Issues
If you want to invest in the whiskey trend, and a select few food trends, there’s really only one way to do it. That’s to buy shares in the company I’m profiling in this month’s Issue of Cabot Small-Cap Confidential. All the, oaky, spicy, and bold details are inside.
The intermediate-term trend in emerging market stocks remains down, and we continue to advise a substantial degree of caution. At the same time, the fact that the indexes (both emerging markets and domestic) have been able to hold above their February lows means there’s a chance that a renewed advance can begin at any time. But we won’t predict; we’ll just follow the market’s lead, while keeping you apprised of the action in the highest potential emerging markets stocks we can find. Today we add another name to the watch list; it’s an old friend that just hit a new high a couple of days ago.
Last week I downgraded four stocks to Hold, and this week I recommend selling two—one for a fat profit and one for a quick loss. Still, because I keep adding a new stock every week, that leaves nineteen stocks in the portfolio, and most of them are acting very well!
As to this week’s recommendation, it’s a real wild card, a recent Chinese IPO that has been spun off from one of the big Chinese leaders. Risk-averse investors might want to give it a pass, or at least wait until there’s an established uptrend, but if you can handle the risk, buying down here might work out really well!
As to this week’s recommendation, it’s a real wild card, a recent Chinese IPO that has been spun off from one of the big Chinese leaders. Risk-averse investors might want to give it a pass, or at least wait until there’s an established uptrend, but if you can handle the risk, buying down here might work out really well!
There’s quite a bit of discussion on stock market trends pertaining to energy stocks, financial stocks and takeover stocks.
Current Market OutlookThe broad market continues to be challenging, with last week’s low having the potential to kick off a renewed market uptrend and at the same time holding the potential to establish a floor that—if it collapses—could bring a fresh round of pain. In short, the path ahead is foggy and continued caution is advised. But don’t put your head in the sand! Our OptiMo system continues to dig up top-performing stocks with the potential to bring you substantial profits, if you play your cards right—and one of the most promising characteristics of these stocks is that they tend to be under-owned, meaning far more institutional money could arrive to boost them higher over time.
Today’s roster includes some strong breakouts and a handful of set-ups, and our Top Pick is AMN Healthcare (AMN), which has a steadily growing business in the field of healthcare staffing.
| Stock Name | Price | ||
|---|---|---|---|
| AMN Healthcare Services Inc. (AMN) | 0.00 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| Dexcom (DXCM) | 421.36 | ||
| Integra LifeSciences (IART) | 0.00 | ||
| Michael Kors Holdings Limited (KORS) | 73.22 | ||
| Novocure (NVCR) | 0.00 | ||
| Oil States International (OIS) | 0.00 | ||
| Phillips 66 (PSX) | 0.00 | ||
| SVB Financial Group (SIVB) | 0.00 | ||
| Transocean Ltd. (RIG) | 0.00 |
The market had a great, bullish setup a couple of weeks ago, but that rally has fallen flat, which is a red flag. Our Cabot Tides and Two-Second Indicator remain negative, and we’re now seeing the selling spread even to resilient growth stocks.
The broad market has gotten jumpy again, but it’s no reason to panic. In today’s issue, we review why dividend stocks are better in downturns, add a conservative-aggressive stock to the Safe Income tier, and have earnings updates on all our stocks (four have already reported; the rest will over the next week.)
The long-term trend of the market remains up, but increasingly, it pays to be nimble. For today’s recommendation, that means jumping on the start of a new uptrend after an excellent earnings report.
Current Market OutlookThe market backed off late last week, but the overall picture hasn’t changed much—following a successful retest of the February lows, the major indexes are in a solid rally attempt, but that rally has yet to turn the intermediate-term trend up, either for the indexes or for the majority of leading stocks. There are many encouraging signs, and if the market rallies from here, the trend could turn up later this week; we’re ready and waiting for an all-clear signal should it come. But we learned long ago not to anticipate signals—right now, the trend is mostly sideways, few stocks are running away on the upside (most that have perked up fall back quickly) and most companies are set to report earnings over the next three weeks. Thus, we advise sticking with a cautious stance, which means holding some cash and keeping new positions on the small side.
This week’s list has a wide variety of stocks and sectors, all of which have shown great relative strength. Our Top Pick is Cheniere Energy (LNG), which has a unique story and a stock that’s built a great-looking base. Earnings are out soon, so start small.
| Stock Name | Price | ||
|---|---|---|---|
| Abercrombie & Fitch (ANF) | 15.37 | ||
| Autohome (ATHM) | 98.65 | ||
| Cheniere Energy (LNG) | 63.82 | ||
| E*Trade Financial (ETFC) | 0.00 | ||
| First Solar (FSLR) | 83.74 | ||
| InterXion (INXN) | 0.00 | ||
| Loxo Oncology (LOXO) | 186.59 | ||
| Netflix, Inc. (NFLX) | 423.92 | ||
| Pioneer Natural Resources (PXD) | 0.00 | ||
| TransUnion (TRU) | 83.09 |
Updates
Has there ever been anything as overvalued as SpaceX (SPCX)?
