Issues
I add another Canadian company to the Model this month. Canadian stocks are more undervalued than U.S. stocks, and the Canadian economy is now improving noticeably for the first time in a long while.
Today’s featured stocks include four companies that should benefit from the post-Hurricane Harvey rebuilding process.
With August in the rear-view window, it’s time for Wall Street to get back to full-time work. At present, trends continue to look good (but not great). Still, there are plenty of candidates to choose from, and this week’s comes from an emerging market that is not China; I think you’ll like it.
Current Market OutlookAfter lots of sloppy and weak action in June, July and the first half of August, the past two weeks have certainly been an improvement—the major indexes have popped higher, often in the face of bad news and uncertainties, and many of the resilient growth stocks did the same. We can’t conclude the market is out of the woods, as the broad market is still iffy, the intermediate-term trend is mostly sideways and relatively few stocks have actually broken out on good volume. Still, this is probably the best action by growth stocks (which have led the way higher this year) since June, so we’re not complaining. We’re moving our Market Monitor up one notch to a level 6 (out of 10); you can put a little more money to work, though we need more upside confirmation before getting bullish.
This week’s list contains a mix of familiar and newer names, all of which are showing great strength. For our Top Pick, we’re going with Match Group (MTCH), which has exploded to new highs; it’s a bit thin, but we like the overall growth story and the recent power. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| BeiGene (BGNE) | 170.20 | ||
| Catalent Inc (CTLT) | 0.00 | ||
| Franco-Nevada (FNV) | 125.51 | ||
| Match (MTCH) | 0.00 | ||
| Shopify (SHOP) | 585.00 | ||
| SolarEdge Technologies Inc. (SEDG) | 124.37 | ||
| TowerJazz (TSEM) | 0.00 | ||
| Universal Display (OLED) | 187.54 | ||
| Werner Enterprises (WERN) | 0.00 | ||
| Wynn Resorts (WYNN) | 121.08 |
Today’s candidate provides at-home health care solutions to people with vascular disease. These are often chronic conditions, which account for up to 80% of every healthcare dollar spent in the U.S. The company is growing quickly, with average annual growth since 2013 is over 30%!
This month’s Cabot Value Model contains a diversified list of high-quality buy recommendations. Many of these stocks have been neglected by investors in 2017 and are now poised to rise dramatically. Buying blue-chip companies is prudent when the stock market is noticeably overvalued!
We’re trimming our portfolio a little further, and adding a healthy new financial stock to the Dividend Growth Tier.
We’re adding what we believe can be a leading glamour stock of the bull market. Elsewhere in tonight’s issue, we write about the recent long-term breakout by Chinese stocks.
Tonight’s Stock of the Week is little known among investors, but it has a national brand name and an excellent cookie cutter growth story. The stock recently reacted well to earnings and has tightened up a bit; we think the next big move is up.
Current Market OutlookIt’s the last week of August, and that means that many big investors (and more than a few small investors!) are at the beach and volume remains relatively light. Last week, though, was generally constructive for the market, but at this point, not much has really changed—the intermediate-term trend of the major indexes is sideways-to-down, the broad market is iffy and few stocks are pushing higher with any consistency. That’s not to say the bears are completely in control, either, but we continue to think a cautious stance makes sense—limiting new buying and holding some cash, but also giving your strong, profitable holdings a chance to catch their breath and resume their longer-term upmoves. We’re keeping the Market Monitor at a level 5 tonight.
Tonight’s list definitely has a more diverse feel to it, with a couple of materials stocks and some special situations. Our Top Pick is Alcoa (AA), which could morph into a leader if the recent strength in materials stocks is sustained. Shares just broke out from a nice base; try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| 58.com (WUBA) | 0.00 | ||
| Alcoa (AA) | 0.00 | ||
| Alexion (ALXN) | 0.00 | ||
| Autodesk (ADSK) | 229.00 | ||
| CyrusOne Inc (CONE) | 0.00 | ||
| Live Nation Entertainment, Inc. (LYV) | 0.00 | ||
| Southern Copper (SCCO) | 0.00 | ||
| Supernus Pharmaceuticals (SUPN) | 52.50 | ||
| Westlake Chemical Corp. (WLK) | 0.00 | ||
| Yelp (YELP) | 41.30 |
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
Today’s move pushed our Cabot Tides back into a negative stance, so we’re raising our cash position to around 40%.
Twilio (TWLO) sold off in a big way this morning because late last Friday, the company announced that it will sell shares in a secondary offering—but it didn’t say how many!
Smith, A.O. (AOS 51.25) reached its Minimum Sell Price of 51.36 today, October 6, and should be sold.
Special Bulletin on BorgWarner (BWA), E*Trade (ETFC), General Motors (GM) and WellCare Health Plans (WCG)
Sell CVS Health (CVS). Dividend Growth Tier holding CVS Health (CVS) broke through support yesterday, and we’re going to cut our loss today.
Cognizant Technologies (CTSH 46.00) dropped 16% this morning on news that the company is conducting an internal investigation into whether some payments in India violated the U.S. Foreign Corrupt Practices Act.
Chemtura (CHMT) is Up 15% on Buyout Offer and Carnival (CCL) Reports Earnings Beat
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.