Issues
The market has hit a little turbulence as we wade into the early innings of the Q3 earnings season. But despite the bumps, there are more than enough stocks acting well enough to fill the pages of the October Issue.
This month, I continue to spread things around, exploring new ideas from the Fintech, software and coal (yes, coal!) industries while plucking two steady performers from our Watch List to add to the portfolio.
Enjoy!
This month, I continue to spread things around, exploring new ideas from the Fintech, software and coal (yes, coal!) industries while plucking two steady performers from our Watch List to add to the portfolio.
Enjoy!
What started as a good week for the bulls was quickly vanquished by renewed U.S./China trade fears last week. How long these worries will again weigh on the market is anyone’s guess. However, Friday’s ugly selloff was enough to send the S&P 500 lower by 2.4% on the week, while the Dow fell 2.7%, and the Nasdaq lost 2.5%. Monday’s encouraging bounce-back erased some of those gains, however. We’ll see where it goes from here.
There have been a few shots across the bow in recent weeks, and last week was another, with Friday’s big selloff hitting just about everything, though today’s bounce took some sting out of that. Overall, after six months with hardly any pullbacks, the market could easily be ready for a “real” correction—however, anticipating such a decline isn’t advised. Don’t get us wrong, our antennae are up and we continue to advise being selective, but we’re mostly focused on the next few days: A strong bounce in leaders and the indexes would be positive, but a break of last week’s lows would likely usher in a volatile, corrective period. For now, with most of the evidence unchanged, our Market Monitor remains at a Level 7.
This week’s list has something for everyone, though it’s again full of more growth-y titles. Our Top Pick is part of a newly strong group, and whose stock actually rebounded to a new high today.
This week’s list has something for everyone, though it’s again full of more growth-y titles. Our Top Pick is part of a newly strong group, and whose stock actually rebounded to a new high today.
Stocks hit another pothole this week after President Trump re-escalated tariff rhetoric against China last Friday, which genuinely spooked the market for the first time in months. He has since walked back some of those comments, and the market is rebounding in an encouraging way today. But the U.S.-China trade war is definitely back in the news, so today we aim to steer clear of it by adding a new position in something that’s a little outside our normal sandbox: a foreign currency. More specifically, it’s a fund that offers exposure to a well-known European currency, and it’s up more than 12% year to date – with more potential upside ahead. The fund was recently recommended by Carl Delfeld to his Cabot Explorer audience.
Details inside.
Details inside.
What started as a good week for the bulls was quickly vanquished by renewed U.S./China trade fears. How long these worries will again weigh on the market is anyone’s guess. However, Friday’s ugly selloff was enough to send the S&P 500 lower by 2.4% on the week, while the Dow fell 2.7%, and the Nasdaq lost 2.5%.
What started as a good week for the bulls was quickly vanquished by renewed U.S./China trade fears. How long these worries will again weigh on the market is anyone’s guess. However, Friday’s ugly selloff was enough to send the S&P 500 lower by 2.4% on the week, while the Dow fell 2.7%, and the Nasdaq lost 2.5%.
The markets don’t seem too swayed by the government shutdown, as they continue to remain near all-time highs.
Economically speaking, we’re not getting some reports, like inflation or unemployment, due to the shutdown. But manufacturing seems to be holding up; real estate prices continue to moderate (up 1.8%); existing home sales were down 0.2%; and consumer confidence dipped a bit. Not much to rattle the markets.
Economically speaking, we’re not getting some reports, like inflation or unemployment, due to the shutdown. But manufacturing seems to be holding up; real estate prices continue to moderate (up 1.8%); existing home sales were down 0.2%; and consumer confidence dipped a bit. Not much to rattle the markets.
Gold hit $4,000 an ounce and the signal this is sending is not hard to grasp.
Investors are enjoying stock gains but are hedging downside currency and stock price risk as well as a hedge on growing government debt and geopolitical risk. Gold seems the most popular safe haven as it is viewed as a safe harbor asset in a way that the greenback used to be viewed. Gold’s rally began almost three years ago, fueled by central banks and Chinese investors leery of both its stock and property markets.
