Issues
Current Market OutlookGiven the strong October run-up, we weren’t surprised to see the market retreat last week. However, the severity of the dip in both indexes and individual stocks was a yellow flag—many indexes dipped below their 50-day lines, lots of lagging stocks were crushed and even the leaders came under pressure on Friday and today. The action isn’t necessarily a death knell for the rally, but it does put it back on the fence; we’re switching our Market Monitor back into the neutral zone. It’s vital to get rid of losers, honor your stops and remember to book some partial profits in your winners. And as for new buying, it’s prudent to keep new positions small until we see the rally perk up again.
This week’s list has a broad mix of stocks and sectors—no unifying theme but a bunch of good charts and stories. Our Top Pick is Fleetmatics (FLTX), a unique software company with steady growth and a huge opportunity. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Tyler Technologies (TYL) | 0.00 | ||
| Charles Schwab (SCHW) | 0.00 | ||
| NetEase, Inc. (NTES) | 0.00 | ||
| Kite Pharma (KITE) | 0.00 | ||
| Global Payments Inc. (GPN) | 0.00 | ||
| Alphabet, Inc. (GOOGL) | 0.00 | ||
| Fleetmatics Group PLC (FLTX) | 0.00 | ||
| New Oriental Education (EDU) | 113.97 | ||
| A.O. SMITH (AOS) | 0.00 | ||
| Alkermes (ALKS) | 0.00 |
Current Market OutlookToday finally saw a meaningful pullback in the major indexes and most stocks; the realization that the Fed is likely to hike rates next month has created some jitters, and given that the S&P 500 and Nasdaq bumped up against their old highs last week (and that the advance has been narrow), further weakness wouldn’t be unusual. But until we see abnormal action, we’re going with the major trends, which continue to point up. Thus, we believe this dip, while probably having further to run, is buyable. That said, stock selection remains key, as we’re still seeing many stocks fall apart even as others remain in favor.
This week’s list has a well-sponsored feel to it, which isn’t surprising given the market’s preference for bigger-cap stocks of late. Our Top Pick is Nvidia (NVDA), which looks like a liquid leader following its recent run higher. Try to buy on dips of a point or two.
| Stock Name | Price | ||
|---|---|---|---|
| Sinclair Broadcasting (SBGI) | 54.14 | ||
| Phillips 66 (PSX) | 0.00 | ||
| Bank of the Ozarks (OZRK) | 0.00 | ||
| NVIDIA Corporation (NVDA) | 242.42 | ||
| ServiceNow (NOW) | 341.86 | ||
| MSCI Inc. (MSCI) | 0.00 | ||
| Lear Corp. (LEA) | 0.00 | ||
| Imperva Inc. (IMPV) | 0.00 | ||
| Activision Blizzard, Inc. (ATVI) | 0.00 | ||
| Align Technology (ALGN) | 316.20 |
Current Market OutlookLast week brought another small improvement in the market, both for the major indexes (the S&P 500 and Nasdaq notched their fifth straight up week and are holding above some key longer-term moving averages) and for some leading stocks—more growth stocks with top-notch fundamentals have reacted well to earnings, offering some much-needed leadership for this rally. Of course, the flip side is also true, as a bunch of stocks have been crushed on earnings, and the broad market’s action is just decent. Overall, we’re a bit more constructive than we have been, so we’ll bump the Market Monitor up a notch, but it remains vital to be selective—buy what’s working, keep losses small and avoid or sell anything that breaks down.
This week’s list has an encouraging batch of growth stocks with good stories and numbers (not as many defensive-type stocks this week). Our Top Pick is LinkedIn (LNKD), a dynamic big-cap growth stock that’s come back to life after its quarterly report blew away expectations.
| Stock Name | Price | ||
|---|---|---|---|
| Ultimate Software (ULTI) | 0.00 | ||
| Lending Tree (TREE) | 411.51 | ||
| Royal Caribbean Cruises (RCL) | 0.00 | ||
| Proofpoint (PFPT) | 113.79 | ||
| The Priceline Group Inc. (PCLN) | 0.00 | ||
| LinkedIn Corporation (LNKD) | 0.00 | ||
| IntercontinentalExchange, Inc. (ICE) | 0.00 | ||
| Expedia Group (EXPE) | 0.00 | ||
| Ctrip.com International Ltd. (CTRP) | 34.94 | ||
| Boyd Gaming Corporation (BYD) | 0.00 |
Current Market OutlookThe big-cap indexes are looking better and better, with the S&P 500 and Nasdaq rocketing above their 200-day lines last week on the back of some bullish earnings reports. That said, not all is hunky dory—mid- and small-cap indexes continue to languish, the number of stocks hitting new 52-week lows is actually picking up and many stocks near their highs are still just biding their time. All in all, we’re still cautiously optimistic but we’re also sticking with our relatively neutral stance—it’s fine to take a shot at a few good set-ups, but honor your stops and keep some cash on the sideline until we see more leadership emerge, possibly on earnings during the next couple of weeks.
