Issues
Early last week was fairly quiet as stocks went mostly nowhere until anxiety ramped higher on Friday on tensions rising in the Middle East. By week’s end the S&P 500 had fallen 0.4%, the Dow had lost 1.3%, and the Nasdaq declined by 0.6%.
The top-down evidence couldn’t be much better, with our Cabot Trend Lines joining our intermediate-term measures on the bullish side of the fence, while the market’s action over the past two months portends big gains down the road. That said, we’re still waiting for more growth names to liftoff--so far, growth is up but at a moderate pace, and many names are still battling with old resistance. Not to repeat ourselves, but we’re optimistic more names will kick into gear, but we don’t want to get too far in front of our skis before then. We’re doing a tiny add-on buy tonight, but will still be holding 28% in cash and looking for new leaders to hop on board.
It looks like the president’s tariffs are beginning to show some effect on inflation. The latest CPI report showed that the inflation rate—while lower than the 2.5% economists had expected—crept up to 2.4% from April’s 2.3% rate. Core inflation—excluding food and energy—rose 2.8%, the same as April’s increase.
The number was helped by drops in apparel and automobile prices.
The unemployment rate remained stable at 4.2%. The ADP employment number was just 37,000, the lowest level since March 2023, and less than the 111,000 anticipated.
The number was helped by drops in apparel and automobile prices.
The unemployment rate remained stable at 4.2%. The ADP employment number was just 37,000, the lowest level since March 2023, and less than the 111,000 anticipated.
Stocks have made an impressive recovery from the April tariff swoon. The S&P 500 is now within just 2% of the all-time high.
The recent market overreactions have been reversed. The market index is perched near the high. It’s tough to envision a catalyst that will drive a sustained rally anytime soon. Sure, there could be good tariff news. But uncertainty is likely to linger for a while. The economy is okay but not great. A recession is unlikely, but growth is still slowing.
Anything can happen, of course. But it’s time to acknowledge the possibility that the market could go sideways for the rest of the year and even beyond.
Dividends are king during times like this. Dividends roll in no matter what the market is doing or what’s going on in the world. Dividend income has accounted for a substantial portion of total market returns over time, about 34% since 1940. But dividends account for a much higher percentage of returns during periods of flat markets. While overall stock prices are stuck in the mud, the cash register keeps ringing.
In this issue, I highlight one of the very best income stocks on the market. It has a strong recent track record and is poised to thrive in the quarters ahead.
The recent market overreactions have been reversed. The market index is perched near the high. It’s tough to envision a catalyst that will drive a sustained rally anytime soon. Sure, there could be good tariff news. But uncertainty is likely to linger for a while. The economy is okay but not great. A recession is unlikely, but growth is still slowing.
Anything can happen, of course. But it’s time to acknowledge the possibility that the market could go sideways for the rest of the year and even beyond.
Dividends are king during times like this. Dividends roll in no matter what the market is doing or what’s going on in the world. Dividend income has accounted for a substantial portion of total market returns over time, about 34% since 1940. But dividends account for a much higher percentage of returns during periods of flat markets. While overall stock prices are stuck in the mud, the cash register keeps ringing.
In this issue, I highlight one of the very best income stocks on the market. It has a strong recent track record and is poised to thrive in the quarters ahead.
The S&P 500 broke back above the 6,000 level for the first time since February last week as the indexes are now within striking distance of their all-time highs (though they do have some work to do). By week’s end, the S&P 500 had gained 1.5%, the Dow had rallied 1.2% and the Nasdaq had advanced by 2.2%
It was another positive week for the market, with some major indexes nosing to new highs, and while it’s far from 1999 out there, individual stocks are seeing very few breakdowns while the leadership ranks gradually expand. Of course, there remain some headwinds out there, but the intermediate-term evidence remains positive, and we’re now even seeing some longer-term evidence start to point up. Thus, we’ll nudge our Market Monitor up another notch to a level 8.
This week’s list has something for everyone, with some zingers, some steady Eddies and more than a few recent earnings winners. Our Top Pick looks like an emerging blue chip in the cloud software field, and shares emerged from a big consolidation after earnings last week.
This week’s list has something for everyone, with some zingers, some steady Eddies and more than a few recent earnings winners. Our Top Pick looks like an emerging blue chip in the cloud software field, and shares emerged from a big consolidation after earnings last week.
The market continues to nurse itself back to health, with the S&P 500 back above 6,000 for the first time since February and volatility at a four-month low. Numerous newsy items could derail it, including this week’s inflation reports. But lately, the market has mostly ignored the headlines, and so should you.
So today, we try and capitalize on the strong market in front of us by adding a potential new growth leader with enough momentum that Mike Cintolo tabbed it as his “Top Pick” in last week’s Cabot Top Ten Trader issue.
Details inside.
