Cabot Top Ten Trader Issue: April 28, 2025

Excellent Thrust-Type Action

The past week or so definitely showed some very encouraging action, starting with the fact that, after a big drop Monday, the major indexes shot straight up with good breadth nearly every day. Indeed, one of the key “blastoff” indicators we track turned green on Thursday as the S&P 500 rallied 1.5% or more for the third straight day—a historically rare show of strength that almost always leads to good gains over the next six to 12 months. Throw in the awful sentiment and panic-type selling at the lows, and we’re growing more optimistic that the market is going to be nicely higher down the road. So does that mean we’re off to the races? Well, we wouldn’t go there, at least not yet: The intermediate-term trend of the market and most stocks are still down (in fact, most everything is still living below longer-term moving averages), and it’s not unusual at all to see some near-term wobbles (or possibly a full retest) after this kind of blastoff signal. All in all, we think there’s enough good vibes to extend your line a bit—but we don’t advise buying hand over fist as we’re still looking to see added confirmation from the major indexes and, more importantly, from individual stocks as earnings season progresses. We’ll bump up our Market Monitor two notches to a level 5.

This week’s list is full of resilient names, though many have earnings coming up, so be aware of those dates. Our Top Pick has already reported: Penumbra (PEN) has a great story, great numbers and a resilient chart, with shares back near their highs after a bullish earnings reaction. Start small here or on dips.

Stock 1

Amphenol (APH)

Why the Strength
With the dual trends of automation and AI continuing to boom, the supporting industry of advanced sensing technology has taken on an outsized role in enabling real-time data collection and analysis, leading to improvements in various aspects of AI and automation while playing into multiple other industries. Amphenol is a leader in this field, supplying advanced interconnect systems, sensors and antennas for a growing array of applications across several industries, including aerospace, industrial, medical and transportation. Driving the strength for Amphenol are the powerful tailwinds in AI, along with continued strong military/aerospace spending and a broad recovery in networking. Each of these trends was on display in last week’s Q1 earnings report, which featured a big 48% year-over-year increase in revenue (helped along a bit by some good-sized mid-quarter buyouts) to $4.8 billion, and per-share earnings of 63 cents that beat estimates by 11 cents. The firm also reported record adjusted operating margin of 24% and free cash flow of $580 million that increased 16%, driven by a 91% increase in Communications Solutions segment revenue, a 38% jump in Harsh Environment Solutions (military, medical and industrial) and a 5% increase in Interconnect and Sensor Systems sales. As mentioned above, Amphenol also closed on its acquisition of LifeSync, a leading provider of interconnect products for medical applications, with annual sales of around $100 million, while also completing the much bigger ($1.3 billion in sales) buyouts of CommScope’s outdoor wireless and distributed antennae businesses that will prove to be slightly accretive to earnings this year. Entering Q2, Amphenol guided for sales to increase in the high-single-digit range sequentially (a 25% to 30% organic growth rate), and it remains encouraged by the company’s leading position in the defense market (where it sees massive expansion in spending on current and next-generation technologies). Analysts, meanwhile, see earnings soaring 37% this year with more gains in 2026.

Technical Analysis
APH had a super-smooth run from late 2023 to the middle of last year when it ran into resistance—while shares did break out in November, the move didn’t go anywhere, leading to a late-January dump on earnings. Shares dipped to 60 in March and, after a bounce to 70, fell to 56 during the tariff-induced panic. However, APH bounced from there on excellent weekly volume, and after a few days of tight trading, zoomed higher on even heavier volume last week. There will be volatility, but we’re OK with a small buy here or on dips.

