Cabot Top Ten Trader Issue: April 7, 2025

Wash and Rinse

We’re trend followers, not trend predictors, and it doesn’t take a black-box proprietary timing system to know the trend is down—we’ve been cautious and defensive since late February when the market and leaders first went over the falls, and we remain so today as the market has obviously nose-dived; we continue to advise cash being your largest holding and, if you want to test the waters, to keep position sizes very small. That said, we’re also students of the market, and there’s no question we’re in the midst of an outright panic—whereas sentiment was sky-high last December (when one long-time market bear publicly threw in the towel and growth stocks were gapping up 40% on earnings reports), the pendulum has swung all the way toward recession/depression fears, with some truly extreme readings (north of 1,000 new lows on the NYSE on Friday and today; 95% of the S&P 1500 below their 50-day lines, etc.) that have a history of showing up near some sort of market low. That’s not a reason to turn bullish—again, the trends are clearly down—but keep your head up and stay alert should some actual “good news” hit the wires. We’ll leave our Market Monitor at a level 3.

This week’s list is chock-full of defensive growth stocks—firms that have steadier growth stories that shouldn’t be affected by the tariff or economic headwinds. Our Top Pick is Insulet (PODD), which is showing great relative strength and has a huge runway of growth ahead.

Stock 1

Alignment Healthcare (ALHC)

Why the Strength
Alignment Healthcare is a California-based managed care outfit that services seniors on Medicare Advantage, and it’s growing fast by dramatically boosting patients outcomes and (as the name suggests) aligning everyone involved—and its technology is able to proactively reach out to clients who are most at risk, providing more care to actually cut costs. The firm partners with hosptials, health plans and physicians (with whom it shares some of its savings), sharing data among all players so nothing falls through the cracks in terms of medications or pre-existing conditions; the sharing includes its own care teams and care centers, which offer treatment and lab work for members when needed. Importantly, Alignment offers what it calls concierge-level support and its own call center, even to the point where a care member will visit someone who’s been admitted to an ER or ICU in order to make sure doctors there are up to speed with the patient’s history. As for the business, one of the keys here is the firm’s technology, which divvies its client base into risk levels to it can prompt and prod those that are higher-risk to get services (pre-emptive care) while spending less on healthy and pre-chronic patients. All in all, it works, both for partners and users (39% fewer inpatient admissions compared to the competition, with 47% lower turnover among clients), which is leading to very solid membership growth (209,900 patients as of January, up 35% from a year ago; its memers are mostly in California though growth is rapid elsewhere), and the firm sees big margin improvements possible as members who have been with the firm for five or more years have a gross margin more than twice as large as first-year members. For 2025, the top brass expects high-30% revenue growth, and while earnings are still in the red, EBITDA should come in around $45 million, up from breakeven last year. Longer term, the top brass thinks it can glide over half a million members and drive the bottom line higher at the same time.

Technical Analysis
After a multi-year post-IPO bust, ALHC bottomed about a year ago and lifted itself out of single-digit territory, and it’s basically been in an uptrend ever since—albeit with wild swings alonog the way, including a 26% drop in September/October, a 29% dip in November/December and another 18% correction into February. But ALHC is clearly showing relative strength here, tagging new recovery highs last week thanks to its great growth numbers in a defensive-ish business. If you want to nibble, aim for a shakeout toward the 50-day line.

