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%.

Nuclear energy is a $2 trillion industry waiting to explode. And while some of the bigger-name providers of it have seen their share prices rise manyfold over the last year, other companies that provide nuclear power have remained under the radar – and undervalued.

That includes this month’s new addition. It’s a California utility company that’s one of the largest electricity providers in the country – and it has a nuclear plant that’s starting to get into the (you guessed it) artificial intelligence game.

Details inside.

Today we’re taking a half-sized position in an emerging MedTech company disrupting the insulin market. It has developed a fully automated device that removes many of the headaches associated with insulin pumps, which have kept adoption of those systems in check.

It’s a rapid-growth company with one product already approved by the FDA, and more solutions in the pipeline.

All the details are inside the November Issue of Cabot Small-Cap Confidential.

The market’s momentum continued last week as a benign inflation print and another round of solid earnings backed up bullish sentiment—with virtually all of the major indexes moving higher. For the week the S&P 500 rose 0.7%, the Dow Jones Industrial Average advanced 0.8%, the Nasdaq Composite jumped 2.2%, but the Russell 2000 slipped 1.4%.

The big-cap indexes have been leading for a while now, but more recently, we’ve seen an even greater dichotomy out there, with the broad market actually coming under pressure and with most (non-big-cap) indexes testing or breaking intermediate-term support. On the flip side, the number of growth-y stocks in good shape has actually increased. As we wrote last Friday, these sorts of divergences tell us the risk of some unpleasantness has increased, though that doesn’t guarantee it will happen and, if it does, when. Thus, it’s best to go with the flow right here—aiming to buy strong, fresh leaders at decent entry points, but also being willing to book partial profits on the way up and raise stops when needed. We’ll again leave our Market Monitor at a level 7.

This week’s list has a major growth tilt, which goes along with the emergence of many growth stocks from multi-week (or, sometimes, multi-month) consolidations. Our Top Pick is getting going from a two-and-a-half-month rest following another great quarterly report.

The major indexes continue to hover near all-time highs, even as more issues beneath the surface crop up. Another strong earnings season, dwindling U.S.-China trade tensions, and another interest rate cut are helping prop stocks up, even as volatility begins to creep higher again. So today, to account for a possible pullback, we opt for a stock that’s a household name but one that has become so undervalued that Clif Droke just added it to his Cabot Turnaround Letter portfolio.

Details inside.

The market’s momentum continued last week as a benign inflation print and another round of solid earnings backed up bullish sentiment—with virtually all of the major indexes moving higher. For the week the S&P 500 rose 0.7%, the Dow Jones Industrial Average advanced 0.8%, the Nasdaq Composite jumped 2.2%, but the Russell 2000 slipped 1.4%.

The market’s momentum continued last week as a benign inflation print and another round of solid earnings backed up bullish sentiment—with virtually all of the major indexes moving higher. For the week the S&P 500 rose 0.7%, the Dow Jones Industrial Average advanced 0.8%, the Nasdaq Composite jumped 2.2%, but the Russell 2000 slipped 1.4%.

We’re seeing lots of crosscurrents in the market right now, especially when it comes to the evidence -- the big-cap indexes are in good shape and we’ve seen a few more breakouts from growth stocks ... but the broad market is very iffy and most other indexes are stuck in the mud. We think it’s best to go with the flow--ditching stocks that break down but selectively adding stronger, fresher names, all while holding some cash for future buying power (if more breakouts come during earnings season) and for cushion (if the market weakens again). We’ve had a few changes in the past two weeks (including some in our special bulletin today), and we go over all the details in tonight’s issue.

Cannabis investors have turned into bored apes.

After President Donald Trump said on August 11 he’d get around to cannabis reform “in a few weeks,” cannabis speculators concluded making money was as simple as pulling out a calendar, counting forward three weeks, and buying ahead of the expected big pop on that date – which was in early September.

It goes without saying that a big part of being a turnaround investor is having a contrarian bent. Let’s face it, we’re a hardy bunch who typically shun the crowd and buy what are, in most cases, stocks that are completely out of vogue with the typical market participant.

Stocks made yet another new high this week.

The S&P 500 has returned 17% this year and is well on its way to another 20%-plus return year, making it three consecutive years of such returns for the first time in nearly 30 years. Sure, the market likes rate cuts, but artificial intelligence is the main force driving the market higher.

