Cabot Early Opportunities Issue: April 16, 2025

Stocks in This Issue

Recent Portfolio Updates

Apple’s (AAPL) stock was dealing with the initial tariff drama pretty well until the insane tariffs on China, and the rest of the world, were announced on April 2. There has since been plenty of analyst commentary, all concluding that moving meaningful manufacturing to the U.S. is just not going to happen, at least not anytime soon. While the Trump administration’s exemptions (last Friday) take away the worst-case scenario (for now), there’s going to be a hangover effect on the stock, at least until we know more about exactly which products and product components will be subject to tariffs and what those rates will be. For the patient investor, AAPL has proven again and again to be one of those “it’ll all work out” type stocks, and I don’t think this time will be any different. That said, while AAPL stock can move higher in the short term, it’s likely to take longer, and a lot more clarity, before we see it make a new high. Earnings should be out on May 1. BUY

Dutch Bros (BROS) was my Top Pick last month, unfortunate timing given Liberation Day tariffs were announced just one week later. Despite having little exposure to tariffs, BROS does have a lot of exposure to the U.S. consumer. In a recession scenario, consumers may pull back – even on coffee if it’s a rough one – and even if they don’t, investors may not be willing to pay as much of a premium for the stock as they were in a non-recession scenario. That’s the main concern right now, though we don’t have any company-specific data to support anything but the bullish view from when I recommended BROS. Among the bullish talking points are the potential for BROS to very realistically grow to 4,000 units (with up to 9,000 not out of the question), the recent addition of mobile orders and margin expansion potential. Keeping an eye on the macro indicators and sticking with BROS for now. BUY

Freshworks (FRSH) is well known for offering user-friendly, cost-effective alternatives to enterprise software from companies like Salesforce (CRM), Zendesk (private), and ServiceNow (NOW). If we do see the economy slow down, it’s possible companies will gravitate toward its lower-cost options. On the other hand, management’s recent view of a stable to improving small and mid-sized business market, offset by a little pressure with larger customers, was already factored into the beaten-down stock and likely required an improving economy for growth to accelerate into the back half of the year. Given an uptick in macro concerns, Freshworks feels more at risk than it did a month ago. On the other hand, cloud software stocks sold off hard and have not really bounced yet, so we could still see a nice upside move (even if temporary) upon any positive economic or tariff-related news. On balance, FRSH is a stock that I’m on the fence with so am moving to hold even though we only hold a half-size position. HOLD HALF

GE Vernova (GEV) just held an Investor Day in December and issued a solid Q4 report in January. On the bullish side of things, management said gas equipment backlog should grow considerably this year, that the company has seen an increase in the Power and Electrification segment pipeline, that it’s seeing more interest in its small modular reactor (SMR) nuclear business, and that it’s looking into ways to increase pricing within the Electrification segment. While the Wind business is still an issue and there is some tariff uncertainty, GEV has a good deal of manufacturing here in the U.S., so it may well gain business in its Power and Wind segments. Electrification has a lot of exposure to Europe (about 50%) and the gas power is mostly U.S. and Middle East. The bottom line is there are too many moving parts here to make a buy or sell call, but we’ll know a lot more after the April 23 (next week) Q1 report. We’re down 4% on the first half of our position, and I’m OK going into earnings as we currently stand. HOLD HALF

LandBridge (LB) is a Texas-based company specializing in active land management for energy and industrial development. Key activities include oil and natural gas development, solar power generation, data centers, power storage, and other industrial operations. Revenue primarily comes from surface-use royalties and fees (55%), resource sales and royalties (29%) and oil and gas royalties (16%). As such, the business is driven by increased producer activity, rising commodity prices, and the addition of new revenue streams. Given its business model, it’s hard not to look at LB as a potential beneficiary of an aggressive reshoring effort. After all, you can’t build much without land and resources. This is likely why LB stock has held up OK lately. We’ll get an earnings report on May 8. BUY

Microsoft (MSFT) has been out of the headlines lately, other than those about datacenter investments, but that will change soon, given the company will report in a couple of weeks. Analysts have lowered price targets on the stock due to macro uncertainty, but it’s still the best stock to play the AI megatrend. BUY

Primo Brands (PRMB) has been acting well since, even when the you-know-what hits the fan, people still need to drink water. Not overthinking this one. We will get a report on May 8. BUY

What to Do Now

There is so much that could be said about the drivers of the market’s crazy action.

