Issues
Current Market OutlookThe market has had plenty of gyrations this year, even since it pushed out to new highs in February. But at no time since then has the intermediate-term trend turned down, and at no time have a bunch of Top Ten stocks showed abnormal action. Thus, we remained bullish, and that patience began paying off last week as the market’s uptrend resumed. There will surely be pullbacks and potholes among various sectors and indexes from time to time, but with the odds favoring higher prices in the weeks ahead, you should be holding your top performers and looking to add new leaders at good buy points.
This week’s list has a diverse mix of stocks, including a few new names. Our Top Pick is Ulta Beauty (ULTA), which is one of the market’s top retail stocks and cookie-cutter stories. A buy on dips is your best bet.
| Stock Name | Price | ||
|---|---|---|---|
| Western Refining (WNR) | 0.00 | ||
| Vipshop Holdings (VIPS) | 14.25 | ||
| Ulta Beauty (ULTA) | 331.95 | ||
| Ryland (RYL) | 0.00 | ||
| Regeneron Pharmaceuticals (REGN) | 512.96 | ||
| Universal Display (OLED) | 187.54 | ||
| Juno Therapeutics (JUNO) | 0.00 | ||
| JD.com (JD) | 39.58 | ||
| JetBlue Airways Corporation (JBLU) | 0.00 | ||
| Fortinet Inc. (FTNT) | 137.53 |
Current Market OutlookThe market has been shaking and baking during the past three weeks on lots of headline (mainly currency-related) news, but while there has been some damage, the major indexes are holding key support and relatively few stocks have fallen apart. Of course the evidence can change at any time, and if the market really breaks down, we’ll turn cautious. But, despite the whippy day-to-day action, we’re sticking to our bullish stance, and believe holding your best performers, and even doing a little buying at opportune times, will prove fruitful.
This week’s list is once again heavy on the medical and retail sectors, though there are a few other tempting ideas out there, too. Our Top Pick is Urban Outfitters (URBN), which has come back to life after a long period out of the limelight.
| Stock Name | Price | ||
|---|---|---|---|
| WisdomTree (WETF) | 0.00 | ||
| Vulcan Materials Company (VMC) | 137.10 | ||
| United Therapeutics (UTHR) | 0.00 | ||
| Urban Outfitters (URBN) | 0.00 | ||
| SunEdison (SUNE) | 0.00 | ||
| IPG Photonics (IPGP) | 0.00 | ||
| Horizon Therapeutics (HZNP) | 49.89 | ||
| GrubHub (GRUB) | 140.03 | ||
| Foot Locker (FL) | 0.00 | ||
| American Eagle (AEO) | 0.00 |
Current Market OutlookAfter a straight-up move in February, the market has hit some rough waters, with the major indexes and lots of growth stocks taking hits. There’s always the chance that the market is beginning a major correction after a strong but relatively brief (in this case, four weeks) advance, but we like to go with the evidence. So far, all of the indexes are holding above their 50-day lines, and very few stocks have shown any abnormal selling. Thus, while we’re not fully invested, we are sticking with a bullish outlook and believe holding your best performers, and even buying a little on this dip, makes sense.
This week’s list is again heavy on the chip and medical (mainly biotech) sectors, with a smattering of retail. Our Top Pick is Biogen (BIIB), a blue-chip leader of the biotech group. The stock lifted out of a 10-month base in January and has acted well since, and it’s now approaching a solid entry point after pulling back.
| Stock Name | Price | ||
|---|---|---|---|
| WhiteWave Foods (WWAV) | 0.00 | ||
| Tesoro (TSO) | 0.00 | ||
| Skyworks Solutions (SWKS) | 0.00 | ||
| NXP Semiconductors (NXPI) | 0.00 | ||
| Mallinckrodt (MNK) | 0.00 | ||
| Jack in the Box (JACK) | 0.00 | ||
| HDFC Bank Limited (HDB) | 0.00 | ||
| Centene (CNC) | 0.00 | ||
| Burlington Stores (BURL) | 193.95 | ||
| Biogen (BIIB) | 0.00 |
Current Market OutlookWith the broad market zooming, finding strong stocks is easy these days. But while buying any strong stock might work, your best odds will come from buying strong stocks that have set up well. That means they have a base, where supply and demand have stabilized for a while, or they have a breakout, which can kick off a new advance, or other supportive patterns. What you don’t want to do in a market this strong is buy (or own) laggards. Make hay while the sun shines! (And take advantage of what are traditionally the two last months in the market’s favorable November-April season.)
