Cabot Top Ten Trader Issue: May 27, 2025

So Far So Good

After a big rally, the market had earned the right to retrench a bit, and that came about last week after stocks were hit with a few “bad” news items, starting with the downgrade of U.S. debt, followed by a new high in longer-term (30-year) Treasury rates and capped by a threat of higher tariffs on Europe (since delayed until early July). Still, while there has been some pullback, the action has been normal thus far, with most indexes and stocks losing ground but doing so relatively grudgingly (in relation to the prior run-up) while remaining north of key support. Of course, we’re still dealing with a thinner batch of leadership, as relatively few stocks are hitting virgin turf and there’s already a good number of smaller, more speculative names moving. Even so, we’re taking things on a step-by-step basis, and it’s been so far, so good for the rally—while the market’s pullback/rest phase could easily carry on a bit longer, the next step we want to see is another thrust higher that takes the indexes to new recovery peaks, leading to a batch of fresh leaders. Today, we’re optimistic, but we’ll leave our Market Monitor at a level 7 and see how things go.

This week’s list has something for everyone, though again, most are either showing great strength (often after earnings) or pulling back normally after big recoveries. Our Top Pick is Amer Sports (AS), which was rattled by tariff fears but has stormed back on record volume as earnings blew away estimates.

Stock 1

Amer Sports (AS) ★ Top Pick ★

Why the Strength
The U.S. vs. everyone tariff shenanigans can threaten supply chains related to the U.S., but they can’t raise prices for consumers beyond American borders, which is good news for Amer Sports, the holding company of 11 well-known and niche sports goods brands. Amer shares leapt 19% a week ago after quarterly earnings showed the dent from the import taxes is easily absorbed by the business, thanks to voracious appetite in Asia for the company’s Arc’teryx and Salomon brands, Amer’s two largest lines by revenue. Amer told investors that even at its worst-case scenario of the initially decreed 145% tariff on imports of China-made goods, that would clip just five cents a share from annual profits, which obviously was good news and put the focus back on the firm’s underlying business. Some of Amer’s brands are more U.S.-reliant than others, particularly racket and ball maker Wilson (the third largest unit by sales) and four baseball brands (including Louisville Slugger and EVO Shield), but overall, the U.S. was just 26% of Amer’s nearly $1.5 billion of sales in the first quarter, which was a big reason the top and bottom lines (earnings of 27 cents a share were up 145% and a big 12 cents above expectations) continue to look great. Between the lower tariff rates on China being telegraphed now and the ability to shift product going into the U.S. from China to Vietnam and other countries, Amer believes the tariff hit will be minimal. The real story for the business is the continued appetite of Asian consumers for Arc’teryx outdoor clothing and Salomon’s hiking and walking shoe lines. Sales in China rose 43% while sales in the rest of Asia lifted by 49%, showing excellent momentum as Amer populates the region with hundreds of stores. The brands are seeing a lot of traction as premium products, too, so Amer is dropping lower-end retail partners in favor of ones that support the affordable luxury image. For the full year, management hiked its outlook to a sales rise of 16% to just over $6 billion, with Wall Street looking for earnings to boom 56% this year and another 31% next.

Technical Analysis
AS’s run from last summer into January of this year was a thing of beauty, but that set the stage for an ugly decline, with shares knifing down from 34 to 25 by March and, after a brief rally, plunging to 20 in April when tariff fears spiked. However, the 200-day line held, and the turnaround has been solid, with AS taking out resistance two weeks ago near 30, and last week’s earnings reaction not only brought a big gap, but also record daily volume for this stock. It’s volatile, but we’re OK starting a position here or on weakness, with a loose stop in the lower 30s.