Investors are enjoying stock gains but are hedging downside currency and stock price risk as well as a hedge on growing government debt and geopolitical risk. Gold seems the most popular safe haven as it is viewed as a safe harbor asset in a way that the greenback used to be viewed. Gold’s rally began almost three years ago, fueled by central banks and Chinese investors leery of both its stock and property markets.
After spending most of the summer making a series of new highs, it’s been more of the same so far this fall.
The drawback is that the market is high-priced. Technology stocks, driven by the AI catalyst, have driven stocks higher. But certain sectors have not had a great year. Despite the impressive performance of the overall market over the last few years, there are still bargains to be found.
The real estate sector struggled during inflation and rising interest rates and has been the worst-performing sector over the last five years. Healthcare has floundered all year because of uncertainty regarding tariffs and new pricing policies from Washington. It has been the second-worst-performing market sector over the last year.
But things are turning around in both beleaguered sectors. The Fed started cutting the fed funds rate again in September and two more cuts are expected this year. The long-anticipated issues in the healthcare industry have revealed themselves. And it doesn’t seem nearly as bad as feared. As a result, healthcare stocks had the strongest weekly rally in more than 20 years.
In this issue, I highlight a REIT that specializes in healthcare properties. It has a stellar track record of performance and has among the fastest earnings growth among REITs. It also pays a strong dividend yield and will likely benefit in the months ahead from a rally in either sector.
The drawback is that the market is high-priced. Technology stocks, driven by the AI catalyst, have driven stocks higher. But certain sectors have not had a great year. Despite the impressive performance of the overall market over the last few years, there are still bargains to be found.
The real estate sector struggled during inflation and rising interest rates and has been the worst-performing sector over the last five years. Healthcare has floundered all year because of uncertainty regarding tariffs and new pricing policies from Washington. It has been the second-worst-performing market sector over the last year.
But things are turning around in both beleaguered sectors. The Fed started cutting the fed funds rate again in September and two more cuts are expected this year. The long-anticipated issues in the healthcare industry have revealed themselves. And it doesn’t seem nearly as bad as feared. As a result, healthcare stocks had the strongest weekly rally in more than 20 years.
In this issue, I highlight a REIT that specializes in healthcare properties. It has a stellar track record of performance and has among the fastest earnings growth among REITs. It also pays a strong dividend yield and will likely benefit in the months ahead from a rally in either sector.
Despite the worries surrounding the government shutdown, the market continued its winning ways last week as the S&P 500 and Dow both rallied 1.1%, and the Nasdaq added 1.3%.
The market’s uptrend continues, but as has been the case for many weeks, it’s somewhat tricky out there, with news-driven moves, selling on strength, the occasional bout of rotation and potholes—all while large swaths of the market are doing a lot more chopping than trending. That’s not “bad,” per se, but it remains a selective environment: We continue to take things on a stock-by-stock basis, focusing on strong names that are ideally fresher in their uptrends, while also being active with portfolio management. We’ll again leave our Market Monitor at a level 7.
This week’s list again has a heavy growth component, and not all are in the AI realm, which we find encouraging. Our Top Pick is a blue chip e-commerce name that, after a couple of false starts, looks like it’s ready to move.
This week’s list again has a heavy growth component, and not all are in the AI realm, which we find encouraging. Our Top Pick is a blue chip e-commerce name that, after a couple of false starts, looks like it’s ready to move.
Stocks keep reaching new heights, as last week’s concerns about the market starting to show cracks under the surface seem to have been overblown, at least in the near term. Third-quarter earnings season gets underway next week, and expectations are high again, with economists expecting 8% growth. Companies may have to exceed those lofty expectations to keep this rally going. For now, though, the market is rolling.
To account for some possible bumpiness ahead, however, today I’m adding a big-name value stock to our portfolio. It’s one that I recommended to my Cabot Value Investor audience last month, and it’s already off to a fast start. It’s a company that thrives when the global economy is sound – which it is, despite myriad fears to the contrary.
Details inside.
To account for some possible bumpiness ahead, however, today I’m adding a big-name value stock to our portfolio. It’s one that I recommended to my Cabot Value Investor audience last month, and it’s already off to a fast start. It’s a company that thrives when the global economy is sound – which it is, despite myriad fears to the contrary.
