It’s fair to say the overall evidence took a step back last week, with the Nasdaq coming under pressure, though many cyclical stocks act well (in fact, there are a few in this week’s issue that have shown great recent power) and, ironically, we’re actually seeing some solid strength in many AI-related stocks, a bunch of which have lifted off from three-plus-month consolidations even as other growth areas have flailed. As has been the case for weeks, then, the market outlook really depends on where you’re looking. We’ll move our Market Monitor to a level 6 here, but we’re still game for taking a swing at some of the many strong names (ideally on dips) out there.

This week’s list is chock-full of strong names, mostly from the cyclical side of the aisle, with many lifting out of very long-term consolidations after earnings, showing great power. Our Top Pick is helping to lead the broader transport group, which is also breaking out to new highs.

It pays to be an optimist when it comes to investing. So, in a middling market, you’re better off focusing on the positives: The bull market remains intact, volatility is down, earnings growth continues to be robust, and market breadth has spread to the many previously unloved sectors. With that optimistic slant in mind, today we look internationally to add one of the biggest names in South America – an e-commerce giant recently recommended by Carl Delfeld to his Cabot Explorer audience.

Details inside.

*Note: Your next issue of Cabot Options Trader will arrive next Tuesday, February 17 due to the market holiday next Monday, February 16 in observance of Presidents’ Day.

Despite a mid-week tech-led sell-off that dragged the broad markets lower, investors clawed back lost ground on Friday on a rebound in semiconductors, AI-related optimism and stabilization in risk assets like bitcoin. By week’s end the S&P 500 had lost a mere 0.1%, the Dow actually closed at a new all-time high above 50,000, and the Nasdaq had fallen 1.8%.

*Note: Your next issue of Cabot Options Trader Pro will arrive next Tuesday, February 17 due to the market holiday next Monday, February 16 in observance of Presidents’ Day.

Despite a mid-week tech-led sell-off that dragged the broad markets lower, investors clawed back lost ground on Friday on a rebound in semiconductors, AI-related optimism and stabilization in risk assets like bitcoin. By week’s end the S&P 500 had lost a mere 0.1%, the Dow actually closed at a new all-time high above 50,000, and the Nasdaq had fallen 1.8%.

Growth as a whole has been stagnant for three months, and this week, we started to see the selling spread out a bit, with our Two-Second Indicator waiving a yellow flag and with more names coming under pressure (and with many growth stocks really caving in). To be fair, the top-down evidence isn’t much changed, so we’re flexible--if this is the final shakeout to the past three months of rest, there could be many things to sink our teeth into soon.

But as growth investors, we’re focused on the growth evidence, which tells us to remain in a cautious stance until the buyers step up.

Large-cap stocks are starting to show some cracks. But small caps aren’t.

After years of underperformance, small-cap stocks appear to finally be poised for a breakout 2026 thanks to a combination of lower interest rates and soaring earnings. So in this month’s Cabot Value Investor issue, we present a small-cap company that is already coming off a very strong quarter, whose sales and earnings have more than doubled since Covid, but whose shares were overly punished last fall and are just now starting the long climb back. The combination of double-digit earnings growth and a well-below-average valuation makes this small cap ripe for our Buy Low Opportunities Portfolio.

Details inside.

Industrial stocks are hot. So today we’re jumping into a small-cap precision‑engineering and motion‑technology company that has both a self-help and an improving end-market story.

This company has spent the past several years transforming itself from a niche motor supplier into a vertically integrated engineering platform. After a strong start to 2025, it looks like 2026 will be even better.

All the details are inside the February issue of Cabot Small‑Cap Confidential.

Despite a rally midweek to new all-time highs, last week finished on a soft note as profit-taking and macro uncertainty crept back into equities. Investors grappled with cooling tech leadership, mixed earnings reactions, and a fresh focus on monetary policy. By week’s end the S&P 500 was up 0.3%, the Dow Jones Industrial Average had slipped 0.4%, the Nasdaq Composite had fallen 0.9%, and the Russell 2000 had lost 1.5%.

The market hasn’t completely changed character at this point, but the recent action suggests that we’re at a key juncture here: After testing its October high, the Nasdaq has been fading, dragging down most other indexes while the number of new lows has picked up right off the recent high, all while defensive areas perk up—though, we’re also seeing many growth stocks hang in there well, with a few testing new high ground. All told, we’re again leaving our Market Monitor at a level 7, but we think the next few days will tell the tale of whether some new leadership can emerge … or whether a more general corrective phase gets underway. Stay tuned.

This week’s list has lots of strong names, including a few early earnings winners. Our Top Pick has a solid aerospace story but, like other names in this issue, is moving into the AI power space with some big future deals. We think nibbling on some here or on a further pullback makes sense.

