Before we dive into this week’s idea we need to move on from our Applied Digital (APLD) covered call as the stock has come under intense selling pressure as the AI story has weakened.

It doesn’t take a proprietary market timing system to see that the evidence has been weakening during the past few weeks—and especially during the past two weeks. That said, the major indexes have refused to give it up, with the big-cap indexes holding near their 50-day lines and, frankly, with more than a few high-relative-strength stocks holding in there. Even so, given the selling, we think it’s best to stay close to shore right now: We’ve moved our Market Monitor to a level 4, which isn’t a sign to sell wholesale, but to limit new buying in general while tightening stops and holding a good amount of cash.

This week’s list surprisingly still has a lot of resilient growth names, which we continue to find interesting given the selling that’s been going on. Our Top Pick is a well-sponsored medical firm with solid growth and a powerful recent breakout.

The market has gotten a lot bumpier in November, though the major indexes haven’t given up much ground. That’s because even as the air comes out of the (perhaps overinflated) artificial intelligence balloon of late, investors are instead rotating into the many under-loved names in other sectors. Today, we add a stock in one of those underappreciated sectors. It’s an educational company that Carl Delfeld recommended to his Cabot Explorer audience last month. And the stock is having a solid year.

Details inside.

Despite a frantic week of heavy sector rotation, the indexes managed to hang in there. Essentially, lofty tech valuations in the AI and growth spaces are now in question, and that hot money poured into defensive sectors. In the end, the S&P 500 eked out a +0.08% gain, the Dow rose +0.34%, and the Nasdaq Composite lost -0.45% last week.

Despite a frantic week of heavy sector rotation, the indexes managed to hang in there. Essentially, lofty tech valuations in the AI and growth spaces are now in question, and that hot money poured into defensive sectors. In the end, the S&P 500 eked out a +0.08% gain, the Dow rose +0.34%, and the Nasdaq Composite lost -0.45% last week.

The market’s evidence has clearly worsened the past two weeks and, really, there hasn’t been any money made in growth stocks since late September, when more names began to flash abnormal action and crack. We’ve mostly been selling in recent weeks, building up a big cash position of 56%, and tonight we’re hanging on to that as our Cabot Tides is on the fence, Two-Second Indicator is negative and many stocks are headed south. To be fair, the indexes are hanging in there and we still have many stocks we like (we write about some liquid biopsy stocks and other potential leaders in tonight’s issue), so we’re staying flexible--but right now it’s prudent to hold our cash and see how this selling wave plays out.

Hopefully, by the time you read this, the government shutdown will be over (at least for a couple of months). It’s about time! I was lucky on my trip to Florida a couple of weeks ago that I only sat on the tarmac for two hours, as things certainly have become much worse for travelers around the country since then.

Who knows if Congress will work out the kinks by January, but at least it’s some progress.

The market has been terrific. But uncertainty is growing, particularly with regard to the economy and artificial intelligence.

The government shutdown is over. Tariffs are increasingly less of an issue in the market. But the economy is about to take center stage. There haven’t been the usual economic reports during the shutdown and there is a risk that when they do finally come out the market could be startled.

At the same time, there has been a tug-o-war regarding the AI trade, and Wall Street doesn’t know what to think. AI has driven the market higher for most of the last three years. The future direction of AI and technology will determine the future direction of the overall market.

Fortunately, there are trends and stocks that are not overly dependent on the unpredictable technology sector or the state of the economy. Electricity demand is soaring because of artificial intelligence data centers, electric vehicles, and manufacturing onshoring. The best health care companies will thrive with the enormous tailwind of the aging population megatrend.

Electricity demand will boom, and people will get sick and need medicine regardless of the near-term gyrations of the economy or the market. In uncertain times like this, I like to go with bankable trends.

In this issue, I highlight two of the very best stocks to buy in the areas of utilities and health care.

Despite a promising start, last week turned into a rough one for the market. A mix of rising economic uncertainty and heavy tech-valuation concerns weighed on sentiment, driving the market to a risk-off environment. By week’s end the S&P 500 had fallen 1.6%, the Dow Jones had slid 1.2%, and the Nasdaq Composite had dropped 3%.

