As market malaise lingers on, it’s become a stock-picker’s market. Fortunately, we have an entire team of expert stock pickers here at Cabot – and in Stock of the Week, we get our pick of the litter. This year already, that’s resulted in gems like Mike Cintolo’s Corning (GLW) (+50% in six weeks), Clif Droke’s JetBlue (JBLU) (+17% in two weeks) and Carl Delfeld’s TransAlta Corp. (TAC) (+10% in a month).

So today, we try to uncover another gem by going back to the well on a former Stock of the Week – and market – darling that has recently rediscovered its mojo. Cabot Dividend Investor Chief Analyst Tom Hutchinson never gave up on it and is now higher on it than ever.

Details inside.

Despite a small bounce Friday on softer inflation data that eased some knee-jerk selling, markets finished on the back foot as renewed investor anxiety around artificial-intelligence disruption rippled through tech and cyclical stocks. Growth names lagged, pressure widened beyond software to financials and real estate, and defensive sectors outperformed amid falling Treasury yields that weren’t enough to stem the slide. By week’s end, the S&P 500 had fallen 1.4%, the Dow Jones had lost 1.2%, and the Nasdaq Composite had tumbled 2.1%.

Despite a small bounce Friday on softer inflation data that eased some knee-jerk selling, markets finished on the back foot as renewed investor anxiety around artificial-intelligence disruption rippled through tech and cyclical stocks. Growth names lagged, pressure widened beyond software to financials and real estate, and defensive sectors outperformed amid falling Treasury yields that weren’t enough to stem the slide. By week’s end, the S&P 500 had fallen 1.4%, the Dow Jones had lost 1.2%, and the Nasdaq Composite had tumbled 2.1%.

The economy is steady, but economists are beginning to worry about consumers. For December, retail sales were flat (vs. the anticipated 0.4% rise) after an increase of 0.6% in November. And credit card balances rose 5.5% from last year, to $1.28 trillion, according to the Federal Reserve Bank of New York.

Inflation remained at 2.7%, and unemployment ticked down a bit, to 4.3%. That’s some good news!

Investors seem to be rotating out of high-fee, labor-intensive business models viewed as potentially vulnerable to AI-driven disruption. Fortunately, Explorer stocks and ETFs have not been impacted and had a good week and start to 2026.

Luckin Coffee (LKNCY) shares were up 3% this week following last week’s 13% gain. The company just opened its 30,000th store and this underscores Luckin’s extensive network.

The market has taken a dramatic turn.

Previously beleaguered stocks are soaring while technology flounders. Cyclical stocks in industries including materials, energy, consumer companies, and industrials have posted double-digit returns while the overall market is barely positive.

Is this a lasting trend or a temporary aberration? The cyclical rally indicates investor confidence regarding the state of the economy in the quarters ahead. Will that stronger growth materialize? Is the AI trade finished, or is this just another periodic consolidation?

Anything can happen in the next several months. It’s easier to focus on the longer term instead of trying to figure out the next fashionable trend on Wall Street. Sectors go in and out of favor all the time. Industry leadership changes often. But one strategy has been a winner in just about every kind of market over time – dividend growth.

In this issue I highlight several portfolio stocks that have consistently paid and grown the dividend for many years and have delivered stellar returns with far less volatility than the overall market.

*Note: Your next issue of Cabot Profit Booster will arrive next Wednesday, February 18, due to the market holiday next Monday, February 16, in observance of Presidents’ Day.

Despite a mid-week tech-led sell-off that dragged the broad markets lower, investors clawed back lost ground on Friday on a rebound in semiconductors, AI-related optimism and stabilization in risk assets like bitcoin. By week’s end, the S&P 500 had lost a mere 0.1%, the Dow actually closed at a new all-time high above 50,000, and the Nasdaq had fallen 1.8%.

It’s fair to say the overall evidence took a step back last week, with the Nasdaq coming under pressure, though many cyclical stocks act well (in fact, there are a few in this week’s issue that have shown great recent power) and, ironically, we’re actually seeing some solid strength in many AI-related stocks, a bunch of which have lifted off from three-plus-month consolidations even as other growth areas have flailed. As has been the case for weeks, then, the market outlook really depends on where you’re looking. We’ll move our Market Monitor to a level 6 here, but we’re still game for taking a swing at some of the many strong names (ideally on dips) out there.

This week’s list is chock-full of strong names, mostly from the cyclical side of the aisle, with many lifting out of very long-term consolidations after earnings, showing great power. Our Top Pick is helping to lead the broader transport group, which is also breaking out to new highs.

It pays to be an optimist when it comes to investing. So, in a middling market, you’re better off focusing on the positives: The bull market remains intact, volatility is down, earnings growth continues to be robust, and market breadth has spread to the many previously unloved sectors. With that optimistic slant in mind, today we look internationally to add one of the biggest names in South America – an e-commerce giant recently recommended by Carl Delfeld to his Cabot Explorer audience.

Details inside.

*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, February 17 due to the market holiday next Monday, February 16 in observance of Presidents’ Day.

