Issues
Current Market OutlookOnce again, the major indexes tested new high ground last week, and once again, the sellers appeared and drove the indexes and many stocks lower. Day-to-day fluctuations aside, the story remains the same—the intermediate-term trend remains sideways, though below the surface, there are many stocks and sectors making good-sized multi-week moves. So the goal, of course, is to stick with what’s working (though taking partial profits on the way up makes sense) while jettisoning any stocks that break support. Keeping some cash on the sideline is also wise, at least until the market begins a sustained uptrend.
This week’s list has it all—some speculative stocks, some stocks that have pushed ahead on big news and some turnaround situations. Our Top Pick is Ligand Pharmaceuticals (LGND), partly because of the big story, and partly because of the lower-risk set-up in its chart.
| Stock Name | Price | ||
|---|---|---|---|
| T-Mobile US (TMUS) | 0.00 | ||
| NetEase, Inc. (NTES) | 0.00 | ||
| MercadoLibre, Inc. (MELI) | 980.83 | ||
| Louisiana-Pacific (LPX) | 0.00 | ||
| Ligand Pharmaceuticals (LGND) | 267.14 | ||
| Integrated Device Technology (IDTI) | 0.00 | ||
| Dunkin’ Brands Group, Inc. (DNKN) | 0.00 | ||
| Clovis Oncology (CLVS) | 0.00 | ||
| Ciena (CIEN) | 44.25 | ||
| Broadcom Limited (AVGO) | 266.26 |
Current Market OutlookThe major indexes’ latest foray into new high ground has again been beaten back, as stocks slid today back into their multi-month trading ranges. It’s clear that the major trend of the market remains sideways, which is a good reason to remain somewhat cautious. But it’s also clear that many stocks are still working well—nobody is printing money, but we’re seeing plenty of stocks and sectors persist higher and, so far, take any selling waves in stride. You should still hold onto some cash and be selective when doing new buying, but if you see a good set-up, go ahead and take it.
This week’s Top Ten is a bit less heavy on growth stocks, though there are still a few hot stocks to read about. Our Top Pick is Cal-Maine Foods (CALM), which is anything but a growth stock, but looks like an interesting special situation. Earnings should explode in the next few quarters.
| Stock Name | Price | ||
|---|---|---|---|
| Summit Materials (SUM) | 0.00 | ||
| Universal Display (OLED) | 187.54 | ||
| Jumei Holdings (JMEI) | 0.00 | ||
| The Goodyear Tire & Rubber Company (GT) | 0.00 | ||
| Cheetah Mobile (CMCM) | 0.00 | ||
| CF Industries (CF) | 45.23 | ||
| Cal-Maine Foods, Inc. (CALM) | 0.00 | ||
| A.O. SMITH (AOS) | 0.00 | ||
| Ambarella (AMBA) | 52.79 | ||
| Autoliv (ALV) | 0.00 |
Current Market OutlookSome of the major indexes are probing the top of their multi-month trading ranges, which is nice to see. But the fact is that, until proven otherwise, the intermediate-term trend remains sideways, so the game plan remains the same—hold some cash and be selective with your new buying. For the stocks you own, you should continue to stick with what’s working—despite the incessant ups and downs, there are plenty of stocks that are working, so focus on the best and leave the rest.
This week’s list has another batch of strong stocks with good stories; we haven’t seen a rash of defensive stocks show up yet, which often occurs when the market is starting to get into trouble. Our Top Pick is Opko Health (OPK), which is speculative but has some major potential catalysts later this year.
| Stock Name | Price | ||
|---|---|---|---|
| Zebra Technologies (ZBRA) | 154.94 | ||
| Tesla, Inc. (TSLA) | 818.87 | ||
| SolarEdge Technologies Inc. (SEDG) | 124.37 | ||
| SolarCity (SCTY) | 0.00 | ||
| OPKO Health Inc (OPK) | 0.00 | ||
| Newmont Mining (NEM) | 57.31 | ||
| Horizon Therapeutics (HZNP) | 49.89 | ||
| Cirrus Logic Inc. (CRUS) | 0.00 | ||
| Cabot Oil & Gas (COG) | 0.00 | ||
| Activision Blizzard, Inc. (ATVI) | 0.00 |
Current Market OutlookWe could recap all of the market’s ups and downs of the past few days, or couple of weeks … or past few months, for that matter. But the bottom line is that, right now, the main trend of the major indexes is sideways until proven otherwise. As for individual stocks and sectors, it’s all about being selective—there are pockets of strength, but stock selection and timing your buys is important in this choppy environment. We’re knocking our Market Monitor down one more notch, not because we’re feeling terribly bearish but more to reflect the overall market’s neutral position.
