Before we dive into this week’s covered call idea, we need to sell our stock positions coming out of March expiration as the calls we sold expired worthless, leaving us with the stock positions.

The market had a welcome bounce today after a hairy end to last week, which is certainly encouraging and comes with some other positives we’ve been writing about. But after a tough few weeks and months, we’ll need to see more than one up day to conclude the multi-month sideways phase (and recently, downturn) is over. We’re staying flexible, but we’ll keep our Market Monitor at level 5 and see how things play out from here.

This week’s list is again heavy on tech plays and energy, though we’re going with a special situation for our Top Pick, a firm who’s had a rough road but a huge acceleration in growth is coming this year and possibly beyond.

The Fed and the Iran war conspired to send stocks tumbling another 1.5% to 2% since we last wrote, though some easing of tensions on the latter front is giving the market at least a temporary jolt of energy today. But it’s still a risk-off market overall, and thus today we are adding another lower-risk position in the form of a high-yield REIT that’s the newest recommendation from Cabot Dividend Investor Chief Analyst Tom Hutchinson.

Details inside.

There’s been lots of news and volatility of late--but the evidence hasn’t changed much, which keeps us in a defensive stance. Tonight, in fact, we’re trimming two of our names based on their action. That said, we’re not hunkered down in our storm cellar--there are many rays of light out there, and we’re not just talking about secondary measures. Many growth stocks are acting just fine, holding near their highs, while even beaten-down areas have held well above their lows from weeks ago, a clear sign of relative strength. Thus, we’re remaining flexible in the face of bad news--but until the bulls put up a fight, we advise remaining heavily in cash.

The war in the Middle East continued to tighten its grip on financial markets last week as U.S. and Israeli airstrikes on Iran showed no signs of letting up, keeping oil prices at an uncomfortable level for the market. Against that backdrop, by week’s end—the third straight week of losses for U.S. equities—the S&P 500 had shed 1.6%, the Dow had dropped 2%, the Nasdaq had declined by 1.3%, and the Russell 2000 had fallen a mere 0.4%.

The market has had a good amount thrown at it of late, though so far, the big-cap indexes have mostly hung in there and more than a few growth stocks have done the same, which are certainly rays of light. At this point, though, that doesn’t outweigh all the other evidence that tells us to be cautious—the intermediate-term trend remains sideways-to-down and most stocks and sectors are firmly in correction territory. All told, we continue with our cautious-but-flexible stance: Right now, we favor only small positions and plenty of cash, though we’re willing to quickly change our tune. We’ll leave our Market Monitor at a level 5.

This week’s list is mostly energy and AI related, though as has been the case lately, there’s something for everyone. For our Top Pick we’re going with a little-known networking play that’s showing excellent strength and looks well suited for the emerging agentic AI boom.

The war in the Middle East continued to tighten its grip on financial markets last week as U.S. and Israeli airstrikes on Iran showed no signs of letting up, keeping oil prices at an uncomfortable level for the market. Against that backdrop, by week’s end — the third straight week of losses for U.S. equities — the S&P 500 had shed 1.6%, the Dow had dropped 2%, the Nasdaq had declined by 1.3%, and the Russell 2000 had fallen a mere 0.4%.

The market slump continues against the backdrop of the Iran war and sky-high oil prices, but there are signs of optimism if you look closely enough: a bitcoin bounce-back, slowing growth stock selling, and declining volatility. Do investors know something? Or is it mere speculation that it’s in everyone’s self-interests for the fighting in the Middle East to be short-lived? We’ll see. Meanwhile, it’s a good time to invest in a country that’s not directly involved in the Iran war: China. For that, we go to Cabot Explorer Chief Analyst Carl Delfeld, who recommends one of the fastest-growing companies in China.

Details inside.

The war in the Middle East continued to tighten its grip on financial markets last week as U.S. and Israeli airstrikes on Iran showed no signs of letting up, keeping oil prices at an uncomfortable level for the market. Against that backdrop, by week’s end — the third straight week of losses for U.S. equities — the S&P 500 had shed 1.6%, the Dow had dropped 2%, the Nasdaq had declined by 1.3%, and the Russell 2000 had fallen a mere 0.4%.

The war in the Middle East continued to tighten its grip on financial markets last week as U.S. and Israeli airstrikes on Iran showed no signs of letting up, keeping oil prices at an uncomfortable level for the market. Against that backdrop, by week’s end — the third straight week of losses for U.S. equities — the S&P 500 had shed 1.6%, the Dow had dropped 2%, the Nasdaq had declined by 1.3%, and the Russell 2000 had fallen a mere 0.4%.

This was a challenging week for investors with little movement either way in Explorer stocks.

The Iranian conflict has expanded into a Mideast pressure cooker with wider repercussions for energy markets. Opening the Strait of Hormuz is crucial as higher energy and oil prices impact not just Americans but our allies and partners that depend on imports for almost all their energy. The challenge is that the situation is volatile and overall security and economic goals collide with day-to-day actions.

Uncertainty in the market has soared. The situation in Iran significantly increases the near-term risk to stock prices.

