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U.S. stock markets have exhibited a high degree of volatility in recent weeks. There are lots of factors contributing to the turmoil, which will ebb and flow, probably for the rest of our lives. So let’s just circle back to why we’re here: We’re here to invest in stocks because over the long term, stocks outperform fixed income investments.

There’s been a variety of news pertaining to airlines, and also to the Boeing 737 MAX jet problem, in recent weeks. It can be hard to know which industry-specific stocks to own and which to ignore. I always use profit growth as my first line of defense when deciding which stocks might join my portfolios, on the theory that rising profits should theoretically lead to rising share prices.

It’s quite common that a year’s top-performing stocks and industries can fade after the new year arrives as investors shift money into industries that have been long-ignored. “Buy low” doesn’t just refer to stock market corrections and random stocks that have fallen precipitous amounts. “Buy low” can also refer to unrecognized industry-wide opportunities.

I expect to be adding and removing stocks from these portfolios in 2020, more frequently than usual. That’s because when a stock market recovers from a big drop, stocks tend to get stuck in trading ranges, advancing in fits and starts.

If you want to build a buy-and-hold portfolio of attractive takeover targets, look no further than undervalued small- and mid-cap growth stocks. Presuming normal stock market action, you’ll reap the benefits associated with owning growth stocks, and you’ll periodically reap the additional exciting benefit of owning takeover stocks.

This morning brought some broad buying to the market, though not enough to reverse the negative signal by our intermediate-term trend-following indicator last week. And that means that raising cash—by selling your weakest growth stocks—is still a good idea.

For Cabot Stock of the Week, I’ve singled out three to sell today (Big Lots - BIG), (RingCentral – RNG) and (Global X Cybersecurity ETF – BUG), but you may have others in your own portfolio.



As for new buying, this week I’m going with a low-risk recommendation from Cabot Dividend Investor, which has a good growth story and pays a 3.1% dividend.

Last week didn’t start off so well, with the major indexes sagging during the first four days; however, many potential leaders that popped higher the week before held firm. And then, on Friday, the market bolted higher! Clearly, we’re still in a choppy and tricky environment, but the action we’ve seen during the past two or three weeks looks like accumulation to us; at the very least, it looks like the sellers have lost their grip on things. We’re keeping our Market Monitor in neutral territory because it’s still early; many stocks are simply repairing the damage they suffered since April, as opposed to launching into new advances. But we’re growing more encouraged, and it’s fine to ratchet up your aggressiveness by one step.

This week’s list has many enticing names and growth stories from a variety of industries. Our favorite of the week is Athenahealth (ATHN), which isn’t at an ideal buy point but has shown a classic huge-volume breakout followed by tight trading ever since. The story is great and we think you can start a position on any dip.

Stock Name	Price	Buy Range	Loss Limit
Acuity Brands (AYI)	0.00	58-60	-
Apple (AAPL)	248.94	590-610	-
Athenahealth (ATHN)	0.00	91-95	-
CAB (CAB)	0.00	42-45	-
Cirrus Logic Inc. (CRUS)	0.00	35-38	-
The Gap, Inc. (GPS)	0.00	31-33	-
Seagate Technology (STX)	0.00	29.5-31.5	-
ServiceNow (NOW)	341.86	26.5-29	-
Tesoro (TSO)	0.00	30-32	-
Western Refining (WNR)	0.00	24-25	-

The market and many leaders bolted ahead last week, which is just what we wanted to see as the big investors came back from the beach; it’s clear the buyers are in control. That said, despite some heady gains, we wouldn’t call this a runaway bull market—we’re seeing some under-the-surface rotation every few days, with money cycling out of some stocks and sectors and into others. That is totally orderly and, over time, healthy, but it does mean you get some periodic weakness in favored names. Thus, keep your feet on the ground, and look to use pullbacks as buying opportunities in the best stocks. As for winners, you should generally hold on to your best performers, though taking partial profits here and there (hopefully on the way up) is a good idea.

This week’s list is another potpourri of stocks and sectors, most of which have unique catalysts for higher prices. Our favorite of the group is Urban Outfitters (URBN), part of the very strong retail group. The stock is following through beautifully from a huge earnings gap a couple of weeks ago. Try to buy on weakness.

