Issues
It’s been a highly unusual market environment, with the overall market grinding slightly higher, but with growth stocks generally under pressure as more leaders crack or test key support. We continue to think great things will happen when looking out a few months, but we also have to deal with the here and now and have been shedding names as they act abnormally, giving us a cash position north of 50%. We’d prefer to have that lower, but are holding it tonight, waiting for at least some support to show up before putting some of it back to work.
A strong earnings season has propelled the broad market to fresh highs, and as we enter mid-August, “rotation” has become the buzzword of the moment.
We’ll respect this action by not pressing too hard on the gas today. But at the same time, with a number of attractive setups floating across my screen, we’re not going to be wildly conservative.
We step up to the plate and take a swing at three new positions today.
We’ll respect this action by not pressing too hard on the gas today. But at the same time, with a number of attractive setups floating across my screen, we’re not going to be wildly conservative.
We step up to the plate and take a swing at three new positions today.
Led higher by the Russell 2000 (IWM), which gained 3% on the week, the leading indexes saw extreme rotation but closed the week higher as the S&P 500 rose by 1%, the Dow added 1.7%, and the Nasdaq gained 0.8%.
As we roll toward Labor Day, it’s pretty much the same story when it comes to the market: Most of the evidence is at least leaning positive and we see many recent positive earnings reactions, which is a plus—but there also remain many crosscurrents out there, with plenty of selling on strength as many sectors chop sideways. We’re sticking with the same stance—holding our strong performers, but tightening stops on names that wobble and being selective on the buy side, aiming for strong entry points in case more air pockets emerge. We’ll once again leave our Market Monitor at a level 7.
This week’s list was affected by last week’s rotation, but our Top Pick is a name that had a big run but has now dipped in an orderly fashion for the past month.
This week’s list was affected by last week’s rotation, but our Top Pick is a name that had a big run but has now dipped in an orderly fashion for the past month.
Stocks inched further into record territory this week. And while there’s another big news event to weather this week (the Fed’s Jackson Hole meeting and Jerome Powell press conference), the market has already motored ahead in the face of a bad July jobs report and escalating inflation. The real test is likely to come in September, historically the worst month for stocks as Wall Street returns from its summer vacation and sells off its laggards. So today, we add a bit of safety in the form of a low-beta, high-yield utility courtesy of Cabot Dividend Investor Chief Analyst Tom Hutchinson. But this utility acts more like a growth stock, thanks to AI and data center buildouts.
Details inside.
Details inside.
Led higher by the Russell 2000 (IWM), which gained 3% on the week, the leading indexes saw extreme rotation, but closed the week higher as the S&P 500 rose by 1%, the Dow added 1.7%, and the Nasdaq gained 0.8%.
Led higher by the Russell 2000 (IWM), which gained 3% on the week, the leading indexes saw extreme rotation, but closed the week higher as the S&P 500 rose by 1%, the Dow added 1.7%, and the Nasdaq gained 0.8%.
All in all, not a bad month. The stock markets had a nice bounce. The unemployment rate held steady at 4.2%; productivity increased (by 2.4%), higher than economists expected; and while home prices continued to rise in certain areas of the country (Northeast and Midwest), nationwide, they fell by 4.9%, to $401,800, on average.
And best of all, the turmoil regarding tariffs doesn’t seem to be affecting earnings much.
FactSet reported that, so far, 90% of S&P 500 companies have announced second-quarter earnings, and 81% have reported a positive EPS surprise and a positive revenue surprise.
That gives us an 11.8% earnings growth year over year—not bad!
And best of all, the turmoil regarding tariffs doesn’t seem to be affecting earnings much.
FactSet reported that, so far, 90% of S&P 500 companies have announced second-quarter earnings, and 81% have reported a positive EPS surprise and a positive revenue surprise.
That gives us an 11.8% earnings growth year over year—not bad!
This was a great week for Explorer stocks.
Coeur Mining (CDE) shares were up 19.6% this week following last week’s 13% gain after quarterly revenue was up 117% year over year. Dutch Bros (BROS) shares were up 16.9% this week. Sea Limited (SE) shares were up 17.3% this week following net income in the second quarter increasing by more than fivefold to $414 million.
Coeur Mining (CDE) shares were up 19.6% this week following last week’s 13% gain after quarterly revenue was up 117% year over year. Dutch Bros (BROS) shares were up 16.9% this week. Sea Limited (SE) shares were up 17.3% this week following net income in the second quarter increasing by more than fivefold to $414 million.
Artificial intelligence is a massive catalyst that is changing the market. It is spreading beyond technology and transforming other industries.
Utilities are companies that provide water, energy, and electricity to homes and businesses. They operate monopolies or near monopolies in their areas and the rates they charge are usually determined by regulatory bodies.
They usually pay strong dividend yields and provide highly defensive earnings that continue in any kind of economy. But, aside from the dividend and defensive characteristics, they’ve typically offered little else. Good stocks tend to outperform the indexes in flat or down markets and underperform them in bull markets. They are the market sector that most closely resembles bonds.
