October 30, 2025

Market’s Spooky Season Winding Down, with No Frights In Sight

This Halloween, there’s nothing to fear. At least not for investors.

OK, nothing is a bit of an exaggeration. Today’s anticipated meetup between President Trump and Chinese President Xi Jinping could go sideways, putting high tariffs between the two mega-powers back on the menu. There could be some key earnings blowups ahead as we remain in the thick of third-quarter reporting season. And the government shutdown is more than a month old at this point, which could take a toll on the market.

But there’s no real boogeyman looming over the market like Michael Myers or Freddy Krueger right now. It’s no longer the Fed, which has turned from foe to friend of late and just slashed rates by another 25 basis points on Wednesday. Corporate earnings growth has gone through the roof thanks to the artificial intelligence boom, with S&P 500 companies on pace for a fourth consecutive quarter of double-digit earnings growth. And the tariff fears that dominated the news cycle back in the spring have mostly been doused, pending negotiations with China.

So the good times are rolling on Wall Street, with the S&P reaching a new all-time high every day this week – and, bigger picture, posting a sixth straight month of positive gains, something rarely seen. Yes, valuations are high … but because earnings have been so strong, they’re not as high as they were in early 2022 or late last year or even this February, at least on a forward price-to-earnings basis. It’s in value investors’ nature to tsk-tsk the market when it’s technically overvalued, and to warn of impending doom. But stocks can remain “overvalued” for quite a while – the S&P’s forward P/E has been north of 20 since April, and for all of 2024 (see chart below, courtesy of MacroMicro).

My advice? Ride the wave! While growth and AI have clearly led the charge this year, especially in the six months since the Liberation Day bottom in early April, value stocks have performed well too, up more than 13% during that time. Eventually, the good times will come to an end, but that may still be a ways off – market trends tend to last longer than most people expect, as my former Cabot boss Tim Lutts used to say. So let’s capitalize while it lasts by investing in more stocks that blend characteristics of value and growth.

I’ll have a new pick that fits that description in next week’s November issue. Stay tuned!

Note to new subscribers: You can find additional commentary on past earnings reports and other news on recommended companies in prior editions and weekly updates of the Cabot Value Investor on the Cabot website.

Send questions and comments to chris@cabotwealth.com.

Also, please join me and my colleague Brad Simmerman on our weekly investment podcast, Cabot Street Check. You can find it wherever you get your podcasts, or you can watch us on the Cabot Wealth Network YouTube channel.

This Week’s Portfolio Changes

None

Last Week’s Portfolio Changes

None

Upcoming Earnings Reports

Thursday, October 30 – BYD Co. Inc. (BYDDY), KBR Inc. (KBR)

Tuesday, November 4 – ADT Inc. (ADT)

Wednesday, November 5 – Cinemark (CNK)

Thursday, November 6 – Shift4 Payments (FOUR)

Growth & Income Portfolio

Growth & Income Portfolio stocks are generally higher-quality, larger-cap companies that have fallen out of favor. They usually have some combination of attractive earnings growth and an above-average dividend yield. Risk levels tend to be relatively moderate, with reasonable debt levels and modest share valuations.

Bank of America (BAC) is perhaps the most resilient large U.S. bank. It bounced back from the Great Recession of 2007-08, when BAC shares lost 93% of their value. The stock has rebounded after losing half its value from the 2022 bear market and subsequent implosion of Silicon Valley and Signature banks in March 2023. Now, the bank has never been more profitable or generated more revenue. And at 11.9x forward earnings estimates, it’s cheap.

Warren Buffett has long seen value in BofA; it’s still the third-largest position in the Berkshire Hathaway portfolio, despite some recent trimming. So, we’re not breaking any new ground here. But sometimes the obvious choice is the right one. The combination of growth, value (BAC also trades at just 1.4x book, cheaper than all but Citigroup among the big banks), and history of resilience makes for an enticing formula.