Stock Name	Price	Buy Range	Loss Limit
Affiliated Managers Group, Inc. (AMG)	0.00	118-122	-
eBay Inc. (EBAY)	0.00	47-48.5	-
Fortune Brands Home & Security (FBHS)	81.02	25.5-26.5	-
GHL (GHL)	0.00	46-48	-
IPG Photonics (IPGP)	0.00	59-62	-
Men’s Wearhouse (MW)	0.00	36-37	-
ServiceNow (NOW)	341.86	33-35	-
Tesoro (TSO)	0.00	38-41	-
Urban Outfitters (URBN)	0.00	37-38.5	-
Valero Energy (VLO)	97.40	30-31.5	-

The capital markets are always interesting, and seemingly more so now. A lot of trends are coming together that could drive some late-year turbulence.

Artificial Intelligence (“AI”) is this year’s hot topic. Following a remarkably strong outlook last quarter, chipmaker and AI beneficiary Nvidia (NVDA) is scheduled to report earnings on Wednesday. The company’s shares surged on Monday in advance of the report as speculators place bets for another blow-out report. Other Magnificent 7 tech stocks are riding the wave. If Nvidia’s revenues, earnings and guidance are uninspiring, tech stocks will have a rough year-end.

Sizing up a merger arb opportunity requires more than just garden variety equity analysis. In his famous letter to Berkshire Hathaway shareholders in 1988, Warren Buffett laid out four questions to answer regarding arbitrage situations:

1. How likely is it that the promised event will indeed occur?
2. How long will your money be tied up?
3. What chance is there that something still better will transpire – a competing takeover bid, for example?
4. What will happen if the event does not take place because of anti-trust action, financing glitches, etc.?

Today, we add a new Cabot Turnaround Letter recommendation that we think comes close to answering all four.

Tesla (TSLA) is getting lots of headlines these days, and for good reason.

Their CEO and founder, Elon Musk, was tabbed by President-elect Donald Trump to head up something called the Department of Government Efficiency (along with Vivek Ramaswamy); their stock price is up 57% in the last month; and the company is coming off its first truly encouraging quarterly earnings report in a year. Anyone who invested in TSLA a year ago, five years ago, or 13 years ago, when our Mike Cintolo first recommended the stock in his Cabot Top Ten Trader advisory, has made a LOT of money.

But another company has surpassed Tesla as the biggest EV seller in the world. And today, we add it to the Cabot Value Investor portfolio.

Stocks had a good week, but dark debt-ceiling clouds are gathering. The closer we get to the early-June deadline without a deal, the more likely we are to see some selling, at least if 2011 is any guide. To prepare for such a scenario, today we add a bit of safety in the form of a master limited partnership (MLP)-adjacent play on America’s infrastructure boom. It’s a recommendation from Cabot Income Advisor Chief Analyst Tom Hutchinson, and it’s hitting new 2023 highs as I write this.

Details inside.

The good news is that it seems that the markets are back on track, although we remain cautious.

Economic statistics continue to be strong, with factory orders and consumer confidence better than analysts expected. Home prices have moderated somewhat, although interest rates and the continuing lack of inventory are not helping that market.

The last couple of years haven’t exactly been kind on food, beverage and restaurant stocks. Generally speaking, the companies in the food and drinks category underperformed the S&P 500 last year, while in the case of restaurants, 2025 was a particularly bad one.

The market has gotten a lot bumpier in November, though the major indexes haven’t given up much ground. That’s because even as the air comes out of the (perhaps overinflated) artificial intelligence balloon of late, investors are instead rotating into the many under-loved names in other sectors. Today, we add a stock in one of those underappreciated sectors. It’s an educational company that Carl Delfeld recommended to his Cabot Explorer audience last month. And the stock is having a solid year.

Details inside.

Current Market Outlook


There were some intra-week ups and downs, but overall, not much changed with the evidence last week—the major indexes mostly closed down 0.5% to 1.5%, which keeps the broad market in an uptrend but also means growth stocks and the Nasdaq are still in corrections and consolidations. With many names now five to seven weeks into new launching pads, we’re looking for definitive signs that the buyers are coming back for growth stocks—and indeed, we have seen some encouraging action during the past two sessions—but it’s too soon to conclude the environment is changing. Thus, we’re sticking with the same stance: Some small buys of strong stocks on pullbacks is fine, but we’d stay relatively close to shore until the bulls prove that the buying pressures are spreading and more solid entry points emerge.