Our Top Pick this week is WABCO Holdings (WBC), a global supplier of technology systems for commercial trucks, buses and trailers. Business is booming and the stock has great and growing sponsorship.
| Stock Name | Price | ||
|---|---|---|---|
| WABCO Holdings (WBC) | 0.00 | ||
| Norwegian Cruise Lines (NCLH) | 0.00 | ||
| IntercontinentalExchange, Inc. (ICE) | 0.00 | ||
| Hilton Worldwide Holdings (HLT) | 0.00 | ||
| Salesforce.com (CRM) | 0.00 | ||
| Cracker Barrel Old Country Store (CBRL) | 0.00 | ||
| Cavium (CAVM) | 0.00 | ||
| Acuity Brands (AYI) | 0.00 | ||
| Akorn (AKRX) | 0.00 | ||
| Agrium (AGU) | 0.00 |
Current Market OutlookAlong with heaps of snow in the Northeast, February has brought a marked change in character for the general market—the major indexes have moved into new high ground (led by the growth-oriented Nasdaq Composite), and individual stocks have done the same. In the short-term, we have seen a little giddiness take hold, which could easily lead to some potholes and shakeouts. But there’s no doubt that the intermediate-term evidence remains bullish, so we believe dips will present good buying opportunities.
This week’s list has an interesting mix of volatile glamour stocks and bigger-cap companies that are under accumulation. There are many attractive charts, but our Top Pick is CommScope (COMM), a telecom play that’s super-strong after a recent, game-changing acquisition.
| Stock Name | Price | ||
|---|---|---|---|
| Zillow (Z) | 76.64 | ||
| VeriSign (VRSN) | 190.71 | ||
| Vipshop Holdings (VIPS) | 14.25 | ||
| Ultimate Software (ULTI) | 0.00 | ||
| Sony Corp. (SNE) | 0.00 | ||
| Molina Healthcare (MOH) | 0.00 | ||
| Marathon Petroleum Corporation (MPC) | 0.00 | ||
| FireEye (FEYE) | 0.00 | ||
| CommScope (COMM) | 0.00 | ||
| Berry Global (BERY) | 64.22 |
Current Market OutlookFor the past three months, the market has been on the cusp of breaking out a few times, only to fail as selling pressures grew. The past couple of weeks, however, have brought a change of character—many stocks surged on earnings, and then held and even built on those gains. And of course, the major indexes have kissed new high ground. That doesn’t guarantee higher prices—you’ll often see major indexes “fake out” above obvious resistance before pulling back—but we’re putting more emphasis on the increasingly positive action of individual stocks. Our Market Monitor is back into bullish territory, and we’re looking to put money to work as opportunities arise.
This week’s list has a broad array of stocks and sectors, a sign the buying pressures have broadened. Our Top Pick is LinkedIn (LNKD), which gapped out of a huge base on earnings two weeks ago—it looks like a liquid leader and should do very well if the market can continue higher.
| Stock Name | Price | ||
|---|---|---|---|
| Twitter (TWTR) | 40.37 | ||
| Skechers (SKX) | 0.00 | ||
| Sealed Air (SEE) | 0.00 | ||
| Ryland (RYL) | 0.00 | ||
| Pharmacyclics (PCYC) | 0.00 | ||
| Martin Marietta Materials (MLM) | 261.52 | ||
| LinkedIn Corporation (LNKD) | 0.00 | ||
| CyberArk (CYBR) | 111.74 | ||
| Charter Communications (CHTR) | 0.00 | ||
| Apple (AAPL) | 248.94 |
Current Market OutlookThe market definitely showed some improvement last week—the major indexes bounced back decently, and importantly, many recent earnings winners not only held their gains but stretched higher, something we haven’t seen much of for a few months. Because of that, we’re pushing the Market Monitor up a bit, but we remain relatively neutral for one simple reason: the market (and most stocks) are still range-bound, and until that changes, it’s going to be hard for any stock to make persistent progress. We’re OK doing some new buying, especially in some recent earnings winners (preferably on dips), but holding cash and keeping risk in check is necessary in this environment.