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Stock 2

Amphenol (APH)

Why the Strength
Amphenol is the world’s largest maker of specialty high-speed cables, sensors, antennas and interconnect systems used in just about every industry where electronics are required, including automobiles, mobile phone networks, aerospace, data centers and general IT. Though demand in some end-markets (like autos) remains soft, Amphenol shattered expectations for the first quarter reported last month, coming in at $4.8 billion revenue, $700 million more than forecast, thanks to massive data center-related demand, primarily driven by AI; data center sales rose 133% and AI-related demand is estimated to be at a run-rate of $2 billion annually now. Margins are excellent as well, reflecting Amphenol’s size and breadth of offerings that allow it to sell packages of interconnecting solutions that smaller competitors can’t match; earnings per share were up 58% from a year ago and were also 21% greater than consensus at $0.63. What makes the results more impressive is that the business is spending aggressively on acquisitions and capital investments to position itself for a long runway of AI demand. Earlier this year, Amphenol closed on the all-cash purchase of Andrew, a long-running brand in antennas, as well as snapping up Lifesync Corp. which has a specialty with interconnection products for medical devices—together the companies add another $1.4 billion in revenue this year. For the current quarter, management says sales should end up between $4.9 and $5.0 billion, a rise of around 37%, with net income increasing 50% to $0.66 per share. While investors are thrilled with how well management is executing, not everything is perfect. The Trump tariffs are pulling forward some business to the current period, which increases the likelihood of weaker periods down the line, and any AI slowdown could bring disappointment to tech-focused bulls. Still, Amphenol is the leading provider in a core IT supply line, and big investors clearly see more good times ahead.

Technical Analysis
After a persistent run into May of last year, APH really didn’t do much, hitting only marginal new highs in November and February before going over the falls with the market—by the time the selling stopped, shares were off 29% from their highs in April. But after steadying itself for two weeks, APH took off on massive weekly volume following earnings, and shares have shown little inclination in pulling back since, with the recent rest period very tight. If you don’t own any, we’re OK taking a swing at it on minor weakness, with a stop in the mid-70s.

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Stock 3

AngloGold (AU)

Why the Strength
South Africa is home to the third-largest gold mine reserves in the world and, at one time, was the largest national gold producer (as recently as 2006). Today, however, the country is considered a high-risk jurisdiction for mining companies due to factors like political instability, resource nationalism and legal uncertainties. While mining giant AngloGold (covered in the March 24 issue) still has headquarters in South Africa, the firm has moved away from mining operations in its home country in recent years, instead focusing on Australia, the Americas and other (more politically stable) African nations for exploring and producing the yellow metal. After several years of erratic performance (both financially and operationally), AngloGold sold the last of its South African operations in 2020 and brought in fresh new management in 2021 as part of a strategic turnaround. And over the last couple of years, those efforts have clearly paid off, particularly in terms of profitability, thanks in part to the company’s strategic acquisitions—most notably last year’s purchase of the highly productive Sukari Gold Mine in Egypt (which has confirmed reserves of 6.2 million ounces). In Q1, the miner got off to a solid start for the year, primarily driven by solid production growth from the Sukari mine, reporting total revenues of $1.9 billion (up 68% from a year ago) and earnings of 88 cents that increased many-fold from a year ago. All-in sustaining costs per ounce (AISC, a key metric) decreased 2% to $1,657, which allowed the firm to improve production costs. Significantly, AngloGold reported a sevenfold increase in free cash flow (FCF), to $403 million, and an almost eightfold rise in profit attributable to equity shareholders, driven by higher gold production, effective cost management and, of course, a stronger gold price. Looking ahead, management guided for full-year gold production of around 3.1 million ounces (up a strong 17% if realized), with analysts expecting booming sales and earnings for the year. Additionally, under its dividend policy, AngloGold will target a 50% payout of annual FCF, subject to maintaining a reasonable net debt-to-adjusted EBITDA target ratio, which could mean a hefty payout later this year.

Technical Analysis
We took profits in our last AU trading position in late April after riding that month’s run-up and as gold stocks were a bit overextended. The group did pull back after that, but encouragingly, it’s turned into more of a healthy consolidation—AU dipped quickly to 39, and after a modest bounce, fell back to slightly lower lows to test the 50-day line. But now shares are perking up again, a good sign that this five-week rest will resolve to the upside. We’ll set our buy range above 45, aiming to enter on a push above near-term resistance.