But while it can be fun to get into the weeds of this or that policy, at the end of the day, we’re here to talk about stocks that can work in whatever market we’re dealing with, not get too distracted by what those drivers are.

The bottom line right now is that it’s not time to be a hero and take on a ton of risk.

It’s time to play it a bit safe and wait until there’s a little less uncertainty before ramping up our exposure, especially to the higher-beta growth names.

We’re already seeing some names emerge from the chaos and act well. That’s what this month’s Issue is focused on and what you should be buying.

All the other stuff, which definitely has some great deals mixed in but requires a good deal of luck in order to allocate more to the winners than the losers, is best put off to the side on a secondary watch list until market conditions improve.

NEW STOCKS

ADMA Biologics (ADMA)

Following our sale of Soleno (SLNO) a couple weeks ago for a 61% gain, I’ve been looking for a new biotech/pharma name. But I’ve wanted one that doesn’t have much exposure to potential tariffs.

ADMA Biologics (ADMA) has been near the top of my list. Management’s comments last week confirmed the company’s manufacturing, supply chain and sales all come exclusively within the U.S., so it’s earned it a spot on our Watch List.

The company develops and manufactures plasma-derived biologics aimed at treating infectious diseases in immunocompromised and high-risk populations.

It has a vertically integrated business model that includes a network of 10 FDA-licensed facilities dedicated to collecting human plasma (annual processing capacity of up to 600,000 liters), as well as domestic facilities for purification, fill-finish, testing and distribution.

ADMA has three FDA-approved treatments.

ASCENIV is the biggest revenue driver. The therapy was approved for adolescents and adults in 2019 for the treatment of Primary Humoral Immunodeficiency (PI). PI is a class of inherited genetic disorders that causes a person to have a weak immune system due to lack of, or poorly functioning, antibodies.

BIVIGAM is another PI treatment used for less severe cases than ASCENIV. Nabi-HB is approved for post-exposure prophylaxis to prevent Hepatitis B infection.

The main development-stage asset (early stage) in the company’s pipeline is SG-001, a biologic targeting Streptococcus pneumoniae, the leading cause of community-acquired pneumonia in the U.S. It’s responsible for about 400,000 hospitalizations and has a 5% to 7% mortality rate.

Management thinks SG-001 represents a $300 - $500 million annual revenue opportunity.

The big push this year is a yield improvement (+20%) project that ADMA management expects to drive meaningful revenue and earnings growth in the back half of 2025, following anticipated FDA approval mid-year.

As it stands right now, ADMA is expected to grow Q1 2025 revenue by 42% to $116 million and generate $0.16 in adjusted EPS.

We should have earnings in the first week or two of May. I’ll be listening to that call and will consider adding ADMA to our portfolio after the latest updates on the yield enhancement project.

The Stock
ADMA has been public since 2013 when its IPO priced at 8.5. Without meaningful sales for many years, the stock suffered, but that began to change in 2021 when revenue grew by over 90% for a couple of years. ADMA stock, which was trading well below 2, began to come to life. By mid-2023, it was pushing 4, and by mid-2024, it was over 10. The stock hit an all-time high of 23.6 back in November of last year then crept lower for several months, ultimately hitting its 200-day line near 15.3 in February. Following the Q4 report on March 4, shares walked higher, topping out near 20 before a little dip. ADMA has been strong this week and closed near 22 yesterday. WATCH

Alamos Gold (AGI)

Gold producers are enjoying an extremely strong market right now, given high uncertainty and the record high price of gold.

Alamos Gold (AGI) is a name we’ve owned before and one I continue to like given its relatively low risk profile as a profitable gold producer with projects in mining-friendly areas.

