This month’s Cabot Value Model contains a diversified list of Buy recommendations, with a focus on high quality companies with proven records of steady sales, earnings and dividend increases.

While the Cabot Emerging Markets Timer continues to flash a green light, there’s no doubt that buyers and sellers are locked in a battle right now, as the MSCI Emerging Markets ETF has been heading sideways for 15 sessions. In response, we’re doing a bit of house-cleaning in the portfolio.

Contributors remain positive on a variety of industries, beginning with our Spotlight Stock, a giant in the telecom sector that is poised to greatly benefit from cutting-edge tech developments like the mass-market adoption of the Internet of Things and the coming 5G rollout.

Today’s featured stocks include Johnson Controls (JCI), Vertex Pharmaceuticals (VRTX); and a new addition to the Growth & Income Portfolio, TiVo (TIVO).

Today’s recommendation is a case in point. After a long three-year waiting period, the stock broke out to new highs yesterday and followed through today. The stock’s name will probably be familiar to you; its story is certainly interesting.

Current Market Outlook


The market enjoyed a nice bounce after last Monday’s shakeout, especially in growth-oriented sectors and indexes like the Nasdaq. But we don’t think the market is quite out of the woods—by our measures, the intermediate-term trend is still on the fence (most indexes are just above or below their 50-day lines), and the fact is that far fewer stocks are hitting new highs now than the past couple of times the indexes have tested their highs. To be clear, we’re not overly negative, as the longer-term trend looks great, as do many stocks, and the major indexes are just a couple of percent from all-time highs. But we think it’s best to play things carefully (holding some cash, keeping new buys relatively small, etc.) until the market confirms that the post-election uptrend is back on track.

This week’s list is a mixed bag, with some turnarounds, some recent earnings winners and others that have soared on news. For our Top Pick, we’re going with Western Digital (WDC), which, after a brief shakeout, has come storming back to new highs on great volume.

Stock Name	Price	Buy Range	Loss Limit
Huntsman (HUN)	0.00	23-24.5	21-22
Jabil Inc. (JBL)	41.50	27.5-29	26-26.5
Jazz Pharmaceuticals (JAZZ)	0.00	138-144	129-130
Lending Tree (TREE)	411.51	120-124	112.5-115
Penn National Gaming (PENN)	45.38	17.5-18.5	15.8-16.5
PRA Health Sciences Inc. (PRAH)	96.08	63-65	58-59
RH Inc. (RH)	252.93	44-46	40-41.5
Tesla, Inc. (TSLA)	818.87	280-295	260-270
Vertex Pharmaceuticals (VRTX)	230.36	104-109	95-100
Western Digital Corporation (WDC)	0.00	79.5-82.5	73-75

We’re adding a 100-year dividend payer to the Safe Income Tier, and saying sayonara to a perpetual underperformer. We also take a look at the incredible power of dividend reinvestment.

In tonight\'s issue, we write about the importance of following your plan, especially soon after you buy a stock. We dive into our new \"7.5% Rule,\" which is another in a long line of studies that show higher prices to be very likely in the months down the road.

Current Market Outlook


During the past three weeks, we’ve seen the market’s breadth begin to sag (small- and mid-cap indexes haven’t made much progress in three months), then we saw some key sectors falter (financials have decisively broken down) and now the market’s own intermediate-term trend is on the fence. That’s enough yellow flags for us to advise trimming your sails a bit; we’re nudging our Market Monitor down to a level 6, as the onus is on the bulls to pull us out of this near-term funk. However, longer-term, we’re much more optimistic—today’s show of support was encouraging, of course, and there remains a ton of strong stocks (especially growth-oriented stocks) out there, so you should continue to hold on tightly to your top performers.

This week’s list is chock-full of stocks that have ignored the market’s recent dip. There are many good names to choose from, our Top Pick is Teladoc (TDOC), a newer issue that’s emerging from a long post-IPO droop and consolidation. It has a great story.

Stock Name	Price	Buy Range	Loss Limit
Criteo (CRTO)	0.00	49.5-51.5	46-47
Grand Canyon Education (LOPE)	121.03	66-69	60-62
Lumentum (LITE)	87.00	50-54	43-45
MercadoLibre, Inc. (MELI)	980.83	205-210	196-200
Momo Inc. (MOMO)	44.65	31.5-33.5	29-30
RingCentral (RNG)	238.73	25.5-27	24-25
SiteOne Landscape Supply (SITE)	98.49	44-46	40.5-41.5
Skyworks Solutions (SWKS)	0.00	94-97	87-88
Teladoc, Inc. (TDOC)	127.95	23.5-25	20.5-21.5
Wynn Resorts (WYNN)	121.08	107-111	98-101

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.

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.

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.

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.

[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.

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.

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.

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%.

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.

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.

Putting it altogether, we remain more bullish than bearish, however, we are going to pull in our horns a bit tonight to respect the market’s action.

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.