Details inside.
Updates
“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” -Sir John Templeton
Tech stocks and a couple of Explorer stocks are having a tough week, but the rest of the market is calm as investors await Federal Reserve Chair Jerome Powell’s speech on Friday at the central bank powwow in Jackson Hole, Wyoming.
Tech stocks and a couple of Explorer stocks are having a tough week, but the rest of the market is calm as investors await Federal Reserve Chair Jerome Powell’s speech on Friday at the central bank powwow in Jackson Hole, Wyoming.
The market’s tectonic plates are shifting.
Last week, I wrote that big tech – namely, the top 20 stocks in the S&P 500 by market cap – had led the way as the market emerged from a sharp late-March/early-April downturn and stretched to new all-time highs earlier this month. Now they’re retreating, with growth stocks – as measured by the Investors’ Business Daily 50 (FFTY) – off roughly 8% in the last week, with some big names (CRWV, -55%; PLTR, -22%; APP, -17%; SMCI, -31%, etc.) plummeting much further than that.
Last week, I wrote that big tech – namely, the top 20 stocks in the S&P 500 by market cap – had led the way as the market emerged from a sharp late-March/early-April downturn and stretched to new all-time highs earlier this month. Now they’re retreating, with growth stocks – as measured by the Investors’ Business Daily 50 (FFTY) – off roughly 8% in the last week, with some big names (CRWV, -55%; PLTR, -22%; APP, -17%; SMCI, -31%, etc.) plummeting much further than that.
Just when the market appeared vulnerable to selling pressure, news from an unexpected source rode to the rescue, lifting stocks.
On Tuesday, the Labor Department announced that inflation rose 2.7% in July from a year earlier, which was the same as the previous month and up from a post-pandemic low of 2.3% in April. “Excluding the volatile food and energy categories, core prices rose 3.1%, up from 2.9% in June,” according to the Associated Press.
On Tuesday, the Labor Department announced that inflation rose 2.7% in July from a year earlier, which was the same as the previous month and up from a post-pandemic low of 2.3% in April. “Excluding the volatile food and energy categories, core prices rose 3.1%, up from 2.9% in June,” according to the Associated Press.
The bull market has become top-heavy again.
Since the early-April lows, the top 20 stocks in the S&P 500 by market cap – nearly all of which are in the technology sector, and fueled in some way by the artificial intelligence bonanza – are up an average of 40.6%, versus a net gain of 27.9% for the index itself in that time, according to DataTrek Research co-founder Jessica Rabe.
Since the early-April lows, the top 20 stocks in the S&P 500 by market cap – nearly all of which are in the technology sector, and fueled in some way by the artificial intelligence bonanza – are up an average of 40.6%, versus a net gain of 27.9% for the index itself in that time, according to DataTrek Research co-founder Jessica Rabe.
WHAT TO DO NOW: The market is still singing a similar tune, with the big-cap indexes looking fine (and, now, some broader indexes looking better), but growth stocks remain tricky, with many names marking time and more looking iffy. In a special bulletin yesterday, we took partial profits in GE Aerospace (GE), and tonight we are moving Rubrik (RBRK) back to Hold as it’s been unable to escape the weak sector action. That will leave us with 43% cash, which we’ll sit with for now, though we could put some to work in some of our strong performers if growth stocks can perk up.
There were a lot of headlines over the last couple of days about the emerging small-cap rally.
That’s because small caps surged on both Tuesday and Wednesday after a somewhat cool CPI inflation report drove expectations for a 25bps September rate cut to 99%.
On Wednesday, the S&P 600 SmallCap Index jumped 2.0%, trouncing the 0.3% rise in the S&P 500 Index.
That’s because small caps surged on both Tuesday and Wednesday after a somewhat cool CPI inflation report drove expectations for a 25bps September rate cut to 99%.
On Wednesday, the S&P 600 SmallCap Index jumped 2.0%, trouncing the 0.3% rise in the S&P 500 Index.
Unlike Rodney Dangerfield, cannabis stocks continue to get some respect. They are up 66% since I last suggested them here on July 30, using the AdvisorShares Pure U.S. Cannabis (MSOS) as a guide. In the past month, the sector is up 72%.
