Cabot Top Ten Trader Issue: June 2, 2025

Still Consolidating as Bad News Hits

As a student of the market, one of the first things you learn is that it’s not necessarily the news that counts, it’s how the market reacts to the news; stocks are always looking three to nine months, so the reaction gives you a hint as to what may already be discounted. During the past couple of weeks, there’s little doubt the news has gotten worse, with the U.S. debt downgrade, renewed U.S-China trade tensions, another hike in steel tariffs announced last week and a big pickup in war uncertainty over the weekend … but so far, the market has handled itself decently, with some wobbles (mostly among the broad market) but overall a quiet-ish consolidation compared to the recent run-up, which keeps the intermediate-term evidence pointed higher. To be fair, that can always change (a bad couple of days could alter the tenor of the market), and we’re still dealing with a relatively thin group of leadership, but given everything, we’re pleased with the action thus far. We’ll again leave our Market Monitor at a level 7 as we wait to see which way the market breaks from this tight range.

This week’s list has a ton of overall strong charts with recent tightness, just like the market. Our Top Pick is Veeva Systems (VEEV), a steadily growing emerging blue chip in the software space that just left behind an endless consolidation with a powerful earnings gap.

Stock 1

Badger Meter (BMI)

Why the Strength
Rising investments in water infrastructure and industrial automation are contributing to strength in the U.S. flow measurement market, with a number of growth industries integrating smart flow meters to boost efficiency and data analytics. Badger (covered in the April 28 issue) is an industry leader in flow measurement, offering water quality and control products that serve water utilities, municipalities and industrial customers worldwide, all of which rely on the firm’s smart water metering solutions to optimize water use and reduce waste. Contributing to the firm’s growth is the energy sector, as oil and gas frackers use Badger’s accurate flow meters to optimize production processes and ensure safety. The industrial heating, ventilation and air conditioning (HVAC) industry is another big revenue contributor for Badger, as it uses the firm’s flow and energy instrumentation for large HVAC systems, helping facility managers measure energy costs for hydronic chilled and hot water applications that are commonly used in large commercial buildings as well as in homes with underfloor heating and radiators. Additional growth drivers for Badger include the need to replace and upgrade aging infrastructure (which is being addressed by ongoing state and federal spending, specifically through expanding access to clean drinking water). In Q1, Badger posted revenue of $222 million that increased 13% from a year ago, driven by a 16% jump in utility water product line sales and 7% sequential growth in instrumentation sales, with earnings of $1.30 a share crushing estimates by 22%. However, software was the top revenue growth contributor, up 25% in the quarter, with the firm’s BlueEdge suite and Beacon software being a “significant and growing revenue source” for the company in terms of providing consistent, high-margin sales. It’s not the fastest-growing name, but analysts expect mid-teens percentage growth on both the top and bottom lines for this year, though the stock’s action suggests that could prove conservative.

Technical Analysis
We missed getting into BMI in April after the stock never pulled back into our buy range, but we’ve kept an eye on it and think the recent tight, quiet rest period bodes well. The stock’s most recent show of strength began with the major bottom two months ago, which, along with the Q1 report, saw shares slingshot from a low of around 160 to 250 over a six-week period. Since reaching this record high, BMI has given up nothing as volume has generally dried up, with shares actually nosing to new high ground today. We’re not ruling out a wobble, but we’re OK taking a swing at it here or minor dips with a stop toward 220.

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Stock 2

Cameco (CCJ)