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Stock 4

Carvana (CVNA)

Why the Strength
It’s somewhat rare for a former glamour name to stage a big turnaround like Carvana did in 2023 and 2024—but it’s even rarer for that turnaround to morph into an emerging blue chip of sorts, which is what this company is doing. Carvana burst on the scene many years ago to upend the enormous used car market in the U.S. (something near $200 billion per year of sales and approaching 40 million units sold annually), selling solely online but providing numerous backstops (seven-day return policy, guarantees that no car has been in a reported accident) and, of course, huge online inventory, no-haggle pricing, financing and more. Rapid expansion years ago meant costs (and losses) were out of control, but management got that under control a while ago, and all that expansion ($10 billion of investment that went into a fully integrated business, from acquiring cars to reconditioning to a full-featured online store to delivery) has produced an offering that people are flocking to—and a business model that’s light-years more scalable and efficient than its peers (Carvana has by far the largest EBITDA margins of any automotive retailer). Now it’s simply a matter of keeping costs in check and building on its share in this highly fragmented market, which the firm is doing brilliantly: In Q1, units sold lifted 46%, revenue leapt 38% and EBITDA boomed 93%, while earnings of $1.51 per share more than doubled estimates. Looking ahead, the top brass said all that prior investment means it has the capacity to support sales of over one million cars per year (nearly double Q1’s run rate) with “only” higher staffing (support, services) likely needed to get there—and longer term, it already has the real estate footprint to support three million units annually should they build out their inspection and reconditioning facilities. The top brass is aiming for something like 20% to 40% compounded unit sales for many years to come, with more margin expansion, too. While growth will likely slow somewhat from recent quarters, the big-picture view is very enticing.

Technical Analysis
CVNA had a massive run as a turnaround play from last February through Thanksgiving, so some sort of correction was likely needed—and it arrived in two stages, first with a 35% dip into year-end, and after a failed breakout attempt, a horrid 49% implosion with the market into April. A normal recovery would take a while … but CVNA has been anything but normal, with seven straight up weeks on good (not amazing) volume that’s taken shares to marginal new highs. We’ll aim to enter down a few points, with a loose stop in the 250 area.

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Stock 5

Construction Partners (ROAD)

Why the Strength
Despite a slowdown in residential construction, public and private infrastructure development continues to boom, driven in part by government funding (state and federal), onshoring and population growth (particularly in the Southern U.S.). Collectively, these trends are further supporting increased demand for paving, which accounts for the growth spurt Construction Partners is experiencing. The Alabama-based outfit is a holding company with a focus on the hot-mix asphalt paving and related construction industries (roads, bridges and airport runways) for both private and public civil infrastructure customers. It owns a portfolio of paving businesses across eight southern states, and its geographic footprint covers more than 633,000 total lane miles in a consistently high-growth region of the country. Earlier this month, the firm posted stellar fiscal Q2 (ended March) results that were greatly helped by a big new acquisition and a robust project backlog that reached a record $2.8 billion. Revenue of $572 million increased 54% from a year ago, though to be fair, 7% of that was organic growth with the rest from M&A. On the bottom line, EBITDA of $69 million soared 135% while earnings breezed past expectations. The company described its performance in the winter quarter (typically the slowest one of the year) as “outstanding” and said it’s “well-positioned for continued success” heading into the historically brisk spring/summer months. Management said it’s also seeing “healthy” state and federal project funding across its eight-state Sunbelt footprint, in addition to a steady workflow of commercial projects, with many of its local markets providing some of its fastest-growing contracts in the Sunbelt. A big part of the story is the recent acquisition of Pavement Restorations, a Tennessee-based company that Construction Partners said would increase its presence in that state (which it said is “ripe” for opportunities thanks to strong economic growth and favorable demographic trends). Moreover, the firm entered into two new states—Oklahoma and Texas—in Q2 via recent platform acquisitions, too. Further out, with less than 50% of the Infrastructure Investment and Jobs Act (IIJA) money spent to date, analysts see strong public spending potential ahead for the company, while Construction Partners remains committed to reaching its goals of 15% to 20% annual top-line growth by 2027, along with steady EBITDA expansion. It’s a solid story.

