The market is sputtering. While the S&P is still up slightly for the year, it’s at the same level it was three months ago.

After two glorious years of being up over 20%, stocks may be expensive and due for consolidation. While that’s certainly possible, it’s normal and healthy in a bull market. And stocks may not be as expensive as they seem.

This bull market has been driven higher by technology and the artificial intelligence catalyst. Without a handful of large technology companies, the bull market returns so far would be quite lame. But things are changing. There are good reasons to believe the relative returns of the rest of the market should vastly improve.

The rally has broadened out. Other stocks are picking up the slack while technology is wobbling. The grossly lopsided performance couldn’t last. And there’s more to the story than just sector rotation. Earnings are catching up.

The energy sector in particular is likely to benefit from the shared bounty going forward.

There are powerful reasons to believe certain energy stocks will benefit from increasing natural gas demand, more oil and gas drilling, and friendlier regulations. Some of these stocks have pulled back from the highs and offer an attractive entry point. In this issue, I highlight two energy stocks that are likely in a multi-year bull market that historically generate high call premiums.

Before we dive into this week’s idea, we need to clean up our February positions that expired on Friday. First off, both our NET and HOOD positions closed for their full profits.

However, RBRK and GH stocks closed below their strike prices, which means the calls we sold expired worthless, and we are left with the stock positions, which we are going to sell today.

While there have been some encouraging signs here and there, the market never could quite kick into gear during the past two months, which didn’t necessarily portend doom but is why we never turned very bullish in recent weeks—and now we’ve seen a sudden rug pull, as leaders have hit air pockets. Now, to this point, the selling has been mostly seen in the growth arena, so there are still many names that are handling themselves just fine. We’re open to this being the final shakeout to a two-month-long grinding period, but as always we’re taking the evidence as it comes: We’ll yank our Market Monitor down to a level 5, though a lot of it comes down to entry points and what stocks you own.

This week’s list is a hodgepodge of names, with some growth, some turnaround and a few others sprinkled in. Our Top Pick is a great short- and long-term growth story that acts well and could be ready to help lead if the market can turn back up.

After weeks of withstanding a geyser of negative headlines – higher inflation, tariffs, slower interest rate cuts, the DeepSeek impact on AI, etc. – the market finally took on water last Thursday and Friday. Whether that’s the start of a deeper correction, we’ll likely know in the next few days. Even if it is, it’s nothing abnormal. After all, the S&P just touched new all-time highs three trading days ago. A pullback was probably inevitable.

Out of respect for the about-face in U.S. stocks in recent days, however, today we’ll turn our attention to Europe, where stocks have been outperforming their U.S. counterparts by more than 2-to-1 so far this year. Our new addition comes from Spain and is a company that’s been in Carl Delfeld’s Cabot Explorer portfolio for several months.

Details inside.

After notching an all-time high earlier in the week, the S&P 500 and its index peers came under intense selling pressure to close the week. By week’s end, the S&P 500 fell by 1.7%, while the Dow and Nasdaq both lost 2.5%.

After notching an all-time high earlier in the week, the S&P 500 and its index peers came under intense selling pressure to close the week. By week’s end, the S&P 500 fell by 1.7%, while the Dow and Nasdaq both lost 2.5%.

The market remains relatively mixed from a top-down perspective, but growth stocks remain a different story -- some still look fine, but the action is very hit or miss, and recently, more have come under pressure, with air pockets appearing all over the place this week. That doesn’t portend doom -- in fact, some things like sentiment are encouraging, and the indexes aren’t in bad shape -- but we’ve pared back this week and will look to reinvest the proceeds once big investors decisively step up to support growth stocks.

The February 2025 Issue highlights a variety of both new and familiar names across the software, delivery, MedTech, appliance and land management markets.

As always, this Issue should have something for everyone.

Despite early-week wobbles on inflation worries, the market again held its ground and in fact advanced as the week wore on. By week’s end the S&P 500 had gained 1.5%, the Dow had risen by 0.5%, and the Nasdaq had added 2.6%.

Most of the overall evidence out there is the same as it has been for weeks, but there is one factor that is very encouraging for the bulls: Earnings season, which continues to produce a good-sized batch of gaps higher in growthy names, with another round of winners this past week; as things stand now, there should be plenty of leadership for the market to ride ... if big investors finally click the buy button. We’re far from flooring the accelerator, but we’ll nudge up our Market Monitor to a level 7.