Despite a mid-week tech-led sell-off that dragged the broad markets lower, investors clawed back lost ground on Friday on a rebound in semiconductors, AI-related optimism and stabilization in risk assets like bitcoin. By week’s end the S&P 500 had lost a mere 0.1%, the Dow actually closed at a new all-time high above 50,000, and the Nasdaq had fallen 1.8%.

*Note: Your next issue of Cabot Options Trader Pro will arrive next Tuesday, February 17 due to the market holiday next Monday, February 16 in observance of Presidents’ Day.

Despite a mid-week tech-led sell-off that dragged the broad markets lower, investors clawed back lost ground on Friday on a rebound in semiconductors, AI-related optimism and stabilization in risk assets like bitcoin. By week’s end the S&P 500 had lost a mere 0.1%, the Dow actually closed at a new all-time high above 50,000, and the Nasdaq had fallen 1.8%.

Growth as a whole has been stagnant for three months, and this week, we started to see the selling spread out a bit, with our Two-Second Indicator waiving a yellow flag and with more names coming under pressure (and with many growth stocks really caving in). To be fair, the top-down evidence isn’t much changed, so we’re flexible--if this is the final shakeout to the past three months of rest, there could be many things to sink our teeth into soon.

But as growth investors, we’re focused on the growth evidence, which tells us to remain in a cautious stance until the buyers step up.

WHAT TO DO NOW: Remain cautious with growth stocks. While the broad market is in decent shape, growth stocks continue to bring up the rear, with our Growth Tides and Aggression Index having trouble while some setups begin to sag. In the Model Portfolio, we cut our loss in JFrog (FROG) this week and today are placing Lilly (LLY) on Hold as that stock cracked near-term support. That said, given our big cash position, we are adding one half-sized new position tonight—Axsome Therapeutics (AXSM), which is in a clear uptrend and has rapid growth in the pipeline for years to come. Our cash position will still be around 60%, which is a bit high, though we’re content to go slow until growth stocks kick into gear.

Halfway through January and one of the big stories of the year is the continued outperformance of small-cap stocks. Along with the strength in the equal-weight S&P 500 (the Invesco S&P 500 EW ETF (RSP) is an easy option to track this), this is part of the “market is broadening out” theme that you’ve likely been hearing about.

As I stated several times in the waning months of last year, small caps benefit from (1) an early cycle backdrop, (2) stabilizing earnings revisions, (3) positive operating leverage, and (4) lower rates. These conditions are materializing right now. Analysts expect small-cap earnings to grow 15% in 2026, only slightly ahead of the 14.8% expected for large caps but a massive improvement from the small-cap earnings contractions in 2023 and 2024, and above the expected 2025 earnings growth rate of 13.4%. By the way, mid‑cap earnings are expected to grow by 19.3% in 2026. This is helping to draw more attention to the small and mid-cap (SMID) asset class, which is actually what a lot of small-cap ETFs and mutual funds really have exposure to.

Value stocks are outperforming growth stocks right now.

That’s not a sentence that’s been uttered (or written) often over the past decade and a half. But for the past three months, it’s definitely true. Growth stocks – as measured by the Investors’ Business Daily 50 ETF (FFTY) – peaked in late October and are still 10% off their pre-Halloween apex. Value stocks – as measured by the Vanguard Value Index ETF (VTV) – have risen more than 4% during that time and have really come on since the calendar flipped to 2026, advancing nearly 3%.

Cannabis investors should see a significant catalyst inside the next six weeks. That’s a reasonable time frame to expect Attorney General Pam Bondi to implement President Donald Trump’s executive order to reschedule cannabis.

The news would spark a sellable rally for traders. Long-term investors should hold through.

The background: Rescheduling means moving cannabis to Schedule III from Schedule I under the Controlled Substances Act. That will save the larger publicly traded cannabis companies like the ones in our portfolio tens of millions of dollars each in annual tax expenses. That’s because rescheduling neutralizes an IRS rule that bars the deduction of operating expenses against the sale of Schedule I substances.

So far, so good. On just the seventh trading day of the year, the S&P 500 is already about 2% higher. Early 2026 performance is indicative that stocks want to go higher.

A look under the hood tells an interesting story. Cyclical stocks are booming. The sectors are killing it so far in 2026 with materials, consumer discretionary, and industrials leading the pack, with stunning YTD returns of 6.78%, 5.82%, and 4.43% respectively. Investors are betting on a strong economy in the new year.

For anyone engaged in the forecasting business, the temptation is always present to make a sensational claim about the future in order to stand out from the crowd and garner mainstream media attention. And truth be told, for those of us whose livelihoods involve predicting financial markets, that temptation must often be suppressed in the interest of professionalism.

Big oil and oil services like Halliburton (HAL) have moved upward in the wake of the Venezuela situation. The world is now awash in oil, but the sector was already looking interesting as technology has greatly outperformed energy. The Energy Select Sector SPDR ETF (XLE) has treaded water for the past three years while the Technology Select Sector SPDR ETF (XLK) has surged almost 240%.

Sector rotation can be a winning strategy both in terms of returns and managing overall risk. We will be looking for these opportunities throughout the year.