Alamos has three operating mines: the Young-Davidson and Island mines in Ontario, Canada, and the Mulatos mine in Sonora State, Mexico.

It is also developing a number of new mining properties, including the Lynn Lake project in Manitoba, Canada (production expected in 2028), the Qiqavik gold project in Quebec, Canada, the Kirazlı, Ağı Dağı and Camyurt projects in Turkey, and the Quartz Mountain project in Oregon, U.S.

Beginning this year, Alamos should start to enjoy significantly higher production in the Island Gold Mining District thanks to last year’s acquisition of Argonaut Gold. That deal brought Argonaut’s flagship Magino mine to Alamos.

This deal made a ton of sense.

Magino, an open pit mine, is located just a few hundred meters from Alamos’ underground Island Gold mine. It has an estimated 19-year reserve life and a new mill with capacity for 10,000 tonnes per day (tpd), with expansion potential.

Prior to the Argonaut acquisition, Alamos had been processing Island Gold ore at its Kremzar mill, an older facility that needed upgrading. That mill is no longer needed and will be shut down this year since ore from Island Gold can be processed through the new Magino mill at much lower processing costs.

The Marino mill’s capacity is expected to be increased by over 20%, to around 12,400 tpd, in 2026, so that it can handle at least two decades of production from Island Gold and Magino.

This year, the Island Gold District (Island Gold and Magino mines) is expected to produce 275k – 300k ounces at about $1,125/oz.

The underground Young-Davidson mine should do about $175k - $190k at a slightly higher cost, around $1,415/oz. And the Mulatos (Mexico) open pit mine should add another 135k or so at $1,150/oz.

That adds up to all-in 2025 production of around 580k – 630k ounces (versus 567k ounces in 2024) at a cost roughly $50 less per ounce than last year.

Translated to analyst consensus numbers, and not factoring in a significantly higher price for gold (which may or may not happen), that implies 2025 revenue will grow 26% to nearly $1.7 billion and adjusted EPS will jump around 57%, to about $1.27.

With the price of gold recently surging and taking gold stocks with it, we’ll stay on the sidelines for now. But I like AGI, and if we jump into a gold stock soon, this will almost certainly be the one.

The Stock
AGI has traded on the NYSE since 2004, so it’s been through several gold boom and bust cycles. The current rally began to take shape at the beginning of the year and then accelerated in March after AGI convincingly broke above previous resistance around the 21 level. AGI walked up to an all-time high near 27 just prior to Liberation Day (April 2), then after a couple of sharp down days, the stock came back with a vengeance. It has since rallied to fresh all-time highs near 30. WATCH

Palomar Holdings (PLMR)

Property and casualty (P&C) insurance stocks tend to hold up, and often do very well, when the market gets wonky and macro concerns ignite. We’ve seen this pattern begin to play out in recent weeks.

One of my favorites among the smaller players is Palomar (PLMR), a specialty insurer serving residential and commercial clients in five product categories, including earthquake (39% of gross written premiums, or GWP), inland marine and other property (23%), casualty (18%), fronting (16%) and crop (4%).

The company has a market cap of around $4 billion and was started in 2014 when it began selling earthquake insurance in California and 11 other markets. Its products are sold through multiple channels, including retail agents, program administrators, wholesale brokers, and in partnership with other insurance companies.

In the early days, Palomar stood out from the competition because it went after geographic markets where there was little interest from carriers that used one-size-fits-all pricing strategies across large areas.

That left the door open to reach customers who needed something specific to their area. Palomar walked right through.

It developed a proprietary data analytics and technology platform that allowed for flexible products and granular pricing. A reinsurance program was added to provide protection from large-loss, low-frequency events.

Over the years, Paloma has added more products and geographies – crop, environmental liability and excess and surplus (E&S) casualty are all relatively new lines.

While California remains its largest market by far at 43% of 2024 GWP (Texas, the second largest, is 8%), Palomar is now licensed in 44 states.

The company has also grown through acquisition, the latest (January 2025) being First Indemnity of America, a New Jersey-based insurance carrier specializing in surety bonds for small to medium-sized contractors in the Northeast U.S.

