The market is in a tough spot, and has been for about a month and a half. It doesn’t mean the bull market is on borrowed time – remember, we had a much deeper correction in July and August, only to have stocks roar to all-time highs by Labor Day – but it does make for a tricky environment in the short term. A news-heavy week (inflation data, the start of earnings season, two big industry conferences) could potentially help turn the tide. But right now, the bears are in control. One subsector that has mostly avoided the recent selling is the airlines. So today, we add one of the stronger airline stocks, courtesy of Cabot Turnaround Letter editor Clif Droke.

Details inside.

Interest rate worries continued to weigh on the market last week as the S&P 500 lost 1.6%, the Dow fell 1.5%, and the Nasdaq declined by 2.3%. This week will have plenty of market-moving events, including the start of earnings season, so expect continued volatility.

Interest rate worries continued to weigh on the market last week as the S&P 500 lost 1.6%, the Dow fell 1.5%, and the Nasdaq declined by 2.3%. This week will have plenty of market-moving events, including the start of earnings season, so expect continued volatility.

Welcome to our 2025 TOP PICKS issue! Our Cabot analysts have kindly shared their top stock ideas for this year. And you’ll find that they include a variety of companies that should be attractive to investors of all styles—growth, value, dividend payers, and companies on the cusp of turning around—as well as small, mid, and large-cap stocks. I hope you’ll find one or more to your liking!

But first, let’s take a look at the economy and the markets and talk about what’s in store for this year.

It’s not 2022 or 2008, of course, but the vast majority of stocks out there are in correction mode, and that includes the growth arena, which after a huge run began to hit turbulence in early December and has generally been under pressure since. Now, there are some rays of light out there, which we discuss in this issue, and we’re not having trouble keeping a full-ish watch list for the next upmove, but we’ve been favoring a cautious stance for a while now and think that remains the right move, as we’ve trimmed further this week and now have 60% on the sideline.

In tonight’s issue, we do write about one big positive factor out there (no strength in defensive stocks), talk about the allure of buying former winners “cheap” and, of course, write about all of our names and a bunch we’re watching for when the buyers retake control.

California is burning and the rest of the country is in a deep freeze. It seems like a metaphor for the mixed messages we’ve been getting from the market in recent weeks, with stocks running very hot and cold since the start of December as the major indexes have mostly held near their highs but the under-the-surface action has been wobbly at best. The last six weeks have been rough on small caps in particular. As both a value investor and a contrarian, that spells opportunity!

So today, we add one of the highest-profile, more beaten-down small-cap stocks out there to our Buy Low Opportunities Portfolio. The stock is miles from its Covid-era highs, but it’s starting to build momentum for the first time in years: shares have tripled since bottoming five months ago. And it’s a name virtually everyone knows.

Details inside.

Editorial Note: With the market closed tomorrow, January 9, we’ve bumped up this week’s Issue to today.

At the end of 2024, we were in a “buy now to win tomorrow” type market. Now, we’re in more of a “buy now to win in the coming quarters” type market.

Given this backdrop, our first portfolio addition of the year is a lower-risk, high-quality software company specializing in digital banking solutions. It’s the fastest grower in its space and is on pace to deliver its first full-year profit in 2025.

Like a lot of stocks in both the software and financial arenas, shares of this company have been a little weak lately. I think that’s good – we can step in at a price modestly lower than just a few weeks ago.

While the outlook for 2025 is positive, things are changing.

Sure, this bull market has driven the S&P 500 nearly 70% higher. But most of the gains are from technology stocks. Until this past summer, nearly all the bull market returns were driven by technology. The rest of the market had done very little.

But the rest of the market is waking up. While artificial intelligence (AI) will likely continue to be a powerful growth catalyst, its dominance over everything else might not be as pronounced in 2025 as it has been in the past. Earnings for other stocks are catching up.

The earning growth difference between the “Magnificent 7” companies and the other 493 S&P 500 companies is expected to plummet from 27.8% last year to 8.3% this year. The rest of the market is cheap, has momentum, and will likely get hot this year as stocks experience an earnings growth spike that could last for years.

In this issue, I highlight a healthcare stock that looks highly promising in 2025. It is poised in front of the aging population megatrend, which makes a successful pick so much easier, and it will likely experience a sizable earning spike in the years ahead. It is an existing portfolio stock of which half the shares were sold last year. It’s a great time to buy back the other half.

With the calendar flipping to 2025 and the long holiday weeks/weekends behind us, most traders will be back at their desks starting yesterday. Let the fun begin!

The new year is off to a good start, with many of the areas that took lumps during December (namely the broad market and growth stocks) showing strength through three days—and, just as important to us, many individual stocks have perked up, with some resilient names pushing to new highs and others that dipped to support bouncing. That’s a good thing, but we’re also keeping in mind the fact that early January is often tricky (lots of sharp moves in both directions), that the intermediate-term trend of most indexes and measures is still neutral-to-negative and that there remain lots of crosscurrents among individual stocks, with some selling off while others strengthen. As we wrote above, we are encouraged and will nudge our Market Monitor up to a level 6, but, while this is a good first step, we want to see the action continue to conclude that the December air pockets are a thing of the past.