Technical Analysis
ROAD experienced a year and a half of solid, steady strength on the back of the infrastructure spending boom and its M&A program, with the stock accelerating higher into its top near 100 last December. That’s when it saw its first sustained correction, with the stock sliding sharply to 65 (down 35%) by early March—but shares held that low during the April collapse and, after an initial bounce, have ripped higher this month both before and after earnings. The recent rest area was tight, with today’s move to new highs a good sign. We’ll set our buy range down a bit from here.

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Stock 6

Dycom Industries (DY)

Why the Strength
Skyrocketing mobile data usage due to video streaming, social media, online gaming and remote work, combined with the growth of cloud and edge computing, has created a boom for the U.S. network telecommunications infrastructure sector as they build the capacity to handle all the data flow. Florida-based Dycom is a leading provider of contracting solutions to that area, including engineering, construction, maintenance and installation services. As more individuals work from home, the growth of fiber optic-based high-speed Internet is a key growth driver for Dycom, along with fiber installation and maintenance at commercial properties. Also supporting the firm’s expanding footprint is data center-related fiber demand, mainly to meet the increasing needs of AI infrastructure and the still-strong uptake of cloud offerings, with Dycom’s wireless equipment replacement business also contributing. Last week’s fiscal Q1 (ended April) results underscored these trends, as shown by a 10% year-on-year jump in revenue, to $1.3 billion, and a 29-cent EPS beat, to $2.01, with adjusted EBITDA increasing 15% to $150 million (all reasons for the stock’s latest strength). Further fueling the quarter’s strength were several notable awards from Verizon (for both fiber-to-the-home and maintenance work), with Windstream (for both services as well) and with Lumos (fiber-to-the-home). Of note, the company reported a record backlog of $8.1 billion, including a record $4.7 billion of which should be earned within the next 12 months (most commitments having a two-to-four-year duration). In the earnings call, the top brass expressed confidence that its diversified services and customer base would protect it from any tariff- and macroeconomic-related headwinds that might be ahead, with the growth of its installation and maintenance business (particularly for fiber-to-home and hyperscaler-related business) providing additional consistency along with a “stable base” of recurring revenue. For Q2, Dycom expects revenue of around $1.4 billion (up 17% if realized, which would be the fastest quarterly revenue growth in at least a couple of years), EPS of $2.90 (up 18%) and adjusted EBITDA of around $200 million (up 27%).

Technical Analysis
DY broke out from a very tight area in February 2024 and had a great run for three months, culminating with a gap higher to the 185 area. Shares nosed higher from there for a few months, but 200 could never really be surpassed, and then came this year’s downturn, which saw DY sink 37% right quick. But the stock held its March lows, and it’s been all up since then, up six straight weeks followed by last week’s earnings boom. We’re OK starting a position here or on dips.

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Stock 7

Kyndryl Holdings (KD)

Why the Strength
IBM spinoff Kyndryl is a big provider of mission-critical enterprise technology services, including IT infrastructure and info systems, cloud solutions, data center, AI services and more. The company is commanding headlines in the tech world lately with the number of lucrative deals it’s racking up, including last week’s announcement that it will invest up to $73 million over three years to help strengthen France’s capabilities in data, AI and cyber resilience as part of that nation’s ambition to deploy new technologies and attract talent and skills for economic growth and competitiveness. Kyndryl expects to benefit from this by strengthening its position in the lucrative European market while leveraging the new talent that it attracts to better serve its customers in France and beyond (particularly in the areas of AI and cybersecurity). On the domestic front, there have been many positives announced, including inking a “significant” deal with a major U.S. healthcare provider to optimize its IT environment, announcing a partnership with Palo Alto Networks to deliver secure access service edge (SASE) solutions powered by AI, as well as strengthening its alliances with major cloud providers, including Microsoft, Amazon Web Services and Google Cloud. For fiscal 2025 (ended March), Kyndryl reported a sizable jump in in total signings, which reached a record $18.2 billion—a 46% year-on-year increase—which included 55 contracts exceeding $50 million (up from 40 such contracts in 2024). Although Q4 revenue of $3.8 billion was down 1%, it increased by 1% on a constant currency basis, while EPS of 52 cents beat estimates by 3% and was miles ahead of the year-ago per-share loss (the reason for the stock’s strength). Management sees a big opportunity in AI going forward, with 95% of its customers adopting AI and driving double-digit signings across all its segments, but with nearly two-thirds still needing an AI governance framework. Back to the numbers, the big upside will be from margins—the top brass sees free cash flow of around $2.25 per share this year, and Wall Street sees earnings up 84% this year and another 54% next.