Since its founding in 2014 through the end of 2024, Palomar has grown GWP from $16.6 million to $1.5 billion. That’s a compound annual growth rate of almost 57%. In 2024, GWP grew by 35%.

Like most insurance companies, Palomar generates a significant proportion of earnings by investing premium reserves in fixed securities (95% of its portfolio), including Treasuries, mortgage-backed securities and corporate debt.

The company has been profitable since 2016, growing net income at a compound annual growth rate of 43%. In 2025, net income grew by 48% to $117.6 million. That works out to adjusted EPS of $5.09, up 38% over 2014.

At the company’s Investor Day in February, management painted a bullish picture for the future with explicit goals to expand further into non-earthquake lines and double net income every three to five years.

Guidance for 39% net income growth in 2025 was solid and leaves some room for upside, depending on how catastrophe losses and reinsurance renewals (June timeframe) come in.

The Stock
PLMR came public at 15 in April 2019 and rose steadily until shares topped out near 120 in September 2020. The next three years were choppy and mostly down. The first hint that PLMR was “back” was after the Q4 2023 earnings report in February 2024. Shares rallied through overhead resistance and soon broke through 80. The trend afterward was relatively steady, and PLMR touched 112 just before the end of 2024. The Q4 2024 report in February sent the stock up 15% to 128. There was a wobble for two days around Liberation Day, but PLMR’s nine-week ascent from 128 to the current level just above 150 is about as steady as they come. PLMR stock looks a little extended right now, so it will go on the Watch List. WATCH

Sportradar AG (SRAD) ★ Top Pick ★

Watch List stock Sportradar (SRAD) is among a select few growth stocks to hit a new high recently. That impressive performance, coupled with a compelling presentation from management during its April 1 Analyst Day, means SRAD has more than earned a spot in our portfolio today.

While we have a few more details to consider from the Analyst Day, the big-picture story is much the same as when I added SRAD to our Watch List just three weeks ago.

The Switzerland-based sports technology company has an increasingly popular platform of solutions for consumers, media groups, sports betting operators and sports federations that integrates sports media and betting.

The end result is an immersive experience for fans and operators that has all sorts of bells and whistles, including fan engagement tools for media companies, sportsbook management solutions for betting operators, data-driven insights for teams and leagues, and integrity services to combat fraud, doping, and match-fixing.

Sportradar is a global company. It covers around a million sports events every year and has partnerships with the big organizations, including the NHL, MLB, NBA, NASCAR, UEFA, FIFA, Bundesliga, ICC, and ITF.

These partnerships appear to be getting stronger, as evidenced by the recent, exclusive long-term partnership with MLB that will run through the 2032 season.

The recent acquisition of IMG Arena and its global sports betting rights portfolio from Endeavor Group Holdings (EDR) also seems like a win, though the deal isn’t expected to close until Q4 of this year, so the expected 20% increase to expected 2025 revenue won’t be enjoyed until next year.

The acquired portfolio includes partnerships with over 70 rights holders, encompassing approximately 39,000 official data events and 30,000 streaming events across 14 global sports on six continents. Notable properties include Wimbledon, the U.S. Open, Roland Garros, MLS, EuroLeague Basketball, the PGA Tour, and UFC.

At the April 1 Analyst Day, management talked about how the company already has around 75% of its expected 2025 and 2026 revenue under contract, and that it sees potential to increase take rates and pricing by leveraging its scale, data and technology assets.

The sports betting market appears especially lucrative. The global market is growing at about 10% a year, with North and Latin America growing well into the double digits. Management expects in-play betting to be a major growth opportunity and is working on technologies, such as personalized betting and real-time engagement tools, that are aimed at dramatically increasing user interaction and retention.

Following the event, consensus estimates moved meaningfully higher, with expected 2025 revenue growth now at 20.7% (versus 14% three weeks ago) to $1.45 billion and adjusted EPS up $0.06 to $0.38 (+250% vs. 2024).