Technology stocks, which now comprise more than a third of the S&P index, have driven the market higher for most of this three-year-old bull market. While AI is the primary driver of the market, it isn’t about just technology stocks anymore. The AI catalyst is driving other sectors higher.

AI is transforming the utility sector. The best stocks now offer strong growth in addition to defense. After being stagnant for decades, electricity demand is exploding. AI requires enormous amounts of electricity for the data centers that house the computer components. Electric vehicle proliferation and rapidly growing onshoring of manufacturing are also juicing demand.

In this issue, I highlight one of the best utility stocks on the market. This unprecedented environment is transforming the market’s most defensive sector into one that also offers exciting growth. The combination of defense and growth is unbeatable.

The market just keeps on going. Both the S&P and the Nasdaq made yet another new high on Monday. And that makes me nervous. I guess I’m just not built to receive continuing good news without getting suspicious.

So much for the cranky post-summer investor and the historically rough September. The S&P is up 3.4% for the month so far. It’s also up 13.8% YTD and 38% from the April low. Why not? We’re in a Fed rate-cutting cycle. The AI catalyst is going strong. And the economy is nowhere near recession.

Thursday’s massive rally in Intel (INTC), a Cabot Turnaround Letter portfolio holding, did more than just underline the just-announced $5 billion stake that Nvidia (NVDA) initiated in the company. It also highlighted the degree to which growing federal involvement in tech- and defense-related companies—particularly those used to enable AI and other “mission critical” applications—has been driving the seemingly endless rallies of many leading tech sector stocks.

Investors got the 25bps cut we expected yesterday, and as a little bonus, the Fed’s dot plot indicates potential for two more rate cuts this year. That’s what the CME’s Fed Watch tool is projecting as of mid-morning today as well.

That said, the bond market might not fully believe it. The 10-year Treasury bond yield is trading higher today.

Alibaba (BABA) shares surged 15.5% this week as the company announced that it had completed a roughly $3.2 billion capital raise. Better yet, Baidu (BIDU) shares jumped a stunning 29% in the stock’s first week as an Explorer recommendation.

But could quantum computing be a bigger investment opportunity than artificial intelligence (AI) as the U.S.-China rivalry escalates?

Value stocks have outperformed the market of late, with the Vanguard Value Index Fund (VTV) up 2.9% in the last month vs. a 2.3% return in the S&P 500. Granted, that’s minuscule outperformance, but it’s a sign that investors are starting to look for value with the major indexes at or near all-time highs for the last couple months.

The market is at another new high and looking good. Anticipated Fed rate cuts and a revitalized artificial intelligence trade are driving stocks higher.

It’s Fed Day! And a rate cut is expected. That’s even better than Prince Spaghetti night to Wall Streeters. More than 90% of traders are expecting the first fed funds rate cut in 2025 to be 0.25%. Hopes for a 0.50% cut likely went out the window with the higher-than-expected August CPI number.

Stocks made another new high this week as investors expect a resumption of Fed rate cuts on Wednesday.

The Fed Chairman indicated that the fed funds rate will be cut at the September meeting during his Jackson Hole comments last month. Wall Street traders are pricing in a 90%-plus probability of a 0.25% cut on Wednesday. And consensus expectations are for two more such cuts before the end of this year.

The ultimate “fear gauge” isn’t the CBOE Volatility Index (VIX), as financial market pundits often insist. My contention is that it’s actually gold, which arguably is the most historically reliable barometer of how worried the average investor is over various economic, geopolitical and market-related developments.

WHAT TO DO NOW: The top-down, market-wide evidence remains in good shape, and encouragingly, growth stocks have revved up decently over the past week, though the action remains heavily concentrated in AI infrastructure-type names. There are still lots of crosscurrents and many names are hitting the occasional pothole, though, so picking your stocks and spots remains vital. In the Model Portfolio we’re making one new buy—a half-sized stake in Alnylam Pharmaceuticals (ALNY)—while placing MP Materials (MP) on Hold. We could have some other moves in the next few days (including averaging up on names in the portfolio), but tonight we’ll buy ALNY and go from there. Our cash position will be around 43%.

With jobs numbers (and revisions) looking pretty iffy and inflation numbers looking as expected (CPI, today), if not slightly better (PPI, yesterday), the chances of the Fed cutting rates next Wednesday are essentially a lock.