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Stock 2

Ascendis Pharma (ASND)

Why the Strength
Ascendis is a Danish firm but it has the only FDA-approved treatment for hypoparathyroidism (the parathyroid gland doesn’t produce enough of a certain hormone, leading to low blood calcium) in adults, dubbed Yorvipath, which launched earlier this year. The market here is about 80,000 adults in the U.S. and more overseas, and the earnings report coming Thursday evening will be the first full quarter of results for Yorvipath; the expectation among analysts is Yorvipath revenue hitting €29 million in the period across the U.S. and European Union combined, though some analysts have been raising expectations beyond that figure in recent days—and, either way, the big payoff should be down the road, as analysts see the drug’s peak annual sales somewhere in the $1.5 to potentially $2.5 billion, partially due to an out-of-this-world price tag north of nearly $300,000 per year. Yorvipath is the second success from Ascendis’ “TransCon” platform for drug development, combining known biology with the benefits of pro-drug and sustained release technologies. Ascendis’ other commercial drug is Skytrofa, which was launched about three years ago to address pediatric growth hormone deficiency. It tallied €200 million in sales in 2024, with analysts seeing peak sales there up another 70% or so from that figure. The company also has drugs in development to address rare endocrinological diseases and various tumors in the oncology field. Ascendis seeks to handle commercialization of its drugs in the U.S. and in Western Europe, while utilizing partnerships to handle other regions, mainly Eastern Europe, the rest of the Western hemisphere and Asia. For the upcoming Q1 earnings report due this week (May 1 after the close), consensus sees overall sales of $95 million and a sizable net loss due to higher launch and development costs. Management doesn’t provide guidance, so there is more risk of a miss low or high, but any tidbits about Yorvipath’s sales path over the next few quarters should be key. It’s a good story, albeit a bit speculative.

Technical Analysis
ASND has essentially been in the confines of a giant consolidation since February 2024, with some big dips, some pops higher and, starting in February of this year, a change in character for the better. Of course, the market topped out soon after that improvement, causing a rash of volatility: The dip back to 125 in April made it seem like the stock was broken, but ASND’s recovery has been very impressive, especially with the big-volume buying seen off the bottom. The quarterly report this week will be key—we’ll set our buy range up from here, looking to start a small position on a breakout.

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Stock 3

Badger Meter (BMI)

Why the Strength
The global flow meter market is an under-the-radar growth industry that’s booming right now due to strong uptake by several major businesses, including wastewater treatment, petrochemicals and power generation. Badger is an industry leader in flow measurement, offering water quality and control products that serve water utilities, municipalities, plus commercial and industrial customers worldwide—all of which rely on the firm’s smart water metering solutions to optimize water delivery and use, maximize revenue and reduce waste. Among the Milwaukee-based company’s top customers are oil and gas providers, for which flow measurement is of paramount importance because it not only helps them minimize waste and reduce costs, but also helps with all-important regulatory compliance. The aerospace sector is yet another key customer base for Badger, as the firm’s products are used for critical fluid flow applications on both commercial and military aircraft. In Q1, Badger posted revenue of $222 million that increased 13% from a year ago, driven by a 25% jump in software sales (the top revenue growth contributor) and a 16% improvement in utility water product line sales. EPS of $1.30 beat estimates by 27 cents, free cash flow of $30 million (around $1 per share) spiked 60% and the company reported a record operating profit margin of 22%, all of which helped account for the stock’s recent strength. The sanguine financial results in the face of what the top brass called a “volatile macroeconomic environment” are in part due to the replacement-driven nature of its business, which tends to be relatively resilient to economic downturns. On that note, Badger said it’s confident it will be able to manage tariff-related cost challenges going forward, and its recent acquisition of SmartCover Systems (a provider of real-time monitoring and control solutions for sewer, lift station and stormwater infrastructure) is expected to drive long-term growth prospects. Wall Street sees several quarters of 10%-ish top- and a bit faster bottom-line growth ahead.

Technical Analysis
BMI had a great advance for much of 2023, and then after building a nine-month base, broke out last April and rallied into mid-December. Since then, the going has been rockier: Shares dipped about 18% and hovered near the 20-day line for a few weeks before nosediving another 20% to the panic low earlier this month. But Q1 earnings changed everything, with BMI soaring three straight weeks on solid volume back to within 10% of its highs. There is resistance near 220, so if you want in, start a position on modest dips with a stop under 200.