The Stock
SRAD came public at 27 in September 2021 and immediately headed south. The stock fell below 10 before it firmed up, then the trend through mid-2024 was completely unremarkable. Shares began to drift higher in the back half of last year but didn’t really stand out until they shot to 18 in the two weeks after the Q3 earnings report on November 7 and kept walking higher. The stock pulled back into its March 19 Q4 report, then jumped 14% the next day. It dipped with the market after April 2 but has come right back to multi-year highs above 23. We’ll step in here. BUY

Sprout Farmers Market (SFM)

When I added Sprouts Farmers Market (SFM) to our Watch List last November, I wrote that it “… is not the most glamorous stock story out there. At the end of the day, it’s a grocery store chain that’s growing through expansion across the U.S.”

Glamour hasn’t worked lately. And a steady-growth, domestic, health-oriented grocery store with extremely low import risk is just what I want right now.

The story hasn’t changed much in the last five months. Sprout’s stores continue to gain traction because people are trying to eat healthier. Organic, plant-based, gluten-free, paleo, keto and dairy-free foods are becoming increasingly popular.

Sprouts plays right into these trends. Over 70% of products sold are attributed to these types of better-for-you and specialty products.

The company’s stores feature an open layout and focus on fresh produce. There’s a good-sized deli, bakery and meat and seafood area, bulk goods, and, where state law allows, beer and wine.

The chain offers a very inviting store that resembles the farmer’s market experience. Consumers, many of whom are Gen Z, Millennials, educated, in families, and have above-average incomes, continue to come back.

Sprouts also has its own brand, which is growing in popularity (23% of total sales in Q4 2024). E-commerce sales are on the rise, with 14.2% of sales so far in 2024.

Management hosted a headquarters visit in late March in Phoenix, AZ. A few big-picture in-store trends management talked about are strong sales and larger packs of proteins, different types of proteins (bison, venison and goat), and strong made-to-order sandwich business and one-pan meal offerings.

In terms of store growth, Sprouts has 440 stores today and sees potential to get to around 1,200. Around half of new store growth should be in newer markets, with the Northeast and Midwest representing entirely new market opportunities.

E-commerce, of which about 80% is delivery, continues to do well.

The company posted 12.9% revenue growth in 2024 and is expected to grow at about the same clip this year. Adjusted EPS, which grew by 32% to $3.75, should grow 25% to $4.68.

Earnings are due at the end of the month.

The Stock
SFM came public in 2013 at 18 and soon rallied to 49.5. It then fell well below its IPO price before getting a little boost during the pandemic. The real change began last September when SFM moved through 40, then kept rising until it hit 155 in November. Then SPT was nailed after the Q4 earnings report. The stock was trading in the 130 – 140 range when management spoke at the BofA Consumer & Retail Conference on March 12 and hosted its headquarters visit later in the month. Despite a little wobble around Liberation Day, the stock has moved back above 160 and has acted very well over the last five weeks. BUY

PORTFOLIO CHANGES SINCE LAST ISSUE

We sold our half stake in Soleno Therapeutics (SLNO) for a 61% gain on April 3, when we also stepped aside from SharkNinja (SN) for a 35% loss. We then sold DoorDash (DASH) for a 20% loss on April 8.

Today, we will drop Joby Aviation (JOBY) from our Watch List.

An updated table of all stocks rated BUY, HOLD and WATCH as well as recent stocks SOLD, is included below.

Stocks rated BUY are suitable for purchasing now. I suggest averaging into every stock to spread out your cost basis.

For stocks rated BUY A HALF, you should average into a position size that’s roughly half the dollar value of your typical position.

Those rated HOLD are stocks that still look good and are recommended to be kept in a long-term-oriented portfolio. Or they’ve pulled back a little and are under consideration for being dropped.

Stocks rated SOLD didn’t pan out, or the uptrend has run its course for the time being. They should be sold if you own them. SOLD stocks are listed in one monthly Issue, then they fall off the SOLD list.

Please use this list to keep up with my latest thinking, and don’t hesitate to email with any questions.

Active Positions

Recently Sold Positions

The next issue of Cabot Early Opportunities will be published on May 21, 2025.

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