In fact, the only reason the probability of a 25bps cut is only 89% is because the chance of a 50bps cut is 11%!

The market likes this news very much. And so do small caps.

This is, almost certainly, our last update before the Fed starts slashing interest rates for the first time this year. According to the CME Group’s FedWatch Tool, there is now a 100% chance Jerome Powell and company will cut rates by some amount on September 17; 90% think it will be by 25 basis points, another 10% think it will be by 50 basis points, much like last September.

The waiting game continues. President Donald Trump teased cannabis rescheduling in an August 11 press briefing, suggesting it would happen in a few weeks.

A month has passed, but no joy yet for cannabis investors.

While it would make more sense to reschedule closer to the 2026 mid-term elections for greater political impact, media reports once again recently cited Washington, D.C., insiders who say rescheduling will happen soon.

WHAT TO DO NOW: The indexes continue to look good, and the big-picture (months down the road) outlook is very favorable. But growth stocks remain hit and miss, with some newer names perking up but many potholes out there, too. Today, we’re going to sell one-third of our stake in GE Aerospace (GE), which has been a fine performer, but it’s been lagging a bit, got hit today and many in the group have topped. We’ll take a few chips off the table and hold the rest, leaving us with around 42% in cash.

Doximity (DOCS) Delivers

National Grocers (NGVC) stock should have a good day after posting a solid Q3 FY 25 and raising guidance for the rest of the year. Revenue in Q3 grew 6.3% to $328.7, daily average comparable store sales grew 7.4%, net income grew 26% to $11.6 million and adjusted EPS grew 34% to $0.54. The company declared a $0.12 dividend, payable on September 17.

Primo Brands (PRMB), Dynatrace (DT) and Dutch Bros (BROS) Report

Sell Remaining Quarter of Paramount Global (PARA). Bloomin’ Brands (BLMN) Earnings Update.

Shares of A10 Networks (ATEN) are trading higher today after the company beat Q2 expectations on both the top and bottom lines. Revenue grew 15.5% to $69.4 million (beating by $3.3 million) while adjusted EPS grew almost 17% to $0.21, beating by $0.02.

ThredUp (TDUP), Sportradar (SRAD) and Alamos Gold (AGI) Report

WHAT TO DO NOW: The market has finally seen some selling this week, with two downside reversals and then today’s big drop on tariff and economic fears. Our Cabot Tides are now on the fence as the broad indexes have sagged, though with 30% cash already on the sideline, we’re taking things on a stock-by-stock basis. Today that means pulling the plug on Snowflake (SNOW), which is cracking support today. This will raise our cash level to 39%—some of which we might redeploy into a stronger name when the indexes find support. Details below.

Enovix (ENVX) reported Q2 results after the closing bell yesterday. Results were generally in line with the pre-announced results (from early July), with $7.5 million in revenue and an EBITDA loss of $20.1 million ($1.3 million less than the pre-announced amount).

Carpenter Technology (CRS) & Microsoft (MSFT)

MLPs (short for master limited partnership) are exempt from U.S. corporate taxes in exchange for passing on most of their income to investors, who are called unitholders. As a result of this unusual situation, unitholders accept the tax burden on the distributions they receive from the MLP.

One of the things many investors like best about dividend income is that it can qualify for the lower Federal capital gains tax rate. For investors in the 25% to 35% marginal tax bracket, that’s 15%, and for those in lower brackets, it’s 0%. But not all dividends and distributions qualify.

Real estate investment trusts are special-purpose entities, with special tax status, that own real estate and pass along most of the income from the real estate (rents or mortgage payments) to shareholders. They can own any type of real estate, and many specialize in one type.

This month, I’m considering making the first sale from our portfolio, to cut our losses in Seadrill (SDRL). I think now is a good time to address our approach to selling, which stems from our focus on long-term, income-oriented returns.

Guide to Options Trading

Even if you’ve been investing for decades, income investing can introduce a lot of new lingo and acronyms, which are not always well explained. Here are some of the key terms I use in Cabot Dividend Investor or that you may see as you research your investments further.

Using Options to Hedge a Portfolio


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.

Here some of the most common questions Mike Cintolo gets from the readers of Cabot Top Ten Trader.