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Stock 2

Insulet (PODD) ★ Top Pick ★

Why the Strength
Competition has always been intense in the diabetes field, especially when it comes to automated insulin delivery (insulin pumps), but in recent quarters there’s little question that Insulet, which has an outstanding long-term track record (nine straight years of 20%-plus sales growth!), is taking the lead. The firm has a few pumps on the market that have a large user base (half a million active users), but it’s the Omnipod 5 offering (365,000 of that total) that’s the big draw, as it’s the #1 most prescribed pump in the U.S. and #1 in Europe, too. Omnipod 5 is the first tubeless, waterproof system in the U.S., offers a choice of sensor integration (three options now, not just Dexcom), can be controlled through an app on your phone and, of course, leads to great results (much more time within the normal range of insulin). For investors, the best part is that the pump is the only automated insulin delivery system that’s FDA approved for both Type 1 and Type 2 diabetics (Type 2 approval was just received last August) and is widely available (including at 46,000 U.S. pharmacies), all of which means the runway of growth here should be enormous: The firm thinks it’s now playing in a U.S. market of 7.2 million patients (about double that if you include international; Insulet launched in five European markets in January with three more international launches occurring a few weeks ago), yet only 1.2 million or so are using any sort of pump at all—and for Type 2s that ratio is far lower. Growth here has slowed a touch as Insulet has gotten bigger, but the top brass still sees revenues lifting 18% or so this year (including 19% growth in Omnipod sales), while operating income should lift 30% or so as margins expand. Obviously, a lot will depend on execution, but Insulet has a very bright near- and long-term future.

Technical Analysis
PODD already went through the wringer in 2023, with the recovery from there not really kicking into gear until last September—the point being that the stock wasn’t “overplayed” during the past year or two. The last big pop came after earnings in November, with shares crawling higher after that before being pulled down by the market. However, PODD is showing relative strength of late by (a) holding its 200-day line and (b) holding near its early-March low even as the indexes cascade to much lower levels. As with many names, we’re OK nibbling if (and only if) the stock can perk up from here—we’ll set our buy range above today’s high.

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Stock 3

Marex Group (MRX)

Why the Strength
U.K.-based financial services company Marex Group counts among its clients some of the world’s biggest commodity producers, banks, hedge funds and asset managers, also offering services to consumers, brokerage houses and professional traders. The company primarily caters to institutional clients, providing access to the world’s major commodity markets, and offers a range of services, including market making, execution, clearing and hedging and investment solutions. For individuals, the firm provides tailored products through its Hedging Solutions division, including customized over-the-counter (OTC) derivative products that allow individuals to manage exposures in markets like agriculture, dairy, metals, energy and environmental areas. Brokerage firms like Marex tend to see business pick up when market volatility is exceptionally high, which partly accounts for the stock’s recent resilience. But the company’s strategic initiatives and financial performance are other factors supporting the sanguine outlook, positioning Marex to benefit from the dynamic market environment. Part of the reason for its recent growth is the firm’s strengthening client collateral balances in the wake of market turbulence, though Marex has also grown the old-fashioned way by expanding its client figures, too. In what is typically the slowest quarter of the year for Marex, the firm reported a strong Q4 performance in a “supportive” market backdrop, led by strength in its securities segment, which is benefiting from the integration of TD Cowen’s prime services business. Client activity levels remained “robust,” as average daily balances grew to $15.5 billion in the quarter (up 42% from a year ago; balances rose each quarter of 2024), while sales in each of its segments lifted nicely from a year ago. And those trends continued in Q1, with Marex’s Investor Day last week revealing a solid 25%-ish gain in revenue from a year ago, while pre-tax profit looks to be up 17% sequentially from Q4. (Numbers are preliminary.) Going forward, management is looking at further M&A, and while Wall Street sees modest growth this year, that could prove too conservative given all the uncertainties out there (leading to more volatility and trading activity).

Technical Analysis
MRX came public in late April of last year at 19.5 and didn’t do much (net-net) until August, when the stock lifted to new highs above 23. After one more minor hiccup in late September, shares embarked on a beautiful, persistent uptrend, with shares tapping 40 in February before being yanked down to 30 during the first leg of the market’s decline. Still, the recovery from there was very solid (nearly back to the old highs) and while the slippage in recent days isn’t pretty, MRX is well above its prior low (far better than the market and most stocks). As with most names these days, we’ll set our buy range up from here if you want to dabble, or you can just keep it on your watch list.

