May 22, 2025

WHAT TO DO NOW: The market has pulled back a bit this week after a big recent run, but most things have taken the selling in stride. Further weakness can’t be ruled out, especially in the near term, but with the market digesting well and our intermediate-term indicators looking good, we have a few moves tonight. First, we’re going to sell our small position in Flutter (FLUT), but we’re also adding half-sized positions in Axon Enterprise (AXON) and ProShares Ultra S&P 500 Fund (SSO), the latter of which we’re averaging up in. We’re also placing Take-Two Interactive (TTWO) on Hold. Our cash position will still be around 47% after these moves.

Current Market Environment

Stocks finished narrowly mixed today, with the S&P 500 unchanged and the Nasdaq up 0.3%.

After a heady run, the market was due for some sort of retrenchment, and the latest news and happenings—from the U.S. debt downgrade over the weekend to rising Treasury rates this week—have prompted a dip, with the major indexes and most leaders (and potential leaders) pulling in some.

Could this dip morph into something major? It’s possible—we’d note that our Two-Second Indicator has recorded two straight days of 40-plus new lows (including some rate-sensitive issues), and as we’ve written numerous times, the leadership of this rally isn’t fully developed, with few stocks hitting new highs and not much on the breakout front to this point.

However, while it’s good to keep all possibilities in mind, we have to go with the odds, and right now our Cabot Tides and Aggression Index are still positive, and for the stocks that have been acting well (breaking out or close to it), the dip so far has been about what you’d expect, normal and under control.

Near term, of course, a bit more retrenchment is certainly possible after the market’s big snapback, and given relatively thin market leadership, we’re not cannonballing into the pool—but we are leaning positive given our indicators and the “normal” action of the market despite the recent worries.

Thus, we’re making a few changes: Today, we’re going to sell our small stake in Flutter (FLUT), which has again failed at resistance and hasn’t been able to bounce with much vigor in recent weeks.

However, we’re going to buy half-sized positions (5% of the portfolio) in Axon Enterprise (AXON) and in the ProShares Ultra S&P 500 Fund (SSO), averaging up in the latter. Our cash position will still be around 47% after these moves. We’re also placing Take-Two Interactive (TTWO) on Hold.

Model Portfolio

Axon Enterprise (AXON) is no stranger to the Model Portfolio, as we rode it to solid gains last year—though we admit that we’re (pleasantly) surprised to see it regain its mojo so quickly. Frankly, if the story here was the same as most of last year, that might not be enough—but Axon has continued to roll out a stream of new products, highlighted by some AI offerings (as we wrote in last week’s issue, its DraftOne offering has had the fastest uptake of any software launch in the firm’s history) that are helping to keep growth of both recurring revenue and EBITDA intact. AXON isn’t at a perfect buy point, of course, but it’s shown great strength moving to new highs of late, and we’re going to start a half-sized position after the mini-two-day dip this week, using a mental stop in the 630 area for now. BUY A HALF

GE Aerospace (GE) has finally eased, dipping after an analyst downgrade today that followed a great run that brought the stock out to new highs. As we’ve written before, this isn’t a go-go stock, so we do expect the periodic dip and rest period, but there’s no doubt that aerospace names are some of the strongest in the market thanks to a bullish multi-year outlook for plane building, and GE is clearly one of the big leaders in the space, with a very long runway of higher engine sales and (importantly) recurring service revenue. We’ve already averaged up here, so we’ll simply stay on Buy—hold on if you own some, and if not, we’re OK starting a position here or (preferably) on a bit more weakness. BUY

Flutter Entertainment (FLUT) has now attacked round-number resistance near 250 a couple of times—and fallen back after each attempt, with the latest dip bringing shares back toward their May lows. We still like the overall story, and it’s always possible this is the stock’s final shakeout, but FLUT’s uninspiring bounce off the lows and failure to get above that 250 area despite the market’s big rally isn’t the best sign. We’re going to cut bait on our small position here as we rotate into more vibrant performers. SELL

Palantir (PLTR) acts fine here, easing about 10 points before today’s bounce but remaining nicely above its moving averages (25-day line is at 116 and rising). Given the big move from its early-April lows, some more short-term shenanigans could easily be in store (same goes with the overall market for that matter), but the stock’s comeback is impressive, and while PLTR’s overall run isn’t in the early stages, the still-accelerating growth profile isn’t something usually seen at tops. We like the rest period so far, and a bit more of that could prompt us to restore our Buy rating—for now, though, we’ll stay on Hold. HOLD