The good news is that Top Ten automatically hones in on the market’s strongest stocks, and despite the usual batch of earnings potholes, most are still in good shape. Our Top Pick this week is SunEdison (SUNE), which is leading the new recovery in solar stocks thanks to its huge pipeline and yieldco strategy.
| Stock Name | Price | ||
|---|---|---|---|
| XPO Logistics (XPO) | 0.00 | ||
| SunEdison (SUNE) | 0.00 | ||
| Qunar (QUNR) | 0.00 | ||
| Norwegian Cruise Lines (NCLH) | 0.00 | ||
| Martin Marietta Materials (MLM) | 261.52 | ||
| Global Payments Inc. (GPN) | 0.00 | ||
| Tableau Software (DATA) | 126.42 | ||
| Carter’s (CRI) | 0.00 | ||
| Celanese (CE) | 0.00 | ||
| AMAG Pharm. (AMAG) | 0.00 |
Current Market OutlookA week ago, it looked like the market had finally left behind its up-and-down pattern, but earnings season had other ideas—the major indexes took on some water, and many individual stocks were hit hard after so-so quarterly reports. That said, it’s not the end of the world; most indexes are holding their 50-day lines and there are a bunch of stocks either holding their own, or still within multi-month launching pads. We are respecting last week’s selling by knocking our Market Monitor back down a notch, and we do think it’s best to be very selective when doing new buying. The real key will be the next few days and whether the market can hold important support levels.
In the meantime, we’re impressed that we’re still finding solid growth ideas from a variety of fields. Our Top Pick is Equinix (EQIX), a steadily-growing data center operation whose REIT status offers tax advantages and the prospect of big dividends.
| Stock Name | Price | ||
|---|---|---|---|
| Valeant Pharmaceuticals (VRX) | 0.00 | ||
| Oshkosh (OSK) | 95.04 | ||
| NetEase, Inc. (NTES) | 0.00 | ||
| JetBlue Airways Corporation (JBLU) | 0.00 | ||
| Incyte Corporation (INCY) | 76.98 | ||
| Equinix, Inc. (EQIX) | 547.73 | ||
| CyberArk (CYBR) | 111.74 | ||
| Ctrip.com International Ltd. (CTRP) | 34.94 | ||
| Bluebird Bio (BLUE) | 0.00 | ||
| Ambarella (AMBA) | 52.79 |
Current Market OutlookAfter weeks of banging on resistance, the major indexes lurched above some key levels last week, and many individual stocks did the same. To be fair, “breakouts” in indexes are notoriously unreliable, which is why we put more emphasis on the overall trend (choppy, but still positive) and the action of leading stocks (improving, though earnings season continues to have its say). Thus, while last week wasn’t a major buy signal, the weight of the evidence tells us to push our Market Monitor up a notch into bullish territory and continue to look for new leadership to emerge in the weeks ahead.
This week’s list has a wide variety of stocks, but for our Top Pick, we’re going with the mega-cap stock that just gapped up on earnings—Amazon’s (AMZN) surge last week pushed it out of a 15-month base as investors see huge potential for the firm’s cloud computing division.
| Stock Name | Price | ||
|---|---|---|---|
| Taser (TASR) | 0.00 | ||
| Men’s Wearhouse (MW) | 0.00 | ||
| Ligand Pharmaceuticals (LGND) | 267.14 | ||
| HD Supply Holdings, Inc. (HDS) | 0.00 | ||
| Hasbro (HAS) | 0.00 | ||
| GW Pharmaceuticals (GWPH) | 174.52 | ||
| Fortinet Inc. (FTNT) | 137.53 | ||
| Axalta Coating (AXTA) | 0.00 | ||
| Amazon.com (AMZN) | 2.00 | ||
| Akamai Technologies (AKAM) | 0.00 |
Current Market OutlookLast Friday saw a big, broad selloff in the market, not unlike what we’ve seen a few times so far this year. But, interestingly, while those other selloffs lasted a few days, this one might not—the market snapped back vigorously today. All of this is short-term stuff, of course; the overall trend is still generally sideways and few stocks are running away on the upside, so we’re not suggesting it’s time to become fully invested. But we’re seeing evidence that selling pressures are fading, which, if earnings season goes well, could launch a sustained advance.