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Stock 4

Monster Beverage (MNST)

Why the Strength
While they haven’t yet surpassed traditional caffeinated beverages like coffee and soda in popularity, energy drinks are a fast-growing part of the overall drink market. By some estimates, energy and sports drinks combined account for over half of all functional beverage sales today, and their market share is growing by the year. Also growing quickly is Monster Beverage’s share in the global energy drink industry: It’s currently ranked number two (with a 33% share) behind Red Bull (43%), and it’s rapidly catching up to its big-brother competitor. Monster’s portfolio does include more than just energy drinks, with natural soft drinks, fruit drinks and no-sugar drink offerings also part of its product lineup—but the Energy segment makes up nearly all of sales, with revenue from that segment increasing 5% year-on-year to $1.7 billion in Q4, with EPS of 38 cents flat from a year ago and in line with expectations. Last year’s total revenue of $7.5 billion increased 5% from 2023, led by sales of top energy drinks like Monster Energy (its most recognizable brand) and the highly caffeinated Reign (especially popular among Millennials). The latter cohort is a big reason for Wall Street’s sanguine expectations for Monster going forward, as studies suggest Millennials are more likely to buy energy drinks than tea, with a consumption rate of over 50% across that demographic, while a whopping 64% of Gen Z consumers regularly consume them, too. Analysts see this as a key factor even if the U.S. enters a recession since energy drinks are considered an affordable luxury, with younger consumers “less likely to drastically cut spending on things they see as essential for their lifestyle,” in the words of an industry report. And Monster is distributed mainly through convenience stores, gas stations and supermarkets, where business tends to remain steady even in downturns. With or without a recession, Wall Street expects a pickup in growth for Monster, with steady low-teens earnings growth this year and double-digit growth over the next several years, due not only to the above factors also thanks to international expansion—the top brass sees good things from markets like Argentina, Brazil, Colombia, Mexico and others, prompting two major banks to recently hike their outlooks.

Technical Analysis
MNST double topped near 60 in mid-2023 and early 2024, sunk as low as 43 last August and, after a decent rally into November, retested that panic low in February. But now, as the market has caved in, this slow, steady grower has been advancing, with shares marching persistently back to resistance near 60 before getting whacked Friday. Still, the action looks fine to us—we’re OK buying a little on this dip with a stop in the lower 50s if you want in.

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Stock 5

Netflix (NFLX)

Why the Strength
Streaming industry pioneer Netflix is more than just an entertainment platform—in the words of one analyst, it’s become a “need rather than a want” for its worldwide user base of over 300 million viewers, a subscriber count that’s grown significantly in recent years, including a notable jump in just the last few quarters. The platform has continued to invest heavily in exclusive content, including top-rated shows like Stranger Things and Squid Game. A big part of the company’s growth plan is focused on further expanding its global footprint and diversifying its content to include foreign language productions and “innovative formats,” but the main long-term goal is to capture more of the critically important TV viewing time metric. Somewhat surprisingly, and despite its explosive popularity, the streaming industry has yet to capture half of the traditional television viewing time even in the U.S. (one of the biggest viewing markets). That said, the tide is moving in Netflix’s favor, as the latest data (for February) revealed that cable TV viewing time in the U.S. declined while TV streaming remained robust, increasing its share to 44% of total viewing time, continuing a growth trend as viewers migrate away from traditional television. Although YouTube led the latest month in terms of time spent streaming, at 27%, Netflix came in second with 8% of total viewership, driven by its original action-thriller series The Night Agent, which had six billion viewing minutes throughout February. For 2025, Netflix plans to spend a “significant amount” on new content in an effort to increase its leadership position in the streaming market. The company estimates a more than $700 billion revenue opportunity worldwide, currently owning a mere 6% of that total, which suggests a massive runway ahead despite the platform’s popularity. Growth here remains very solid, as the firm’s subscriber base in Q4 lifted 16% from a year ago (it added 19 million net subscribers in the quarter, which more than doubled analysts’ expectations), helping revenues grow at the same pace while earnings doubled. It’s obviously not an unknown story, but Wall Street sees 22%-plus bottom-line growth this year and next, and odds favor that will prove too low.