Why the Strength
Uranium prices are up 12% over the last couple of months on accelerating power demand from data centers and AI infrastructure, plus political support for nuclear power in several countries. More recently, prices, along with the shares of major uranium producers, got a boost when President Trump signed executive orders that will slash regulatory requirements, accelerate licenses for nuclear reactors and more, all of which should stimulate the industry while boosting uranium demand. A major beneficiary of the news was Cameco, which is one of the world’s top uranium miners and owner of the world’s largest high-grade uranium mine and mill, the McArthur River/Key Lake project, and Cigar Lake—both located in Canada’s highly productive Athabasca Basin. The company has various long-term contracts in place that position it to sell approximately 220 million pounds of uranium to 41 customers globally (primarily nuclear utilities), providing it with a more reliable business than relying solely on spot uranium prices. Moreover, Cameco boasts a large and growing pipeline of business under discussion, indicating further potential for long-term contract growth, with the U.S. ban on Russian uranium imports adding to the growth potential. In Q1, Cameco’s revenue of $789 million increased 25% year-over-year on the back of higher average realized prices, a robust long-term contracting portfolio and “positive momentum” across the nuclear energy market. Earnings of 16 cents a share topped by three cents and were 45% higher, prompting a major Wall Street bank to up its target price on the stock (a reason for the latest show of strength). Looking ahead, management expects long-term uranium contracting activity to gain even more momentum and said the big-picture outlook for uranium sales is “more positive than we’ve ever seen” after the World Bank announced plans to lift its decades old ban on funding nuclear projects. Analysts see Cameco’s bottom line up 33% this year 2025 and booming 76% next as higher prices are realized and more deals are inked. While there are some interesting but speculative nuclear firms out there, Cameco looks like the institutional-quality play in the group right now.

Technical Analysis
CCJ had a great run from mid 2023 into May of last year, but when shares hit 56, they effectively stalled out, with a big dip to 35, a run back to marginal new highs, and then another dip to that 35 area during the market’s downturn this year. However, CCJ’s action since the low has been very impressive—not just rallying back to its old highs, but rising seven weeks in a row, the final three of which came on above-average weekly volume. We do think some near-term retrenchment could be in store after the recent news-driven pop, so if you want in, aim for dips.

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Stock 3

Cloudflare (NET)

Why the Strength
Cloudflare has had a big growth story ever since it came on the scene toward the end of the pandemic bull market: The firm is effectively a state-of-the-art content delivery network, built through an edge network, that operates globally (data centers in more than 335 cities … 190 of which can support AI models) and provide millions of Internet properties (websites, blogs, apps, etc.) to have far better performance and security, while allowing users to have more data security and lets developers easily build and deploy applications (including new AI models that can run on Cloudflare’s network). It’s a straightforward idea that’s been a huge hit, and the firm is constantly adding capabilities to its network that continues to attract tons of clients, including many big firms out there (35% of the Fortune 500) from every industry group. Of course, AI seems to be the next big draw, with Cloudflare thinking it will be able to offer customers the ability to scale AI inference (an already-trained model making predictions/decisions; no need for clients to buy pre-determined capacity) and AI agents (to automate tasks) using its Cloudflare Workers offering. As for the numbers, the firm is investing in sales capacity (especially for enterprises) and is seeing a larger chunk of contracts pre-pay for a certain usage amount (which can muddy up revenue recognition), but the big idea here is that Cloudflare is one of the key behind-the-scenes technology cogs in the Internet, and is positioning itself the same way for the coming AI age. The top line has been growing rapidly and consistently for years and continues to do so (up 27% in Q1), thanks to larger customers (revenue from clients paying over $100k per year rose 32%--the number paying over $1 million annually lifted 48%!), including the largest deal the firm has ever signed (over $100 million; the top brass said it’s “actively hunting” several more $100 million-plus deals) thanks to its Workers offering. (Remaining performance obligations rose a very strong 39%.) While earnings were flat (and should be flat-ish this year), that’s main due to some one-time accounting shenanigans and taxes; operating income was up 32% in Q1. Expect continued mid-20% top-line growth for many quarters to come.

Technical Analysis
NET had a big fall (43% deep) in the middle of last year before steadily gaining steam in the second half, with a great-looking breakout from a tight area in January sending shares to new multi-year highs. But the market got in the way, causing the stock to crater 50% as tariff and economic worries overroad any fundamentals. Frankly, there wasn’t much in the initial bounce phase that looked great, but the Q1 report seems to have changed perception—NET rallied five straight days on great volume following that and has slowly advanced since then even as the market has gyrated sideways. The prior highs should mark resistance, so we’ll aim to enter on weakness and use a loose leash.

