April 24, 2025

WHAT TO DO NOW: Start to slowly come off the sideline. Our Cabot Trend Lines and Cabot Tides remain negative, and most stocks are still south of key moving averages, so we’re remaining overall defensive—but today our Three Day Thrust indicator flashed, and while that doesn’t preclude some near-term volatility, it does hint that a bottom could be in and a good-sized rally will evolve down the road. That’s not a reason to buy willy-nilly, but given our monstrous cash hoard, we are slowly coming off the sidelines with two new small buys, adding half-sized stakes in Take-Two Interactive (TTWO) and Penumbra (PEN). Our cash position will still be around 75% after these buys; as always, we’ll follow the market from here in terms of more new buys—or backing off.

Current Market Environment

The market posted its third straight big gain today, with the S&P 500 up 2.1% and the Nasdaq up 2.7%.

We’ve been sticking with the primary evidence before and during this correction, and there hasn’t been much change to that despite the nice bounce this week—the major indexes just poked above their downtrending 25-day lines today, and most still have yet to rally above the peak from two weeks ago (when the tariff delay was announced), so while there’s been a lot of movement, there hasn’t been a ton of (net) upward progress.

That keeps our Cabot Tides and Cabot Trend Lines negative, and when you add in the fact that most stocks are still buried below lots of resistance (more than 70% of S&P 1500 names are south of their 50-day and 200-day lines), the market still has a lot of proving to do.

Now, with that said, we are encouraged by what we see. Part of that is because of what we wrote about last week—the setup in terms of panic selling and pessimism is certainly there after the six-week, tariff-induced plunge, which should lead to a solid rally phase sooner or later.

And part of it is because one of the three blastoff indicators we wrote about last week triggered: Today was the third straight gain of 1.5% or more in the S&P 500, creating a green light from our Three Day Thrust, which has flashed just 10 times since 1970 and has led to great longer-term results. To be fair, when the signal comes below the 200-day line (like now), the near-term risk/reward is about even (about half the time there’s a lot of volatility over the following few weeks), but looking out a year, the S&P’s max gain after these signals is 23% or so, with most coming near major market lows or take-off points. (The last signal was in November 2020, which kicked off the big vaccine-induced rally.)

Of course, that’s just one indicator, and we’re now in the heart of earnings season, which is sure to add to the crosscurrents out there. If we were, say, 60% in cash (40% invested), we’d almost surely simply sit tight today.

But since we’ve been so heavy in cash (85%-plus for a few weeks) and given the Three Day Thrust, we’re going to extend our line just a bit today, adding two half-sized (5% of the Model Portfolio): Take-Two Interactive (TTWO), which is set to see booming orders and cash flow in the quarters ahead as some new video games launch; and Penumbra (PEN), which has held up well during the entire correction and showed some strength after earnings today.

Even with these new buys, we’ll still be about three-quarters in cash, so we’re hardly flooring the accelerator; if the stocks get hit from here, we’ll keep our losses small as always. But given our big cash position and the market’s show of support, a little nibbling here makes sense—and then we’ll see how things play out.

Model Portfolio

We’ve recently written up both of our new additions, so we won’t rehash everything here today. Take-Two Interactive (TTWO) has acted pristinely throughout the market correction, likely because investors are looking ahead to soaring earnings in the current fiscal year (just started in April) due to some hot new game releases, especially Grand Theft Auto VI, which is one of the most anticipated releases of all time. We’re not usually giant fans of the sector, but TTWO looks early stage overall (original breakout in November) and wants to go higher. We’ll start with a half-sized stake (5% of the account) with a stop in the mid-190s. BUY A HALF

