Cabot Growth Investor Issue: June 12, 2025

Still Waiting on Growth Leadership

When it comes to the overall market and the top-down evidence, we really do believe we’re in one of those sweet spots where just about everything is lining up: You have an amazing setup, with true panic selling (spike in new lows and the VIX, etc.) at the bottom, driven by headline-grabbing news (tariffs) that even the man on the street was hubbub-ing about, resulting in durable pessimism (the Investors Intelligence survey still has fewer than 40% bulls, a low figure) as economic worries and uncertainty persist.

Then, of course, you have the rally phase, which brought with it some blastoff-type measures (Three Day Thrust) and was strong enough to turn our intermediate-term indicators positive. And now we see even more of that, with our longer-term Cabot Trend Lines back in bullish territory (not a precise timing tool, but certainly a good sign) and with yet another rare show of strength from the market: The S&P 500 rallied 20% in two months’ worth of trading— according to Ryan Detrick of Carson Group, the only other times since 1950 that’s happened has been at major (sometimes generational) lows like 1974/1975, 1982, 1998, 2009 and 2020. On average, the S&P was up 30% a year later, even after running higher by 20% in two months!

Of course, near term, things have been a bit (too?) quiet lately with little reaction to good news (another U.S.-China trade truce) and the big-cap indexes (which are the strongest) are back into their December-February range (read: resistance), so we wouldn’t be surprised if something (possibly renewed Middle East tensions?) induced a pullback. But overall, the odds strongly favor higher prices for the market down the road.

The trick, at least for now, is that we’re still not seeing a ton of great growth leadership out there—the number of stocks hitting new highs across the market remains relatively small, and of those, not a ton are institutional-quality growth names. Even just looking at some growth indexes like the IBD 50, the intermediate-term trend is certainly up, but the advance isn’t exactly setting the world on fire (see more later in this issue on both topics).

Not to continually repeat ourselves, but that sort action isn’t necessarily bearish—given the huge decline/rebound we’ve seen this year and the big rally among many issues in 2024, many names might simply need more time to build their launching pads. And given the overall positive vibes from the market, we do think the odds favor a lot more names getting going in a decisive way down the road.

But we’re also careful not to get too far over our skis until more names do just that—until that happens, we’re in a situation where a couple of bad days for the market and growth stocks could actually have more than a few names looking iffy.

What to Do Now

Still, don’t get us wrong: We’re optimistic, we’ve been buying in steps for weeks, and we’re putting a little more money to work tonight—but we’re also not complacent, keeping relatively tight leashes on a few of our names and holding some cash on the sidelines. Tonight, we’re going to add a bit more to ProShares Ultra S&P 500 Fund (SSO), adding another 3% position to our leveraged long index fund. As has been the case, we’re more than happy to put our 28% cash position to work if more growth names kick into gear.

CURRENT RECOMMENDATIONS

As we wrote above, the top-down evidence could hardly look better, with our intermediate-term measures (Tides, Aggression Index, Two-Second Indicator) still positive, our longer-term Trend Lines joining the bullish parade and with the huge strength of the past two months both rare and historically positive. Plus, of course, it doesn’t hurt that the big-cap indexes are toying with new high ground, either.

As has been the case for most of the rally, though, growth stocks (especially those that have had good runs) have been good-not-great, and this week saw many that have enjoyed solid advances hit potholes. As we write later in this issue, you can see this via the action of some growth measures and the lack of new highs out there.

Still, as we’ve written endlessly, that doesn’t portend doom, and at this point, the dips have generally been sharp but reasonable—possibly trend-knockout moves within strong uptrends. Tonight, we’re making just one tiny change—buying another 3% stake in ProShares S&P 500 Fund (SSO)—but are otherwise standing pat as we wait for a decisive show of strength.