BAC shares bounced back this week, regaining the 3% it lost last week. The bank is coming off a strong third-quarter earnings report. Earnings per share of $1.06 were 12% higher than the 95-cent estimate and 23% higher than the same quarter a year ago, while revenues of $28.2 billion marked an 11% year-over-year improvement. As one might expect from such a robust quarter for stocks, Bank of America’s trading and investment banking revenues improved sharply, with investment banking fees up 43% and equities trading up 14%. Net interest income, which accounts for more than half of revenues ($15.4 billion), improved 9% year over year.

The next big company event that could potentially spur movement in the share price is the bank’s Investor Day on November 5. The company plans to highlight some future areas for growth, among other items. As it stands, we have a solid double-digit gain in BAC, and shares have another 9% upside to reach our 57 price target. BUY

BYD Company Limited (BYDDY) has long been one of China’s top automakers. What really sent its sales into hyperdrive, however, was when it made the switch to all battery electric and hybrid plug-in vehicles in 2022. Revenues instantly tripled, going from $22.7 billion in 2020 (a record, despite the pandemic) to $63 billion in 2022. In 2023, sales improved another 35%, to $85 billion. In 2024, revenues ballooned to $107 billion, or 25% growth, with another 19% growth expected in 2025. The EV maker has emerged as a legitimate rival to Tesla.

But there’s even greater upside. Right now, BYD does roughly 80% of its business in China, accounting for one-third of the country’s total sales of EVs and hybrids this year. The company is trying to change that, recently opening its full-assembly plant outside of China, with a new plant in Thailand starting deliveries. A plant in Uzbekistan puts together partially assembled vehicles. A plant in Brazil is expected to open early next year. And BYD has plans to open more new plants in Cambodia, Hungary, Indonesia, Pakistan and Turkey. Mexico and Vietnam are possible targets as well. Despite no plans to do business in America just yet, BYD is on the verge of becoming a global brand.

And while BYDDY stock has fared well, it hasn’t grown as fast as the company.

BYD shares advanced 3% this week ahead of today’s (12:30 a.m. ET) third-quarter earnings call. Analysts are looking for 21% revenue growth. EPS estimates are not available. BYD is coming off a rare down quarter in Q2, with profits falling by roughly a third year over year, mostly due to rampant price-cutting in China. The stock is down roughly 15% since then. A better quarter could lead to a swift bounce-back, or at least help get BYD out of its monthslong funk.

Fortunately, we booked profits on half our BYD stake right around the top way back in May and are letting the second half ride. I still think the stock’s best days are ahead of it, but it’ll need to start proving it soon. Today’s earnings will be pivotal on that front. HOLD HALF

Dick’s Sporting Goods (DKS) has been growing steadily for years.

From 2016 to 2023, the sporting goods chain’s revenues have improved 64%, from just under $8 billion to just under $13 billion. In 2024, topped $13 billion for the first time. It’s on track for close to $14 billion this year.

Dick’s, in fact, has grown sales in each of the last seven years – including in 2020 and 2021, when most other retailers saw sales nosedive due to Covid restrictions. But Dick’s all-weather ability to keep growing no matter what’s happening in the world or the economy speaks to its versatility. Since Covid ended, however, Dick’s sales have entered another stratosphere. As youth sports returned in 2021, Dick’s revenues jumped from $9.58 billion to $12.29 billion. They’ve been rising steadily each year since and are expected to do so again this year.

But Dick’s isn’t purely a growth stock—it’s also undervalued. DKS shares currently trade at 15.2x forward earnings estimates and at 1.4x sales.

DKS shares rebounded from a modest downturn, adding back 1.5% this week. There was no company-specific news, though positive developments on tariffs – with South Korea inking a low-tariff pact with the U.S. this week, and tensions with China subsiding, at least for now – have likely helped, since a lot of Dick’s sports apparel is manufactured in places like China, Korea, Indonesia and Japan. So far, Dick’s business has been largely unaffected, with sales and earnings growing by more than 5% last quarter.