Stocks continue to prove resilient in the face of myriad economic and geopolitical fears. And the U.S. consumer – despite declining sentiment and confidence – is doing enough to make those fears seem overblown, pushing large-cap companies toward their fifth consecutive quarter of double-digit earnings growth. So today, we add a stock that’s well-known to the U.S. consumer – and one that’s making a strong comeback after being overly punished by investors. It’s a recent addition by Clif Droke to his Cabot Turnaround Letter portfolio.

Details inside.

Despite a rally midweek to new all-time highs, last week finished on a soft note as profit-taking and macro uncertainty crept back into equities. Investors grappled with cooling tech leadership, mixed earnings reactions, and a fresh focus on monetary policy. By week’s end the S&P 500 was up 0.3%, the Dow Jones Industrial Average had slipped 0.4%, the Nasdaq Composite had fallen 0.9%, and the Russell 2000 had lost 1.5%.

Despite a rally midweek to new all-time highs, last week finished on a soft note as profit-taking and macro uncertainty crept back into equities. Investors grappled with cooling tech leadership, mixed earnings reactions, and a fresh focus on monetary policy. By week’s end the S&P 500 was up 0.3%, the Dow Jones Industrial Average had slipped 0.4%, the Nasdaq Composite had fallen 0.9%, and the Russell 2000 had lost 1.5%.

*Note: Due to the New Year’s holiday, there will be no Cabot Dividend Investor update next Wednesday, December 31. I will be back with our next weekly update on Wednesday, January 7. Have a safe and happy holiday season!

Another strong year in the market is closing out. The S&P 500 is up over 17% for 2025 with about a week to go. This follows two straight years of 20%-plus returns for the market in 2023 and 2024. That’s the best three-year run this century.

Of course, the upside has been overwhelming due to technology. Without that sector, market returns would be rather lame. Now that technology is sputtering, what can we expect in 2026?

It’s been another productive year for the market, with the S&P 500 up more than 17% with a few trading days to spare. Growth stocks continue to carry the day despite recent weakness, advancing more than 22% this year. Value stocks have held their own, up more than 13% and picking up the slack of late as momentum in the growth space has waned. But ultimately, it was yet another year of growth outpacing value.

[Note: Due to the Christmas holiday, there will be no Cabot Turnaround Letter weekly update next Friday. The next monthly issue of the newsletter will be published on December 31.]

The Fed has reversed a long-standing balance sheet tightening phase with its recent decision to expand its balance sheet—a move that has largely fallen under the news radar.

Housekeeping: As the holidays get underway, just a heads up that we’re going to send the next issue of Cabot Growth Investor next Wednesday, Christmas Eve, December 24, likely midday.

WHAT TO DO NOW: Remain cautious. Growth stocks tried to come out of their corrective phase following the mid-November low—but that bounce has faded, with our Growth Tides and Aggression Index still struggling. We’ve gone slow of late, holding half the portfolio in cash, and tonight we’re going to mostly stand pat and look for signs the correction will end. Our only change tonight is placing CrowdStrike (CRWD) on Hold.

A quick Holiday schedule note. We won’t publish our regular weekly update next Thursday since it will be Christmas and our office will be closed. Also, with the New Year’s holiday the following Thursday – and the first Thursday of January – we will push the January 2026 issue of Cabot Small Cap Confidential back a week, to January 8.

Happy Holidays! On to the market.

For a second straight fall, the Federal Reserve has slashed interest rates three times from September through December. The result? What was a two-decade-high federal funds rate (5.25%-5.5%) 15 months ago is now down to a far more palatable 3.50-3.75% range. That’s still higher than at any point since before the Great Recession, so from a 21st-century perspective, interest rates aren’t exactly “low.” Usually, when interest rates are this high, stocks underperform their historical norm. In fact, prior to this recent stretch, it had only occurred two other times this century. Here were the results …

The artificial intelligence trade was under pressure last month. But it recovered over the last three weeks. The back and forth has again taken a negative turn after AI bellwethers Oracle (ORCL) and Broadcom (AVGO) reported earnings that didn’t impress investors.

Technology is getting a comeuppance. But other sectors are getting a boost.

The artificial intelligence trade was under pressure last month. But it recovered over the last three weeks. The back and forth has again taken a negative turn after AI bellwethers Oracle (ORCL) and Broadcom (AVGO) reported earnings that didn’t impress investors.

It’s no secret that a conspicuous presence of activist investors in an ailing company has proven to be one of the most powerful, and reliable, catalysts for a successful turnaround. For that reason, I’m always on the lookout for companies that have recently become the target of activism.

But if the Trump Administration gets its way, the activist investor catalyst could soon be of diminished importance.

This week was all about the Fed. But those of us watching small caps noticed some major news too – the S&P 600 has broken out to its highest level in just over a year.