This week’s list has a wide array of stocks and sectors, including a few recent earnings winners. For our Top Pick, we’re going to go where the strength is—Delta Air (DAL) isn’t changing the world, but earnings are huge and the sector is acting very well.
| Stock Name | Price | ||
|---|---|---|---|
| Netgear Inc (NTGR) | 0.00 | ||
| Lennox International (LII) | 270.56 | ||
| General Motors Company (GM) | 0.00 | ||
| Facebook, Inc. (FB) | 0.00 | ||
| Euronet Worldwide (EEFT) | 142.83 | ||
| Delta Air Lines (DAL) | 54.28 | ||
| Cavium (CAVM) | 0.00 | ||
| Acuity Brands (AYI) | 0.00 | ||
| Athenahealth (ATHN) | 0.00 | ||
| Agnico Eagle Mines (AEM) | 79.05 |
Current Market OutlookThe market put together another constructive week, with the major indexes recovering following some early weakness and more stocks setting up in constructive launching pads. That said, the rubber will likely meet the road during the next three weeks as earnings season revs up—a bunch of powerful breakouts would dramatically raise the odds that the market is beginning a sustained rally, but if the sellers feast on stocks following their reports, it’ll be best to take things slowly. For now, we remain neutral—buying a stock here or there is fine, but booking some partial profits on the way up and holding a chunk of cash on the sideline also makes sense.
This week’s list contains a mix of stocks already out to new highs, many that are setting up, and a few that are recovering well from huge declines. Our Top Pick is Restoration Hardware (RH), which is near the top of its launching pad and doesn’t report earnings until December.
| Stock Name | Price | ||
|---|---|---|---|
| TripAdvisor (TRIP) | 55.14 | ||
| Synaptics (SYNA) | 0.00 | ||
| RH Inc. (RH) | 252.93 | ||
| PDC Energy (PDCE) | 0.00 | ||
| ServiceNow (NOW) | 341.86 | ||
| Newfield Exploration (NFX) | 0.00 | ||
| The Goodyear Tire & Rubber Company (GT) | 0.00 | ||
| Franco-Nevada (FNV) | 125.51 | ||
| Fiat Chrysler (FCAU) | 0.00 | ||
| Amazon.com (AMZN) | 2.00 |
Current Market OutlookThe market rally continued last week, with the major indexes pushing back toward (and in some cases, above) their multi-week highs. That was enough to turn the intermediate-term trend back up, causing us to flip our Market Monitor back into neutral territory, so you can begin to loosen the purse strings a bit, buying some new positions and looking to add more should you develop profits in the days ahead. That said, there are still a few flies in the ointment; the longer-term trend remains down and most of the big movers have been the worst performers of the past few months. That’s not bearish, but we would like to see real leadership emerge to new highs before we get more bullish.
This week’s list has some newer names, including a few off-the-bottom stocks from beaten-down sectors. For our Top Pick, we’ll take a stab at one of those—Matador Resources (MTDR) resisted the energy plunge well in recent months and is already back toward new high ground. If the energy run continues, it should do very well.
| Stock Name | Price | ||
|---|---|---|---|
| Zillow Group (ZG) | 0.00 | ||
| Cimarex Energy (XEC) | 0.00 | ||
| Paycom Software (PAYC) | 0.00 | ||
| NVIDIA Corporation (NVDA) | 242.42 | ||
| Netflix, Inc. (NFLX) | 423.92 | ||
| Matador Resources Company (MTDR) | 27.89 | ||
| JinkoSolar Holding (JKS) | 0.00 | ||
| Hawaiian Holdings Inc. (HA) | 0.00 | ||
| Global Payments Inc. (GPN) | 0.00 | ||
| EPAM Systems (EPAM) | 188.24 |
Current Market OutlookWe’ve seen some constructive action during the past few days—the major indexes have thus far successfully re-tested their August lows and we saw some positive divergences in the broad market (far fewer stocks hitting new lows this time around). Now we’re looking to see if the intermediate-term trend can turn up; by our measures, it could happen within a day or two if the market holds its recent gains. And if it does happen, we’ll move to a more neutral stance—giving some stocks looser leashes and advising more new buying (though we wouldn’t advise jumping in with both feet). We’ll see how it goes, but for now, be sure to have your shopping list ready.