So today, we try and capitalize on the strong market in front of us by adding a potential new growth leader with enough momentum that Mike Cintolo tabbed it as his “Top Pick” in last week’s Cabot Top Ten Trader issue.
Details inside.
The S&P 500 broke back above the 6,000 level for the first time since February last week as the indexes are now within striking distance of their all-time highs (though they do have some work to do). By week’s end the S&P 500 had gained 1.5%, the Dow had rallied 1.2% and the Nasdaq had advanced by 2.2%
The S&P 500 broke back above the 6,000 level for the first time since February last week as the indexes are now within striking distance of their all-time highs (though they do have some work to do). By week’s end the S&P 500 had gained 1.5%, the Dow had rallied 1.2% and the Nasdaq had advanced by 2.2%
Most companies that were hit hard by Covid have recovered and then some. Many are faring better than ever. But because of investors’ narrow focus on the Magnificent 7 and a handful of artificial intelligence stocks the last two and a half years, share prices across various sectors have not kept pace with revenue and earnings growth. In recent months, we’ve capitalized on that discrepancy by pouncing on United Airlines (UAL), The Cheesecake Factory (CAKE) and, just last month, Carnival Corp. (CCL), with great success.
This month, we hope to mine another quick double-digit winner from the industrials sector. It’s a company that’s thriving like never before, but there’s been a significant lag between the fundamentals and the share price. We hope our timing in adding it to the portfolio now can produce UAL- or CCL-like rapid returns.
Details inside.
This month, we hope to mine another quick double-digit winner from the industrials sector. It’s a company that’s thriving like never before, but there’s been a significant lag between the fundamentals and the share price. We hope our timing in adding it to the portfolio now can produce UAL- or CCL-like rapid returns.
Details inside.
Explorer stocks are either steady or performing well with Dutch Bros (BROS) shares up 18.4% during the last two weeks and Luckin Coffee (LKNCY) shares jumping 9.4% this week after a strong first quarter with 41% year-over-year revenue growth.
In addition, Singapore’s Sea Limited (SE) shares are up 18.6% during the last two weeks, and Spain’s Banco Santander (SAN) shares have surged 73% so far in 2025. China’s BYD (BYDDY) shares are up 53% in 2025. New silver and gold play Coeur Mining (CDE) shares were up 13.5% in their first two weeks in the portfolio.
In addition, Singapore’s Sea Limited (SE) shares are up 18.6% during the last two weeks, and Spain’s Banco Santander (SAN) shares have surged 73% so far in 2025. China’s BYD (BYDDY) shares are up 53% in 2025. New silver and gold play Coeur Mining (CDE) shares were up 13.5% in their first two weeks in the portfolio.
Today’s new addition is a consumer-oriented stock with a range of shooting devices that are quickly becoming the must-haves among sportsmen and those looking for a less lethal self-defense option.
Revenue growth and profitability are on the rise, buoyed by new retail partnerships, domestic manufacturing and the launch of the company’s newest device.
All the details are inside this month’s Issue.
Enjoy!
Revenue growth and profitability are on the rise, buoyed by new retail partnerships, domestic manufacturing and the launch of the company’s newest device.
All the details are inside this month’s Issue.
Enjoy!
Updates
Stocks are taking a hit. It was an ugly day last Friday and there was more of the same on Tuesday. Should we expect more?
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Alcoa (AA), American Airlines (AAL), Berkshire Hathaway (BRKB), Brookfield Wealth Solutions (BNT), GE Aerospace (GE), Pan American Silver (PAAS), Starbucks (SBUX) and Toast Inc. (TOST).
At the index level, small caps have hardly changed since last Thursday, but it sure feels like there’s a lot of downward drift out there.
I could say the same thing for the broad market. Things seem to be getting a little more tense. But then again, the S&P 500 and Nasdaq just hit fresh all-time highs.
I am a little concerned that it’s going to be harder to ignore all the background noise once earnings season is over. Because there is a lot of noise.
I could say the same thing for the broad market. Things seem to be getting a little more tense. But then again, the S&P 500 and Nasdaq just hit fresh all-time highs.
I am a little concerned that it’s going to be harder to ignore all the background noise once earnings season is over. Because there is a lot of noise.
This week I’m in Cebu, Philippines. While in a shopping mall I spent a couple of hours analyzing a fascinating situation whereby Samsung, Apple and Huawei stores were right next to each other.
I’m not technically proficient enough to tell you which company and product offer the best value, but Huawei’s lower end smartphone was only $450 and seemed to offer everything anyone would need. Its high-end leader was just slightly cheaper relative to Apple’s most recent model, with all the bells and whistles. The store was very polished and in no way seemed to be of lesser quality to Apple or Samsung.
I’m not technically proficient enough to tell you which company and product offer the best value, but Huawei’s lower end smartphone was only $450 and seemed to offer everything anyone would need. Its high-end leader was just slightly cheaper relative to Apple’s most recent model, with all the bells and whistles. The store was very polished and in no way seemed to be of lesser quality to Apple or Samsung.