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Stock 4

Carpenter Technology (CRS)

Why the Strength
Surging demand for aircraft and related components on both the commercial and military fronts is helping Carpenter Technology continue its solid growth path. The company plays a dual role in the aerospace sector by providing both finished components for aircraft makers as well as materials for manufacturing parts to other companies within the industry. Its finished products are provided by its Special Products division (providing the bulk of its revenue) and include bearing cages, structural elements, missile cases and helicopter parts, while its Additive division (around a quarter of annual sales) provides various metal powders used for powder forging, injection molding and 3D printing critical applications for commercial and military aircraft makers, including engines and landing gear. Additionally, Carpenter is a solutions provider for the electrification sector, offering alloys for nuclear power fuel assemblies, control rods and steam generators, plus supplying materials for the traditional electricity and renewable energy spaces. The outfit also does business with the medical industry via its alloys and process solutions for instruments, prosthetics and other devices. Despite disruptions in the supply chains in which it operates, Carpenter reported record results in fiscal Q3 (ended March), including adjusted operating income that increased 53% year-on-year thanks to surging margins, with total revenue of $727 million rising 6%. Earnings of $1.88 a share beat estimates by 14 cents, with the strong earnings also contributing to a pick up in cash flow. The results were led by strength in the aerospace and defense market, which saw sales jump “notably” across engines and fasteners, which respectively rose 16% and 25% sequentially. Sales in the energy market increased 26% (up 9% sequentially from Q2) with “significant” sales increases to its power generation customers. By contrast, medical segment sales were down 14%, but management said the underlying demand trends are positive, with ongoing increases in patient procedures; Carpenter also sees sizable growth potential in medical looking forward. For the full year, it guided for free cash flow of $275 million at the mid-point (up 60% if realized; abotu $5.50 per share), while Wall Street sees earnings up 50% for fiscal 2025 (ending June) and 25% in the year after. A trailing P/E of 28 doesn’t look bad, either.

Technical Analysis
After etching out a multi-month launching pad in late 2023/early 2024, CRS blasted off last April with shares rising steadily—and more than tripling—for the rest of the year. The stock met with resistance in mid-January at around 210, and after a failed test of those highs, reversed lower with the rest of the market in early March. After a bounce, it did knife to new lows during the early-April meltdown, but the comeback (both before and after earnings) has been solid, as CRS is back testing round number resistance near 200. Starting a position on modest dips with a tight stop makes sense.

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Stock 5

Eli Lilly (LLY)

Why the Strength
For all the talk of AI and what-not, Eli Lilly has been one of the market’s big liquid leaders of the past couple of years—and, as we write about below, the stock may have spent the past nine months resetting its advance, paving the way for higher prices if the market decisively comes out of its funk. The big idea here, of course, remains Mounjaro and Zepbound, which are the same drugs but for different indications (diabetes for Mounjaro; weight loss and sleep apnea for Zepbound, the latter of which was approved in Q1), and it could be one of the biggest sellers of all time: In Q4, the combined indications brought in a total of $5.4 billion of revenue, and those figures were still soaring (up from $2.4 billion a year ago), with plenty of growth likely ahead of it, especially as Zepbound is launched into more markets and as an oral version of the drug (good trial results recently popped the stock) works its way toward approval. Importantly, while Mounjaro/Zepbound are definitely the main drivers, Lilly has a bunch of other huge potential names, including some that are just hitting the market, from Jayprica (leukemia; $114 million of Q4 revenue, with peak sales potentially up to $3 billion), Omvoh (ulcertative colitis and Crohn’s disease; $57 million sales in Q4, peak likely north of $800 million), Kisunla (Alzheimer’s; just launched late last year, peak sales likely north of $3 billion), Verzenio (breast cancer; sales of $1.6 billion Q4, prescriptions up 15%) and Ebglyss (eczema; launched late last year with peak potential north of $2 billion) and more. When you put it together, Lilly is likely to see its bottom line soar for years to come—analysts see this year bringing 32% sales and 72% earnings growth, with another 34% earnings gain in 2026 and much more beyond that. Of course, the Q1 report this week will be key—the quarter will be reported Thursday (May 1) morning, with any update to the full-year outlook likely driving the stock.