This week’s list has a few steady Eddies but also some real growth stories, including a couple of new ones to us. For our Top Pick we’ll stay with the big-cap growth theme that’s offered many resilient stocks—Adobe Systems (ADBE) dominates its field and just completed a transition to the cloud, which will lead to huge recurring revenues going forward.
| Stock Name | Price | ||
|---|---|---|---|
| Zoës Kitchen (ZOES) | 0.00 | ||
| VeriSign (VRSN) | 190.71 | ||
| Sarepta Therapeutics (SRPT) | 120.93 | ||
| Shopify (SHOP) | 585.00 | ||
| Jabil Inc. (JBL) | 41.50 | ||
| Incyte Corporation (INCY) | 76.98 | ||
| Edwards Lifesciences (EW) | 228.06 | ||
| Cal-Maine Foods, Inc. (CALM) | 0.00 | ||
| Adobe Inc. (ADBE) | 315.23 | ||
| Advance Auto Parts (AAP) | 0.00 |
Current Market OutlookLast Monday we wrote that the next few days would be telling—and given the action, it’s clear the onus remains on the bulls to show they have sufficient strength to halt the market’s downtrend. There are some positives, including the fact that the indexes have held above their late-August lows for five weeks and, believe it or not, the broad market is in slightly better shape now than in late August. But, as always, it’s best to just take the evidence as it comes—today, that means holding lots of cash and limiting new buying as we patiently wait for a bottom to form.
This week’s list has a big-cap feel to it as investors seek out some dependability. Our Top Pick is Salesforce.com (CRM), whose stock is big, liquid and remains resilient.
| Stock Name | Price | ||
|---|---|---|---|
| Vantiv (VNTV) | 0.00 | ||
| Starbucks (SBUX) | 64.49 | ||
| Nike (NKE) | 89.77 | ||
| Nordic American Tankers (NAT) | 0.00 | ||
| Medicines Company (MDCO) | 56.98 | ||
| JetBlue Airways Corporation (JBLU) | 0.00 | ||
| Imperva Inc. (IMPV) | 0.00 | ||
| Salesforce.com (CRM) | 0.00 | ||
| Chipotle Mexican Grill (CMG) | 773.32 | ||
| Big Lots (BIG) | 43.12 |
Current Market OutlookIt’s been four weeks since the August 24 panic low and the market has done a decent job hanging in there—all of the major indexes probed higher into last week before selling off on Friday. Currently, the major trends of the market remain down, so we’re staying defensive. However, the next few days will be telling—if the indexes can advance from here, we could receive an intermediate-term buy signal late this week, which will have us loosening the wallet a bit. But if the sellers show up again, all bets are off. For now, it’s best not to anticipate anything; you should continue to hold plenty of cash and keep new buys small. We’ll let you know on Friday if the outlook has changed.
In the meantime, we are encouraged by the action of many individual growth stocks, which are showing lots of relative strength even as the market struggles. Our Top Pick this week is Activision Blizzard (ATVI), which is pushing higher on the back of some very good product news. Consider nibbling on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Tyler Technologies (TYL) | 0.00 | ||
| T-Mobile US (TMUS) | 0.00 | ||
| Sucampo Pharmaceuticals (SCMP) | 0.00 | ||
| Pandora Media Inc. (P) | 0.00 | ||
| Masco (MAS) | 0.00 | ||
| Expedia Group (EXPE) | 0.00 | ||
| Dexcom (DXCM) | 421.36 | ||
| Activision Blizzard, Inc. (ATVI) | 0.00 | ||
| Athenahealth (ATHN) | 0.00 | ||
| Adaptive Biotechnologies Corporation (ADPT) | 39.41 |
Current Market OutlookThe major indexes have done a decent job of holding above the August 24 lows, and a few stocks and sectors have pushed to new high ground. In the short term, we still think further upside testing is possible, especially if the Federal Reserve issues some reassuring words later this week. However, it’s going to take more than just another couple of good days to turn the market’s trends back up—right now, all of the major indexes (and the vast majority of stocks) are still buried beneath resistance and are trading below key moving averages. Thus, we’re sticking with our defensive stance—the onus is clearly on the bulls to re-take control.