Technical Analysis
We were stopped out of our previous position in NFLX in March, but in view of its relative strength showing in the weak market environment, we see another potential entry point … if it (and likely the market) can rally from here. After breaking out from a good-sized base a year ago, the stock had a great run into mid-February when it ran into strong resistance around 1,065, quickly dipping to 850. The rally from there was decent, and now NFLX is retesting that low, which is above the 200-day line—far better than the vast majority of names out there. If you’re interested, see if the stock can recapture the 910 area before nibbling.

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Stock 6

Option Care Health (OPCH)

Why the Strength
Option Care offers infusion services in the U.S. in both home and ambulatory care settings for patients with acute and chronic conditions. It offers a wide range of infusion treatments, including anti-infective therapies, Immunoglobulin therapies, bleeding disorder therapies and nutrition support. The shift to home-based health services, plus explosive growth in specialty pharmaceuticals, are big parts of the growth story here—the company offers a lower-cost, safer care site setting, which is fast becoming a preferred treatment option for infusion patients (particularly older ones). Although U.S. home infusion is a smaller part of the overall $100 billion infusion market, it’s projected to grow around 7% annually, driven by an aging population, increasing chronic disease prevalence and a growing preference for personalized care. The pharmaceutical aspect of Option Care is another attraction, as it recently opened two state-of-the-art compounding pharmacies in New York City and Tampa—its pharmacies prepare and dispense customized medications, including parenteral nutrition, anti-infectives, chemotherapy and other specialized therapies. All told, as the largest independent provider in the infusion therapy space with a network of infusion suites and pharmacies as well as a team of over 8,000 members and more than 5,000 clinicians, Option is well positioned to benefit from each of these trends. A solid performance in Q4 was a big reason for the stock’s strength, as the company demonstrated “resilience in a dynamic and challenging period” while delivering on its financial commitments for the 20^th consecutive quarter. Revenue of $1.4 billion increased 20% year over year, while per-share earnings of 44 cents beat estimates by eight cents and adjusted EBITDA of $122 million improved by 9%. The firm also closed its acquisition of Intramed Plus in the quarter, a top infusion provider in the Southern U.S., with Option seeing this, along with other buyouts, helping to expand its national footprint. For 2025, Wall Street expects high-single-digit revenue growth and earnings growth of 14%. It’s a steady growth story in a defensive area.

Technical Analysis
After a big pandemic-era run, OPCH entered a holding pattern in late 2022 and stayed there until last October—when shares tumbled after the Q3 report, falling to a low of 22. However, it was able to establish support above that level and it gapped higher shortly after the calendar flipped (management pre-announced results at a healthcare conference), riding the 25-day line higher until the market finally got in the way late last week. If you want to try a token position, we suggest setting your entry range above today’s high, which would coincide with a bounce off 50-day-line support.

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Stock 7

Penumbra (PEN)