This week’s list has a nice mix of charts; some are super-strong, some are tight after prior advances. Our Top Pick is MobilEye (MBLY), a company with as big a growth story as you’ll find and a chart that’s showing strength after a long decline. Stick with a small position and expect volatility.
| Stock Name | Price | ||
|---|---|---|---|
| WABCO Holdings (WBC) | 0.00 | ||
| Qunar (QUNR) | 0.00 | ||
| Universal Display (OLED) | 187.54 | ||
| Newfield Exploration (NFX) | 0.00 | ||
| Netflix, Inc. (NFLX) | 423.92 | ||
| Mobileye N.V. (MBLY) | 0.00 | ||
| First Solar (FSLR) | 83.74 | ||
| Esperion Therapeutics (ESPR) | 0.00 | ||
| Depomed (DEPO) | 0.00 | ||
| Builders FirstSource (BLDR) | 44.12 |
Current Market OutlookThe Nasdaq poked above the 5,000 level for the third time in six weeks today, and most other indexes aren’t far behind. To us, what’s distinctive about the recent upmove is a complete lack of selling—very few stocks are hitting new lows, and even bad news has failed to attract the bears. Now, to be fair, buyers aren’t exactly flexing their muscle, either; not many stocks are hitting new highs and volume’s been generally light. Overall, we’re going to keep our Market Monitor where it is because the sideways trend of the market is still intact, but we do think there’s a good chance the third time could be the charm as the Nasdaq tests new high ground.
This week’s list has a bunch of good prospects, including some from unexpected areas (energy and yieldcos!). But our Top Pick is Valeant Pharmaceuticals (VRX), a steady grower in the drug field that should see earnings accelerate thanks to its recent acquisition of Salix.
| Stock Name | Price | ||
|---|---|---|---|
| Valeant Pharmaceuticals (VRX) | 0.00 | ||
| Terraform Power (TERP) | 0.00 | ||
| Sabre Corp. (SABR) | 0.00 | ||
| PDC Energy (PDCE) | 0.00 | ||
| Orbital ATK (OA) | 0.00 | ||
| JD.com (JD) | 39.58 | ||
| Intercept Pharmaceuticals (ICPT) | 0.00 | ||
| Harman International Industries, Inc. (HAR) | 0.00 | ||
| Canadian Solar (CSIQ) | 0.00 | ||
| Autohome (ATHM) | 98.65 |
Current Market OutlookThe market found some buying support after this morning’s gap lower, as some investors believe the Fed might stay on hold for longer considering job growth has slowed. That was good to see, but, daily wiggles aside, the intermediate-term trend remains sideways, which means staying selective, holding some cash and honoring your stops is paramount. There are still plenty of stocks working and a few set-up nicely, and that’s where your focus should be.
This week’s Top Ten presents a bunch of current winners; all have held up well during the market’s recent selloff. Our Top Pick is Carmax (KMX), which popped out of a nice, flat base on earnings last week.
| Stock Name | Price | ||
|---|---|---|---|
| 58.com (WUBA) | 0.00 | ||
| United Therapeutics (UTHR) | 0.00 | ||
| Medivation (MDVN) | 0.00 | ||
| CarMax (KMX) | 0.00 | ||
| Horizon Therapeutics (HZNP) | 49.89 | ||
| Humana Inc. (HUM) | 0.00 | ||
| Diamondback Energy (FANG) | 0.00 | ||
| E*Trade Financial (ETFC) | 0.00 | ||
| D. R. Horton (DHI) | 66.55 | ||
| Cirrus Logic Inc. (CRUS) | 0.00 |
Current Market OutlookDespite today’s rally, the major indexes have basically been in a sideways trend during the past few months—they’ve tried to get going on the upside twice during the past few weeks, but both times hit a wall and fell back. Now, a sideways trend isn’t a death knell for the market, but it does make it more difficult—it’s vital to pick your spots when buying, to book partial profits on the way up and to honor your stops should a stock break down. We’re going to knock down our Market Monitor a bit—we’re still more bullish than bearish, but given the environment, we want to lighten up on the gas pedal a bit.
This week’s list has a few dependable growers, not surprising given the market’s wobbles. Still, for our Top Pick, we’re going with a faster mover—Ctrip.com (CTRP) recently gapped up on earnings after 18 months out of the spotlight, thanks to a bullish forecast. We think you can start a position around here.
| Stock Name | Price | ||
|---|---|---|---|
| VeriSign (VRSN) | 190.71 | ||
| Twitter (TWTR) | 40.37 | ||
| Signet Jewelers (SIG) | 0.00 | ||
| ServiceMaster (SERV) | 0.00 | ||
| Red Hat (RHT) | 0.00 | ||
| Novo Nordisk (NVO) | 0.00 | ||
| Molina Healthcare (MOH) | 0.00 | ||
| Huntington Ingalls (HII) | 0.00 | ||
| Ctrip.com International Ltd. (CTRP) | 34.94 | ||
| Abiomed (ABMD) | 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
Last summer, problems with the Chinese stock market, economy and currency caused ripple effects all over the globe. As a result, U.S. stock markets fell dramatically in August and September, recovered with a stunning one-month gain in October, then pulled back a bit. We are seeing literally the same situation play out again this week.
Stocks are cheap, so we’re adding some bargains to the Smart Investing in Turbulent Times portfolios today.
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.