This week’s list has another batch of potential leaders; there’s not many defensive stocks making the list, which is encouraging. Our Top Pick is Royal Caribbean (RCL), a big-cap leisure stock that has a strong chart and big earnings estimates.
| Stock Name | Price | ||
|---|---|---|---|
| WellCare Health Plans, Inc. (WCG) | 271.83 | ||
| Virgin Airlines (VA) | 0.00 | ||
| Tempur Sealy (TPX) | 85.53 | ||
| RH Inc. (RH) | 252.93 | ||
| Royal Caribbean Cruises (RCL) | 0.00 | ||
| Neurocrine Biosciences (NBIX) | 123.40 | ||
| Martin Marietta Materials (MLM) | 261.52 | ||
| Clovis Oncology (CLVS) | 0.00 | ||
| Amazon.com (AMZN) | 2.00 | ||
| Abiomed (ABMD) | 0.00 |
Current Market OutlookThe market continues to gyrate wildly, gapping up or down based on the news of the day. In the short-term, the indexes (and most stocks) have etched out a little trading range, and that could continue for a while longer. But the main trend remains down, so you should be using these bounces as a chance to unload any broken stocks and raise cash if you’ve yet to do so. On the buy side, we are starting to see the wheat separate from the chaff, but it remains too early to put any big money to work; a couple of small positions is fine, but we suggest focusing mostly on preserving capital for the next sustained run—that’s when the big money will be made.
This week’s list includes with some recently strong themes (medical, construction and retail), including a couple of recent IPOs. Our Top Pick is one of those newly-public firms—Planet Fitness (PLNT) has a good story and the stock has shown solid relative strength since coming public.
| Stock Name | Price | ||
|---|---|---|---|
| Signet Jewelers (SIG) | 0.00 | ||
| Post Holdings (POST) | 0.00 | ||
| Planet Fitness (PLNT) | 0.00 | ||
| PDC Energy (PDCE) | 0.00 | ||
| Medicines Company (MDCO) | 56.98 | ||
| Lululemon Athletica (LULU) | 304.69 | ||
| JetBlue Airways Corporation (JBLU) | 0.00 | ||
| TopBuild (BLD) | 111.00 | ||
| Anacor Pharmaceuticals (ANAC) | 0.00 | ||
| AMN Healthcare (AHS) | 0.00 |
Current Market OutlookThe major indexes actually made decent gains last week, though that came on the heels of a major breakdown the week before. In the short-term, last week’s show of support was encouraging; it could be the start of a multi-week bottoming process following the extreme selling pressure. If you want to trade stocks, taking small positions on dips could be worthwhile. However, remember that the bigger picture remains bearish—the major trends of the indexes are clearly down and most stocks have a ton of overhead supply to deal with. Thus, you should remain overall defensive, holding lots of cash and focusing more on building a watch list than trying to make a bunch of money here.
This week’s list has some steady growth stories as well as a few earnings winners from last week. Our Top Pick is Dycom (DY), a leading provider of construction services to the telecom industry, which is dramatically expanding its bandwidth. It’s not a long-term growth story but should be in great shape for at least another few quarters.
| Stock Name | Price | ||
|---|---|---|---|
| Vantiv (VNTV) | 0.00 | ||
| Under Armour (UA) | 0.00 | ||
| Tyler Technologies (TYL) | 0.00 | ||
| TransDigm (TDG) | 599.41 | ||
| Sarepta Therapeutics (SRPT) | 120.93 | ||
| Incyte Corporation (INCY) | 76.98 | ||
| Flotek (FTK) | 0.00 | ||
| Express (EXPR) | 0.00 | ||
| Dycom Industries (DY) | 0.00 | ||
| Buffalo Wild Wings (BWLD) | 0.00 |
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
Yesterday, Vulcan Materials (VMC) reported fourth-quarter 2015 results of $0.31 per share, when the market was expecting $0.26. As a result, the stock is climbing.
For the second time since we launched Smart Investing in Turbulent Times in October 2015, we have a takeover stock in the Buy Low Opportunities Portfolio.
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.