DKS shares have performed well for us and have another 9% to go before they reach our 250 price target. BUY

FedEx Corp. (FDX) needs no introduction. It’s the third-largest package courier in the world with a 17% global market share, behind only DHL (39%) and UPS (24%). In America, it’s second banana, behind only UPS, accounting for roughly a third of courier and local delivery revenue and 19% of total parcel volume.

Like every package delivery company, FedEx’s sales and earnings peaked during Covid, when people around the world did virtually all of their shopping online, and packages were zooming around the world like never before. In Fiscal 2021, which for FedEx ended in May 2021, the company’s revenue reached a then-record $83.8 billion, 20% better than any previous year. EPS came in at $19.77 that year, 15.6% higher than the previous (FY 2018) high. In Fiscal 2022, which essentially coincided with year two of the (roughly) two-year-long global pandemic, revenues swelled to $93.5 billion, though the company was less profitable ($14.52).

While there hasn’t been a big dropoff from those two Covid-enhanced years, sales have yet to eclipse that FY ’22 peak, while earnings haven’t come close to the FY ’21 apex. This year (FedEx’s Fiscal 2026 began in June) is on track to come closest to hitting those Covid highs, with analysts forecasting more than $89 billion in revenue and $18.53 in EPS. Next year, those numbers are expected to rise to more than $92 billion and a record $21.23 in EPS. These are projections, of course, but they’re reflective of a healthy and, in fact, incrementally improving global economy.

And yet the stock is quite cheap on a price-to-earnings (13.4x forward estimates), price-to-sales (0.6x) and price-to-book-value (2.0x) basis. The stock is well shy of its five-year averages in all three valuation metrics.

FDX shares added another 3% this week. There was no company-specific news, but there also was no reason behind the drop-off in shares earlier in the month other than the escalation of U.S.-China trade tensions potentially throwing a wrench into the global economy and, by proxy, FedEx’s business. Now that those trade tensions have seemingly eased, faith in the global economy has been restored (for now), and FedEx remains a great way to play a healthy economy.

We have a double-digit gain on FDX shares in less than two months, and the stock has another 20% to go before it reaches our 300 price target. BUY

KBR, Inc. (KBR) is an industrial conglomerate that has its hand in a lot of big revenue-generating pies – aerospace, defense, energy, engineering and intelligence. Its Government Solutions segment provides support for agencies including NASA, militaries in the U.S., U.K., and Australia, among others, and infrastructure projects from Indonesia to the Middle East. Its Sustainable Technology Solutions segment helps engineer energy projects, helps companies and governments transition to more sustainable forms of energy, and provides energy security solutions in markets like the Middle East. KBR also dabbles in cybersecurity, national security solutions, surveillance, global supply chain management, data analytics and much more.

As with most industrials, business slowed to a crawl in the aftermath of Covid due in large part to supply-chain issues. After peaking at $7.3 billion in revenue in 2021, sales dipped to the $6 billion range in 2022 and 2023. Last year, however, brought a new record high of $7.74 billion; this year, the analysts see revenues at $8.76 billion, a 13% improvement, and stretching to $9.5 billion in revenue next year. And after failing to turn a profit in 2023, the company is on track for a record $3.85 in EPS this year (up 15% from 2024) and $4.27 next year.

While sales have surpassed pre-Covid levels, however, shares haven’t consistently followed suit, peaking in late 2024 but currently trading at 20% below its apex. At 14.8x earnings and 0.77x sales, the stock is quite cheap, trading well below its five-year averages (forward P/E of 18.5, price-to-sales north of 1.0).