Technical Analysis
Along the way to long-term gains, you’ll often see big winners correct and consolidate for months and shake out below major low points, which shakes out the last of the weak hands and resets the overall advance before launching higher again. We think there’s a chance LLY has been doing just this since last summer: Shares had a huge run into the 960 area in July and again in August before correcting 30% by the fall. The rally from there was just OK, and the market pulled LLY to a fresh low at 677 in April … undercutting more than a year’s worth of trading. But now shares are on the comeback, helped by the positive results of oral Zepbound. With earnings due Thursday, we’ll aim to enter if the stock pops above 900.

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Stock 6

Guidewire Software (GWRE)

Why the Strength
California-based Guidewire provides a property and casualty (P&C) insurance platform that supports the entire lifecycle for leading insurers (including filing claims and managing policies and billing), helping them to dramatically boost productivity. Its main product is its comprehensive, cloud-based InsuranceSuite, which includes three core systems: PolicyCenter for policy administration, BillingCenter for billing and collections and ClaimCenter for claims management, plus modules for data/analytics and digital engagement, with an aim of helping agencies streamline operations and more efficiently manage claims, bills and receivables, as well as underwriting and policy administration. It also offers the cloud-based InsuranceNow, which provides a unified, ready-to-use risk control solution designed mainly for regional and super-regional P&C insurers, with core, digital, data, analytics and integration capabilities. For Guidewire, the growth story has largely hinged on the firm’s pivot away from licensing revenue and toward recurring subscriptions (monthly and yearly), which is accounting for an ever-larger share of the firm’s annual sales pie due to the growing popularity of cloud platforms. This in turn has resulted in an expansion in Guidewire’s margins, thanks to the shift to subscription-based models, plus other operational efficiencies. The continued improvements were highlighted in fiscal Q2 (ended January), which included year-over-year revenue growth of 20%, to $290 million, and per-share earnings of 51 cents that were in line with estimates. Annual recurring revenue (ARR, a key metric) of $918 million increased 6% from six months ago, with the solid results driven by 12 cloud deals (mostly larger insurers). Tellingly, subscription and support revenue increased 35%, while license revenue decreased 10%, which underscored the longer trends the company is seeing. Going forward, management sees continued slow, steady expansion, guiding for total 2025 revenue of around $1.17 billion, up 20% if realized, while operating cash flow should come in around $2.80 per share, well above earnings. Earnings won’t be out until early June, most likely.

Technical Analysis
GWRE began to get going in a major way in November 2023, and after a base last summer, embarked on a steeper uptrend into December before getting clonked on earnings. Shares did run back just above the old highs after that, but that was a fakeout, with the stock being pulled in with the market; all told, GWRE made no net progress for about six months. However, shares have shown relative strength of late—it’s held its 200-day line, held its early-March low during the April meltdown and is now battling with some resistance near 200. We’ll set our buy range up a bit from here, entering as shares clear resistance.

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Stock 7

Penumbra (PEN) ★ Top Pick ★

Why the Strength
Penumbra will probably never be a household name, but it looks like a big medical leader thanks to its newer, best-in-class devices for blood clot removal, which affects something like 800,000 patients per year in the U.S. alone and contributes to 100,000 premature deaths. Taking drugs to dissolve the clots was the standard of care but carries major risks and the results were often hit and miss, while the initial wave of mechanical devices had limitations and were cumbersome. Penumbra has come up with a better way, thanks to its CAVT technology (computer-assisted vacuum thrombectomy) that has many next-level advantages both technologically (optimized suction strength depending on vessel size, etc.) and practically (quicker procedure times are good for everyone, along with better outcomes). CAVT is integrated into a few different device platforms for Penumbra that serve a variety of blood clot types (removing those found in blood vessels is the main draw, but it’s also big in pulmonary embolisms and even in the brain after certain strokes), and they’re all rapidly gaining share: In Q1, total revenues lifted 16%, but thrombectomy revenue were up 25% and, wthin that, venous-related revenue were up 42%, while margins here continue to boom (operating margin of 12.4% in the quarter, up 5.5 percentage points from a year ago) driving earnings up 102%. (All of the firm’s products are made in the U.S., with three-quarters of its materials and components sourced in the U.S., allowing it to sidestep most of the tariff uncertainty.) Top-line growth is likely to slow some going ahead, but Wall Street sees continued big market share gains and margin expansion, which should lead to 30%-plus earnings growth this year and next. Of course, the valuation isn’t cheap, but Penumbra has an emerging blue chip feel to it in the medical device space.