On balance, there’s little doubt the evidence worsened last week, and yet, most leaders didn’t crack, and the big-cap indexes didn’t either, so the question was whether a “real” correction was getting underway … or this would be yet another shakeout-type decline that gives way to higher prices. So far, of course, it’s looking like the latter. On Friday’s update, we dropped our Market Monitor to a level 6, but we’re going to quickly change course and go back to 7 today—and then stay flexible as we see whether a year-end run is getting underway or whether more volatility is coming.

This week’s list again has a growth tilt to it, which we find encouraging given the selling we saw in many areas of the market of late. Our Top Pick is a steadier leader in the AI (and solar) space and is testing its 10-week line for the first time—look to enter on strength and use a tight-ish percentage stop.

The market took a few lumps last week but is recovering nicely today. We’ll see which direction it goes from here now that third-quarter earnings season is winding down. Yet again, earnings did more help than harm, providing a floor for stocks to help counteract some of the unfavorable headwinds (high valuations, record-long government shutdown, accelerating job cuts by major corporations) threatening to derail them. Today, we add one of the bigger earnings season winners, a mid-cap biotech that has been beaten up for a couple years but is staging a comeback that got a welcome boost from its late-October report. It’s a stock that got Mike Cintolo’s attention in Cabot Top Ten Trader.

Details inside.

Despite a promising start, last week turned into a rough one for the market. A mix of rising economic uncertainty and heavy tech-valuation concerns weighed on sentiment, driving the market to a risk-off environment. By week’s end the S&P 500 had fallen 1.6%, the Dow Jones had slid 1.2%, and the Nasdaq Composite had dropped 3%.

Third-quarter earnings season gets underway next week, and expectations are high. Economists are expecting 8% earnings growth among S&P 500 companies, according to data compiled by FactSet. It would be the eighth consecutive quarter of at least 8% profit growth among U.S. companies – perhaps the biggest reason stocks have been on a tear the last two years.

The S&P 500, Nasdaq and Russell 2000 are all up modestly compared to a week ago, while the S&P 600 is roughly flat.

Between the two small-cap indices, the Russell 2000 has been the stronger performer lately. It has a higher proportion of more speculative, lower quality stocks (i.e., those with lower or negative earnings), which have attracted more attention than the comparatively higher-quality (i.e., those with higher or positive earnings) stocks in the S&P 600 index.

While President Donald Trump hangs fire on rescheduling cannabis, we continue to get signs that support what I call the inexorable march towards greater acceptance of cannabis use and legal reform that will help public companies in the space.

We see momentum for cannabis acceptance and reform in: Ongoing federal-level evidence that Trump may actually follow through on his campaign promise to reschedule cannabis; ongoing robust state-level sales growth; opinion polls; and scientific evidence that cannabis has medical benefits.

What shutdown? What tariffs? The market couldn’t care less. It just keeps moving higher.

After making a series of new highs throughout the summer, the S&P had a great September. October looks good so far, too. Stocks are being driven higher by technology and the artificial intelligence trade. The technology sector is up 9% over the past month.

I was recently asked, “Why are there so few small-cap stocks in the Cabot Turnaround Letter portfolio?” That’s a fair question—a timely one at that—so I’ll address it here.

This week, about half of the Federal government shut down, causing stocks to waver and gold prices to spike due to uncertainty over how and when the budget duel might end. There are few winners in this tug-of-war scenario. This is not a good time for this showdown given weak business spending, a weak dollar, and weak job growth. The market normally takes these political fights in stride depending how long they last. Stay positive but cautious, and as always look for some profits to take off the table.

The market continues to hover near the high. The S&P is up over 13% year to date and about 38% from the April low.

The bull market continues to roll on. Stocks are hovering within bad-breath distance of the new high made just last week.

Why shouldn’t the market keep climbing? We are in a Fed rate-cutting cycle. There’s no sign of recession. And the artificial intelligence catalyst is driving projected earnings in the market’s largest sector into the stratosphere. It looks like stocks want to move higher and will continue to do so unless something pops up that makes them go down.