This week’s list has something for everyone, whether you’re looking for different sectors or setups. Our Top Pick is LGI Homes (LGIH), which has reemerged on the upside and could be leading a new group move in the homebuilders.

Stock Name	Price	Buy Range	Loss Limit
Aclaris Therapeutics (ACRS)	28	25.5-27.5	21-22
Alcoa (AA)	30	29-31	25.5-26.5
Cimarex Energy (XEC)	60	56-58.5	51-52.5
IAC/InterActiveCorp (IAC)	248	237-250	214-220
Jack in the Box (JACK)	115	111-115	100-102
LGI Homes (LGIH)	142	138-143	123-126
Spirit AeroSystems (SPR)	48	46-49	41.5-43
Steel Dynamics (STLD)	47	44.5-47	40.5-41.5
TripAdvisor (TRIP)	54	51-54	45-47
Williams-Sonoma (WSM)	180	167-173	148-152

Current Market Outlook


The holiday-shortened week was a relatively quiet one, with most indexes and sectors mostly meandered in tight ranges. After the prior two and a half weeks of constructive action, we consider the lack of selling a positive; to this point, the bears haven’t really come around for many names despite some decent rallies and a few breakouts. But now the real test will begin—if the former leaders that have run right into some tough resistance can hold firm, if recent breakouts can build on their gains and fresh breakouts can emerge, this rally could gain steam ... but if the sellers return, things could go back in the soup within a few days. Right now, we’re still in the trust-but-verify mode of the rally, slowly increasing exposure but also keeping a close eye to see if cracks show up.

This week’s list has a wide array of stocks, including a few cyclical names that are pushing up after a few weeks of consolidation. Our Top Pick is Marathon Oil (MRO), which showed some real power last week as oil stocks came to life.

Stock Name	Price	Buy Range	Loss Limit
Apellis Pharmaceuticals (APLS)	59	54-56.5	48-49.5
Callon Petroleum (CPE)	48	45.5-48	40-41.5
Discover Financial Services (DFS)	124	118-122	108-110
General Motors Company (GM)	63	62-64	56-57
Jabil Inc. (JBL)	58	55.5-57	51-52
Logitech (LOGI)	133	126-130	112-115
Marathon Oil (MRO)	14	13.0-14.0	11.5-12.0
SeaWorld Entertainment Inc. (SEAS)	58	56-58.5	50-51
United Parcel Service (UPS)	213	209-214	193-196
Vale S.A. (VALE)	22	21.5-22.5	19.3-19.8

Note: Due to the celebration of Independence Day next week, the next issue will be delivered Tuesday, July 5.



After two brutal weeks for the indexes, the market staged a very nice snapback last week, and this comes after some decent resilience in many growth names during the June mini-crash. But the real question is can the market build on it: We’ve seen a handful of nice baby steps for the market this year, but each time the sellers reappear quickly and smack everything lower. Overall it’s best to remain mostly defensive until the buyers show they’ve conclusively taken control from the bears, which will take more time.



On a positive note, this week’s list has many names either showing some outsized accumulation of late or are forming solid bottoming areas. Our Top Pick is one that’s had a couple of false starts this year but looks ready to run if the market can get going.

First, a scheduling note: With Christmas coming quick, next Monday (December 27) is the second of our two regular weeks off for Top Ten. We’ll be in later that week, but if we don’t talk to you have a great holiday season!

After an encouraging bounce, the sellers immediately came back to the well last week. While we don’t think this is going to morph into 2008, it’s clear that most of the evidence remains negative: The intermediate-term trend of most indexes and stocks is pointed down and the vast majority of former leaders are in shambles. We’ll let others predict (guess) what happens from here, but with most things acting poorly, it’s best to remain cautious, holding plenty of cash, building your watch list and keeping any new buys on the small side.



This week’s list has a variety of names that are resisting the market’s weakness, so if you want to nibble on something, you’ll find it here. Our Top Pick is a unique IoT-related firm whose stock is acting just fine.