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Stock 4

Flex Ltd (FLEX)

Why the Strength
Flex is the world’s largest provider of electronics manufacturing services with well over $20 billion of annual sales. That includes things like printed circuit board and electronic systems assembly as well as related design and logistics services along with providing components and enclosures for printed circuit boards. Of late Flex has been caught between two strong forces in the market: The boom of AI that’s ratcheting up demand for much of its hardware that goes into data centers, and tariffs, which threaten to raise costs and complicate the supply chain. On balance it appears AI will win out, since Flex produces nearly half its product (by revenue) in Mexico, where its facilities are almost totally compliant with the North American trade deal Trump cut in his first term, which means they’re free from tariffs (for now at least). The company also gets about half its revenue from North America, so cross border issues are minimized. Only a sliver of basic components used in the U.S. come from China and a global manufacturing base allows Flex to shift sourcing to its facilities that will help it keep costs in check. Even so, automotive is a big end-market for Flex and, so far, the auto industry seems caught in the grip of the Trump tariffs, even as Flex says all its contracts allow it to pass through tariffs to customers. That means that Flex will see current fiscal year 2026 (ending next March) revenue probably flat to slightly higher, with management citing a range of $6 billion to $6.5 billion in its earnings call a month ago, which would represent a good-sized (though expected at this point) slowdown from recent quarters. What investors have been enjoying is that the business continues to find ways to broaden its margins, and that should continue—Wall Street sees double-digit earnings gains this year despite the headwinds, and if the tariff situation clears up somewhat and/or Flex is able to gain business from tariff-scared customers (as management thinks is possible due to the firm’s excess capacity), those numbers could prove too low. A modest valuation (16x trailing earnings) is another plus.

Technical Analysis
FLEX broke out in late 2023 and had a solid run into February of this year, with a big flat-ish area (March to September last year) along the way. Then the tariff panic lopped off 44% from the stock during the downtown, with a huge plunge into the April low. However, the next week saw “over the top” volume (elevated and higher volume on the rebound) and FLEX has marched higher, with the early-May earnings report helping the cause. The recent rest has been very tight, too—we’re OK starting small here and possibly adding more above 45.

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Stock 5

MasTec (MTZ)

Why the Strength
Secular tailwinds in areas such as 5G infrastructure, renewable energy and grid modernization are driving the forward momentum for engineering specialist MasTec in 2025. The Florida-based firm is one of the nation’s top power plant and renewable energy construction providers, specializing in the building and engineering of natural gas power plants and renewable energy facilities, and in recent years it has positioned itself position as one of only a few industry partners whose workforce, size and scale affords it the capabilities to take on projects of any size, with customers including energy, pipeline, wireless and broadband operators, plus government agencies. Despite what management called “macro pressures” from global trade and other factors, MasTec believes the business is resistant to these challenges given the capital investment that’s being made to support broadband delivery and enable the AI economy. In Q1, the company saw revenue growth from nearly all of its top 10 customers, with particular support from broadband infrastructure buildouts and federal investment, with a “race to build data center capacity” that extends to every part of its business. Revenue of $2.9 billion increased 6% from the year-ago Q1, helped by 21% growth from the firm’s non-pipeline segments—there was a 44% decrease from Pipeline Infrastructure year-over-year due to large contract close-out last year—with EBITDA up 7%. By segment, Clean Energy and Infrastructure revenue jumped 22%, Power Delivery rose 13% and Communications saw sales leap 35%. A major highlight of the quarter was MasTec’s backlog reaching a record $16 billion, up 24% year-on-year and up 10% sequentially, ironcially helped along by “significant” Q1 additions in Pipeline Infrastructure (which more than doubled), though every segment delivered backlog growth. Going forward, the top brass opened the door to selective acquisitions that complement current offerings, but sees growth picking up either way, with 11% sales and 14% EBITDA growth this year as it works off its big and growing backlog.