Technical Analysis
KD broke out from a three-month base-building stage last November on earnings, rising strongly over the next several weeks before topping near 44 in February. The stock turned south immediately afterward, falling 39% as the market downturn intensified, coming to rest above 26 in early April. A couple of weeks of tightening up around the 200-day line followed, with KD soaring back to its highs after earnings, followed by a low-volume normal retreat. We’ll set our buy range up a bit from here, aiming to enter on strength.

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Stock 8

NetEase (NTES)

Why the Strength
NetEase is one of China’s major tech players, providing a variety of online services, including video games, streaming and online education. Through its online retail platform called YanXuan, the firm offers high-quality consumer goods, while YouDao, its learning platform, provides a variety of digital learning tools, including AI-powered language translation and tutoring services. It also owns one of China’s leading music streaming services, NetEase Cloud Music. But by far its most important segment (and leading growth driver) is NetEase Games, which offers a diverse portfolio of self-developed and licensed PC, online and mobile games, with related advertising and in-game purchases. (Some of its more popular titles include Knives Out, Harry Potter: Magic Awakened and Naraka: Bladepoint; the segment has also partnered with global licensors like Blizzard Entertainment and Warner Bros.) The segment further boasts one of the world’s largest in-house game R&D teams, with a focus on developing innovative and high-quality gaming experiences, with a reach that extends well beyond China, even into North America and several other nations. Indeed, video games were the main reason for the stock’s latest show of strength, as Q1 results highlighted a double-digit percentage sales jump in the firm’s core games unit. Total revenue of $4 billion increased 7% from a year ago, with revenue from games and related value-added services up 12%, thanks to increased online game sales from titles like the just-launched global top-seller Marvel Rivals (which NetEase called a “major milestone” in its portfolio), as well as many other licensed games. Earnings of $2.41 per share beat estimates by 50 cents and were up 33%. Other segments were weak, with YouDao revenues down 7% and NetEase Cloud Music decreasing 8%, but the main focus (and what drove the earnings beat) is on recently released games, with several titles maintaining “strong” global popularity, including Where Winds Meet, which surpassed 30 million registered players in Q1. The firm expects its “robust pipeline” of upcoming game releases (including Marvel Mystic Mayhem) will drive growth going forward—Wall Street sees 25% to 30%-ish bottom-line growth in Q2 and Q3.

Technical Analysis
NTES hit a peak around 118 in November 2023 and fell on rough times for the better part of 2024, working its way down to the mid-70s in September and again in November. Shares picked up from there, rallying back to 110 in February, where NTES began a tighter, shallower base-building effort as the market fell apart. Volume support showed up at the April lows, and the big earnings gap two weeks ago is certainly a good sign. We’re OK buying on a little weakness with a stop in the upper 100s.