Technical Analysis
After a big downtrend into last summer, PEN changed character on Halloween, surging on earnings and moving back above its 200-day line, leading to a run into the 310 area by February. From there, shares did get tossed around by the market—but only a bit, as the stock held well above its 200-day line, fell a maximum of 21% from its highs (way more resistant than most growth stocks) and, now that the market is perking up, PEN has surged back toward its highs post-earnings. The 300 area could provide some near-term resistance, but we’re OK with a small buy here or on modest dips.

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Stock 8

Sea Ltd (SE)

Why the Strength
Singapore-based Sea Ltd. (covered in the March 10 issue) is one of Southeast Asia’s and South America’s leading online sales, entertainment and financial service providers, with offerings ranging from its expansive e-commerce platform Shopee to its digital gaming Garena segment. Additionally, Sea has a thriving digital payments arm (SeaMoney) and digital bank (MariBank) aimed at customers across several Southeast Asian countries, plus Brazil. Shopee has been the main focus lately among investment analysts, with the platform currently owning a nearly 50% share of the entire e-commerce market across Southeast Asia and Taiwan (and with an additional presence in several Latin American countries, including Mexico). A major Wall Street firm just raised its price target for Sea based on its e-commerce dominance, while predicting the firm’s longer-term margins have the potential to more than triple in the years ahead (a reason for the recent strength). Moreover, on the gaming front, Sea’s Garena segment posted year-over-year growth in Q4—its first quarter of positive growth in nearly three years—which Sea believes represents a critical turning point for that business, especially as Garena saw quarterly active users and gross bookings increase by around 20% each, led by a global resurgence of popularity in Free Fire (which the firm sees as an “evergreen” franchise with long-term growth potential). Indeed, management expects Garena’s user base and bookings to increase by double digits for the full year and continue thriving for from there. Lastly, Sea is bullish on the fintech sector across emerging markets and believes that Shopee is a potentially valuable source of consumer data that can help facilitate cross-selling opportunities, accurately assess credit worthiness among clients (based on past shopping behaviors and shopping history) and drive overall expansion in financial technology. All told, the growth opportunities are expected to provide Sea with a multi-year runway to address what amounts to a massive market opportunity across all three of its businesses. When the company reports Q1 earnings on May 15, Wall Street sees sales up 32% from a year ago while earnings per share soar to 81 cents.

Technical Analysis
We were stopped out of our position in SE during the April market plunge, but the stock’s rapid technical repair has provided a potential “shake and snap” setup—which can often precede big moves. The big sell-off earlier this month was violent, but short-lived, with shares being dumped on what looked like capitulation volume and finding support at the 200-day line (better than most stocks). The rebound has been solid, though to be fair, the rally has been on mundane volume, and SE is back into an area of resistance. Even so, we do like the comeback; as with many names, we’re OK starting a position on signs of further strength. Use a looser leash if you enter given SE’s volatility.