Elon Musk’s rocket and space-based internet company reported $18.7 billion in revenue in 2025. That’s less than half the revenue declining electronics store chain Best Buy (BBY, $41.7 billion) generated last year, less than International Paper Company (IP, $23.6 billion), and barely more than Casey’s General Stores (CASY, $17.6 billion). Those three companies have a combined market cap of roughly $67 billion. As of this writing, SpaceX has a market cap of $2.7 trillion. That’s more than the combined market cap of Walmart (WMT), JPMorgan (JPM) and Visa (V). Together, those three companies generated $847 billion in revenue last year.
Elon Musk’s rocket and space-based internet company reported $18.7 billion in revenue in 2025. That’s less than half the revenue declining electronics store chain Best Buy (BBY, $41.7 billion) generated last year, less than International Paper Company (IP, $23.6 billion), and barely more than Casey’s General Stores (CASY, $17.6 billion). Those three companies have a combined market cap of roughly $67 billion. As of this writing, SpaceX has a market cap of $2.7 trillion. That’s more than the combined market cap of Walmart (WMT), JPMorgan (JPM) and Visa (V). Together, those three companies generated $847 billion in revenue last year.
Small caps continue to hold up well. The S&P 600 Small Cap Index is up modestly since last Thursday and is trading just below the fresh all-time highs it hit earlier this week. The group’s resilience stands out, especially against a backdrop of narrowing leadership and ongoing rotation beneath the market’s surface.
The main macro development this week was the Fed’s June meeting and Chair Kevin Warsh’s press conference, which confirmed a shift in policy direction.
The main macro development this week was the Fed’s June meeting and Chair Kevin Warsh’s press conference, which confirmed a shift in policy direction.
WHAT TO DO NOW: The market’s bounce has been a good one, and the intermediate-term outlook remains bright. That said, near term, there are still some crosscurrents (rotation into the broad market, Dow outperforming the Nasdaq) that tell us growth stocks could throw us another curveball in the coming week or two. Overall, then, we’re mostly standing pat, but we’re going to add a half-sized stake in Guardant Health (GH) here, leaving us with a still-good-sized cash position of 37% or so. Details below.
Stocks started this week with a huge rally as the Iran ceasefire deal appears to be the real thing.
Of course, it’s been months of supposed peace deals falling apart. It’s hard to believe. I’m sure that fact is holding the market back somewhat. But this one is different for a couple of reasons.
Of course, it’s been months of supposed peace deals falling apart. It’s hard to believe. I’m sure that fact is holding the market back somewhat. But this one is different for a couple of reasons.
Stocks are starting off this week with a huge rally as the U.S. and Iran have reached a ceasefire deal.
We’ve been here before. These peace deals have fallen apart several times. I’m sure that fact is holding the market back somewhat. But this one is different for a couple of reasons. First, it’s the furthest a peace deal has gotten with both sides agreeing and independent verification from Pakistan. Second, this is what a peace deal would look like at this point if it’s real and lasting.
We’ve been here before. These peace deals have fallen apart several times. I’m sure that fact is holding the market back somewhat. But this one is different for a couple of reasons. First, it’s the furthest a peace deal has gotten with both sides agreeing and independent verification from Pakistan. Second, this is what a peace deal would look like at this point if it’s real and lasting.
[Note: The Cabot Turnaround Letter weekly update won’t be published next Friday, June 19, due to the market being closed for the Juneteenth holiday.]
Before we get into the main topic for today’s newsletter update, a quick note on the portfolio is in order. I’m continuing our “spring cleaning” effort that we began last week by trimming a couple more of our holdings, but I’m also adding a new position to take the place of the recent deletions.
Before we get into the main topic for today’s newsletter update, a quick note on the portfolio is in order. I’m continuing our “spring cleaning” effort that we began last week by trimming a couple more of our holdings, but I’m also adding a new position to take the place of the recent deletions.
After two near-record-setting months, stocks are encountering their first real turbulence since March. It’s no surprise.
While stocks go up an average of 10% a year, they rarely do so in a straight line. And after the S&P 500 rallied nearly 20% in April and May and the Nasdaq shot up nearly 30%, a pullback of some kind – or possibly even a true correction – was to be expected. It seems it’s happening all at once.
While stocks go up an average of 10% a year, they rarely do so in a straight line. And after the S&P 500 rallied nearly 20% in April and May and the Nasdaq shot up nearly 30%, a pullback of some kind – or possibly even a true correction – was to be expected. It seems it’s happening all at once.