Axon Enterprise (AXON)—AXON has wobbled a bit this week along with the vast majority of high relative strength names, but shares didn’t even touch their 25-day line, and the stock snapped back nicely right quick. Just looking at the business effects, the protests/riots in California (and bubbling up in some other places) should put the focus more on Axon’s various body/dashboard cameras, Taser electrical weapons and newer cloud response tools for all types of law enforcement (local, state and even Federal), continuing the rapid adoption of its products in the U.S. and elsewhere. Of course, we’ll see how the stock does from here—a quick reversal back into the 680 area would be iffy, but while further near-term wobbles are possible, AXON remains in a firm uptrend, and we think perception has a ways to run on the upside given its dominant position. We’ll stay on Buy. BUY

GE Aerospace (GE)—In “Reminiscences of a Stock Operator,” Jesse Livermore (going by the name Larry Livingston) had a chapter about the unexpected, or even the unexpectable, where something happens totally out of the blue that you really can’t factor into your analysis because it’s such a low-odds event. But that may be what happened with GE Aerospace overnight due to the very tragic crash of an Air India flight, which was a Boeing 787 plane using GE engines. That obviously raises a lot of uncertainty both with the company (was it engine failure? why?) and the industry (if not, will it affect Boeing’s production levels and GE’s new engine sales?) in terms of future order flow. (GE has a team on the way to India today to see what’s what.) Interestingly, though, the stock, which had tumbled during the pre-market, fell only modestly today, maybe because so much of the firm’s earnings power is tied into recurring service contracts (for engines already out there, which are obviously performing well). GE had pulled back ahead of today’s news, but despite that, the stock is still north of its 25-day line and found support today—thus, we’ll stay on Buy, though we’ll obviously be keeping an eye on the news and the action from here. BUY

Palantir (PLTR)—PLTR tried to decisively move to new highs in early May, mid-May and again in early June, though all three resulted in (normal) pullbacks, with last week’s rumor-driven dip (their systems could supposedly be used by the Feds to track individuals, etc.) likely shaking out some weak hands. Now, shares are again trying to move, with a new price high (though the relative performance line remains flat). Big picture, we do remain a bit hesitant given the stock’s giant run since last August, which opens up the possibility of a large air pocket at some point (due to elevated expectations), and the action in and of itself is solid but certainly not amazing. Put it together and our game plan here is the following: Should PLTR show some power from here, we’ll aim to average up in a small way; conversely, a dip all the way into the mid/upper 100s would be a red flag. For the here and now, we’ll again officially remain at Hold, though if you’re not yet in, we’re OK with a nibble here and possibly adding to your position on strength. HOLD

ProShares S&P 500 Fund (SSO)—If we were running a portfolio full of index-related ETFs, we’d probably be fully invested right now—the big-picture setup is pristine, nearly all of the top-down evidence is positive and, as we wrote on page 1, the strength seen over the past two months (20% gain in the S&P 500) is extremely rare, has only occurred near major bottoms and has led to stunning gains in the short, intermediate and longer term. To be fair, we also aren’t leaving our brains at the door: The S&P 500 is nosing right up to its prior highs (resistance), and after a month of quiet trading, some sort of shakeout is possible to raise the fear level. Even so, we’re leaning into the overall evidence—if you want to simply hold what you own, you can, but we’re going to add an additional 3% position to SSO, force-feeding a bit more money into a leveraged long index fund at what looks like the early-ish stages of a new advance. Moreover, with a mental stop in the low 80s, our risk remains reasonable should something come loose in the system. BUY AN ADDITIONAL 3% POSITION

Rubrik (RBRK)—Rubrik’s business remains in great shape, with Q1 results easily topping estimates. Recurring revenue was up a strong 38% (cloud-based recurring revenue, which makes up 80% of the total, was up 60%), while the loss of 15 cents per share was half that expected and free cash flow was well into the black (15 cents per share). Of course, the stock had a huge run before the report, so some initial selling in the day or two afterwards wasn’t a surprise—but then the firm announced a big ($1 billion) convertible bond offering (which causes convert buyers to hedge by shorting common stock), which resulted in further declines on Tuesday—all together shares fell more than 15% from high to low. Here’s our take: We think the odds favor this mostly news-driven decline finding support for a variety of reasons (in a nutshell, it would be unusual for a name like RBRK to simply up and die at this point given the chart, story and the market), so we’re hanging onto our half-sized stake. However, the next week or two will be key—continued weakness below 80 would be a red flag (giving up all of its breakout move), but if shares can advance from here, we might use the opportunity to fill out our position. Right now, then, we’re holding on but staying flexible. If you’re not yet in, we’re OK starting a position, but be willing to pull the rip cord if the stock cracks support. BUY A HALF