KBR shares tumbled another 2% this week ahead of today’s (October 30) pre-market earnings report. If the earnings fail to spark a turnaround in the share price, we may cut bait on this heretofore disappointing stock. But expectations are fairly upbeat: 1.7% revenue growth, but with a 13.1% EPS growth estimate; and KBR has topped earnings estimates in each of the last four quarters. The last quarter, reported in late July, resulted in shares running up from 45 to 51 in the ensuing four weeks. With shares now trading at 43, let’s hope for a similar post-earnings run-up this time. BUY

Buy Low Opportunities Portfolio

Buy Low Opportunities Portfolio stocks include a wide range of value opportunities. These stocks carry higher risk than our Growth & Income stocks yet also offer more potential upside. This group may include stocks across the quality and market cap spectrum, including those with relatively high levels of debt and a less clear earnings outlook. The stocks may not pay a dividend. In all cases, the shares will trade at meaningful discounts to our estimate of fair value.

ADT Inc. (ADT) is literally a household name.

It’s a 150-year-old home security company whose octagon-shaped blue signs with white lettering that say “Secured by ADT” are ever-present in neighborhoods across the country. ADT provides security to millions of American homes and businesses, with products ranging from security cameras, alarms and smoke & CO detectors, to door/window/glass break sensors and more, all of which can alert one of ADT’s industry-best six 24/7 monitoring centers if any one of those security systems is breached.

Business has been fairly stable, with annual revenues hovering in the $5 billion range for four of the last five years (2021 was an exception, with a dip down to $4.2 billion during Covid) and is on track to do it again both this year and next. But where the century-and-a-half-old company has really improved of late is profitability. The last three years marked the first time the company has been in the black in consecutive years, with earnings per share going from 15 cents in 2022 to 51 cents in 2023 to 69 cents a share in 2024. EPS is expected to improve to 85 cents in 2025.

All of that EPS growth makes the share price look quite cheap. ADT shares currently trade at just 9.6x earnings estimates and at just 1.6x sales. A solid dividend (2.5%) adds to the appeal of this mid-cap stock.

ADT shares were down 1.5% this week but have been hovering in the same 8.4 to 8.8 range all month. There’s been no news, but that will change next week, when the company reports earnings on November 4. Analysts anticipate 5% revenue growth with 4% EPS growth. If the company manages to top earnings estimates by double digits for a fifth straight quarter, I think there’s a very good chance the stock will break to new highs above 8.8 resistance. As it is, ADT has 16% upside to our 10 price target. BUY

Cinemark Holdings (CNK) is the third-largest movie theater chain in the U.S., behind only former meme stock AMC Entertainment (AMC) and Regal Cinemas, which is privately held. It’s also the largest movie theater chain in Brazil, with a 30% market share. In addition to its flagship Cinemark, which began operation in 1977, the company owns Century Theatres, Tinseltown, CineArts and Rave Cinemas.

Business peaked in 2019, when the firm raked in a record $2.97 billion in revenue. It cratered to a mere $587 million the following year, thanks to Covid, but by 2022 it was back above the $2 billion mark, swelling to more than $2.7 billion in each of the last two years. This year, the company expects to top $3 billion in sales for the first time, which would mark an 8.5% uptick from last year.

And yet, despite sales being on track for a record year and earnings per share likely to trail only last year, the share price is more than 35% below its 2015 apex above 45 and about 30% below its pre-Covid, 2019 highs above 42. As we did with great success in both the airline industry and the cruise industry, I like finding sectors that were essentially wiped out during Covid, only to come roaring back to new heights due to pent-up demand.

CNK shares cooled a bit this week, falling about 1.5% after advancing 8% in the previous two weeks. The company reports earnings next Wednesday, November 5, which should give us some insight into whether Cinemark is still on track for a record sales year. In other news, the company announced a deal with IMAX Corp. to open 17 70mm IMAX theaters in the U.S. and South America – a good sign of growth.