The good news is that we continue to see a broadening array of stocks firming up. Our Top Pick for the week is Tesoro (TSO)—while most energy stocks are still struggling, refiners are surging, and TSO looks like the leader. Buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Vulcan Materials Company (VMC) | 137.10 | ||
| Tesoro (TSO) | 0.00 | ||
| Sprouts Farmers Market (SFM) | 19.00 | ||
| Lear Corp. (LEA) | 0.00 | ||
| Integrated Device Technology (IDTI) | 0.00 | ||
| GrubHub (GRUB) | 140.03 | ||
| E*Trade Financial (ETFC) | 0.00 | ||
| Tableau Software (DATA) | 126.42 | ||
| Ashland Inc. (ASH) | 0.00 | ||
| Amazon.com (AMZN) | 2.00 |
Current Market OutlookOfficially, the major indexes are still in no-man’s land, gyrating within their two-month ranges. But the action is definitely feeling heavier. While a few stocks have emerged during earnings season (including a few in today’s issue), every market rally of a day or two has led to quick selling pressure; the broad market can’t get its act together and most stocks that poke into new high ground quickly retreat. We’re still not willing to make any bold predictions here—the environment remains more choppy than bearish—but the bottom line is that no money is being made. Thus we are knocking our Market Monitor down a notch (though it’s still in neutral territory) due to the recent deterioration.
The silver lining is that our screens are still picking up on a good number of resilient stocks, including more than a few earnings winners. Our Top Pick this week is Harman International (HAR), which has come to life after a yearlong rest. Try to buy on dips.
| Stock Name | Price | ||
|---|---|---|---|
| Pacira Biosiences (PCRX) | 54.85 | ||
| ServiceNow (NOW) | 341.86 | ||
| Netflix, Inc. (NFLX) | 423.92 | ||
| Lowe’s Companies (LOW) | 98.15 | ||
| Harman International Industries, Inc. (HAR) | 0.00 | ||
| Freescale Semiconductor (FSL) | 0.00 | ||
| Blackstone Group (BX) | 49.12 | ||
| Burlington Stores (BURL) | 193.95 | ||
| Biogen (BIIB) | 0.00 | ||
| Boeing (BA) | 432.22 |
Current Market OutlookThe market bounced back nicely last week, though the major indexes are still in no-man’s land, sitting in the middle of their two-month ranges, and with many stocks still hovering just south of new highs as earnings season gets underway. We have seen a couple of rays of light (growth stocks are showing a hint of outperformance this month, which is a good thing), but overall, the environment remains on the edge—decisive upmoves by the indexes and breakouts from leading stocks would be bullish, while a move below support and a bunch of downside earnings gaps would be bearish. For now, we’re keeping our Market Monitor neutral, but we’ll let you know if we see a sustained trend getting underway.
This week’s list contains a couple of recent earnings winners, as well as a couple of others that shot to new highs on big volume last week. Because of the market environment, our Top Pick will be a slower, but surer, play—Starbucks (SBUX) isn’t going to double, but it’s just the type of mega-cap name that institutions can pile into following a great quarterly report.
| Stock Name | Price | ||
|---|---|---|---|
| Zebra Technologies (ZBRA) | 154.94 | ||
| WisdomTree (WETF) | 0.00 | ||
| Ulta Beauty (ULTA) | 331.95 | ||
| United Continental Holdings (UAL) | 96.76 | ||
| Starbucks (SBUX) | 64.49 | ||
| Royal Gold, Inc. (RGLD) | 129.66 | ||
| Janus Capital (JNS) | 0.00 | ||
| Dexcom (DXCM) | 421.36 | ||
| Dollar Tree (DLTR) | 0.00 | ||
| Agrium (AGU) | 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
I’m adding BorgWarner to the Buy Low Opportunities Portfolio today, and I encourage you to buy at the current price.
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.