The U.S. stock market is doing just fine. More than fine, in fact. On Tuesday, the S&P 500 closed at a new all-time high, and the index is up roughly 4% year to date through the first seven weeks of 2025. That comes on the heels of back-to-back years of gains in excess of 20%. And while the current bull market has been mostly spearheaded by a handful of artificial intelligence and Magnificent Seven stocks, the rally is finally starting to spread, with the Equal Weight index also up 4% this year, the Dow Jones Industrial up nearly 5%, and the Russell 2000 up nearly 3%.
While the S&P 500 has stalled at about the same level since late November, it’s been more exciting under the hood.
The market indexes have stalled mostly because of technology. Those stocks still haven’t fully recovered from the DeepSeek plunge in late January. At the same time, earnings for the rest of the market are catching up.
The market indexes have stalled mostly because of technology. Those stocks still haven’t fully recovered from the DeepSeek plunge in late January. At the same time, earnings for the rest of the market are catching up.
The market has been sideways for the past couple of months. It’s up YTD because of a rebound from the December swoon. But the S&P is still at about the same level it was in early December.
Earnings have been solid, averaging about 11% growth in the quarter as tech earnings moderate and the rest of the market catches up. Earnings are expected to average about 14% in 2025. But the solid earnings quarter is only helping the market hold serve in the face of higher interest rate expectations, tariffs, and a strong dollar.
Earnings have been solid, averaging about 11% growth in the quarter as tech earnings moderate and the rest of the market catches up. Earnings are expected to average about 14% in 2025. But the solid earnings quarter is only helping the market hold serve in the face of higher interest rate expectations, tariffs, and a strong dollar.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), American Airlines (AAL), Berkshire Hathaway (BRKB), Sirius XM (SIRI) and SLB Ltd. (SLB).
Overall market liquidity remains ample, yet small-cap stocks have lagged in recent months, suggesting money availability isn’t as profuse as it was last year.
Overall market liquidity remains ample, yet small-cap stocks have lagged in recent months, suggesting money availability isn’t as profuse as it was last year.
WHAT TO DO NOW: We continue to stay relatively close to shore as the major indexes remain rangebound and many stocks are hit and miss—but we are impressed given the resilience shown after some worrisome headlines, and earnings season has gone fairly well so far. Today and tonight, we’re making a few small moves: On the sell side, we sold one-third of our AppLovin (APP) stake today and, tonight, will sell half of our On Holding (ONON) position—but we’ll also buy an additional 3% position to Duolingo (DUOL) and start a half-sized stake in DoorDash (DASH). All told, we’ll still have a mid-40% cash position, but we could do more buying if the recent resilience leads to clear buying.
Small caps have underperformed since last Thursday with yesterday’s selloff pushing the index to the lowest level since mid-January.
The main culprits are yesterday’s slightly hotter-than-expected CPI report, concerns about tariffs (carveouts expected) and an uptick in bond yields. Yesterday the 10-year yield jumped back to 4.64%, a three-week high.
The main culprits are yesterday’s slightly hotter-than-expected CPI report, concerns about tariffs (carveouts expected) and an uptick in bond yields. Yesterday the 10-year yield jumped back to 4.64%, a three-week high.
On last Friday’s Cabot Street Check episode, the weekly podcast I co-host with my colleague Brad Simmerman, we welcomed on four different Cabot analysts to help us take the market’s temperature in the midst of an eventful and rather volatile start to 2025. All four of them – Mike Cintolo, Cabot’s Chief Investment Strategist; Jacob Mintz, our options trading expert; Tyler Laundon, our small-cap and early-stage stock expert; and Clif Droke, my fellow value investor who runs the Cabot Turnaround Letter – described themselves as varying degrees of “cautiously bullish.” Given all the headlines of late, that qualifies as a victory.
These are dark days for cannabis investors, maybe the darkest ever.
AdvisorShares Pure U.S. Cannabis (MSOS), one of the key benchmark exchange-traded funds in the space, is down 85% in the past five years against market gains of 80%.
As has always been the case, the fate of cannabis stocks is much more about politicians than the leadership and results at cannabis companies.
AdvisorShares Pure U.S. Cannabis (MSOS), one of the key benchmark exchange-traded funds in the space, is down 85% in the past five years against market gains of 80%.
As has always been the case, the fate of cannabis stocks is much more about politicians than the leadership and results at cannabis companies.
Alerts
Sell Veralto (VLTO); Note on Rivian (RIVN); AST Spacemobile (ASTS) Taking off
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.
Shares of Zeta (ZETA) are up about 5% this morning after the company announced it will acquire LiveIntent, a people-based marketing technology company founded in 2009.
Portfolios
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
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.