CNK shares have been up and down of late and have a whopping 56% upside to reach our 42 price target. Let’s see if next week’s earnings can help start a more sustained rally in the stock. BUY

J.M. Smucker (SJM) makes a lot of products that have been in almost every American’s pantry and pet food box for years: Smucker’s jelly, Jif peanut butter, Folger’s and Dunkin’ coffee, Hostess cupcakes, “Donettes” and mini muffins, Meow Mix and Milk Bones. Those generational hand-me-downs are why this family-run (currently run by Mark Smucker) company is still thriving 128 years removed from its 1897 founding. The stock has been equally reliable since it came public in 1994, but just dipped to a five-year low in June – which spells opportunity.

Despite finishing its 2025 fiscal year on a down note, Smucker’s is growing just fine, posting record sales ($8.73 billion) last year. Analysts expect the company to achieve a new sales record in FY ’26 ($8.98 billion) and to top the $9 billion mark in FY ’27. Earnings per share have been all over the place but are expected to swell from $9.13 in FY ’26 to $9.83 in FY ’27. So, the company is growing about as well as it ever does … and yet shares are a third off of their 2023 highs.

SJM shares gave back their 3% gain from last week, falling about 3.5% this week. There was no news, and there might not be much prior to the next earnings report, on November 25. Let’s be patient until then. The stock remains undervalued at 12x earnings and 1.3x sales. It has 27% upside to our 130 price target. BUY

Shift4 Payments (FOUR) bills itself as the leader in secure payment processing solutions. Its fintech offerings are available in more than 75 countries and process more than 5 billion annual transactions, using over 100 payment methods. Based in Allentown, Pennsylvania, Shift4 was founded in 1999 by a 16-year-old named Jared Isaacman in his parents’ basement in New Jersey. Called United Bank Card at the time, it shortened the time it took for businesses to set up payment systems from a month to a day and offered free credit card readers – a rarity at the time. Today, after several rebrandings, Shift4 Payments (it took on the name of a payment gateway provider it acquired in 2017) processes payments for more than 200,000 businesses worldwide in the retail, hospitality, leisure and restaurant industries.

The company came public in June 2020 – one of the few IPOs on U.S. exchanges in the months after the onset of the pandemic. After debuting at 23 per share, the stock more than quadrupled to 101 a share by the following April. Then, the bear market arrived in 2022, and FOUR retreated all the way back to the low 30s by the middle of that year. It has since recovered, rising to new heights above 125 this February. But the tariff scare in early April took shares all the way back to the low 70s. They’ve recovered slightly since, but not much, trading at 80 as of this writing.

But the company never stopped growing. What was a $766 million (in revenue) company in 2020 now does more than $3 billion in revenue and is well on its way to topping the $4 billion mark this year. While not growing revenues as fast as it did in 2021 (+81%) or 2022 (+43%), Shift4 is on track to top 28% revenue growth for a third straight year. Sales are expected to expand by another 26% this year. Meanwhile, the company is now steadily profitable, with EPS expected to grow another 40% this year and 24% next year. And yet, the stock trades at 14x forward earnings – the cheapest it’s ever been aside from when it was 11.3x earnings this April – and 2.2x sales, well below its 2.6x average P/S ratio.

Fintech has become an off-Broadway term, swallowed whole by the AI tidal wave. But the industry never stopped growing, even if it’s not quite at the breakneck speed of a few years ago. And Shift4 is certainly one of the sector’s leaders.

FOUR shares slipped again, knocked back about 6% after Mizuho lowered its price target on the stock from 100 to 95. While shy of our 110 target, that’s still about 34% above the current price. The average analyst price target is 105, so the Wall Street consensus is that this fintech stock is woefully undervalued. Perhaps next Thursday’s (November 6) earnings report will help turn things around. Expectations are high: 30% revenue growth and 42% EPS growth. Earnings have been a mixed bag of late for Shift4, with two beats and two misses in the last four quarters. So let’s hope for the former this time around. BUY

Current Recommendations

Note for stock table: For stocks rated Sell, the current price is the sell date price.

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