got the stamp of approval from Cabot Top Ten Trader Chief Analyst Mike Cintolo.

Details inside. And Happy New Year!

This week and next week’s Monday morning Week in Review will be focused on position updates so that I can spend the last two weekends of the year with my family. Then starting the week of January 6^th, it’s back to full blast for the Cabot Options Trader and Cabot Options Trader Pro service.

This week and next week’s Monday morning Week in Review will be focused on position updates so that I can spend the last two weekends of the year with my family. Then starting the week of January 6^th, it’s back to full blast for the Cabot Options Trader and Cabot Options Trader Pro service.

Cannabis stocks are generally flat since I sent you the March 27 issue of Cabot Cannabis Investor.

Given the potential magnitude of near-term catalysts, I suggest continuing to hold exposure to the group, and accumulating on weakness. If you have zero exposure, consider buying some now. If you have full exposure, consider adding on any substantial weakness of 2%-4% or more in this highly volatile group.

It’s still a bull market and a rally. But the S&P has been in a sideways funk since the middle of last month.

April has not had news that the market seems to like. There has been stronger-than-expected economic news. The manufacturing numbers were the highest in about two years, and the Fed upgraded its 2024 GDP forecast from 1.4% to 2.4%. But sometimes good news is bad news.

The next earnings season starts very soon, with Mattel (MAT) set to report on Tuesday, April 23.

The first week in April was quiet for Explorer stocks. Looking at what sectors are doing particularly well through the MSCI World index, technology and other cyclical sectors such as energy have outperformed.

Where are the bargains? Consumer staples, Europe, and perhaps even electric vehicle stocks. The EV slowdown can’t be denied – their first-quarter growth rate was a weak 2.7% vs. last year’s 47%. Hybrids vehicles are clearly preferred by many, and on the rise.

It was a great first quarter. The S&P closed out March up 10% YTD. The index also rallied an impressive 28% from late October through the first quarter. Is there more upside ahead?

Things have been good. The Fed reiterated its intention to lower the Fed Funds rate three times this year at the March meeting. Meanwhile, inflation is way down and the economy is solid. Manufacturing data was much better than expected and the Fed raised its GDP forecast for 2024 from 1.4% to 2.4%.

The market looks great. The quarter ended last week with the S&P posting the strongest first-quarter start in five years. All three major market indexes have now risen for five straight months.

The Fed said it still intends to cut the Fed Funds rate three times this year at the March meeting. Meanwhile, inflation remains subdued, and the economy is surprisingly strong. Manufacturing data was much better than expected and the Fed raised its GDP forecast for 2024 from 1.4% to 2.4%.

In today’s note, we discuss the recent earnings reports from Walgreens Boots Alliance (WBA). Our note also includes the monthly Catalyst Report and a summary of the April edition of the Cabot Turnaround Letter, which was published on Wednesday.

The story of the week in the markets has been that central bankers are still leaning toward cutting rates by mid-year (odds still favor a cut in June). That’s helped stocks do pretty well, with outsized performance in energy, banks, insurers and homebuilders.

I’ve been monitoring the performance of small-cap sector ETFs versus those of the comparable large-cap offerings. It’s been interesting to see small-cap financials, materials and industrials performing far better.

WHAT TO DO NOW: Remain bullish, but continue taking things on a stock-by-stock basis. We’re seeing another round of sharp selling in many leading growth stocks today, though few (if any) have cracked meaningful support. To us, it’s another shot across the bow, not prompting any major moves but putting us on alert with certain names. In the Model Portfolio, we’re making one small move—selling 20% of our stake in CrowdStrike (CRWD)— while doing a quick flip on Celsius (CELH), placing it on Hold after last week’s half-position buy after today’s drop on news. Our cash position will now be 25%, and we’re keeping our eyes on a few names should the selling continue.

A bullet was dodged, and the bull market forges on.

It looks like the Fed is going to play ball. There was much worry among investors that the Fed would abandon the three-rate-hike goal for this year amid higher-than-expected inflation. But they didn’t. The Fed reiterated its intention for three cuts this year. The odds of a first cut in June increased to 70%.

It is with mixed emotions that I am writing my last Cabot Value Investor issue. My nearly four years as part of the Cabot team have been exceptionally rewarding. I have had the opportunity to work with an exceptional research team – who bring talent, dedication and investment results that readily match and likely exceed most Wall Street sell-side and buy-side analysts. Our Cabot analysts, despite their very different investing styles, have helped me become a better investor.

Earnings season is over, so there were no companies that reported earnings this past week. However, the next earnings season is just around the corner, starting with Walgreens Boots Alliance (WBA) on March 28.

We sold a SPY November 17, 2023, bear call spread in late September for $0.74. It’s now worth roughly $0.03. A week later we initiated a SPY November 17, 2023, bull put spread for $0.58, essentially legging-in to an iron condor.

We have a couple positions with calls due to expire today, so let’s get ahead of it and buy back our short calls and immediately sell more calls to collect another round of premium.

I will be exiting the Mastercard (MA) trade today. I will discuss the trade in greater detail in our upcoming weekly issue.

I will be exiting the American Express (AXP) trade today. I will discuss the trade in greater detail in our upcoming weekly issue.

Alphatec (ATEC) Taps Equity Market to the Tune of $150 Million

We allowed our calls to expire worthless, thereby reaping all of the call premium. Now it’s time to start selling more call premium.

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.