Issues
*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, January 20 due to the market holiday next Monday, January 19 in observance of Martin Luther King, Jr. Day.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, January 20 due to the market holiday next Monday, January 19 in observance of Martin Luther King, Jr. Day.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
A broad-based rally carried U.S. equities to fresh record territory last week as investors cheered softer labor data and tilted back toward risk. For the week, the S&P 500 advanced by 1.8%, the Dow climbed 3%, the Nasdaq rose 1.9%, and the Russell 2000 led the charge, adding 4.6%.
The flip of the calendar has brought some wild action, and overall, growth stocks and funds remain stuck in the mud, unable to make much progress (even including the Nasdaq itself). We remain cautious right now and, in fact, are placing two of our stocks on Hold today as they’ve been weighed down by the environment. That said, while we’re holding lots of cash, we remain flexible, as tons of names are in consolidations and are presenting at key conferences (which have become like earnings reports at times) next week—if we see many breakouts, we’ll pounce, but for now, we advise a bit more patience.
Welcome to our 2026 TOP PICKS issue! This is one of my favorite issues each year as our Cabot analysts take a deep look at their portfolios and share their top stock ideas for 2026.
You’ll find a well-diversified selection of stocks—growth, value, dividend payers, metals, technology, healthcare, retail, manufacturing, and much more!
I hope you’ll find one or more to your liking!
You’ll find a well-diversified selection of stocks—growth, value, dividend payers, metals, technology, healthcare, retail, manufacturing, and much more!
I hope you’ll find one or more to your liking!
Today we’re diving into a fast‑growing oilfield‑services company that sits at the center of one of the most powerful energy build‑outs happening anywhere in the world.
This company is a pure‑play operator in the Middle East and North Africa (MENA) – home to the steadiest upstream spending on the planet – and it just secured a multi‑billion‑dollar contract that makes it the largest unconventional completions provider in the region.
With national oil companies racing to expand gas production to fuel AI, data centers, and industrial growth, this stock is positioned to benefit from multi‑year demand in the MENA region.
All the details are inside the January issue of Cabot Small‑Cap Confidential.
This company is a pure‑play operator in the Middle East and North Africa (MENA) – home to the steadiest upstream spending on the planet – and it just secured a multi‑billion‑dollar contract that makes it the largest unconventional completions provider in the region.
With national oil companies racing to expand gas production to fuel AI, data centers, and industrial growth, this stock is positioned to benefit from multi‑year demand in the MENA region.
All the details are inside the January issue of Cabot Small‑Cap Confidential.
The bull market enters its fourth year, with no signs of slowing. That bodes well for all stocks; growth is likely to continue to outperform, though the gap between growth and value titles appears to be narrowing. To kick off 2026 in style, today we fuse the two by investing in a traditional growth stock (and a household name) that has been so beaten down in recent months that it is now deeply undervalued, at least compared to its historical norm. We also “Retire” a stock from our Growth & Income Portfolio after it eclipsed our price target in just four months.
Details inside.
Details inside.
Despite a holiday-shortened week and light volume, U.S. stocks pulled back from recent highs last week as year-end positioning and lack of fresh catalysts weighed on sentiment. The S&P 500 and Nasdaq slipped after failing to sustain record levels, while tech and small caps bore the brunt of profit-taking amid mixed breadth. For the week, the S&P 500 fell about 1%, the Dow lost roughly 0.7%, the Nasdaq slid nearly 1.5%, and the Russell 2000 dropped by around 2.1%.
The calendar has flipped, and so far the early-January effect has been in effect, with some volatile ups and downs, as well as some sharp rotation into and out of certain areas. Still, we always go with the evidence, and stepping back, not much has changed: For the overall market, the evidence is tilted higher, though growth stocks look worse, still in intermediate-term sideways-to-down phases for most names, but it depends where you look. Overall, we’ll leave our Market Monitor at a level 7 from here, but we’re flexible and will be keying off any breakouts or breakdowns among individual stocks.
Our first list of the New Year is a mix between strong growth titles, aerospace/defense-related names and cyclical stocks. Our Top Pick is a blue-chip growth name that has a history of stair-stepping higher over time—and whose stock just broke out from a three-month range last week.
Our first list of the New Year is a mix between strong growth titles, aerospace/defense-related names and cyclical stocks. Our Top Pick is a blue-chip growth name that has a history of stair-stepping higher over time—and whose stock just broke out from a three-month range last week.
The bull market marches into a fourth year. On the heels of three straight years of double-digit gains, can the S&P 500 make it four in a row? Wall Street thinks it can come close, with the average predicted return among 21 analysts surveyed by Bloomberg coming it at 9% in 2026. And not one of those analysts thinks stocks will be down this year.
