Issues
The past month has gone about as well as any bull could have hoped, with the market stampeding off the late March low -- and with nearly all of the top-down evidence looking positive today. Individual stocks have been a bit trickier, with leadership concentrated in AI names and with earnings season causing some gyrations; we’re standing pat and holding our still-large cash position tonight because of that. But don’t get us wrong -- we’re optimistic, and looking to extend our line as more leaders (preferably outside of AI) emerge during earnings season.
Back on April 23 at the market close, I suggested buying cannabis stocks in the sharp pullback that day right after the federal government announced cannabis rescheduling.
From opening prices the next day, cannabis stocks were recently up 18%. Not only that, but for the moment, cannabis stocks seem to have found a stable footing.
From opening prices the next day, cannabis stocks were recently up 18%. Not only that, but for the moment, cannabis stocks seem to have found a stable footing.
For investors in UnitedHealth Group (UNH), the last 18 months have probably felt like an eternity. After hitting a lifetime high north of 600 a share in late 2024, a rapid succession of shocks—ranging from leadership turmoil to compressed margins to Medicare policy changes—combined to crush the company’s stock over the next year-and-a-half, cutting its value by more than half.
But after the seemingly endless turbulence of that period, the stock has begun to stabilize while UnitedHealth’s turnaround is gaining significant traction, with the firm’s recent financial results showing better-than-expected recovery signs. For this and other reasons I’ll describe here, the stock appears worthy of our consideration.
But after the seemingly endless turbulence of that period, the stock has begun to stabilize while UnitedHealth’s turnaround is gaining significant traction, with the firm’s recent financial results showing better-than-expected recovery signs. For this and other reasons I’ll describe here, the stock appears worthy of our consideration.
This has been an amazing turnaround!
The market has made up for all the March losses and then some, before the war has even ended. Investors are clearly looking toward the post-war market. And the market usually gets these things right.
The inevitable post-war bounce has come early. Soon, we will see what lies beyond the war. It will likely be more uncertainty. The problem is that the war has further clouded what was an already uncertain economy over the remainder of the year. The economy was likely headed for a high level of growth. But the war probably put that off for a while.
The current situation creates another great income opportunity. The market is at all-time highs after a post-war bounce, before the war is over, and ahead of a very uncertain economic environment over the rest of the year. It’s a great time to take advantage of the recent rally and lock in high-priced calls on stocks near the highs while the market still has upward momentum.
In this month’s issue, I highlight covered calls on two more stocks. These will be the first calls sold in both positions as the market is providing a perfect vehicle to widen the high-income participation of more of the portfolio.
The market has made up for all the March losses and then some, before the war has even ended. Investors are clearly looking toward the post-war market. And the market usually gets these things right.
The inevitable post-war bounce has come early. Soon, we will see what lies beyond the war. It will likely be more uncertainty. The problem is that the war has further clouded what was an already uncertain economy over the remainder of the year. The economy was likely headed for a high level of growth. But the war probably put that off for a while.
The current situation creates another great income opportunity. The market is at all-time highs after a post-war bounce, before the war is over, and ahead of a very uncertain economic environment over the rest of the year. It’s a great time to take advantage of the recent rally and lock in high-priced calls on stocks near the highs while the market still has upward momentum.
In this month’s issue, I highlight covered calls on two more stocks. These will be the first calls sold in both positions as the market is providing a perfect vehicle to widen the high-income participation of more of the portfolio.
Tech took the wheel last week as a surge in semiconductors — led by Intel’s (INTC) stunning earnings beat that sent shares surging more than 20% to a record high — helped the Nasdaq extend its winning streak while the broader market ground out modest gains. The Iran ceasefire extension from President Trump mid-week kept risk appetite alive, though the Dow lagged as oil prices remained stubbornly elevated. For the week, the S&P 500 gained 0.6%, the Nasdaq added 1.5%, the Russell 2000 ticked up 0.4%, while the Dow Jones slipped 0.4%.
The market has basically acted as well as any bull could have hoped during the past month, showing some very rare strength that, historically, should portend nice gains in the months ahead. Of course, the worries of the world haven’t disappeared, so near-term, some digestion or rotation is certainly possible, especially if the relative quiet in the Middle East blows up. Still, while we remain flexible, we always go with the odds, which favor upside for the market and leaders down the road. We’ll stick with a level 7 on the Market Monitor for now, though we’d like to bump that up if we see some calmness going forward.
This week’s list has a broad range of ideas, both fundamentally and chart-wise. For our Top Pick, we’re going with a name that staged a long-term breakout in the fall and, after a tough correction, has re-emerged nicely as business accelerates.
This week’s list has a broad range of ideas, both fundamentally and chart-wise. For our Top Pick, we’re going with a name that staged a long-term breakout in the fall and, after a tough correction, has re-emerged nicely as business accelerates.