Stocks look set to enter the summer near all-time highs, but leadership has narrowed, volatility has ticked up, and there’s been renewed scrutiny on the AI trade and valuation concerns in some of the market’s biggest winners.
At the same time, the macro backdrop remains a mix of resilience and intermittent turbulence. While economic data continues to hold up, energy prices remain elevated due to the ongoing Iran conflict – which has no end in sight – keeping upward pressure on inflation and yields.
At the same time, the macro backdrop remains a mix of resilience and intermittent turbulence. While economic data continues to hold up, energy prices remain elevated due to the ongoing Iran conflict – which has no end in sight – keeping upward pressure on inflation and yields.
Tech, commodity, AI, and Explorer stocks struggled this week as concern over capital expenditures increased. Mideast tensions intensified and inflation numbers came in yesterday at their highest rate in over three years, fueled by rising energy costs. The combination of anticipated higher interest rates and rising bond yields impacted the price of precious metals, with gold sliding below $4,200 an ounce and silver falling below $64 an ounce.
Stocks look to enter summer near all-time highs, but leadership has narrowed and volatility has ticked up thanks to renewed scrutiny on the AI trade and open-ended questions about valuations in some of the hottest areas of the market.
There’s also been more focus on the evolving macro landscape, which features a resilient U.S. economy but stubbornly high energy prices due to the ongoing Iran conflict, and somewhat elevated yields. We’re now looking at a higher likelihood of a Fed rate hike, with the odds of a hike by December now well over 50%.
There’s also been more focus on the evolving macro landscape, which features a resilient U.S. economy but stubbornly high energy prices due to the ongoing Iran conflict, and somewhat elevated yields. We’re now looking at a higher likelihood of a Fed rate hike, with the odds of a hike by December now well over 50%.
The high-flying AI stocks got crushed on Friday. But those stocks started this week higher. Where do we go from here?
The technology-heavy Nasdaq index fell 4% on Friday, and the S&P 500 fell for the week for the first time in 10 weeks. A couple of things spooked investors. The AI trade turned sour after Broadcom (AVGO) reported earnings that included slightly lower revenue projections for its AI chips than were expected. Also, a blowout jobs report strengthened the case for a Fed rate hike by the end of the year.
The technology-heavy Nasdaq index fell 4% on Friday, and the S&P 500 fell for the week for the first time in 10 weeks. A couple of things spooked investors. The AI trade turned sour after Broadcom (AVGO) reported earnings that included slightly lower revenue projections for its AI chips than were expected. Also, a blowout jobs report strengthened the case for a Fed rate hike by the end of the year.
A major economic narrative that took shape in recent years was the decline and (presumptive) inevitable death of the so-called “petrodollar,” as a growing number of countries diversified their foreign exchange reserves away from the U.S. dollar and toward gold and alternative currencies like the Chinese yuan.
Alerts
Our recommendation is a sale of a biotech with disappointing quarterly results.
We learned this morning that one of our holdings dismissed its auditing firm and hired another to take over. At the same time, the company’s CFO has resigned, citing “personal reasons.” I think that’s a load of bull.
Crista reviews the GameStop (GME) earnings report.
GameStop (GME) reported fourth-quarter and full-year 2016 results after the market closed yesterday.
Canaccord Genuity recently upgraded this social media stock to ‘Buy’.
I changed a number in yesterday’s Special Bulletin discussion about the S&P 500, and I failed to subsequently adjust the percentages, so I wanted to issue an update with the correct percentages as they pertain to increases in the S&P’s value.
Our first pick today is a tech fund whose five largest holdings are: Apple Inc (AAPL, 17.47% of assets); Microsoft Corp (MSFT, 11.90%); Facebook Inc A (FB, 7.59%); Alphabet Inc A (GOOGL, 5.98%) and Alphabet Inc C (GOOG, 5.84%).
I don’t think oil prices are going to revisit the lows of the bear market, but the recovery likely has stalled for a year or more. The fund returned 15.95% over the last 12 months.
There’s nothing abnormal happening in the market. Stocks don’t go straight up, rather, they bounce around, whether the general trend is up, down or sideways. That said, it’s a little premature to buy low now because most stocks that are having pullbacks have not bottomed yet.
I’m closely watching our newest position, which recently reported results and is now trading right around the 9.5 to 10 level. The current trading range should represent a nice entry point to add to existing positions, but we’ll need a little support from the broad market to prevent a drop into the low 9s.
Guggenheim just raised the rating of this retailer’s shares to ‘Buy’. In the past 30 days, 19 analysts have increased their earnings forecasts for the company for 2017 and 14 for 2018.
We are downgrading this stock from the Buy and Long-Term Buy lists after the company posted a disappointing December quarter and gave mixed guidance for 2017.
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.