We’ll also start a position in Penumbra (PEN), whose CAVT devices for removing blood clots continue to sell well. In fact, Q1 results were reported last night and easily topped expectations—sales lifted 16%, EBITDA boomed 50% and earnings more than doubled as margins continued to expand, with the top brass nudging up full-year estimates. Shares still have some overhead to chew through like most everything out there, but they reacted well to earnings today and certainly look like they want to head higher if the market’s rebound continues. We’ll buy a half-sized stake (5% of the account) with a looser stop in the 250 area. BUY A HALF

Argenx (ARGX) has actually been tightening up a bit right near its 50-day line and round-number resistance near 600; coming after the strong-volume rally off the lows, we take the action as constructive. The approval for the firm’s pre-filled syringe version of Vyvgart was expected but should continue to expand the growth story here. There’s no set date for Q1 earnings yet, but they’re likely out in a couple of weeks, which, along with the market, will tell the intermediate-term tale. We still think Argenx’s story and numbers can lead to another sustained run, and if shares react well to earnings while the market’s trend turns up, we could average up down the road. For now, we like the action, but will simply hold what we have. HOLD A HALF

Flutter Entertainment (FLUT) looks a lot like the major indexes, holding above the early-April panic low and bouncing decently of late—but still living below its moving averages and it’s yet to really show any major signs of buying. If that continues, we could pull the plug and either hold the cash or look elsewhere, but for now, we’ll hang on, giving shares a chance to show some relative strength (a move above 250 or so would be a definite plus). HOLD

Palantir (PLTR) held up very well during the worst of the market’s implosion, and that relative strength is following through now that the indexes are rallying, with PLTR lifting above round-number resistance near 100. To be fair, volume on the move has been light, there’s likely to be some overhead up to 120 (lots of big-volume selling off the top in February) and, most important, earnings are coming out soon (May 5), which will be key. Still, the action has been solid for a while and we’re encouraged that shares are rounding out a fresh launching pad, which is far better than most of the glamour winners from last year. If you’ve held onto some shares, sit tight. HOLD

Watch List

DoorDash (DASH): DASH is still in good shape, though it hasn’t exactly kicked into gear quite yet. Most of the names we sold in recent months are still circling the drain, but this firm’s rapid, reliable growth story should continue to keep big investors interested. Earnings are due May 7.

GeneDX (WGS): WGS has shown great strength, popping back toward its highs this week. Our big issue here is that volatility remains insane, with 5% to 10% swings the norm, but there’s no questioning the resilience. Earnings are due April 30.

GE Aerospace (GE): GE reported a steady quarter with solid growth (sales up 11%, earnings up 60%, buoyant free cash flow) and orders, helping the stock rally into its 50-day line. It’s not going to be the fastest mover, but after a long rest last year and this year’s wobbles, we think GE can be a steady winner once this market downturn finishes up.

Guardant Health (GH): GH is set up well for a potential breakout (above 50-51) if the bulls take control of the market. Earnings, due April 30, will be key.

Insulet (PODD): PODD is another name that’s rallied into its 50-day line this week as earnings (May 8) approach. The growth story, driven by Omnipod 5, should be both reliable and long-lasting.

Life Time Holdings (LTH): LTH looks completely normal in recent weeks, with every sharp dip being snapped up by big investors. An eventual move over the 33 to 34 area would be bullish. Earnings are due May 8.

Marex Group (MRX): It’s still a bit thin for us, but MRX looks amazing, tagging new high ground today. This is a newer name in the Bull Market stock sector that’s leveraged to higher activity and volatility.

Rubrik (RBRK): Compared to other names on our watch list, RBRK is a bit further behind, but we’re continuing to watch it because it’s newer and because the cybersecurity story here is top-notch.

TG Therapeutics (TGTX): TGTX has held up well during the entire downturn, and it’s starting to stretch its legs a bit now, though volume has been very light. There’s only one drug here, but it’s a big one, taking share in the market for relapsing MS.

That’s it for now. You’ll receive your next issue of Cabot Growth Investor next Thursday, May 1. As always, we’ll send a Special Bulletin should we have any changes before then.

Model Portfolio

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