The market hit the pause button this week, settling into a holding pattern after going nowhere but up through the first three weeks of April. This week could go a long way toward determining where it goes from here, what with nearly half of all large-cap companies reporting earnings and Jerome Powell giving his last formal address as Fed chief. To account for possible volatility, today we add an undervalued blue-chip stock whose name everyone knows. It’s been a mainstay of Clif Droke’s Cabot Turnaround Letter for a while. And today, we add it to Cabot Stock of the Week.
Details inside.
Details inside.
Tech took the wheel last week as a surge in semiconductors — led by Intel’s (INTC) stunning earnings beat that sent shares surging more than 20% to a record high — helped the Nasdaq extend its winning streak while the broader market ground out modest gains. The Iran ceasefire extension from President Trump mid-week kept risk appetite alive, though the Dow lagged as oil prices remained stubbornly elevated. For the week, the S&P 500 gained 0.6%, the Nasdaq added 1.5%, the Russell 2000 ticked up 0.4%, while the Dow Jones slipped 0.4%.
Tech took the wheel last week as a surge in semiconductors — led by Intel’s (INTC) stunning earnings beat that sent shares surging more than 20% to a record high — helped the Nasdaq extend its winning streak while the broader market ground out modest gains. The Iran ceasefire extension from President Trump mid-week kept risk appetite alive, though the Dow lagged as oil prices remained stubbornly elevated. For the week, the S&P 500 gained 0.6%, the Nasdaq added 1.5%, the Russell 2000 ticked up 0.4%, while the Dow Jones slipped 0.4%.
Tech took the wheel last week as a surge in semiconductors — led by Intel’s (INTC) stunning earnings beat that sent shares surging more than 20% to a record high — helped the Nasdaq extend its winning streak while the broader market ground out modest gains. The Iran ceasefire extension from President Trump mid-week kept risk appetite alive, though the Dow lagged as oil prices remained stubbornly elevated. For the week, the S&P 500 gained 0.6%, the Nasdaq added 1.5%, the Russell 2000 ticked up 0.4%, while the Dow Jones slipped 0.4%.
The comeback of big tech dominated markets this week, with Explorer Dominator stocks posting gains while Explorer Disruptive stocks struggled a bit. The S&P 500 and Nasdaq both finished at record highs.
The April rally has been very encouraging. It’s important to remain optimistic but not to get too carried away, given current valuations. And that brings me to this week’s new recommendation.
The April rally has been very encouraging. It’s important to remain optimistic but not to get too carried away, given current valuations. And that brings me to this week’s new recommendation.
What a week it was for the bulls as the Strait of Hormuz went from a major chokepoint and concern for the market, to signs of hope that progress was being made, to “COMPLETELY OPEN AND READY FOR BUSINESS” to borrow President Trump’s all-caps announcement Friday (though this is back in question again!).
Updates
Now before you call me crazy concerning today’s newsletter headline, hear me out.
Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”
Even though large-cap names have garnered more than a fair share of attention among investors this year, I think a case can be made that companies with big capitalizations have a lot more room to run higher before they can be truly regarded as “overbought” or “played out.”
The market is digesting the push and pull of higher oil prices, a deeply divided Federal Reserve, prospects for a prolonged blockade of the Strait of Hormuz and fading momentum from the AI trade that helped push markets to all‑time highs earlier this month.
Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.
Despite the crosscurrents, the overall tone still tilts bullish, supported by investor comfort (for the time being) with the geopolitical tension, resilience in the U.S. economy, and improving visibility into earnings growth over the coming quarters.
Yesterday, four tech giants, Alphabet, Amazon, Meta and Microsoft, representing 22% of the S&P 500’s market value, reported strong quarterly earnings that highlighted the importance of AI.
You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.
You might think the above companies and their AI brethren are “asset light” companies but you would be very wrong.
It’s been a glorious April following a miserable March for the market. What happens in May may determine which direction stocks are headed for the rest of the year.
That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.
That’s probably overstating things a bit, but May should be crucial for the reasons we discussed last week: namely, the fate of the Iran war, but also the bulk of first-quarter earnings season and the introduction of a new Fed chair.
What war? This market is moving on. We may not be out of the woods yet, but investors are looking beyond the Iran war.
Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.
Stocks have already made up all losses from a rough March and then some. The S&P 500 had fallen 7.7% in the month of March by the 30th. Since then, the index has rallied over 13%. The S&P is now at a higher level than before the war began and is hitting new all-time highs.
The other day I was paid a visit by a roving ISP salesman who was pitching his company’s fledgling internet service over the local monopoly’s. We struck up a conversation and he asked what I did for a living. When I told him, his eyes lit up and he asked, “Got any good stocks you can recommend?”
Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation
Without thinking I blurted out, “Anything AI-related. You can’t go wrong.” The advice was only semi-facetious, for there’s undeniably a degree of truth behind it. My instinctive response to that question also prompted me to consider the question: just how long can the broad market continue its “all things AI” run without broader sector participation
Note: I’m out of town this week, so I’ll be a bit briefer on the update today—but I’m still checking my laptop a couple of times a day if you have any questions or comments. I’ll be back at my desk come Monday. Cheers.
WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.