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Stock 9

Take-Two Interactive (TTWO)

Why the Strength
The sixth edition of the video game phenomenon Grand Theft Auto (GTA for short) is coming to market later this year, possibly as early as this summer, promising to add significantly more momentum to Take-Two’s improving recent performance. The video game publisher produces dozens of games for consoles and (thanks to its Zynga subsidiary) for mobile, but it has three major franchises which, for the most part, make or break the business. One is the annual basketball game, NBA2K, which has outperformed already high expectations with its latest edition. The forthcoming GTA is expected to be another big and potentially humongous seller: The game’s first five versions have already sold 210 million units worldwide in its 25-year history and has an ongoing multi-player subscription business that grew 10% in the most recent period. Following Grand Theft Auto will be the seventh edition of the third pillar of Take-Two’s business, Sid Meier’s Civilization, a world-building game. Pre-release reviews have been strong for “Civ,” and preorders are believed to be firm as well. Throw in high hopes for two more sports-focused games to come in later this year, PGA Tour TK25 and WWE 2K25, and it’s likely the bottom line here is set to soar down the road. Near-term, consensus expectations continue to project that Take-Two will report $1.55 billion in revenue and $1.09 earnings per share for the fourth quarter when earnings come out on May 15. There are concerns in the video game industry that tariffs will negatively affect the sector, both because of higher costs on consoles as well as consumer spending cutbacks on fears of higher prices. But while competitors have already been having a mixed past year, Take-Two has been executing well and odds are the massive fanbases of Take-Two’s three core games will open their wallets regardless—Wall Street sees the fiscal year that began this month showing earnings surging into the mid-$7 range with more growth in the following year, and even that could prove conservative if the uptake of new releases pushes past expectations.

Technical Analysis
TTWO barely shows any effect of the tariff fears roiling the markets the past month, with shares actually nosing to new highs in March (when the market had already fallen quite a bit) and, after a dip during the tariff maelstrom in early April, a quick rebound back toward the highs. And last week, as the pressure started to come off the market, TTWO popped to new highs on good volume. Given the environment, we still expect fits and starts (like today’s reversal), but we’re OK starting a position here with a loose-ish stop under 200.

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Stock 10

Toast (TOST)

Why the Strength
Toast has always had a simple, powerful growth story, and after (mostly) sitting out the last bull cycle, we’re wondering if the stock is ready to help lead the next advance as big investors (1,170 funds own shares, up from 939 six months ago) pile in. The company is known as a payments firm, but it’s really an all-encompassing software solution for the gigantic restaurant industry (860,000 locations in the U.S. alone, with millions more overseas), offering clients just about everything they need to run their ship, including point-of-sale and mobile ordering solutions, invoicing, kitchen display technology, drive-thru solutions, payment processing and financing, gift card and loyalty management, payroll and scheduling, tips management, email marketing, catering tools and much more. While there’s competition and Toast’s offering is generally richly priced, the solution works, with 20% of new clients actually coming from referrals and three-quarters coming from inbound marketing methods (not outward sales calls). The company’s main focus is on recurring revenue, both through payment processing and subscriptions, and that metric has been growing rapidly, with annualized recurring revenue in Q4 of $1.6 billion, up 34% from the year before—yet that’s just a fraction of the $15 billion serviceable market for Toast in the U.S. alone. Meanwhile, total locations leapt to 134,000, up 26%, and gross payment volume was up 25%. Growth has been solid for a while, but importantly, the bottom line here is also starting to perk up (EBTIDA of $111 million in Q4, up from $29 million the year before) while free cash flow was 13 cents per share or so in Q4, well ahead of earnings. The 2025 outlook calls for another round of big growth (EBITDA up 39%), but more will be revealed on May 8 after the close, when the firm will report Q1 results. We’ve always liked the story here, and if the stock can truly kick into gear (and if the market turns healthy), we think it can be a leader.

Technical Analysis
TOST had an endless bottoming pattern that it finally broke free from in September, running up to the 44 level by November and flashing major accumulation (three straight big-volume buying weeks). However, shares topped there and, after retesting the highs in February, fell with the market. The correction was steep (35% or so), though volume was modest, and TOST found solid support soon after the lows, with a move above its 50-day line (better than 70% of stocks) last week. There’s obviously still overhead, and earnings are coming up, so we’ll set our buy range up from here, looking to nibble on continued signs of strength.

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Previously Recommended Stocks

The next Cabot Top Ten Trader issue will be published on May 5, 2025.

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