Snowflake (SNOW)—SNOW has been calm this week despite most growth stocks showing volatility, which we take as a good sign—we think the chances are good that big investors are changing their tune with the stock, thinking the firm’s leading cloud data platform is going to be in big demand as the AI era continues. We can’t rule out some retrenchment if growth stocks have entered a shakeout phase, but the big earnings reaction (May 22) and solid follow-through since tell us higher prices should be in the offing in the weeks ahead. We filled out our position last week. BUY

Take-Two Interactive (TTWO)—TTWO is one of many names that held up through the market’s plunge but failed to kick into gear when the bulls returned, with three separate sharp-but-brief selling waves since then. But it’s possible the stock just needed a bit more time to consolidate, as shares have been creeping higher within a very tight range of late while holding north of the 50-day line. Of course, tight action is nice, but only if it leads to a strong wave of buying afterwards—thus, for now, we’ll continue to hang onto our half-sized stake, and we’ll play it by the book from here: A clear move into the mid/upper 210s would be bad news, while a powerful push higher could have us not just restoring our Buy rating but possibly filling out our stake. For now, just sit tight. HOLD

Toast (TOST)—TOST essentially fits in the same chart category as TTWO—one look at the weekly chart below shows that this stock remains very much under control, hovering in a 10% range for the four weeks since its powerful earnings move (two big-volume buying weeks) in May. At a conference in mid-May (soon after the Q1 report), the firm said its U.S. market share among restaurants had gone from 10% to 15% in the past two years; those share gains should continue with the small/mid-sized operators, while the enterprise opportunity is big—beyond Applebee’s and TopGolf being announced as Q1 wins, the firm has signed up Marriott, Hilton and Choice hotels in recent quarters for use in their food and beverage operations, and there’s no reason more big chains won’t come onboard in the quarters to come. Back to the stock, we remain optimistic, but now that the rest is a month old, we want buyers to show up somewhat soon—a drop into the high 30s could tell us TOST won’t be a leader, but any powerful breakout above the May highs would be enticing. For now, we advise holding on if you own a small position, and we’re OK nibbling here if you’re not yet in. BUY A HALF

Uber (UBER)—UBER got hit pretty good as Robotaxi trials in Austin began (and fears of an eventual big dip in market share ramped), but the stock has bounced some as the firm continues to ink deals, including one with Five Below (delivery now available through Uber Eats) and the start of autonomous trials with a U.K. firm. To us, this really comes down to perception: Uber’s top brass sees sales and free cash flow ramping nicely for many years, and long term, believes its app will essentially be the go-to marketplace to book all things ridesharing or delivery. But the autonomous angle (despite the firm’s partnership with Waymo, owned by Google) has many thinking business could dry up in a hurry if competitors in that field don’t partner with Uber. As always, we’ll let the stock decide—so far, UBER’s action is tedious but normal, so we’ll hang onto our half-sized stake. HOLD

Watch List

• Amer Sports (AS 37): AS has held up well since its big earnings gap, though it did see some selling when it tried to move to new highs this week. Even so, we like the earnings power and a controlled dip or rest phase could be enticing.
• CoreWeave (CRWV 148): CRWV has hit some resistance three times near 165 in the past week, so maybe the stock is getting ready for a shakeout. We’ll be watching but, in the meantime, aren’t eager to chase it after the recent run.
• Dutch Bros. (BROS 71): Not every winner has to get going as soon as the market does, and BROS might be an example of that, as shares are still base-building while the cookie-cutter story remains as good as ever. See more later in this issue.
• GE Vernova (GEV 486): GEV declined a bit with growth stocks this week, but like many, the dip never touched even the 25-day line, and shares have bounced back. We still like this stock as the institutional way to play the power boom and are looking to enter, ideally on a bit more of a rest or retrenchment.
• Guardant Health (GH 49): GH has done a nice job returning to its highs as it gets more positive news for its Shield and Reveal blood tests. See more below.
• Life 360 (LIF 63): It’s still a bit thinly traded for our taste, and we do wonder if other services (like Find my Phone tracking on iPhones and iPads) could limit its upside—but at heart we think this is a very big idea for families across the globe, especially as the firm monetizes its huge free user base while also adding paid subscribers.
• Seagate Technology (STX 126): Seagate is in a stodgy industry, but demand is picking up and, more important, a new technology could change the firm’s demand curve going ahead. See more below.
• TG Therapeutics (TGTX 37): TGTX still has work to do after getting hit on earnings back in early May, but its Briumvi treatment for MS is selling well and sales and earnings should continue to boom.