The earnings catalyst has passed. Market indexes are near the high. In this environment, a very unpredictable situation in the Middle East could tip the balance. Of course, it’s impossible to know what will ultimately happen in Iran.

There is a huge increase in uncertainty with the market near the high. Although stocks were mostly higher by midday on Monday, the situation in Iran adds another degree of risk.

The current situation makes this an even better time to sell covered calls on stocks near the recent high. After a huge YTD rally in several previously underperforming sectors, a few stocks are generating very high-priced call premiums. An unpredictable market with stocks near the high after the strongest rally in years is the ideal time to turn the recent market successes into high income.

It has been called by many pundits the biggest speculative event since the late ‘90s Internet stock mania. I’m referring, of course, to the widely referenced “AI bubble” that has been in play for the better part of the last three years.

But is it truly a “bubble” in the historical sense of the term? The answer to this question is salient for us not only as investors, generally speaking, but also as it concerns at least a couple of the stocks in our portfolio—namely Intel (INTC) and Centuri Holdings (CTRI).

WHAT TO DO NOW: It’s not 2008 out there, but the market environment remains very challenging, especially for growth, where most indexes, funds and stocks are struggling. That said, we have started to see some growth names emerge on the upside, and our watch list is growing—if we can see more than a day or two of strength, we’d like to put some money to work. But until then, we’re content to stay close to shore and patiently wait for growth stocks to get moving. In the Model Portfolio, we’re placing Axsome Therapeutics (AXSM) on Hold tonight; our cash position is still just above 50%.

It’s been an interesting week here in Rhode Island, where most people are finally dug out from the roughly three feet of snow that fell across the state Sunday night and into Monday.

Growing up in Vermont, major snowstorms were certainly disruptive. But more often than not, it was all about how we would get to the ski resort without going off the road.

Hello from sunny Florida!

I am on vacation with my family this week, taking a much-needed break from the harsh, snowy Vermont winter (and narrowly making it down here ahead of the latest blizzard to dump another foot or two of snow on the Northeast). But with so much going on in the market – tariffs rejected! GDP growth slowing! AI panic! – I wanted to provide an update on everything that’s going on with our stocks.

It’s the same basic market story as it has been for the last four months. Technology is floundering while other sectors are killing it. But a couple of events occurring this week could potentially change the dynamic.

For value-focused investors, this year’s prologue has been a welcome change from the turmoil experienced in early 2025.

In just the past few weeks, some of last year’s most ignored or underappreciated laggards have posted outsized gains, with rallies that have made even momentum-driven tech stock traders envious. Even more remarkable is the fact that much of that strength has been concentrated in ultra-defensive areas of the market like consumer staples, utilities and healthcare.

The market rotation continues to be the main story out there this week, though rumblings of a potential strike on Iran, an update from the January FOMC meeting, and a slew of earnings reports and economic data releases have been giving investors plenty to think about.

In terms of the rotation, the equal‑weight S&P 500 ETF (RSP) is up 5.5% so far this year, illustrating that leadership is broadening beyond the narrow group of mega‑cap stocks that drove much of last year’s performance.

Year to date, the S&P 600 SmallCap Index is up 8.3% and the S&P 400 Mid‑Cap Index is up 7.9%. Both are comfortably outperforming the S&P 500, which is up just 0.1%, and the Nasdaq, which is down 2.1%.

Happy Chinese New Year! The year of the horse is upon us.

China is expecting an incredible 9.5 billion trips to be made during the 40-day Lunar New Year travel period. Chinese automakers are also on the move as the country’s numerous brands sold nearly 200,000 vehicles in Britain last year, doubling their market share to almost 10%.

As U.S. investors have shifted from risk-on to risk-off mode in recent months, a clear disparity between the “haves” and the “have-nots” has materialized.

Let’s start with the “have-nots.” Financials have fared the worst so far this year (-4.7%), followed by technology (-3.1%), communication services and consumer discretionary (-2.8% each). The downturn in the two tech-related sectors in particular is a stark departure from recent years, when technology led the charge of the current bull market.

Cyclical stocks are soaring and technology is floundering in the transformed market.

The bull market is turned upside down. For most of the first three years, technology, and particularly AI stocks, soared while most other stocks did very little. Now, previously meandering stocks are killing it while technology sinks.

We’re going to kick off 2026 by locking in profits with Argan (AGX), an engineering, procurement and construction company that specializes in gas-fired power plants, biomass projects and solar facilities.

WHAT TO DO NOW: We usually hesitate to do much of anything on the first day or two of the New Year given the volatility—but CrowdStrike (CRWD) fell back to support earlier this week and is getting hit again today, falling to new recent lows. We’ll follow our plan and cut our loss here, aiming to redeploy the money in a stronger name should growth stocks kick into gear. Our cash position will now be in the mid-50% range.

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.

As I expected, President Donald Trump’s executive order (EO) to reschedule cannabis was a sell-the-news event.

By following thse guidelines, we’ve always been able to get on board relatively early in each new bull cycle.

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Benjamin Graham is widely acknowledged as the father of modern security analysis and value investing, and his books are considered the bibles for individual investors and professionals.

Today’s new addition to the high yield tier, Pattern Energy Group (PEGI) is a yieldco, a relatively new class of high yield investment.