Technical Analysis
Following a three-month tightening period, MTZ broke out to new all-time highs in late September, with shares rallying to 167 in mid-January before getting whacked by the DeepSeek market selloff. It was pretty much all down from there until March (106), and after a brief rally, shares set new lows near 100 at the market low in April. The bounce from there started slowly, with the change of character coming after earnings on May 1, with MTZ zooming back to its old peak within a couple of weeks. The mini-shakeout after that was normal, and shares look poised to resume higher—we’ll set our buy range above the recent high, aiming to enter on a breakout.

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Stock 6

Robinhood (HOOD)

Why the Strength
Robinhood is the glamour Bull Market stock of this cycle, transforming itself from a meme stock trading platform back in 2021 to a full service brokerage that’s rapidly gaining market share, helped along by its innovations in the sector: It was one of the first to offer commission-free trading, and these days, it has numerous unique offerings, from its Gold membership ($50 a year, brings with it higher money market yields and better research and trading tools; 12.4% of clients are signed up, with the Gold subscriber base up 90% from a year ago), contribution matches (1% IRA match if you stick around for five years; 3% if you’re a gold member), its own credit card (3% cash back on everything if a Gold member) and the occasional referral bonus. (The IRA matches are part of the firm’s big push into the retirement field during the past year, with Q1 assets of $14.4 billion up 242% from a year ago while accounts have more than doubled.) Very interestingly, the company has made a move into prediction markets, too, teaming with Kalshi to offer the ability to bet on pretty much anything (sports outcomes, elections, etc.); it’s still small but early indications are that it’s super popular, and some think this could be a huge growth driver going forward. Right now, the top line is mostly transaction-based, with options and crypto trading making up the lion’s share of that—thus, there will be volatility on a quarter-to-quarter basis, but the trends are certainly up: In Q1, total revenue was up a big 50% while earnings more than doubled, and in the April monthly update, all the key metrics were pointed in the right direction, with funded customers of 25.9 million (up 120,000 month-over-month), platform assets of $232 billion (up 5% from March) and net deposits of $6.7 billion (up 37% from a year ago, annualized); options trading boomed though crypto volume was off some. Obviously, the path of the market will be key—another huge drop could dampen sentiment in a big way—but there’s no question Robinhood has big potential if the environment tilts bullish, and we think the predictions markets angle could be big.

Technical Analysis
HOOD is a volatile stock in both directions, and after more than doubling in the second half of last year into its peak near mid-February, the decline that came with the market correction was vicious, with shares falling 48% by early March and then knifing even lower at the market bottom in April. The snapback was quick but met some hesitation near 50 (including some selling after earnings), but when shares got over that round number resistance area, they changed character, racing back to the old highs in short order and refusing to give up any ground of late, with a low-volume push to new highs today. HOOD is still extended, so we’ll aim to start a position down a bit and use a loose stop.

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Stock 7

Rocket Lab (RKLB)

Why the Strength
Rocket Lab provides launch services, space system components and rocket design and manufacturing; it’s one of the major suppliers of missions and tech to the federal government’s national security-related space projects. Last week Rocket Lab expanded its capabilities for the U.S. with the pending acquisition of Geost for $275 million, which adds a portfolio of critical missile launch detection and tactical surveillance missions to the company’s backlog. Prior to the acquisition, about 30% of Rocket Lab revenue came from launch missions for customers like the U.S. Defense Department, NASA and other agencies. The company’s main vehicle is a rocket called the Electron, which delivers 2,866-pound payloads that drive it to low-Earth orbit. The bulk of Rocket Lab’s business (70% give or take) is from space technologies, like solar panels, star trackers, command and control software and the like; Lockheed Martin, Northrup Grumman and Airbus are big customers here. There are other competitors out there, but Rocket Lab has good niche in larger payloads. Later this year Rocket Lab will debut Neutron, a whopping 14-ton payload rocket that puts the company in direct competition with SpaceX’s Falcon 9. SpaceX provides piggy-back options for smaller loads on its missions but often can’t offer the ideal orbits Rocket Lab gets from its New Zealand launch facility. (Another competitor, Astra, is struggling with quality control issues.) The year has gotten off to a great start for Rocket Lab—in the first quarter sales were up 32% to $123 million, and analysts see the top line lifting 31% this year and then showing acceleration in 2026 (possibly due to Neutron), with 55% growth. The bottom line isn’t as pleasing, but Rocket Lab is expected to start turning a profit sometime next year. It’s a unique story and we like that big investors are starting to pile in, with 436 funds owning shares at the end of March, up from 283 just six months before.