So to kick off the new year in style,let’s stay in growth mode by adding a new pick from Mike Cintolo in his Cabot Growth Investor newsletter.
Details inside.
So to kick off the new year in style,let’s stay in growth mode by adding a new pick from Mike Cintolo in his Cabot Growth Investor newsletter.
Details inside.
Despite a holiday-shortened week and light volume, U.S. stocks pulled back from recent highs last week as year-end positioning and lack of fresh catalysts weighed on sentiment. The S&P 500 and Nasdaq slipped after failing to sustain record levels, while tech and small caps bore the brunt of profit-taking amid mixed breadth. For the week, the S&P 500 fell about 1%, the Dow lost roughly 0.7%, the Nasdaq slid near 1.5%, and the Russell 2000 dropped by around 2.1%.
Despite a holiday-shortened week and light volume, U.S. stocks pulled back from recent highs last week as year-end positioning and lack of fresh catalysts weighed on sentiment. The S&P 500 and Nasdaq slipped after failing to sustain record levels, while tech and small caps bore the brunt of profit-taking amid mixed breadth. For the week, the S&P 500 fell about 1%, the Dow lost roughly 0.7%, the Nasdaq slid near 1.5%, and the Russell 2000 dropped by around 2.1%.
Cannabis stocks are down sharply ever since the group got its best news in decades – President Donald Trump’s December 18 executive order to reschedule the plant.
Using the AdvisorShares Pure US Cannabis exchange-traded fund (MSOS) as a proxy, the group is off 32%.
Using the AdvisorShares Pure US Cannabis exchange-traded fund (MSOS) as a proxy, the group is off 32%.
Updates
It’s not always that the market outperforms in October, but this year’s “jinx month” came and went on a positive note (albeit with a minor setback earlier in the month).
Granted, there was some volatility on the political front, but as far as the equity market was concerned, it wasn’t too bad. The S&P 500 index stood at a record high as recently as Wednesday, and Wall Street’s favorite stocks and ETFs are mainly trending higher as we exit the month.
Granted, there was some volatility on the political front, but as far as the equity market was concerned, it wasn’t too bad. The S&P 500 index stood at a record high as recently as Wednesday, and Wall Street’s favorite stocks and ETFs are mainly trending higher as we exit the month.
The Russell 2000 and S&P 600 SmallCap Index have pulled back from recent highs, but the data suggests they’ll go higher in the weeks ahead.
Bank of America’s seasonality analysis shows November tends to be a strong month for the market. The Russell 2000 is up 70% of the time, with an average gain of 2.64%. Small-cap industrials tend to be particularly strong, up by 6.1% on average, and rising 79% of the time.
Bank of America’s seasonality analysis shows November tends to be a strong month for the market. The Russell 2000 is up 70% of the time, with an average gain of 2.64%. Small-cap industrials tend to be particularly strong, up by 6.1% on average, and rising 79% of the time.
As expected, the Federal Reserve cut interest rates by a quarter point yesterday. This was largely already baked into the market. Looking ahead, Fed Chairman Jerome Powell had an impactful comment: “What do you do if you are driving in the fog? You slow down.”
This comment is consistent with our strategy of alternating aggressive and conservative stocks, taking partial profits to build cash, and seeking international diversification.
This comment is consistent with our strategy of alternating aggressive and conservative stocks, taking partial profits to build cash, and seeking international diversification.
This Halloween, there’s nothing to fear. At least not for investors.
OK, nothing is a bit of an exaggeration. Today’s anticipated meetup between President Trump and Chinese President Xi Jinping could go sideways, putting high tariffs between the two mega-powers back on the menu. There could be some key earnings blowups ahead as we remain in the thick of third-quarter reporting season. And the government shutdown is more than a month old at this point, which could take a toll on the market.
OK, nothing is a bit of an exaggeration. Today’s anticipated meetup between President Trump and Chinese President Xi Jinping could go sideways, putting high tariffs between the two mega-powers back on the menu. There could be some key earnings blowups ahead as we remain in the thick of third-quarter reporting season. And the government shutdown is more than a month old at this point, which could take a toll on the market.
The market just keeps on going. So far this week, the S&P 500 has hit a new high on both Monday and Tuesday.
The S&P 500 is now up about 17% year to date with more than two months left in 2025. There is a good chance that the index delivers another 20%-plus return year, which would make it three consecutive years of such returns for the first time in nearly 30 years. Sure, we’re in a Fed rate-cutting cycle. Investors love that. But artificial intelligence is the main force driving the market higher.
The S&P 500 is now up about 17% year to date with more than two months left in 2025. There is a good chance that the index delivers another 20%-plus return year, which would make it three consecutive years of such returns for the first time in nearly 30 years. Sure, we’re in a Fed rate-cutting cycle. Investors love that. But artificial intelligence is the main force driving the market higher.