WHAT TO DO NOW: Remain optimistic. The market and some leaders have hesitated, but all of our market timing indicators are bullish, and most stocks we own or are watching are working. Last Friday, we bought a half-sized stake in Nebius (NBIS) and added a 3% additional stake in ProShares S&P 500 Fund (SSO); earlier this week, we sold our small remaining position in GE Aerospace (GE); and tonight, we’ll buy a half-sized position (5% of the portfolio ) in Cava (CAVA). We’ll still have 46% in cash or so after these moves.
Despite all the headline noise lately we’re marching deeper into first‑quarter earnings season with the market’s path of least resistance still pointing higher.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
Optimism around the extension of the tentative ceasefire in the Middle East has reduced geopolitical anxiety to a seemingly manageable level. The U.S. economy continues to show resilience, and the corporate earnings outlook points toward meaningful growth in the coming quarters and years.
The old saying, “History doesn’t repeat itself, but it rhymes,” is an apt one for the stock market these last two years.
In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.
In early 2025, the S&P 500 raced to new all-time highs before peaking in late January/early February, only to get dragged down in March and April by a geopolitical crisis (tariffs/Liberation Day), before rallying in a V-shaped pattern as the severity of the crisis abated.
The market turned on the afterburners. The S&P 500 made up all the March losses and catapulted to a brand new high in a remarkably short time. It’s a market that sure looks like it wants to go higher. But stocks are being held back this week by more war uncertainty.
The current ceasefire with Iran expires on Wenesday night. Talks may not happen, and war talk is growing. The resumption of the war will almost certainly prompt a decline in the market. Aside from that near-term threat, investors are clearly looking past this war. Hopefully, it won’t last much longer.
The current ceasefire with Iran expires on Wenesday night. Talks may not happen, and war talk is growing. The resumption of the war will almost certainly prompt a decline in the market. Aside from that near-term threat, investors are clearly looking past this war. Hopefully, it won’t last much longer.
The market came roaring back to new highs last week after a tough March. But the war isn’t over yet, and there could be more bouncing around in the weeks ahead.
Investors are clearly already looking past this war, as there is a high degree of optimism that hostilities will soon end. There is probably still a big rally or two left in the tank when the war actually ends. Sure, there is still headline risk in the meantime. But the war is clearly fading as the biggest market catalyst and giving way to earnings.
Investors are clearly already looking past this war, as there is a high degree of optimism that hostilities will soon end. There is probably still a big rally or two left in the tank when the war actually ends. Sure, there is still headline risk in the meantime. But the war is clearly fading as the biggest market catalyst and giving way to earnings.
The old adage that markets trade on expectations, not news, was certainly validated in the wake of President Trump’s announcement last weekend of his intention to block the Strait of Hormuz.
Although the announcement was initially made as a categorical threat against any and all incoming vessels, it was later softened to a more targeted blockade in which the U.S. and other non-Iran-bound ships are generally allowed to transit the Strait.
Although the announcement was initially made as a categorical threat against any and all incoming vessels, it was later softened to a more targeted blockade in which the U.S. and other non-Iran-bound ships are generally allowed to transit the Strait.
Alerts
Microsoft (MSFT), FTAI Aviation (FTAI), Weatherford (WFRD) and Alamos Gold (AGI) Deliver
The Trump administration today rescheduled cannabis, at least halfway.
* Medical cannabis was rescheduled immediately by a formal order from the Justice Department (DOJ) and the Drug Enforcement Administration (DEA).
* Medical cannabis was rescheduled immediately by a formal order from the Justice Department (DOJ) and the Drug Enforcement Administration (DEA).
WHAT TO DO NOW: Today we’re going to make one move in the Model Portfolio—selling the rest of our small-ish position in GE Aerospace (GE), but we’ll be looking to put some money to work in the days ahead. Our cash position will be around 53% after the moves. Details below.
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.
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.
WHAT TO DO NOW: The market continues to rush higher, with a lot of good news released today helping the major indexes, though many growth stocks are resting while economically-sensitive names ramp. A short-term wobble is possibly after the last three weeks, and earnings season will surely throw us a few curveballs, but with the evidence turning very strong, we’re putting a bit more money to work today -- we’ll buy a half-sized stake in Nebius (NBIS) today and add a 3% position to our ProShares S&P Fund (SSO), leaving us with 48% in cash. Details below.
Sell Atmus Filtration (ATMU); Advanced Energy Industries (AEIS) Moves to Hold
WHAT TO DO NOW: Do some more buying. The evidence has continued to improve, with our Cabot Tides now positive, joining the Aggression Index last week. Of course, this is still a news-driven environment and with many names extended to the upside, there’s risk of an upcoming wobble. But we always go with the evidence, and with more green lights, we’re going to add to our stakes in three names we already own, buying 3% additional stakes in Marvell (MRVL), Dell (DELL) and Macom Tech (MTSI). That will leave us with around 56% in cash, though we’ll likely put more money to work soon if the bulls remain in control.
Portfolios
Strategy
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.