Technical Analysis
RKLB exploded higher in the second half of last year, breaking out of a big trading range and zooming as high as 33 in January. Such a big move meant a big drop was possible, and shares did get whacked 55% or so during the market implosion, but the stock began working its way back right away, and then accelerated higher after a brief shakeout following the Q1 report. Such a big run from the lows adds risk for sure, but RKLB’s low-volume dip after testing the 30 levels looks normal—if you’re game, a small buy here or on a bit more weakness and a loose stop is fine by us.

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Stock 8

Seagate Technology (STX)

Why the Strength
Runaway growth in global data volume is a key driver for the strength behind Seagate Technology. The company is one of the world’s leading providers of mass-capacity data storage solutions, with products including external hard disk drives (HDDs), solid state drives, storage subsystems and other computing solutions ranging from edge to cloud applications. It’s also a key innovator in Heat-Assisted Magnetic Recording (HAMR) technology, which greatly increases the capacity of hard drives beyond the limits of current recording methods (sometimes by two- or three-fold) and is widely considered a key next-generation HDD technology. Seagate has begun volume shipments of HAMR technology to hyperscale customers and forecasts accelerated adoption by later this year, with the technology expected to provide the firm with a significant advantage over its competitors in the coming years. (Seagate enjoys a duopoly position in the HDD market alongside its nearest competitor, Western Digital, with Seagate enjoying a lead over Western in the HAMR space and providing the firm with a significant advantage going forward.) Also important, demand for Seagate’s HDD products is exceeding supply, with hard drives still currently used for around 90% of data in large data centers, due largely to their lower cost per terabyte versus solid-state drives (SSDs). On the financial front, things are picking up in a big way: The company reported revenue of $2.2 billion in fiscal Q3 (ended March), up 31% from a year ago and driven by strong demand for mass capacity storage, particularly from global cloud customers, with earnings of $1.90 beating estimates by 16 cents. The sanguine results prompted Seagate to approve a new $5 billion share buyback program, while it continues to dole out much of its cash flow (dividend yield of more than 2.4%) to shareholders. Looking ahead, the company expects higher compound annual revenue guidance (which it just increased to the mid-teens at its recent investor day), with an aim at achieving gross margins of 40% (up from 36% in the recent quarter) and paying out three-quarters of free cash flow. Recent growth trends should slow down some, but analysts see the bottom line rising over $9 per share in the coming fiscal year (which starts in July).

Technical Analysis
STX had a slow, gradual rebound from its 2022 lows that gained steam into last year, with shares recovering to a bit over 110 last summer … near its highs from the prior bull market. The stock then stalled out for many months before going over the falls this year, nosediving to 63 in April. But the comeback since then has been awesome—up eight weeks in a row to new highs, with four weeks of big, above-average buying volume. We’ll set our buy range down a bit from here, but we’re not expecting a big retreat given the buying power.

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Stock 9

Sterling Infrastructure (STRL)