Why the Strength
Penumbra is a medical device manufacturer that focuses on tools that better treat vascular blockages, which have traditionally been treated with drugs to dissolve clots, but those had major side effects; meanwhile, initial mechanical solutions were an improvement but proved very cumbersome and time-consuming. In the past two years, though, Penumbra has rolled out new products based on what it calls computer assisted vacuum technology (CAVT), that drastically reduce the need for more invasive surgery for deep vein thrombosis (DVT) and pulmonary embolisms (PE) as well as having some in tests to help the recovery of neurological vessels after strokes. Lightning Flash allows the insertion of a very small tube into blood vessels to then use vacuum pressure to remove blockages and monitor for a recovery of blood flow. Thunderbolt is an advanced catheter that allows for less-invasive ways to re-establish blood flow through vessels in the brain after strokes. The third, Lightning Bolt, assists with thrombectomies, the emergency removal of blood clots. Helping sales with new and existing customers are updated and varying iterations of each of the trio being sent to market annually, a dozen among them last year. In the U.S., the product lines are gaining market share at a double-digit rate, allowing the company to more than double sales the past four years to $1.1 billion in 2024. While a path to growth in the unpenetrated target Chinese and European markets is muddied due to the trade war eruption, Penumbra has about a third of the U.S. market share, leaving a lot of runway for growth domestically. Management says doctors are shifting into a new cycle of upgrading equipment after a long post-pandemic lull, which should add to the tailwinds. The top line should show continued solid mid-teens growth, but the real action is on the bottom line, where earnings are expected to grow 28% this year and 34% in 2026—and given the fact that Penumbra has beat on sales and earnings for four straight quarters, even that could prove conservative. This looks like a durable growth story despite all the craziness out there.

Technical Analysis
After rallying on February earnings news to a 20-month high at 304, PEN has retraced just 20% maximum from high to low (miles better than most growth stocks) and is holding near its early-March low, which is heroic compared to the overall market. Action last week was encouraging, with buyers coming in after lower opens to push shares higher into session’s end in four of the five days, with today’s trading also showing encouraging support over the day. As with everything, PEN won’t be able to rally if the market continues to implode, but a rally back above the 50-day line and today’s high would be extremely intriguing.

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Stock 8

Planet Fitness (PLNT)

Why the Strength
Planet Fitness has had some challenges over the years, from the pandemic crushing in-house attendance for a while and some other PR issues more recently (likely part of the reason there was a new CEO and top brass put in place last year), but the underlying story has never changed: The firm is the biggest national fitness center player, with 2,722 gyms at year-end that cater to people who want to use the gym ... but aren’t exactly fanatics about fitness and don’t want to pay for some premium offerings seen among many high-end local competitors. Indeed, the base level plan with Planet remains cheap ($15 per month), though for a bit more ($25 per month) you can use any Planet Fitness location and get plenty of perks (discount on drinks, use of hydromassage or massage chairs, bring a guest, etc.). The customer base has always been well-rounded financially, with 26% of members making south of $50k per year, but 21% making north of $100k, so the appeal is broad. That said, growth had been slowing, so the new leadership team has put in place some changes, including the first hike to the base membership plan in years (it was $10), a reduction in build costs and elimination of certain fees for franchisees, with the end result being a rate of return profile that’s back to where it was before the pandemic, which is getting a big thumbs up from its franchise partners. (It’s also adding more strength equipment in many locations in reaction to customer requests and surveys.) All told, last year was a transition given the new top brass, but business cranked ahead regardless (memberships and gym count both rose 5% to 6%, with revenues up 10% and EBITDA up 12%), and 2025 should see similar low double-digit growth figures, too. It’s not the rapidly-growing outfit it was a decade ago, but Planet Fitness offers an affordable product that should do well even if the economy hits the skids.

Technical Analysis
PLNT built a huge, listless launching pad from late 2021 into late last year, but shares began to tighten up nicely in October, and the November earnings move was a character change. That said, shares didn’t advance a ton from there, with another tight area leading to marginal new highs before the stock got pulled down by the market’s implosion. Even so, PLNT has been holding its 200-day line (better than 80%-plus of stocks in the market) and has, so far, held above its early-March low, which is rare these days. A move back above Friday’s high would be tempting if you want to nibble, or just keep it on your watch list.