Other Stocks of Interest

Guardant Health (GH 49)—As we mentioned on this page in the last issue, we’re a bit gun-shy still when it comes to medical names, but we have seen some that got hit during the initial stages of the rally start to come back—not every leader gets going at the same time, so we’re keeping an eye on a few names should they re-emerge. Guardant Health is a testing outfit that’s always done good business, and they seem to be ahead of the game with some potentially big new products. The firm’s Guardant 360 series of tests has been growing for years and continues to sell well—most use liquid biopsies to find certain gene mutations within a cancer’s DNA, helping patients choose a course of treatment that’s likely to work. (It’s often used when biopsies would be challenging or current treatments aren’t working.) Sales there have been cranking ahead at 20%-plus rates (higher reimbursement rates starting last quarter should help, too) and there’s no reason that won’t continue—but the excitement is about the firm’s newer offerings, the biggest of which is Shield, which is the first FDA approved blood test for primary colorectal cancer screening, which is obviously a huge advance from colonoscopies and stool-based offerings. Others (like Exact Sciences) are working on similar products, but Shield’s obviously in the lead; sales in its first quarter totaled $5.7 million (9,000 tests), which was far better than thought, and the top brass sees something like 55,000 tests for the full year (a figure they hiked meaningfully after seeing Q1 demand). Interestingly, Shield is meant to eventually become a multi-cancer testing platform, with colon cancer the first indication; it’s been selected for large trials to test for a variety of cancers. There’s also Reveal, which is a blood-based test for cancer recurrence; it’s the fastest-growing Guardant test outside of Shield, with recent very strong real-world testing results among breast cancer patients. Now, to be fair, the bottom line has always been in the red and will remain so for some time, and competition will pick up going forward—but there’s no question the potential here is gigantic as Shield and Reveal grab market share and make progress on getting expanded indications. GH held up well during the market decline and looked ready to get going, but the Q1 report (and round-number resistance near 50) brought in some selling. Now, though, the stock has rebounded back to its prior highs on big volume—a breakout would be enticing.

Seagate Technology (STX 126)—We’ve never pined over the hard disk drive sector, a stodgy business as the products have historically been largely commoditized—while things will often pick up every few years due to supply/demand imbalances, prices always push lower on a per-gigabyte basis, which eventually brings earnings back down. However, Seagate Technology—one of two leading industry players, along with Western Digital—has caught our eye for a couple of reasons. The first is simply industry conditions: After a very tough 2022, 2023 and a slow early part of 2024, business has turned up in a big way, with prices holding relatively firm and demand picking up, thanks in large part to the data center boom; because of better efficiency compared to flash memory, hard disk drives make up the vast majority of storage for big data centers. However, far more enticing to us is that Seagate is in the lead with a new type of technology that’s set to dominate the industry: Dubbed Heat-Assisted Magnetic Recording (HAMR), it uses heat to increase density and make it easier to write data on smaller areas of the disk, which means capacity (three times as much!) and cost-per-gigabyte (uses 70% less power per gigabyte) should be improved in a step-function manner, while data center clients will benefit from less space needed to store the reams of data being produced. To be fair, Western Digital is working on its own HAMR offerings, but it appears Seagate is a few quarters ahead of its closest peer (Western Digital actually stopped research on the technology a while back before restarting), which should allow for market share gains. Thanks to the industry turning up and a less cutthroat competitive environment, earnings are already ramping, with the fiscal year starting in July expected to show nearly $10 of earnings per share—and if HAMR sales, which are just ramping, turn out to be big, even that could prove conservative. Clearly the market thinks something is up, as STX has acted like a homesick angel since the market bottom, exploding to multi-year highs on many rounds of big-volume buying. It’s not a buy-and-hold-forever situation, but Seagate should have a very bright future over the next few quarters at least.