Why the Strength
The federal infrastructure investment bill passed in 2021 continues to be a major source of funding for much-needed infrastructure projects across various sectors like transportation, broadband and energy, while driving growth for the nation’s building and construction sectors. Sterling is a major player in heavy, high-growth infrastructure and rehabilitation works for public and private customers, with an exposure to each of the aforementioned trends. Operating through its subsidiaries, the Texas-based outfit’s three main segments include: E-infrastructure Solutions (like AI data centers and e-commerce warehouses), Building Solutions (residential and commercial concrete work) and Transportation Solutions (building projects for highways, bridges, airports and rail). Sterling got off to a solid start in 2025, with Q1 revenue of $431 million down 2% from a year ago but surpassing estimates, while earnings of $1.63 lifted 29% and beating estimates by 13% (a reason for the stock’s strength). Impressively, EBITDA grew 31%, to $80 million, and gross margins rose to 22% as Sterling expanded its footprint in higher-margin service offerings. The company also ended the quarter with a combined backlog of $2.2 billion, up 17%. The excellent showing was led by the E-Infrastructure segment, which achieved 18% revenue growth, thanks to a shift toward large projects, including data centers and manufacturing facilities, where the firm’s execution and delivery times are valued by its customers. (Management said the data center market remains “very active” and now represents over 65% of E-Infrastructure backlog.) Elsewhere, Transportation segment revenue increased 9%, led by “good demand” and project opportunities in the firm’s core Rocky Mountain and Arizona regions. Building Solutions revenue, meanwhile, declined 18% due to the nationwide residential housing market sluggishness, but Sterling remains bullish on what it sees as multi-year demand trends in its key geographies (Dallas/Fort Worth, Houston and Phoenix), all of which are expected to see continued population growth that will drive new home demand. The company guided for bottom line growth that outpaces the top line in 2025, and it raised full-year revenue midpoint guidance to $2.1 billion (unchanged from last year), with midpoint EPS expected at $8.65 (up 36% if realized).

Technical Analysis
STRL had a final breakout from a prolonged advance last September that led to a move to around 200 in November and December. That was ultimately the top, with that level rejecting the advance a couple of times before the stock fell apart with the market—shares imploded to 105 in March and a dipped bit below 100 in April. But like so many names, STRL has roared back, with good-volume buying right off the lows (some of that was exaggerated by its addition to the S&P 600 Smallcap Index) and a persistent advance back to the 190 area. And now we see shares resting tightly as the moving averages catch up. We’re OK with a small buy on dips.

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Stock 10

Veeva Systems (VEEV) ★ Top Pick ★

Why the Strength
Veeva Systems is the hands-down leading cloud software provider to the life sciences industry, with a solution built from the ground-up many years ago to handle the intracacies of that business, starting with sales and marketing functions and expanding to everything from clinical trial management, tracking and reporting, regulatory submissions, safety and quality control aids, medical content creation, data analytics and much more. Of course, the latest growth angle could come from AI, which Veeva announced in April and with offerings that will hit the market later this year: The firm sees two bots (one for CRM functions, one for commercial) launching around year-end, and aims to integrate AI into many parts of its platform, allowing many routine tasks to be automated and even allowing users to create customized automation tools, too. To be fair, Veeva is a larger firm these days—it just crossed $3 billion of annualized run-rate revenue—so growth isn’t going to be off the charts, but the firm continues to execute and the top brass recently set a $6 billion run-rate goal by 2030, expecting continued mid-teens growth for many years to come. Q1 results were terrific, with total revenue rising 17% (subscription revenue, which makes up more than 80% of the total, was up 19%), accelerating a bit from recent quarters, while operating income lifted 34% (margin of 46%!) and earnings of $1.97 per share rose 31% and crushed estimates. It’s not chaning the world, but Veeva is an emerging blue chip with a steady growth outlook, and if its AI products gain big adoption in 2026, results should continue to top estimates and growth could accelerate from the years-long, mid-teens baseline.

Technical Analysis
VEEV was a huge winner during the cloud software boom of 2016-2020, but then it fell hard in 2022 and really never regained its shine, with slightly higher lows over time but no powerful, sustained advances. Indeed, the last time it nosed to new high ground last December was immediately met with selling, with a failed breakout leading to many more months of grinding sideways action. That said, VEEV didn’t fall apart during the market correction, holding the 200 level and the 200-day line, and after a decent recovery, last week’s huge-volume earnings move (biggest weekly volume in years) looks like a change in character. We’re OK entering here with a stop under 250.

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Previously Recommended Stocks

The next Cabot Top Ten Trader issue will be published on June 9, 2025.

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