One of the most attractive industries right now for turnaround-focused investors is chemicals, with the share prices for many major producers in this group hovering at or near multi-year lows.
The reasons for this collective underperformance vary, and while not all chemical companies are in a classic turnaround situation, many of them are under serious margin pressures and are implementing strategic plans aimed at improving their company’s fortunes and reversing the stock price declines.
The reasons for this collective underperformance vary, and while not all chemical companies are in a classic turnaround situation, many of them are under serious margin pressures and are implementing strategic plans aimed at improving their company’s fortunes and reversing the stock price declines.
WHAT TO DO NOW: The market continues to hang in there, but growth stocks have been far trickier, with many pulling back sharply, others testing support and a few breaking down. Still, it’s mostly mixed, with some names perking up, so we’re staying flexible, especially as earnings season plows ahead. This week we sold two names that cracked—MP Materials (MP) and GE Vernova (GEV)—which leaves us with 43% in cash. We’ll stand pat tonight, though we could redeploy some of the money into stronger names if growth stocks continue to stabilize.
There’s been a jump in volatility among individual stocks and some sectors (gold, oil, retail investor favorites, etc.), but at an index level, things continue to be pretty smooth. The S&P 600 SmallCap Index is trading higher than it was a week ago.
Let’s talk about bubbles.
There’s been a whole lot of investor speculation of late over whether we’re near an artificial intelligence bubble, akin to what we saw from the dot-com bubble at the turn of the century or the housing bubble that led to the 2008-09 Great Recession. Indeed, with AI spending (an estimated $300 to $400 billion this year) outpacing revenue (an estimated $60 billion this year) by roughly a 6-to-1 ratio – about double the capital expenditures-to-revenue ratio just before the dot-com bubble burst – the angst over an AI bubble is understandable, and perhaps warranted.
There’s been a whole lot of investor speculation of late over whether we’re near an artificial intelligence bubble, akin to what we saw from the dot-com bubble at the turn of the century or the housing bubble that led to the 2008-09 Great Recession. Indeed, with AI spending (an estimated $300 to $400 billion this year) outpacing revenue (an estimated $60 billion this year) by roughly a 6-to-1 ratio – about double the capital expenditures-to-revenue ratio just before the dot-com bubble burst – the angst over an AI bubble is understandable, and perhaps warranted.
Looking good. The bull market is enduring the historically troubling months of September and October with nary a sign of resistance.
The S&P 500 is up about 15% year to date and within a whisker of the all-time high, as investors are more excited about earnings than worried about tariffs or the government shutdown. And why shouldn’t they be? Government shutdowns are always temporary. And tariff negotiations always culminate in an arrangement that satisfies the market.
The S&P 500 is up about 15% year to date and within a whisker of the all-time high, as investors are more excited about earnings than worried about tariffs or the government shutdown. And why shouldn’t they be? Government shutdowns are always temporary. And tariff negotiations always culminate in an arrangement that satisfies the market.
Stocks started this week on a strong note. After sluggish performance over the past month, the S&P 500 is gaining steam.
Investors are focusing on the promising earnings season and a tamping down of tensions with China. The Trump administration has moderated its stance on China and will meet with them in the weeks ahead. Meanwhile, earnings season is heating up with Tesla (TSLA), Intel (INTC), Netflix (NFLX), and Coca-Cola (KO) reporting this week.
Investors are focusing on the promising earnings season and a tamping down of tensions with China. The Trump administration has moderated its stance on China and will meet with them in the weeks ahead. Meanwhile, earnings season is heating up with Tesla (TSLA), Intel (INTC), Netflix (NFLX), and Coca-Cola (KO) reporting this week.
The introduction of fear to the financial market can be either a good thing or a bad thing—but seldom is it neither.
In the first case, increasing fear among investors in an environment characterized by fairly limited public participation (i.e. an uncrowded market), relatively unstretched valuations and plenty of liquidity often results in the “wall of worry” phenomenon in which stocks actually benefit from the rising fear levels.
In the first case, increasing fear among investors in an environment characterized by fairly limited public participation (i.e. an uncrowded market), relatively unstretched valuations and plenty of liquidity often results in the “wall of worry” phenomenon in which stocks actually benefit from the rising fear levels.
Alerts
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).
WHAT TO DO NOW: The market remains in good shape, and we remain overall bullish, though we’re not flooring the accelerator given that earnings season is revving up. Today’s bulletin concerns Uber (UBER), which is cracking some support today on another round of autonomous news from others—we’re going to cut bait. On the buy side, we’re starting a half-sized stake in Oracle (ORCL), which quacks like a liquid leader.
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.