As an example of what we just wrote, seven of this week’s Top Ten gapped on earnings last week, and while some still need a little work, all should have good potential if the market kicks into gear. Our Top Pick has reemerged after a long base-building effort last year and as some industry worries fade into the background.

The market’s resilience in the face of bad headlines (tariffs, higher inflation, an increasingly cautious Fed, etc.) continues to impress. And with the major indexes currently trading near their 2025 highs despite all the outside attempts to derail them, perhaps the next big market move will be up. With that in mind, today we add to our growth stockpile in the form of a former market (and Cabot) darling that was recently recommended by Mike Cintolo to his Cabot Growth Investor audience. After a rough stretch in mid-2024, the stock is soaring again.

Details inside.

Despite early-week wobbles on inflation worries, the market again held its ground and in fact advanced as the week wore on. By week’s end the S&P 500 had gained 1.5%, the Dow had risen by 0.5%, and the Nasdaq had added 2.6%.

The market took a jab to the face last week, but it still looks good. It’s still a strong market. But one that is showing some vulnerability.


After a great first half and a strong July, the market pulled back 2% last week, reversing most of the July gains. The culprit was a Biden administration announcement of new AI chip export restrictions to China. That news also combined with a perceived likelihood of a Trump presidency and the possibility of further trade frictions with China. The technology sector, and semiconductor stocks in particular, took it on the chin.

V.F. Corporation (VFC) announced the sale of Supreme, the famed streetwear brand, to EssilorLuxottica, the owner of Ray-Ban, for $1.5 billion, leading to a 13.6% surge in VFC’s shares on Wednesday. Supreme, a New York City skate shop turned global fashion icon since 1994, became renowned for its exclusive collaborations with luxury brands like Louis Vuitton and Nike. VFC acquired Supreme in 2020 for $2.1B, hoping to leverage its trendy image to boost its portfolio. However, the huge debt load and miserable margins took their toll, and by last year the company had written down two-thirds of Supreme’s value.

All of a sudden small-cap stocks are the talk of the town.

I guess that’s what happens when the asset class posts its best five-day streak since April 2020!

Despite the recent move, Barclays reports that Commodity Trading Advisor (CTA) positioning is still neutral on small caps (overweight S&P 500 and Nasdaq), leaving ample room for more buying.

Stock market trends last longer than anyone expects.

That was the oft-repeated adage of my former boss, Cabot legend Tim Lutts. And he was right. For all the tsk-tsking about the current bull market being long in the tooth, it’s actually tied for the shortest bull market (21 months) in history at the moment, according to data from Ryan Detrick of Carson Research Group. The average bull market lasts 61 months – nearly three times the length of the current one!

WHAT TO DO NOW: Today is a horrid day for most growth and AI-related stocks, continuing the rotation that began last week. All in all, there remain lots of crosscurrents, with our market timing indicators now positive, but individual growth stocks remain very hit or miss, all while earnings season is starting to rev up. Thus, we continue to favor holding a chunk of cash on the sideline while taking things on a stock-by-stock basis. In the Model Portfolio, we did some buying earlier this week, adding half-sized stakes in the ProShares Russell 2000 Fund (UWM) and Robinhood (HOOD), though tonight we’re going to sell our remaining small position in Uber (UBER) while placing Pure Storage (PSTG) on Hold as it takes on water with most peers. Our cash position is around 36%, which we’ll hold onto tonight as we watch to see how the rotation progresses from here.

There isn’t much not to like about this market. After a strong first half of the year, the market is having a great July. And the rally is broadening out. It’s not just technology anymore.

Wow. Just wow. Not only has this market rally continued to forge on, it’s broadened out too. After a 14.5% gain in the first half of this year, the S&P is putting together an impressive July with a better than 3% gain so far.

The latest leg of this rally has been sparked by a better-than-expected June CPI report. Interest rate optimism abounds. Consensus now expects a Fed rate cut before the end of the year and an increased expectation that overall interest rates have peaked and are likely to trend lower for the rest of the year.

