Issues
The Cabot Emerging Markets Timer continues to offer a green light, so we’re forging ahead as our stocks enter the heart of earnings season for emerging ADRs. We also welcome back a mega-cap old friend into the portfolio.
Today’s featured stocks include a new addition to the Growth Portfolio. You’ll also find comparisons between our featured stocks and their peers in the integrated oil, asset management and semiconductor industries.
Today’s selection is a little-known small-cap stock with a revolutionary process that may change one of the world’s most noxious industrial processes. Plus, I think the stock is at a good entry point here.
Current Market OutlookThe market produced some very constructive action last week, with the Nasdaq bursting to new highs and most other indexes testing their March peaks. And possibly the best action of all came from leading stocks! In a variety of sectors, we’ve seen many resilient names (including a ton of Top Ten stocks) rip higher, often on earnings. With that said, we can’t conclude that the market is completely out of the woods—until most major indexes clearly lift to new highs, there’s still a chance that the post-March 1 consolidation has further to run. Still, all of the major indexes are back above their 50-day lines, most stocks are acting well and the odds favor the market’s March/April consolidation giving way to further upside. We’ll move our Market Monitor to a level 8, and look for new highs on the indexes in the days ahead.
This week’s list has a ton of strong stocks with great growth stories, including a few that recently gapped up on earnings. It’s hard to pick just one, but we’ll go with PayPal (PYPL) as our Top Pick because the stock decisively lifted out of a long IPO base thanks to a big earnings gap.
| Stock Name | Price | ||
|---|---|---|---|
| Exact Sciences (EXAS) | 116.91 | ||
| Graco Inc (GGG) | 0.00 | ||
| GrubHub (GRUB) | 140.03 | ||
| Lending Tree (TREE) | 411.51 | ||
| MKS Instruments (MKSI) | 109.43 | ||
| National Beverage Corp. (FIZZ) | 0.00 | ||
| PayPal (PYPL) | 147.00 | ||
| Tencent Holdings Limited (TCEHY) | 0.00 | ||
| Wabash National (WNC) | 0.00 | ||
| Yandex (YNDX) | 0.00 |
The market\'s rally in recent days has turned our Cabot Tides positive, joining our Cabot Trend Lines and Two-Second Indicator. Because of that, we did some buying in a Special Bulletin last evening, but added half-sized positions because both companies are set to report earnings next week.
In today’s issue, we add a large-cap industrial stock to the Dividend Growth Tier, review our sales from the past week, and explain how to write covered calls.
In choosing today’s stock, I deliberately looked for one that was not hitting new highs, a stock with limited downside. And what I found was a stock that came public recently—to great fanfare—but that has since cooled off and settled down to what I believe is a buyable bottom.
Current Market OutlookA week ago at this time, all the major indexes had just broken below their 50-day moving averages, key sectors were lagging and hardly any stocks were heading consistently higher. But since then, the market has acted very well, capped by today’s French election-induced move higher; it’s looking more and more like the prior dip could have been the final, news-driven shakeout (North Korea fears) to the market’s seven-week consolidation. That said, we don’t want to get carried away—while the Nasdaq hit new highs today, other indexes haven’t yet, and we’re still smack dab in the middle earnings season, which will have a lot to say about the market’s near-term fate. All told, we’re bumping our Market Monitor back up to a level 7 and will look to raise it further if the market holds (or builds) on its gains in the days ahead.
This week’s list is heavy on growth ideas, which is good to see given the market’s recent struggles. For our Top Pick, we’ll go with a strengthening liquid leader—Alibaba (BABA) looks ready to challenge all-time highs, though with earnings likely out in a couple of weeks, keep new positions small.
| Stock Name | Price | ||
|---|---|---|---|
| Activision Blizzard, Inc. (ATVI) | 0.00 | ||
| Alibaba (BABA) | 254.81 | ||
| Autodesk (ADSK) | 229.00 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| Cotiviti (COTV) | 0.00 | ||
| Dycom Industries (DY) | 0.00 | ||
| IAC/InterActiveCorp (IAC) | 0.00 | ||
| Intuitive Surgical, Inc. (ISRG) | 0.00 | ||
| Momo Inc. (MOMO) | 44.65 | ||
| Ollie’s Bargain Outlet (OLLI) | 103.94 |
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
The rebound in emerging market stocks has given us a new buy signal. We’re going to complete our position in Weibo (WB) by buying another half position, and take a full position in NetEase (NTES).
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.