Despite the major indexes trading near the highs, most stocks have struggled.

For most of the rest of the market, the problem is oil. The price per barrel of crude oil skyrocketed to over $110 from under $60 before the war. And prices stayed elevated for more than three months. Oil is involved in everything. And that means inflation. And inflation means high interest rates.

But that’s in the past. The future is likely to be different.
Peace changes the dynamic. Without war, oil prices will fall. Interest rates will come down. That rate hike may be off the table. And stocks held back by inflation and high interest rates should be poised to move higher.

The pessimists have it all wrong. The resilient economy isn’t precarious. The restraints were precarious. When the falling oil prices unleash a stronger economy, it will change things. Let’s get ahead of the curve with stocks that will benefit.

Before we dive into this week’s covered call idea we need to move on from three stock positions coming out of June expiration, as the calls we sold expired worthless.

To execute these trades you need to:

Sell YOU stock

Sell PL stock

Sell VIAV stock

Moving on ...

Last week was a bit of a disjointed, volatile affair, so we’re being a bit more selective when it comes to stock selection and entry points. That said, the intermediate-term picture remains as bright as ever, with the trends for leading indexes, sectors and stocks pointed up and with impressive resilience and mostly-normal action even after many stocks posted massive gains in April and May. We’re leaving our Market Monitor at a level 8, aiming to give our winning stocks some rope and look for fresh buys on dips.

This week’s list is again heavy on growth names, though there are a few newer titles that haven’t appeared before. Our Top Pick is an out-of-the-way AI play that’s seeing humongous new orders and just completed a major acquisition.

Editor’s Note: There will be no issue of Cabot Stock of the Week next Monday. You will receive your next issue on Monday, July 6.

Rotation is in full swing, and that’s making for a healthier, less top-heavy market despite the S&P 500 and Nasdaq trading below their early-June tops. As the air has come out of the AI trade a bit, investors have simply moved money into the many unloved and undervalued sectors – financials, healthcare, utilities, materials. The latter sector is where today’s new portfolio addition comes from. It’s a little-known name Tyler Laundon dubbed his Top Pick in this month’s issue of his Cabot Early Opportunities newsletter. It’s a stock with tremendous upside and momentum.

Details inside.

After more than three months of dictating every move on Wall Street, the Iran war finally headed toward the exits last week — the U.S. and Iran agreed to a framework to end the conflict, reopen the Strait of Hormuz, and lift the U.S. naval blockade, sending oil tumbling back toward the mid-$70s. The other headliner last week was new Fed Chair Kevin Warsh’s first meeting on Wednesday: The Fed held rates steady, but its updated projections flipped hawkish, with the median policymaker now penciling in a rate hike rather than a cut before year-end — a shift that knocked stocks lower midweek before a sharp Thursday rebound.

After more than three months of dictating every move on Wall Street, the Iran war finally headed toward the exits last week — the U.S. and Iran agreed to a framework to end the conflict, reopen the Strait of Hormuz, and lift the U.S. naval blockade, sending oil tumbling back toward the mid-$70s. The other headliner last week was new Fed Chair Kevin Warsh’s first meeting on Wednesday: The Fed held rates steady, but its updated projections flipped hawkish, with the median policymaker now penciling in a rate hike rather than a cut before year-end — a shift that knocked stocks lower midweek before a sharp Thursday rebound.

After more than three months of dictating every move on Wall Street, the Iran war finally headed toward the exits last week — the U.S. and Iran agreed to a framework to end the conflict, reopen the Strait of Hormuz, and lift the U.S. naval blockade, sending oil tumbling back toward the mid-$70s. The other headliner last week was new Fed Chair Kevin Warsh’s first meeting on Wednesday: The Fed held rates steady, but its updated projections flipped hawkish, with the median policymaker now penciling in a rate hike rather than a cut before year-end — a shift that knocked stocks lower midweek before a sharp Thursday rebound.

It was a better week for markets and Explorer stocks. GE Vernova (GEV) came to life this week, up 21%. Coeur Mining (CDE) shares rebounded this week, soaring 13.8% following a recent announcement that it will be added to the S&P MidCap 400 Index.

And new Fed chairman Kevin Warsh signaled yesterday that he is an inflation hawk. Overnight, the Bank of Japan raised interest rates to its highest level since 1995. Officials signaled more hikes ahead to combat too-high inflation.

But our bull market seems to confirm that rising interest rates do not matter much.

The June issue of Cabot Early Opportunities is focused on three companies benefiting from powerful structural growth trends that are still in the early innings.

Whether it’s a newly independent materials company gaining exposure to nuclear and AI demand, a critical power infrastructure provider solving bottlenecks in next-generation computing, or a semiconductor supplier riding a surge in testing complexity, these businesses are seeing improving fundamentals that continue to pull in fresh money.

All the details are in the June issue of Cabot Early Opportunities.

What a difference a week makes. After the prior Friday’s chip-driven rout, a volatile, headline-whipped week ultimately ended higher as growing optimism that a U.S.-Iran peace deal is finally within reach sent oil tumbling back toward $85 a barrel. And despite a modestly hot May inflation report and an Oracle-led wobble in AI names, by Friday the bulls had the upper hand as SpaceX pulled off the largest IPO in history.