Urban Outfitters (URBN 69)—We’re not huge fans of what we call “old retail,” meaning a chain that’s been around for a while but doesn’t have anything particularly new or exciting about it. Urban Outfitters seems to be in that category, operating its namesake brand as well as Anthropologie and Free People, serving hip gear and accessories mostly for 20-somethings, though some in their 30s are also customers. Business has been up and down over time (sales from these brands in the first quarter were up a ho-hum 6%), as has the stock—at its lows in April, URBN hadn’t made any progress for a full decade! However, we’re intrigued by one of the company’s new ventures that’s still small but growing fast: Called Nuuly, it’s a relatively richly priced clothes subscription service for women that includes items from Urban’s brands but also from a couple of dozen others as well as from some up-and-coming designers, covering everything from formal to casual to workwear, even athleisure offerings. It’s not cheap, but for $98 a month, a customer can choose any six items from the company’s offerings and wear them as much as they want for a month, and they don’t have to worry about wear and tear or cleaning (no damage fees; the company handles laundry/dry cleaning when you send it back). Customers can buy anything they try and like, and always get six more items to try the next month. The concept has been a hit, with active subscribers totaling 380,000 at the end of March, up 53% from a year ago, which drove Nuuly revenue up 60% in total. As mentioned above, this is still a small piece of the pie (Nuuly’s sales are just 11% the size of the Retail segment), but (a) it’s obviously growing far faster and there’s huge room to expand, and (b) the firm’s retail brands have all stabilized, helping the bottom line, too. Indeed, in Q1, Urban’s overall sales rose 11%, the fastest figure in at least a couple of years, with earnings up 68% and crushing estimates. Nobody thinks that kind of bottom-line growth is likely to continue, but big investors clearly think there’s something to the story—URBN soared to new highs after the quarterly report on its heaviest weekly volume since June 2022. It’s an intriguing idea, with Nuuly possibly accelerating growth and boosting margins as it becomes a larger part of the business.

Not Everything Gets Going at the Beginning of a Market Move

One of the bigger banana peels many investors fall into is buying laggard stocks, those that will often be sitting around doing nothing for months, even as the market and many other titles head higher. The thinking is that these laggards might be “cheap,” but far more often than not, these titles are stuck in the mud for a reason, usually because of mundane sales and earnings growth and tepid growth prospects.

(For very long-term subscribers, you might remember Cabot founder Carlton Lutts regularly recommending subscribers to ditch IBM (IBM), which back in the 1980s and 1990s was a very popular blue-chip tech name, but shares had been lagging the market for years and business was slowing. He was proven right.)

However, sometimes that thinking can get taken to an extreme, which you might see two or three months into a new market rally. For instance, while it’s true that the names that get going right quick from a deep market correction are leaders, a stock that takes another couple of months to get moving isn’t necessarily a laggard—oftentimes some stock or group can be out of gear with the market for a while, but eventually emerges and has a huge run.

The most recent (and very dramatic) example of this came last year with Applovin (APP): The market and most growth stocks decisively emerged near Halloween 2023, but you can see APP had already had a huge off-the-bottom move at that point; shares tried to get going in November 2023 and again in December, failing each time. But shares did nothing wrong, per se, and the breakout in February (three and a half months after the market liftoff) kicked off a massive run for the rest of the year.

The moral of the story is that it’s important to keep your eyes open for names that might not be powering ahead yet but could emerge if perception changes in the weeks ahead. Two that we’re watching with this in mind are TG Therapeutics (TGTX) and Dutch Bros (BROS).