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Stock 9

On Holding (ONON)

Why the Strength
On Holding has had the occasional uncertainty and headwind over the past year or two, from capacity constraints to some cost overruns to, of course, the recent fear over all things tariffs—but this emerging blue chip in the footwear sector has always had a great story, and the top brass continues to pull the right levers, which keeps big investors coming back once those uncertainties abate. The company’s footwear is comfortable and a bit trendy for regular users but also actually has some technology behind it for athletes, with a more cushion-y impact and spring-ier liftoff; the firm’s latest innovation, dubbed LightSpray, uses “spray on” materials to produce a six-ounce running shoe with no laces and excellent performance (for a premium price). The combination of usefulness for athletes and comfort for regular users has resulted in great demand, especially as the firm has broadened its offerings into more fields (trail running, track and field, tennis, etc.) and moved into apparel and accessories, which are selling well. Tariffs are a concern, but the firm is thriving despite them (much of its product is made in Vietnam; its base case is the current 10% tariff, though obviously that could change) and thinks it has room to raise prices given its premium brand positioning. Meanwhile, despite the uncertainties, business is strong and actually accelerating: In Q1, currency-neutral sales actually lifted 40% (both wholesale and direct-to-consumer lifted at least 39%), with strong expansion all over the map (33% Europe/Middle East, 29% Americas, 129% in Asia) and across its product line-up—footwear sales were up 38%, while apparel and accessories each grew north of 90% (though they were just 6%-ish of sales). Importantly, EBITDA grew 55% here as margins expanded, and the top brass stuck with a relative buoyant (28% sales growth, solid EBITDA margin expansion) outlook. Obviously, trade headlines will likely move On around near term, but barring a complete blowup, On’s still-booming business should continue to entice buyers over time.

Technical Analysis
ONON had a nice run from last spring (when it finally broke free from a long post-IPO base) until late last year, with a stairstep-like advance over many months as perception improved. Still, the 60 area repelled the stock in December, and when the breakout attempt in January failed, the sellers pounced—combined with tariff fears, shares plummeted 46% in just over two months. But the comeback from there has been equally as strong, with a persistent advance from late April into mid-May and then a very strong earnings reaction that took ONON back to its highs. If you’re OK using a loose stop, you can take a swing at it around here.

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Stock 10

Snowflake (SNOW)

Why the Strength
Snowflake has always had a great story, with a data cloud and warehousing offering that allows clients to store and analyze all their data in one place (no matter how big, how many different formats or what type of data), and with the ability to scale up or down resources as need be automatically—if a few different teams at the same firm are trying to query the same data, Snowflake will quickly create separate virtual warehouses, keeping performance intact. (There’s no need for on-premise servers, all the data is handled by Snowflake’s platform.) Basically, the offering was built from the ground up for the cloud era, and with AI workloads slicing and dicing data even more, the firm looks like the Big Data solution for tons of big enterprises (754 of the Fortune 2000 have signed up, including 606 that spend at least $1 million per year with Snowflake, a figure that was up 27% from a year ago). Growth here has always been good-to-great, but after some fits and starts, the bottom line is kicking into gear while future metrics look great: In Q1, revenue lifted 26% (due to both growing purchases among its biggest clients and a 19% jump in the overall customer base) while operating margins more than doubled and free cash flow was miles better than reported earnings. Impressively, the firm’s remaining performance obligations (money that’s coming to it in the future) came in at a big $6.7 billion, up 34% from a year ago, which bodes well for the future. The top brass nudged up estimates, looking for 25% top-line growth for this year as a whole, while margins expand and free cash flow should come in north of $3 per share (compared to $1.10 in reported earnings). To be fair, there is a lot of investment going on here, but it looks like Snowflake should post rapid and reliable sales and cash flow growth for a long time to come.

Technical Analysis
SNOW came public in 2020 with a great story but a gigantic valuation, and the stock has never really been in much of a sustained uptrend since, with a big downtrend in 2022 and lots of ups and downs over the past couple of years. But now, maybe, the stock is changing character—there was a mega-volume pop in November (a bullish clue), and after being pulled down by the market this year, SNOW has stormed back and, last week, reacted very nicely to earnings, tagging 14-month highs on another round of big volume, with nice follow-through today. You can enter here or (preferably) on dips.

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Previously Recommended Stocks

The next Cabot Top Ten Trader issue will be published on June 2, 2025.

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