Welcome to 2026! The new year promises more good returns and a broadening rally.

The S&P 500 was up over 16% in 2025 after back-to-back 20%-plus return years in 2023 and 2024. It’s been the best three-year run of the century so far. But the future is what matters now. And the market seems pricey after all these good years.

Welcome to 2026! Sure, the year technically began on Friday. But nobody cared. The Monday after New Year’s is when the rubber really hits the road. And the year is beginning on a positive note.

This is hopefully the year when the bull market broadens beyond technology and AI. The stage is set for that to happen. The rest of the market is a lot cheaper. The economy is forecasted to strengthen. The Fed is in a rate-cutting cycle. Inflation is benign. And earnings growth is expected to improve.

Despite a tumultuous start to 2025, the S&P 500 index finished the year with an impressive 18% gain (including dividends), trouncing widespread expectations for an overall negative performance.

Leading the charge, of course, were the Magnificent Seven stocks, with the AI boom acting as a major catalyst for the market’s strong showing. Analysts seem to be divided as to whether the “all things AI” investing trend will persist into 2026, but many of the leading Wall Street prognosticators nonetheless still expect the bulls to maintain their control of the market in the new year.

Housekeeping: We’re sending out this update a day ahead of time, given tomorrow’s holiday. We hope you have a great end to the holiday season and, of course, a healthy and prosperous new year. Our office will be open Friday, and we’ll be back at it in full next week. Cheers!

WHAT TO DO NOW: Stay flexible. The market’s overall evidence is positive but not powerful, though growth stocks continue to lag, with our growth measures (such as the Growth Tides and Aggression Index) neutral-ish here. We expect volatility over the next few days as the calendar flips, which could provide some opportunities. For now, with most names we own or watch marking time, we’ll hold what we have and see what comes as we hit January. We have no changes tonight.

It was another stellar year for the market. The S&P is up between 17% and 18% with just a couple of trading days left. After two years of 20%-plus returns in 2023 and 2024, the S&P has put together the best three-year run this century.

Warrior Met Coal (HCC), Primo Brands (PRMB) and Millicom (TIGO) Report

It’s required patience to live with the ups and downs of owning Enovix (ENVX) for as long as we have. And the timeline here serves as another reminder that building a company to bring a new product to market is no small feat. In this case, the launch of high-volume sales keeps getting pushed out, which also pushes out performance of the stock. But we’re sticking with ENVX because those better days should still arrive. And when they do, I think the stock can capture investors’ imagination and push it to levels that will seem, at times, totally ridiculous. We have seen that time and time again with these types of stocks.

WHAT TO DO NOW: While the market is in decent shape, our indicators are worsening, the broad market is weak and growth stocks remain very tricky—many look fine, but volatility is insane and, this week, we’ve seen more than a few air pockets after earnings. We’re still taking things on a stock-by-stock basis, which today means cutting bait on Arista Networks (ANET), which looks toppy after a poor earnings reaction. We’ll sell and hold the cash, which will be around 45% of the portfolio.

Hello from Senegal! While there is no regular Cabot Explorer issue this week as I am halfway around the world, I do have two new Sell alerts today.

Sportradar (SRAD), Unity (U) and Triple Flag (TFPM) Report

Here’s an overview of everything you should know about preferred stocks before adding them to your portfolio.

Here’s a quick review on how to invest in emerging markets the Cabot way.

This is a collection of tips on stock chart reading, something that’s key to Mike Cintolo’s growth stock methodology, but something few individual investors (and even professional investors) understand too well.

A unique market timing tool, we use the Cabot Two-Second Indicator to determine the health of the stock market every day.

I was talking with an investor recently about the latest stock market downturn. He was puzzled; if General Motors (GM) is supposedly such a great stock and vastly favored among portfolio managers, why would it fall 30% during a market correction?

No matter what the market environment, the most common questions we field at Cabot concern selling. Here are some of our most fundamental tools and rules.

The Cabot Dividend Investor portfolio currently holds three ETFs, one in each tier of our portfolio. Their distributions come from a variety of sources, including qualified stock dividends, non-qualified stock dividends, preferred stock dividends, MLP and CEF distributions, and possibly some fixed income distributions. That affects how you will pay taxes on the income, since ETF distributions are taxed based on their original source—i.e., how the fund earned them. So it’s important to know what your ETFs hold and what types of dividends those securities pay.

A BDC, or Business Development Company, is an investment that gives ordinary investors a way to participate in the rarified world of venture capital.

Our market timing indicators are discussed in every issue of Cabot Growth Investor. Here are detailed explanations of what they are and how we use them.

If you follow these rules, you’re sure to boost your portfolio’s results.

My stock-picking strategy has been refined over the course of 28 years, and has been quite stable for the last six years. My investment goals are (1) minimize stock market risk, (2) achieve capital gains, with dividends as a welcome addition to total return and (3) outperform the U.S. stock markets.

These are the six fundamental characteristics that correlated most highly with profits in a 10-year study of stocks bought for the Model Portfolio of the Cabot Growth Investor.