The reason: We continue to get high-profile confirmations that the administration of President Donald Trump will reschedule cannabis. This really isn’t news. I’ve been saying this since Trump promised rescheduling in his election campaign a year ago. But mainstream media attention is drawing money into the sector.
The reason: We continue to get high-profile confirmations that the administration of President Donald Trump will reschedule cannabis. This really isn’t news. I’ve been saying this since Trump promised rescheduling in his election campaign a year ago. But mainstream media attention is drawing money into the sector.
The market is still right near the high. But the dog days of summer are setting in.
Stocks are resilient. News regarding tariffs and the economy got better and then got worse. The market is taking it in stride and meandering near the high. Now we are at that time of year when investors focus on squeezing in the last bit of summer fun.
Stocks are resilient. News regarding tariffs and the economy got better and then got worse. The market is taking it in stride and meandering near the high. Now we are at that time of year when investors focus on squeezing in the last bit of summer fun.
Last week’s release of the latest job market outlook did more than shock the market; it reopened a debate that has been intermittently raging over the last couple of years, namely: will the U.S. dodge an inflationary recession (i.e., stagflation)?
Super Micro Computer (SMCI) stock sank more than 19% yesterday after the troubled AI server maker’s results underperformed Wall Street’s expectations.
Super Micro reported adjusted earnings per share of $0.41 for its 2025 fiscal fourth quarter, less than the $0.44 expected by Wall Street analysts, according to Bloomberg consensus estimates. Its quarterly revenue of $5.76 billion was below the $6 billion expected, while its roughly $551 million gross profit for the period fell a little short of the estimated $601 million.
Super Micro reported adjusted earnings per share of $0.41 for its 2025 fiscal fourth quarter, less than the $0.44 expected by Wall Street analysts, according to Bloomberg consensus estimates. Its quarterly revenue of $5.76 billion was below the $6 billion expected, while its roughly $551 million gross profit for the period fell a little short of the estimated $601 million.
The resilient summer market got a cold slap in the face last week. There was a big recovery on Monday. But the market still looks wobblier than it did a week ago.
One day’s headlines seemed to undo the positive market narrative.
One day’s headlines seemed to undo the positive market narrative.
Stocks are recovering so far this week after a big selloff on Friday.
The sweet summer market that had consistently set new highs got a cold slap in the face last week. But trading so far this week indicates it might not be a game-changer.
The market was looking good a week ago. The huge trade deal with Europe alleviated much uncertainty about tariffs. Second-quarter GDP came in at a much stronger-than-expected 3%. Tariff uncertainty was fading away, and the economy was stronger than expected. But then news of a much worse-than-expected job number for July, along with significant downward revisions for the prior two months, combined with increasing tariff threats to China, India, and Canada and shattered the positive narrative.
The sweet summer market that had consistently set new highs got a cold slap in the face last week. But trading so far this week indicates it might not be a game-changer.
The market was looking good a week ago. The huge trade deal with Europe alleviated much uncertainty about tariffs. Second-quarter GDP came in at a much stronger-than-expected 3%. Tariff uncertainty was fading away, and the economy was stronger than expected. But then news of a much worse-than-expected job number for July, along with significant downward revisions for the prior two months, combined with increasing tariff threats to China, India, and Canada and shattered the positive narrative.
Alerts
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.
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.
Right on the heels of yesterday’s Issue featuring new addition Byrna Technologies (BYRN) management released preliminary Q2 revenue. The press release came just after the closing bell yesterday.
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.
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.
WHAT TO DO NOW: The market remains in good shape, but leadership is still developing, with many resilient stocks getting hit while buying moves elsewhere. Today we’re cutting bait with our small position in Penumbra (PEN), which is slicing through support, and replacing it with Rubrik (RBRK), which looks like a new leader in the strong cybersecurity group. Details below.
WHAT TO DO NOW: The news this past weekend that the U.S. and China have slashed tariffs sent the market soaring yesterday. Of course, there are still headwinds out there (Cabot Trend Lines not yet positive, relatively few new highs among growth stocks), and we wouldn’t be surprised to see a pullback now that the “good” news is out.
Portfolios
Strategy
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.