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Stock 9

Roblox (RBLX)

Why the Strength
Video games on a variety of platforms (consoles, tablets, phones, etc.) are more than just a hobby for millions; they have become a massive part of popular culture and are so deeply ingrained in global society—spanning industries and demographics—that they have become their own unique form of artistic and storytelling expression. Online game engine Roblox is one of the leading platforms for game players globally and has become the go-to platform for online content creators across various devices. The company recently unveiled its strategic vision of having 10% of all global gaming content revenue running through its platform which, if realized, would amount to a four-fold increase of its current market share. Last year, creators on Roblox earned $923 million, up 25% from 2023, while the number of daily active users grew 21%, compared to the broader gaming industry’s single-digit growth rate—metrics the firm sees supporting the long-term vision. Also helping is that Roblox has created a new affiliate program designed to attract more creators, and it sees additional potential to use AI to expand its footprint as well as to facilitate AI-based game characters on the platform. Roblox also continues to attract some older users, thanks in part to its NFL- and NBA-branded games, and it sees additional potential to leverage the platform for e-commerce, entertainment, academics and advertising. (On the latter front, Roblox just entered a new ad partnership with Google, which allows brands and agencies to purchase video ads on the platform.) Financially, Q4 revenue of $988 million increased 32% while bookings of $1.4 billion rose 20% and free cash flow (a far better metric than accounting earnings) boomed 54% to $121 million (more than 16 cents per share). (Interestingly, the firm has about $3 billion more in cash and investments on the balance sheet than debt.) Looking ahead, analysts expect 20% top-line growth for 2025, while free cash flow is projected to soar by a whopping 30%.

Technical Analysis
RBLX had a massive bottoming effort during much of 2023 and 2024, but it kicked into gear after earnings on Halloween, embarking on a solid run as high as 75 in early February. The Q4 report brought in selling, and the stock ended up falling to 52 during the initial market downdraft, which wasn’t good to see. But RBLX did rally from there and, on this latest retreat, has held its 200-day line and is still hovering near its March low. We’re not buying it here, but the chart isn’t broken and we’ll be watching for a strong snapback off support; if you’re interested, we’ll set our buy range above the highs from Friday and today.

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Stock 10

Waystar Holding (WAY)

Why the Strength
Waystar is a cloud-based software company that offers healthcare provider revenue cycle management solutions (RCM). That means the company sells ways for providers of all shapes and sizes, from single-site hospitals to large healthcare organizations, to get paid more easily and more quickly by payers of all types, mainly insurance companies, Medicare, Medicaid, as well as individual patients. The company focuses on healthcare given the complexity in that sector and the wide path it sees for providing software solutions in an industry rife with older technology, hundreds of different billing systems and a heavy reliance on manual processes. Waystar’s system works along the timeline of treatment, from verifying insurance eligibility, to estimating the likelihood of a patient to pay, claim payment and monitoring and post-service analytics for internal quality control and reporting to the federal government. As you might expect, healthcare is a large and growing market for the system, as patient care and insurance seem to only be getting more complex and expensive. The market for Waystar’s current product line is probably about $20 billion between hospitals and ambulatory centers and is growing slowly (about 5% a year) but surely. Healthcare is also largely something people have to have regardless of the economy, so that makes Waystar fairly insulated to near-term economic turmoil. The upside potential is that Waystar integrates easily with existing systems, meaning it doesn’t have to convince care centers to make a big upfront commitment to get in the door, and new product developments should allow it to expand services inside existing clients. Growth has been solid but slowing, and the top brass sees that trend continuing in 2025, expecting revenue a tick over $1 billion, up about 7% from 2024, with similar growth in EBITDA. Impressively, EBITDA margins here are huge (north of 40%) and should grow further.

Technical Analysis
WAY IPO’d in June at 21.5 and, with little volatility for a new issue, climbed up to a peak at 48 by mid-February. It’s no surprise that shares have slipped back given the market turmoil (there was also a share offering in there that dented shares), but after its initial dip to 35, the stock has been able to hold in the vicinity of that low during the recent crash, which like so many names in today’s issue, is a sign of relative strength. We’re not catching any falling knives, though, but a strong rally from here would be intriguing.

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Previously Recommended Stocks

The next Cabot Top Ten Trader issue will be published on April 14, 2025.

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