The catalyst was the Fed’s fully expected 25 bps cut yesterday. It was less of a hawkish cut than expected and included a commitment to buy $40 billion in short-term Treasuries to ease money-market strains that emerged after halting balance-sheet runoff.

Prior to that announcement, the index was toying with a breakout, but afterward it shot up and closed 2.4% higher on the day.

As expected, the Fed cut interest rates for the third time this year on Wednesday, but officials remain divided over the future and signaled that cuts next year are likely to be limited.

Two Explorer stocks stand out. Those are Banco Santander (SAN), up 153% so far this year so I recommend taking partial profits if you have not already done so. And there’s Coeur Mining (CDE), whose shares that are now up 179% so far in 2025.

The law of averages is a powerful thing … especially when it comes to investing.

Stocks and sectors that outperform for an extended period of time often regress to the mean, sometimes violently, when people least expect it. On the flip side, stocks and sectors that have underperformed for months or even years start to get noticed by bargain hunters and play catch-up, even if it’s a bit more gradual.

FTAI Infrastructure (FIP) Reports

Microsoft (MSFT) and Alamos Gold (AGI) Report

WHAT TO DO NOW: As we write about in tonight’s issue, there are many crosscurrents out there, with some growth names cracking while others emerge on the upside, so we’re selling laggards while aiming to add fresher, stronger names. In the Model Portfolio, we sold MP and GEV last week, and today we’re going to sell Oracle (ORCL), which tripped our mental stop today. That said, we’re also going to fill out our position in CrowdStrike (CRWD), adding another half-sized stake, and start a new half position in Vertiv Holding (VRT), all of which will leave us with around 38% in cash.

Shares of Perpetua Resources (PPTA) are bucking the weak day for gold this Monday on news that the company has secured a $225 equity investment from JPMorgan Chase (JPM) and Agnico Eagle Mines (AEM).

We’re going to take a modest profit of around 8% on Doximity (DOCS) today

GE Vernova (GEV) reported this morning, with revenue, EBITDA, margins and Free Cash Flow all coming in ahead of expectations, while GAAP EPS missed. Management reaffirmed full-year guidance and said its Power and Electrification segments continue to lead growth while Wind remains soft but is improving on an operational level. Orders and backlog hit records with 20 gas turbines sold in Q3. The company acquired the remaining 50% stake in Prolec GE for $5.275 billion (expected to close mid-2026).

WHAT TO DO NOW: Yesterday we took our tiny profit MP as that stock has continued to tumble, and now we’re going to sell our stake in GE Vernova (GEV), which reported a very solid quarter this morning—but investors took the opportunity to sell into the move, creating a breakdown from a big double top. We’ll sell and hold the cash, leaving us with around 43% on the sideline.

WHAT TO DO NOW: The indexes continue to act fine, but individual growth stocks remain hit or miss based on the news of the day. Today we’re going to sell our position in MP Materials (MP), taking a tiny gain and holding the cash (which will now be around 35%). Details below.

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’m recommending that we sell our position in Helen of Troy (HELE).

We’re going to step aside from Byrna Technologies (BYRN) today.

Our sell rules demand we sell under a number of conditions, which can be roughly dividend into two broad categories: fundamental weakness or unacceptable risk.

Here are some ways you can use options to hedge or create additional yield in your portfolio. In addition to covered calls, which generate additional income on stocks you already own, I also share hedging strategies using puts and spreads.

Here are some common questions we’re received about Cabot Dividend Investor.

Today, we take a look back at every sale made from the Cabot Dividend Investor portfolio from inception in February 2014 to the end of April 2015 to see how our sold stocks have fared.

Diversification is usually one of the first risk management principles investors learn. It’s simple enough to understand. At its most basic, diversification is simply an extrapolation of the old advice not to put all your eggs in one basket. And it’s good advice.

MLPs (short for master limited partnership) are exempt from U.S. corporate taxes in exchange for passing on most of their income to investors, who are called unitholders. As a result of this unusual situation, unitholders accept the tax burden on the distributions they receive from the MLP.

One of the things many investors like best about dividend income is that it can qualify for the lower Federal capital gains tax rate. For investors in the 25% to 35% marginal tax bracket, that’s 15%, and for those in lower brackets, it’s 0%. But not all dividends and distributions qualify.

Real estate investment trusts are special-purpose entities, with special tax status, that own real estate and pass along most of the income from the real estate (rents or mortgage payments) to shareholders. They can own any type of real estate, and many specialize in one type.

This month, I’m considering making the first sale from our portfolio, to cut our losses in Seadrill (SDRL). I think now is a good time to address our approach to selling, which stems from our focus on long-term, income-oriented returns.

Guide to Options Trading

Even if you’ve been investing for decades, income investing can introduce a lot of new lingo and acronyms, which are not always well explained. Here are some of the key terms I use in Cabot Dividend Investor or that you may see as you research your investments further.

Using Options to Hedge a Portfolio


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.