But skyrocketing electricity demand, mostly from data centers supporting AI, is changing that sector for the better. The phenomenon is making electric utilities growth businesses as well. The changing environment is adding another hugely positive dimension to these underrated stocks.
In this issue, I identify a beneficiary of that positive change that’s ahead of the pack. It’s an opportunity that has never existed before in modern times. The combination of defense and growth is the best of both worlds.
Utilities are companies that provide water, energy, and electricity to homes and businesses. They operate monopolies or near monopolies in their areas and the rates they charge are usually determined by regulatory bodies.
They usually pay strong dividend yields and provide highly defensive earnings that continue in any kind of economy. But, aside from the dividend and defensive characteristics, they’ve typically offered little else. Good stocks tend to outperform the indexes in flat or down markets and underperform them in bull markets. They are the market sector that most closely resembles bonds.
But skyrocketing electricity demand, mostly from data centers supporting AI, is changing that sector for the better. The phenomenon is making electric utilities growth businesses as well. The changing environment is adding another hugely positive dimension to these underrated stocks.
In this issue, I identify a beneficiary of that positive change that’s ahead of the pack. It’s an opportunity that has never existed before in modern times. The combination of defense and growth is the best of both worlds.
Led higher by major tech stocks (and especially AAPL), the Nasdaq gained nearly 4% last week, closing at a new record high. Less impressive were the other leading indexes, though their gains were very positive as well, as the S&P 500 added 2.4%, while the Dow rallied 1.3%.
The big-cap indexes remain in an uptrend, but it’s still a tricky and narrow environment, with just about every other index making no progress (net-net) for the past few weeks while they test their key 50-day moving averages. That means the intermediate-term trend is on the fence, which is obviously something that bears watching. On the positive side of the ledger, though, we’re still encouraged by what we’re seeing during earnings season, with many signs of strength from growth-y titles. All in all, we’re sticking with the stance we’ve been in—our Market Monitor remains at a level 7.
This week’s list has something for everyone, with strength seen in a variety of sectors. Our Top Pick just broke out of a beautiful launching pad after earnings, with some others in the general group also doing well.
This week’s list has something for everyone, with strength seen in a variety of sectors. Our Top Pick just broke out of a beautiful launching pad after earnings, with some others in the general group also doing well.
Updates
There have been plenty of market meltdowns over the years. Few have matched what’s happened since last Wednesday evening – so-called “Liberation Day” – when President Trump announced plans to place high tariffs on … the rest of the world. In the week that followed, stocks nose-dived by 13%, with both the Nasdaq and Russell 2000 swinging to a bear market last Thursday and Friday and the S&P 500 nearly following suit.
Until yesterday.
Until yesterday.
It’s time to buy stocks more aggressively.
That’s the case for stocks in general, but also cannabis stocks. Most cannabis companies aren’t really affected by tariffs. But their stocks have been hit recently by the shift to “risk-off” mode among investors.
That’s the case for stocks in general, but also cannabis stocks. Most cannabis companies aren’t really affected by tariffs. But their stocks have been hit recently by the shift to “risk-off” mode among investors.
It’s a disaster. There was a range of possibilities with the tariffs. The market’s worst fears came to fruition and the S&P crashed more than 5% on consecutive days for the first time since the onset of the pandemic.
Last week the Trump administration announced reciprocal tariffs on just about every nation that trades with the U.S. The tariffs were widespread and severe in many cases. That wasn’t what the market wanted. The S&P is now within a whisker of an official bear market (down 20% from the high on a closing basis). The technology-laden Nasdaq is already there.
Last week the Trump administration announced reciprocal tariffs on just about every nation that trades with the U.S. The tariffs were widespread and severe in many cases. That wasn’t what the market wanted. The S&P is now within a whisker of an official bear market (down 20% from the high on a closing basis). The technology-laden Nasdaq is already there.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Alcoa (AA), Atlassian (TEAM), Centuri Holdings (CTRI), SLB Ltd. (SLB) and Starbucks (SBUX).
Gold miner Agnico Eagle Mines (AEM) is well positioned in the ongoing tariff war to benefit from increasing safe-haven gold demand.
Gold miner Agnico Eagle Mines (AEM) is well positioned in the ongoing tariff war to benefit from increasing safe-haven gold demand.
In a tough week for markets, Explorer stocks held their own. Banco Santander (SAN) shares are up 50% so far in 2025, significantly outperforming bank and European indexes. Luckin Coffee (LKNCY) was up 10% this week and Sea Limited (SE) shares have risen 25% rise so far this year. All our dominating stocks held firm this week.
It was interesting to be in Tokyo and meeting for lunch today with a former Japan Ministry of Finance official as new tariffs of 24% on Japan were announced.
It was interesting to be in Tokyo and meeting for lunch today with a former Japan Ministry of Finance official as new tariffs of 24% on Japan were announced.