As the dividing line between the public and private sectors becomes increasingly blurred, it’s readily apparent that long-term investment decisions must now be evaluated through a new lens. And that means asking a simple question: “Could the financial asset I’m interested in acquiring be potentially influenced through direct federal intervention?”

WHAT TO DO NOW: Hold your dry powder for now. The elevated near-term risk for the market we had mentioned is beginning to play out, with the indexes pulling in, many stocks taking hits and, importantly, our Two-Second Indicator giving a warning sign. We’re not anxious to sell here, but we also want to see how this plays out given a couple of yellow flags that are out there. Tonight, we’ll stand pat with our good-sized (38%) cash position and will watch how things unfold.

We’re about to head into a crucial time of the year for small-cap stocks. That’s because the Q3 earnings season will fire up toward the end of October and run into early November.

This earnings season will let us know how small caps fared over the summer months and also give us a glimpse into how they’re expected to do in Q4 and the beginning of 2026.

Small caps have been outperforming large caps since the beginning of August.

The market has finally started to show some cracks the last couple days, but the bull market remains very much intact. Last week’s 25-basis-point Fed rate cut was expected, but should nonetheless act as a tailwind – or at least a floor raiser – in the coming months, especially as Jerome Powell and company signaled that they plan to cut twice more before year’s end. And yet, there’s no getting around the fact that stocks, as a whole, are overvalued, with the S&P 500 trading at 23.8x forward earnings – its highest point since late February.

Sell Dynatrace (DT) and Waystar (WAY)

My August pick, Argan (AGX), has become one of the core ways for small-cap investors to play the AI data center, natural gas power and electrification of everything themes. The company grew revenue by 50% last year. As such, expectations from Argan have been high, despite management’s continued conservativism given the current year growth rate will be slower (around 10%) than last year before ramping up again in FY27.

Shares of Byrna (BYRN) are trading modestly higher this morning after the company released preliminary revenue results for Q3.

Credo Tech (CRDO) up 10% on Earnings

WHAT TO DO NOW: The weakening of growth stocks that’s been going on for weeks has resulted in all-out selling this week—we came in with 43% in cash, which has helped, but today we’re selling the rest of our Palantir (PLTR) and Rubrik (RBRK) stakes, leaving us with a large 57% on the sideline. Details below.

With a slew of fresh ideas coming in tomorrow’s August Issue and a portfolio that may soon have too many ideas to stay on top of, I’m trimming one position today.

Sell a Quarter Position in Intel (INTC)

Most of our cannabis companies reported earnings in the past week.

Here are some of the key sector insights, followed by company updates.

Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.

The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.

Remaining invested in high-quality dividend paying stocks means your investments will continue to reward you even during bear 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.

Our instincts warn us that stocks reaching all-time highs are invariably overdue to fall. Sometimes yes, sometimes no. We examine two common scenarios involving stocks that are about to rise—or fall—from new high prices.

Here are two points to bear in mind when you’re setting a target price for your small-cap stock stop-loss.

Here’s exactly what I look for in dividend-paying stocks, whether they’re joining the High Yield, Dividend Growth or Safe Income tiers of our portfolio.

If professional investment companies are not making their decisions based on the price of the stock, neither should you.

Here are some common-sense, down-to-earth ways to control your risk, so that the market’s inevitable potholes never cause fatal damage to your portfolio.

More than six years after the Fed lowered the Federal Funds rate to 0%-0.25% in December 2008, the economy has strengthened to the point that the Fed is considering raising rates to prevent inflation.

I created Cabot Dividend Investor’s three-tiered portfolio to address the needs of the widest possible variety of investors with some combination of these goals. But this variety means that you need to figure out how to mix and match my recommendations to best fit your goals.

Here are some common questions we’re received about Cabot Dividend Investor.

Today, we take a look back at every sale made from the Cabot Dividend Investor portfolio from inception in February 2014 to the end of April 2015 to see how our sold stocks have fared.

Diversification is usually one of the first risk management principles investors learn. It’s simple enough to understand. At its most basic, diversification is simply an extrapolation of the old advice not to put all your eggs in one basket. And it’s good advice.