Issues
Current Market OutlookIt’s been a tricky few weeks, but by our measures, the intermediate-term trend of the major indexes has turned up, which is a sign to increase your exposure to the market’s leading stocks (preferably on pullbacks). And there are a lot of leaders to choose from! In particular, the growth stocks that bounced nicely off the market’s early-February low continue to perform excellently, displaying powerful and persistent action, which usually indicates more upside is in store (albeit with normal pullbacks and shakeouts along the way). We’re not viewing this as a blastoff, but more of a resumption of the market’s longer-term uptrend. Our Market Monitor moves up a couple of notches into bullish territory.
This week’s list is another one that’s filled with enticing growth stories and strong charts. There are a ton of good stocks to choose from, but we’re going with TD Ameritrade (AMTD) as our Top Pick, as it’s one of the strongest Bull Market stocks out there today.
| Stock Name | Price | ||
|---|---|---|---|
| Ligand Pharmaceuticals (LGND) | 267.14 | ||
| Micron Technology, Inc. (MU) | 43.31 | ||
| Palo Alto Networks (PANW) | 236.92 | ||
| Qualys (QLYS) | 0.00 | ||
| Sarepta Therapeutics (SRPT) | 120.93 | ||
| TD Ameritrade (AMTD) | 0.00 | ||
| Teladoc, Inc. (TDOC) | 127.95 | ||
| Twitter (TWTR) | 40.37 | ||
| Western Digital Corporation (WDC) | 0.00 | ||
| Zillow (Z) | 76.64 |
With a bumpy market to work with and a few stocks still to report earnings, we take a look at the political risks to the portfolio. We also shift our focus to Brazil, where we find an unusual commodity company and a fresh airline stock to consider.
In this month’s issue, I introduce two new stocks, recommend selling two stocks and change one position from Buy to Hold. I’m consciously changing the portfolio into more defensive stocks to guard against inflationary fears.
I’m really trying to avoid buying high—so today’s selection is an undervalued stock that recently had a great correction and is now working its way back up.
Today’s featured stocks include GameStop (GME), Southwest Airlines (LUV) and PBF Energy (PBF), which is joining the Buy Low Opportunities Portfolio. I’m also selling Nucor (NUE) today.
Current Market OutlookThe market’s two-plus-week rally hit a wall last week, with the major indexes suffering three days in a row of distribution (higher volume selling), that caused most to fall back below their 50-day lines. That’s reason enough to remain relatively cautious—we’re keeping our Market Monitor in neutral territory. On the flip side, though, is the action of leading stocks, a ton of which are actually pushing higher despite the market’s wobbles! Of course, good-looking stocks can go bad in a hurry in a bad market, but there’s no question this broad resilience (including a slew of solid earnings reactions) is very encouraging. Our thought is to pick up a few shares of some potential winners of the next leg up, but because of the market, do so in small amounts, while continuing to hold a chunk of cash on the sideline.
This week’s list is chock-full of strong growth stocks (and a couple of old world stocks, too). It’s hard to narrow down our choice to just one, but we’re going with Proofpoint (PFPT), which looks like a mid-cap leader in the newly strong cybersecurity group.
| Stock Name | Price | ||
|---|---|---|---|
| Coupa Software (COUP) | 262.20 | ||
| Etsy (ETSY) | 112.97 | ||
| Lumentum (LITE) | 87.00 | ||
| MercadoLibre, Inc. (MELI) | 980.83 | ||
| The New York Times Company (NYT) | 0.00 | ||
| Proofpoint (PFPT) | 113.79 | ||
| Salesforce.com (CRM) | 0.00 | ||
| Splunk (SPLK) | 207.67 | ||
| United States Steel Corporation (X) | 0.00 | ||
| Veeva Systems (VEEV) | 180.23 |
We’re adding a pure-play security solutions provider to Cabot Small-Cap Confidential to increase our security software exposure. This company is growing revenue well over 20% and is expanding its portfolio of solutions to address large and rapidly growing markets.
We’re clearing one underperforming stock from the portfolio today, and putting one dividend stalwart back on Buy. In today’s issue, you’ll also find a very high-yielding new addition, a recap of our sell strategy and updates on all our stocks.
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
We’re going to buy a growth-oriented firm that offers a range of lending services in Texas and elsewhere. The company’s sales and earnings growth are accelerating and we think the stock can do well in a bull market.
Freeport-McMoRan (FCX) is under pressure today as the company continues to battle with Indonesian authorities regarding its big mine in that country.
This money center bank beat estimates by two cents, but recently cut its CEO’s pay for not living up to its financial targets. Shares appear to be currently undervalued.
This tech stock beat analysts’ estimates, reporting $0.86 EPS vs. the $0.79 forecast.
Universal Electronics (UEIC) reported earnings yesterday and shares are up 12%. Kraft Heinz (KHC) shares are up over 8% today on news that the company has made a bid to buy Unilever (UN).
This chemical company beat estimates by a penny last quarter and was just awarded a $1.14 million project from the U.S. Department of Energy to develop new silica-based performance fillers for non-tread components which improve the fuel efficiency and performance of tires.
Molina Healthcare (MOH) reported huge fourth-quarter and full-year earnings misses yesterday after the markets closed, bearing no resemblance to analysts’ consensus earnings estimates.
American International Group (AIG – yield 2.1%) reported a larger-than-expected fourth-quarter reserve charge of $5.6 billion. Also, updates on GameStop (GME) and Kraft Heinz (KHC).
Fortress Investment (FIG 8.00) will be acquired by Japan’s SoftBank for $8.08 per share, all cash, and the stock has reached my sell target. Quest Diagnostics DGX 94.70) reached my Min Sell Price of 94.87 this morning.
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.