It started off as an ugly week for the market. But things have gotten better. Stocks flirted with the recent low on Monday but held strong and recovered. That’s a good sign. But is it enough?
Big tariff news is on the doorstep. Uncertainty abounds. It is unclear yet how many countries will be included in the reciprocal tariffs scheduled to take effect today and to what extent there will be exceptions. The market may be happier about things by the end of the week. But if it isn’t, stocks might go lower again.
Big tariff news is on the doorstep. Uncertainty abounds. It is unclear yet how many countries will be included in the reciprocal tariffs scheduled to take effect today and to what extent there will be exceptions. The market may be happier about things by the end of the week. But if it isn’t, stocks might go lower again.
It’s ugly again. The market recovered from the 10% correction bottom earlier this month. But it plunged again below the earlier low on Monday as tariff issues have taken center stage.
Hopefully, stocks will bounce off the low again, but it isn’t looking good right now. The tariff deadline is this week, and uncertainties abound. It is yet unclear how many countries will be included in the reciprocal tariffs and to what extent there will be exceptions. The market may be happier about things by the end of the week. But if it isn’t, stocks will likely go lower.
Hopefully, stocks will bounce off the low again, but it isn’t looking good right now. The tariff deadline is this week, and uncertainties abound. It is yet unclear how many countries will be included in the reciprocal tariffs and to what extent there will be exceptions. The market may be happier about things by the end of the week. But if it isn’t, stocks will likely go lower.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including GE Aerospace (GE), Paramount Global (PARA), SLB Ltd. (SLB), Starbucks (SBUX) and UiPath (PATH).
This month’s catalyst report features a mixed bag of longer-term attractive turnaround candidates in industries ranging from car rentals to dental equipment to semiconductors.
This month’s catalyst report features a mixed bag of longer-term attractive turnaround candidates in industries ranging from car rentals to dental equipment to semiconductors.
WHAT TO DO NOW: Remain defensive. The market has gotten off its duff somewhat this week, but as seen the past couple of weeks, there’s still plenty of selling and news-driven action out there. We do think it’s possible a repair process has begun, but right now, the trends of the major indexes and most stocks are pointed down, so we continue to advise a defensive stance. We’ll again stand pat tonight with our four small-ish positions and our big cash position, though we’ll be on the horn if we have any changes (including possibly re-jiggering the portfolio a bit) in the days ahead.
The S&P 600 SmallCap Index is flat over the last week.
The upside move from the extreme oversold conditions that began two weeks ago has faded as the market grapples with tariff uncertainty.
Uncertainty will continue to linger even though Trump clarified part of his tariff plan last night through an executive order imposing permanent tariffs on autos not produced in the U.S.
The upside move from the extreme oversold conditions that began two weeks ago has faded as the market grapples with tariff uncertainty.
Uncertainty will continue to linger even though Trump clarified part of his tariff plan last night through an executive order imposing permanent tariffs on autos not produced in the U.S.
The last two months have felt historically volatile.
Since Donald Trump took office for a second time and immediately started handing out tariffs like they were surprise take-home prizes at an Oprah taping (“YOU get a tariff, and YOU get a tariff!”), the market has been unsettled. And indeed, from mid-February through mid-March, things weren’t simply unsettled – they were bad. Both the S&P 500 and the Nasdaq entered correction territory – the fifth-fastest correction in the last 75 years, in the case of the S&P. Fears of higher inflation and possibly recession have come rushing back to the surface, consumer confidence is at a 12-year low, and interest rate angst is back in full force.
And yet, actual volatility – as measured by the VIX, a.k.a. the “investor fear gauge” – has been … fairly muted?
Since Donald Trump took office for a second time and immediately started handing out tariffs like they were surprise take-home prizes at an Oprah taping (“YOU get a tariff, and YOU get a tariff!”), the market has been unsettled. And indeed, from mid-February through mid-March, things weren’t simply unsettled – they were bad. Both the S&P 500 and the Nasdaq entered correction territory – the fifth-fastest correction in the last 75 years, in the case of the S&P. Fears of higher inflation and possibly recession have come rushing back to the surface, consumer confidence is at a 12-year low, and interest rate angst is back in full force.
And yet, actual volatility – as measured by the VIX, a.k.a. the “investor fear gauge” – has been … fairly muted?
The market has been recovering since it fell into correction territory earlier this month. The S&P was up for the week last week for the first time in a month and Monday was a strong day. But we might not be out of the woods yet.
Even if the bottom is in (which it might not be), it is unlikely that stocks can generate lasting upside traction until there is more clarity on the tariff situation. But the market really hasn’t been as bad as it might seem.
Even if the bottom is in (which it might not be), it is unlikely that stocks can generate lasting upside traction until there is more clarity on the tariff situation. But the market really hasn’t been as bad as it might seem.
Alerts
Shares of Zeta (ZETA) are up about 5% this morning after the company announced it will acquire LiveIntent, a people-based marketing technology company founded in 2009.
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.
Portfolios
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
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.