ProShares Ultra S&P 500 Fund (SSO) got hit decently yesterday along with the S&P 500 but remains well above its rising moving averages (down in the 81 to 82 area), so the intermediate-term uptrend is in good shape. We’re in the vicinity of even on our initial purchase (close enough for an index fund) and we do like the risk-reward here—we’re going to fill out our position by adding another half-sized stake (5% of the portfolio) and will use a mental stop in the 78 to 79 area, a bit below key support. BUY ANOTHER HALF

Rubrik (RBRK) looks great, continuing to chug higher and zooming to new highs today. The trick is that a couple of key stocks in the cybersecurity group report earnings next week (OKTA and ZS), and RBRK itself reports on June 5, which makes adding up here a bit aggressive given the overall environment. If we see a tidy rest, we could average up in a small way (maybe buying a 2% or 3% position?) to give us breathing room going into earnings—but for now, we won’t push the envelope. Sit tight if you bought with us, and if not, you can buy some here or (preferably) on dips. BUY A HALF

Take-Two Interactive (TTWO) has a bright future fundamentally—last week’s quarterly report was mixed, but the bottom line is that business has begun to pick up, with this fiscal year (ending next March) likely to see record bookings, while the following fiscal year should result in boom times as Grand Theft Auto VI is released. The question is whether investors will wait around for those boom times: TTWO did a nice job of shaking off the GTA delay three weeks ago and got through its quarterly report in good shape, but this week’s good-sized share offering has again dented the stock. Of course, the damage has been relatively limited, with shares hanging around the 25-day line, but given the repeated selling in the 230 to 240 area, we’ll go to Hold on our half-sized position and use a mental stop in the low 210s. If TTWO can hold up and get going, we still think it can have a great run as big investors will likely discount the big earnings stream ahead of time—but if it can’t, we’ll cut bait and look for stronger stocks. HOLD

We started Toast (TOST) with a half-sized position (the same with many other recent buys), knowing a short-term dip could come—and it has, with a normal-looking, low-volume retreat after its big post-earnings rush higher. We’d sit tight if you own some, and if not, we’re OK starting a position here. BUY A HALF

Uber (UBER) has been pulled down a bit by the market as well as its old nemesis—Tesla’s Robotaxi service, which will supposedly begin a test run in Austin, which brought in some profit taking. Like most everything else out there, though, the recent dip has paled in comparison to the prior large (and big-volume) rally. We’ll stay on Buy a Half (we’re fine taking a swing at it here if you don’t own any), while a move back toward the recent highs would likely prompt us to average up. BUY A HALF

Watch List

CoreWeave (CRWV): CRWV has gone vertical after earnings, which will likely require a cooling-off period—but unless the market gets into big trouble again, we doubt the overall run is close to over.

GE Vernova (GEV): GEV hasn’t even stopped for breath this week as it’s powered to new highs. Similar to its cousin that we own (GE), the long-term free cash flow outlook here is big, especially as power and electrification demands soar.

Insulet (PODD): As opposed to most medical stocks, PODD gapped up on earnings and has acted well since, marching to new highs on most days. The Omnipod 5 looks like the real deal, taking share not just in the Type 1 diabetes market but, as the only device approved in the U.S. for Type 2 diabetics, it’s begun to penetrate that huge opportunity as well.

Mosaic (MOS): MOS has enjoyed a great run from its lows in early April to its highs this week. As a cyclical play (fertilizers), there’s risk that something in the macro picture changes, but it certainly looks like dry times are giving way to a new up-cycle.

ServiceTitan (TTAN): TTAN leapt to new highs soon after the market bottom, but it’s been mostly treading water for the past month—with earnings out in a couple of weeks. We think this could be a new leader in the cloud software space, though it could use some more sponsorship and trading volume.

Snowflake (SNOW): SNOW has always had a good story (it’s basically the cloud data leader, which is integral to AI and other activities these days), but it’s been dead money (or worse) since its IPO in late 2020. Now it may be changing character, with a base breakout after another great earnings report last night.

That’s it for now. You’ll receive your next issue of Cabot Growth Investor next Thursday, May 29. As always, we’ll send a Special Bulletin should we have any changes before then.

Model Portfolio

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