TGTX was one of (if not the) top names on our watch list when the indexes turned up. Growth has been fantastic due to one soon-to-be-blockbuster drug, Briumvi, for relapsing multiple sclerosis, and while one-drug firms are always a risk, the drug is rapidly gaining share due to easier administration and great results. Earnings are seen rising from 15 cents per share last year to 90 cents per share this year and $1.80 in 2026, and after getting hit on earnings, the stock has stabilized and is moving back up toward the top of its three-month range.

Then there’s Dutch Bros (BROS), which is probably our favorite cookie-cutter story at the moment (along with Cava (CAVA), though that stock is still having major issues). BROS initially broke out last November and doubled by early February after two huge earnings gaps, so it’s not a surprise it got whacked with the market. Now it’s trying to round out a fresh launching pad—some upside power in the weeks ahead could kick off a sustained run.

All told, we still view it as being relatively early in the market’s rally—we know that might sound odd since we’ve been off the lows for two months, but with so few names hitting new highs (see below) and many names still setting up, we’re still looking for fresher breakouts to emerge going forward.

Still Waiting for Growth, New Highs to Really Kick into Gear

As mentioned earlier in this issue, the top-down outlook for the market is fantastic, with all of our indicators positive and the action of recent months (from the Three Day Thrust to the Zweig Breadth Thrust to the 20% lift in two months) bodes very well for the major indexes.

However, individual growth stocks remain trickier—many look fine, but potholes (like we’ve seen among many growth names this week) aren’t uncommon, and a lot are still repairing the damage from the huge correction earlier this year.

For comparison, take a look at the IBD 50 Index—a collection of high relative strength stocks with generally strong sales and earnings growth, which is the pond we fish in—following three different market low points: 2020 (a huge decline and snapback similar to this year), late 2023 (when growth took off after a long bottoming process) and this spring. Just looking at the charts makes it clear how this growth stock measure had a sharp upward angle after the first two instances … but so far, the push higher has been good, not great, still well below the prior highs.

Going hand in hand with that is the lack of stocks hitting new highs, something we’ve been mentioning for weeks. Shown here is the 10-day average of stocks within the S&P 500 hitting new highs—while picking up of late, it’s hovering near 20 at the moment, which is very tame compared to the late-2023 action (after that year’s bottom), when the average spiked to 60 two months after the low was in.

Not to continually repeat ourselves, but all of this is descriptive—telling you the situation today—but not necessarily predictive. It’s certainly possible many growth stocks simply need a bit more time, given the wild down-up action of the past few months, before letting loose on the upside. But for the here and now, the just-OK action is a reason we continue to pick our spots on the buy side.

Cabot Market Timing Indicators

The top-down evidence couldn’t look much better, with the Cabot Trend Lines turning positive while our other intermediate-term measures (including the Aggression Index, not shown here) remain in good shape. Thus, we’re certainly leaning bullish, but with leadership looking just OK and hitting some potholes, we’re picking our spots on the buy side.

Cabot Trend Lines – Bullish
Our Cabot Trend Lines just missed a buy signal three weeks ago, but of course the market never got hit much, and last week the indicator confirmed on the upside, turning positive as both the S&P 500 (currently above by a bit over 3%) and Nasdaq (by 4.5%) held above their respective 35-week lines for the second straight week. To be fair, this isn’t meant to be a precise timing tool, but the Trend Lines do a great job of keeping us on the right side of the market’s major trend, and with the trend pointed up once again, it’s another feather in the bulls’ cap.

Cabot Tides – Bullish
Our Cabot Tides remains in good shape, with all five indexes (including the Nasdaq, daily chart shown here) above their lower (50-day), rising moving averages. There hasn’t been much progress for the past month, but there remains a good amount of “daylight” above the 50-day lines, so the market has room to ease if it wants to without damaging the buy signal. Bottom line, both the intermediate- and longer-term trends are pointed up, so you should have your optimist’s hat on.

Two-Second Indicator – Positive
Our Two-Second Indicator hasn’t acted perfectly during the past couple of months, but there certainly haven’t been any red flags, either, and the readings of late have been especially encouraging. All in all, while not setting the world on fire, the broad market remains in good health.

The next Cabot Growth Investor issue will be published on June 26, 2025.

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