For the third straight issue, this week’s list is heavy on growth stocks, which remains a sign that big investors aren’t hunting for safety. Our Top Pick is a name we love fundamentally and whose stock has held up relatively well in recent weeks despite a huge run. If you enter, use a loose stop given its volatility.

In the wake of a rare down December, stocks have come roaring back to kickstart 2025, up more than 2% through the first three trading days. It’s early yet, but perhaps the bulls are taking control again after a sluggish end to an otherwise very productive 2024.

Still, there were enough yellow flags under the surface to close out the year that it’s worth taking a cautious approach for now. So today, we add a mega-cap, high-yield dividend stock that’s been a staple of Tom Hutchinson’s Cabot Dividend Investor portfolio for some time.

Details inside.

With the calendar flipping to 2025 and the long holiday weeks/weekends behind us, most traders will be back at their desks starting today. Let the fun begin!

In today’s note, we discuss the recent earnings reports from Agnico-Eagle (AEM) and Janus Henderson Group (JHG). Our note also includes the monthly Catalyst Report and a summary of the August edition of the Cabot Turnaround Letter, which was published on Wednesday.

WHAT TO DO NOW: Growth stocks remain very weak and, today, we saw the broad market get whacked as well. Overall, it remains a split environment, but our Growth Tides and Aggression Index are negative, and growth as a whole is under pressure. The Model Portfolio is more than half in cash, and while we’re not in our storm cellar, we’re standing pat tonight, keeping stops on our positions and taking it day to day. We have no changes tonight.

The market is going from wobbly to ominous. As of Tuesday’s close, the S&P is negative for the month of July after having been up 3.5% in the first few weeks of the month.


It’s technology. The weakness in the sector that began in the middle of July is continuing. The worry started with the report of AI chip export restrictions to China and has grown into fears of sector overvaluation and slowing growth. But it’s the heart of earnings season. And earnings will confirm or deny those fears.

The market seems to have regained its footing since the selloff last week. It’s still flat for the month of July, but it isn’t down, which is encouraging.

Technology hit a snag with bad news from China. We’ll see if earnings can overcome that weakness as the AI catalyst comes front and center again. But the bigger story in July was the broadening rally. An improving interest rate prognosis prompted a strong rally in the previously beleaguered interest rate-sensitive stocks in REITs and utilities.

Mattel (MAT) reported revenue of $1.08 billion, down 0.7% from last year, and missing the consensus estimate of $1.09 billion by 1%. Earnings per share, however, exceeded the consensus estimate of $0.16 by 18.75%, coming in at $0.19. Key metrics showed mixed performance: Barbie sales fell 5.9% to $266.10 million, Fisher-Price dropped 17.5% to $135.90 million, while Hot Wheels rose 3.9% to $327.40 million, and other brands reached $471.90 million, beating estimates.

Small caps have been up and down over the last week with the net result being that there was almost no change since last Thursday (through 10:25 AM ET today).

That doesn’t sound too meaningful until you consider that the S&P 500 is down 2.6% over the same period and that small caps have outperformed in all sectors except for consumer staples, energy and utilities.

This was a difficult week for stocks. Yesterday the S&P 500 sank 2.3% while the tech-heavy Nasdaq declined 3.6%. Collectively, the so-called “Magnificent Seven” lost $768 billion in market value.

America does face some uncertainty but overall has a strong economy but, as I have highlighted, the stock market has become too concentrated at the top and debt is building up too rapidly. China, on the other hand, faces economic issues such as weak consumption, a property slump, 20% youth unemployment, and a struggling stock market in the red so far in 2023. Given the size and importance of China’s economy, this impacts all markets.

Value stocks are starting to gain traction.

No, they’re still not outperforming growth stocks. But the 10.5% year-to-date gain in the Vanguard Value Index Fund (VTV) puts it on track for its best year since 2021, and potentially its third-best year in the last decade. That’s progress. And much of the progress has come this month, as the previously thin bull market rally has spread to the myriad unloved non-tech sectors. Value stocks are up more than 3% this month, outperforming growth stocks (as measured by the QQQ ETF), which are flat in July.

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!

Dogs of the Dow Portfolio Alert (VZ, AMGN), Buffett’s Patient Investor Portfolio Alert (GOOGL)

I’m going to hold on to my March SPY iron condor and will close towards the end of the trading session tomorrow or Friday depending on the price action over the next two days. When I do close, I only plan on closing the bear call side and will allow the bull put side to expire worthless.

For those who are new and wish to enter a trade, all of the details are listed in the alert (as always) for those wanting to initiate a position. As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.

Spotting a “top” in in high-flying stocks is impossible but sticking to a system of taking partial profits on a very fast-moving stock is pretty darn easy, if you can manage your emotions.

Cadre (CDRE) and Soleno (SLNO) Report

Alerts- VNQ, EEM, IBM

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.