Wells Fargo (WFC) kicked off the Cabot Turnaround Letter earnings season today, showing solid EPS of $1.33/share, which exceeded estimates by 4 cents. WFC also beat revenue estimates by $410M, coming in at $20.69B, but the stock is trading lower this morning as the company posted a 9% YoY decline in net interest. We moved this one to HOLD back in the May 27 issue at 60, and it just hasn’t quite been able to clear that prior high. Given that we have a 119% overall gain on this stock in the rear-view mirror, and that interest rates – and therefore WFC earnings – are only likely to go lower from here, we’re moving this one to SELL.

At the index level, small-cap performance has been unremarkable (though stable) for a while, but under the hood, there continue to be plenty of performing names, and we’ve been fortunate enough to be in a number of them.

That said, there’s been some shifting of the deck this week with a few growthy stocks (TMDX, RXST) taking a bit of a hit. On the flip side, continued performance from the likes of ENVX and new addition (from June) AORT is very nice to see.

Explorer stocks put in a solid performance this week as Federal Reserve Chairman Jerome Powell was on Capitol Hill for two days of testimony. His remarks were parsed as if he were an oracle, but the takeaway seems that we are moving towards a rate cut dependent on labor markets cooling off a bit more.

I really don’t like paying too much attention to macro issues like interest rates and would rather focus on new ideas that most investors are not following closely. Right now, in a market so dependent on a small number of leading stocks, you can reduce your portfolio’s overall risk profile by adding some stocks in countries and sectors where expectations and downside risk are low.

If it feels like value stocks are missing the bull market party this year, take comfort in knowing they’re not alone.

Thanks to the Magnificent Seven and a few other mega-cap tech stocks and red-hot artificial intelligence plays, the S&P 500 and the Nasdaq have posted very strong returns through the first half of 2024, up 17.6% and 24.8%, respectively. But most other indexes and funds have had very average years. The Dow is up a mere 4.2%. The Russell 2000 (small-cap stocks) is up 0.8%. And the Equal Weight S&P 500 index is up 3.7% and is well off its late-March peak.

Old-school value managers like Benjamin Graham and Warren Buffett used to have a funny way of describing their investing style.

They said value stocks were like cigar butts on the sidewalk that had a few puffs left in them.

I’d like to offer an updated version of this metaphor. I think cannabis stocks have a few more puffs left in them between now and the end of the year.

Cannabis names are thoroughly unloved and abandoned once again.

I will be exiting our Visa (V) trade today. I will discuss the trade in greater detail in our upcoming weekly issue.

Visa (V) is due to announce earnings after the closing bell today. The stock is currently trading for 271.33.

After selling premium today, our IBM position is already up 31.6% since we initiated it just three weeks ago.

Our IBM position is already up over 12% since we initiated it just over two weeks ago.

I want to add some downside exposure; so, with QQQ trading for 422.16, I want to place a short-term bear call spread going out 38 days and outside of the expected range to the upside, or 440. My intent is to take off the trade well before the March 1, 2024, expiration date.

I’m selling more premium in DKNG and GDX today. As stated in the weekly report yesterday, January has been a good month so far as we have locked in over 10% worth of options premium through our Income Trader wheel approach. If all goes well this week, we should be able to add to our January totals as our PFE calls are due to expire.

I’ll be sending out alerts for several of our Fundamentals portfolios over the next two days as we stay mechanical and roll our January 19, 2024, calls into the February/March expiration cycles. For those who are new to the service and wish to add a position, please read through the alert carefully.

Moving Ironwood Pharmaceuticals (IRWD) to Sell

Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.

The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.

I’ll be sending out alerts for several of our Fundamentals portfolios over the next two days as we stay mechanical and roll our January 19, 2024, calls into the February/March expiration cycles. For those who are new to the service and wish to add a position, please read through the alert carefully.

Cannabis stocks are up sharply – 20% or more – since I suggested buying them on weakness in a Cabot Cannabis Investor update sent to you on January 10.

Using my two favorite exchange-traded funds (ETFs) as proxies for the sector, the AdvisorShares Pure US Cannabis (MSOS) has advanced 20%, and AdvisorShares MSOS 2X Daily (MSOX) is up 37%.

WHAT TO DO NOW: Most of the evidence is still bullish, both for the overall market and for leading stocks, but as the January wobbles have continued, some air pockets are emerging, with today being a tough day for growth stocks. Today we’re going to sell half of Duolingo (DUOL), which is breaking support and has given back its post-earnings gains, while placing our half-sized stake of ProShares Russell 2000 Fund (UWM) on Hold. Our cash position will be around 26%.

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.