After a huge run in April and May, the sellers finally made a stand with the major indexes and leading growth stocks, but the rebound since then has been classic, with growth stocks rebounding nicely and with the quick, sharp decline hitting short-term sentiment. So is it all up from here? Not necessarily—there’s still a decent chance of more short-term shenanigans as the good news is out and many growth stocks remain extended to the upside. Still, the recent rebound is a good sign this bull phase has much farther to run. We’ll bump up our Market Monitor back to a level 8.

This week’s list covers a lot of different areas of the market, including a few names that took their time to get moving after the March low. Our Top Pick just decisively broke out of a huge launching pad on great volume after some wobbles after earnings.

For the last couple months, the market has seemingly been trading at post-war pricing. Now that the war is actually over (or close to it), let’s see if there are even higher rungs for stocks to climb. So far, the market likes the news, with the major indexes climbing between 1% and 3% today. Let’s hope the Fed and its new chief, Kevin Warsh, don’t throw cold water on the renewed rally later this week.

In the meantime, financials are finally getting going, and today we recommend a stock from that beleaguered sector that caught the eye of Michael Brush, chief analyst of our brand-new Cabot Insider Edge newsletter.

Details inside.

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.

These two solar companies are joining up to form a new type of solar power venture, leading to upgraded price targets for each stock.

SunPower (SPWR) and First Solar (FSLR)
from Tech Trend Trader

The economic justification for solar power is growing all on its own as a surge of capacity and production,...

This global construction supplier is benefiting from worldwide economic improvement and beat last quarter’s analysts’ estimates by a whopping $0.17 per share.

Martin Marietta Materials (MLM)
from Cabot Market Letter


Martin Marietta Materials (MLM)—Construction materials and aggregates (cement mix, asphalt, etc.) aren’t usually products that attract growth investors, but we think there are...

This business process outsourcing (BPO) company beat Wall Street’s estimates on both revenues and earnings, in the last quarter. The company’s management said for 2015, “We expect revenues to be in the range of $2.46 to $2.50 billion. We expect 2015 adjusted operating income margins to be approximately 15.0%.”

Genpact Limited...

As I mentioned in my blog post last week, here is an update on the PCYC/ABBV merger. Bottom line recommendation: hold onto your ABBV stock, post-merger.

Hold Pharmacyclics (PCYC)
from The Medical Technology Stock Letter
Updated from Investment Digest 759, July 23, 2014 Mid-Year Top Picks issue

We may have reached a...

This infrastructure company reported quarterly earnings of $0.71, handily beating the consensus estimate of $0.56.

AECOM Technology (ACM)
from PAD System Report


AECOM Technology is an “infrastructure” play. This word is one that makes most economists salivate. Infrastructure refers to roads, bridges, dams, ports, airports, and water and power distribution. Well-functioning infrastructure underlies...

This global fund is rated five stars by Morningstar.

Tweedy Browne Global Value (TBGVX)
from Bob Carlson’s Retirement Watch

I recommend adding Tweedy Browne Global Value (TBGVX), a global stock fund that should benefit if the European Central Bank and other global central banks continue their recent expansive monetary policies.

The management team has...

This semiconductor company trounced estimates last quarter, earning $0.11 per share, compared to analysts’ estimates of $0.06. Our second company disappointed with earnings, prompting a sell recommendation.

Exar Corporation (EXAR)
from The Oberweis Report

Exar Corporation (EXAR) designs, develops and markets high performance analog mixed-signal integrated circuits and advanced sub-system solutions for the...

Sell: Inventure Foods (SNAK)
Updated from Investment Digest 758, June 18, 2014
from The Oberweis Report

Inventure Foods (SNAK) is being deleted after disappointing earnings reports and outlooks in its latest reported quarter.

Jim Oberweis, CFA, The Oberweis Report, www.oberweisreport.com, 800-323-6166, March 2015

...

This medical device company just announced a deal to pay $1.6 billion for the men’s health and prostate health business of Endo International. Our contributor also updates his recommendation for a natural gas mutual fund that is still a “buy” on his list.

Boston Scientific (BSX)
from Sound Advice


Boston Scientific (BSX) is...

Fidelity Select Natural Gas Fund (FSNGX)

from Sound Advice
Updated from Investment Digest 755, March 19, 2014


Fidelity Select Natural Gas Fund (FSNGX) is essentially unchanged this year.

The precipitous drop in the price of oil brought the energy-equivalent costs of oil and natural gas closer, but a substantial disparity still exists. One barrel...

This global automobile maker recently announced that its deliveries of BMW, Mini and Rolls-Royce cars rose 7% in January, to 142,154. Yet the shares currently trade at an undervalued level, providing an attractive opportunity.

Bayerische Motoren Werke Aktiengesellschaft (BAMXY)
from Ian Wyatt’s Million Dollar Portfolio

Annual U.S. auto sales are on track for...

Analysts for this trailer manufacturer have increased their earnings estimates in the last 90 days, by seven cents per share, to $1.20, for the upcoming quarter.

Wabash National (WNC)
from Upside

A leading maker of semi-truck trailers, Wabash National (WNC) has a bright growth outlook. The company is expanding its product line, focusing...

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.