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Recently, we’ve been adding very aggressive, high-growth names. These potential moonshots are a lot of fun to research and buy, but we need to maintain balance in our portfolio.

This month we’re going with more of a Steady Eddie-type, a small-cap company with a measured growth profile that features sustainable top line growth, significant EPS, and enough cash flow to fund both dividend payments and share repurchases.



I think in a few years we’ll look back and say it was one of the better investment decisions we made in 2021.



Enjoy!

Rich Howe, Chief Analyst of Cabot Micro-Cap Insider, has been researching micro-cap stocks for over 20 years and right now he sees a prime opportunity to invest.

In this webinar, he discusses historic returns of micro-caps, why now is such a good time to invest in them, and what to look for to pick the stocks that have the highest wealth-building potential

The market hit a pothole today, which isn’t totally unexpected given the recent run-up; in fact, in the short-term, we don’t see much of an edge either way, as earnings season is underway and growth stocks have generally been lagging.

However, longer-term, the evidence remains piled up on the bullish side of the ledger, both via our trend-following indicators and with a growing number of bullish studies. Thus, we remain heavily invested, though we remain choosy on the buy side given the market’s short-term uncertainties.

The rollout of the new 5G technology is an evolution that is thrusting the world into a digital age that will change the world. This new technology will have a huge effect on the market in 2020 and beyond.

Companies that benefit from 5G have a powerful catalyst for growth that will push stock prices to a new level. But finding stocks in the area that are still cheap and defensive in a pricey and uncertain market is a challenge.



In this issue I identify a company that is defensive and high dividend-paying. But, unlike most stocks in that area, it is still reasonably priced. At the same time, the company has massive exposure to 5G and a huge catalyst for growth. With this company you can play offense and defense at the same time.

After a huge run, the market finally hit some turbulence this week, and it’s a 50-50 bet whether we see more profit taking going forward. Our focus is mostly on the bigger picture (still very bullish) and individual stocks, as the advance has gotten more selective and earnings season is revving up. We remain mostly bullish, but it remains important to take things on a stock-by-stock basis.

The healthcare column I wrote on Monday resulted in my heaviest email volume ever and I thank everyone who responded. In total, 69% of respondents were supportive, 6% were critical, and the remainder addressed other items in the column, mainly American International Group (AIG), which I used as an object lesson of stocks to avoid. But as several readers pointed out, I forgot one big thing, the need for tort reform! That alone is worth a whole column, and maybe I’ll do it someday. But today the words come from you. Here’s a sampling of the best.

There are never any guarantees in the market, but after a very tough 2022, just about all of the top-down evidence (and our indicators are now bullish). We’re not big on labels, but we’re clearly seeing bull market behavior; while leadership usually develops over time (and we’re seeing that here), it’s best to continue stepping into the market as long as things remain in good shape.

Elsewhere in tonight’s issue, we write about some new names go through a variety of topics after that, relaying some thoughts based on various questions we’re receiving.

In the middle of an earnings recession and a slowing economy, defensive stocks are probably the best places to be. These companies can maintain earnings growth while most companies are sliding and remain consistent even as the economy deteriorates further.

Defense is king right now. But defensive stocks are even better when they offer growth as well. In such uncertain times, it makes sense to bank on things that are more certain. Stocks poised in front of a megatrend are the best bet. A megatrend acts as a powerful tailwind for a stock that can make a mediocre pick very good and a good pick great.

In this issue, I highlight a defensive stock that is also one of the world’s largest producers of alternative energy. At the same time, it is also one of the best traditional regulated utilities in the country. It offers defense as well as growth and can thrive in any kind of market.

Inflation has come down. But in the past, when inflation stayed this high for this long, it took about a decade to get rid of it. That’s why the inflation rate averaged 7.25% in the decade of the 1970s and 5.82% in the 1980s.

Once that inflation genie gets out of the bottle, it has historically been a long ordeal to get it back in. Higher inflation and interest rates may persist for several years to come. That’s a different economic situation than we have faced in a long time. And it is changing the investment landscape.

As investors, we need to invest in a way that not only keeps pace with inflation but exceeds the rate of inflation in order to actually grow a nest egg in real terms. In this issue, I highlight two portfolio dividend stocks that have a unique ability to thrive during inflation beyond most dividend stocks.

The market remains in a two-month correction, but as opposed to the sloppy action seen in recent weeks, the sellers are now starting to pounce, damaging even the resilient big-cap indexes. Longer-term, we still believe the next major move is likely to be up, but we can’t ignore what’s in front of us: We’ve been cautious for weeks, and earlier today on a special bulletin, we pared back on two of our current positions, which will leave us with a cash position in the low 50% range.

In tonight’s issue, we give you our latest thoughts on just about everything -- our stocks, the market, the big picture and interest rates, which, after two years, are still one of (if not the) key drivers of the market. There will be a sustained advance that comes out of all this, but we continue to think patience is the name of the game for now.

Few stocks have participated in the YTD rally. In fact, just ten large-cap technology stocks accounted for just about all the market gains this year. The market has so far shunned defense and favored growth. But that situation is unlikely to persist.

There is still lots of risk. Inflation could be stickier, and the Fed could be more hawkish than currently anticipated. Even if a recession never happens, it’s reasonable to expect that the economy will slow in the second half of the year. And overall market earnings have already contracted for the last two quarters.

The relative performance of defensive stocks historically thrives in a slowing economy. If the rally broadens in such an environment, it will need participation from the defensive sectors. If the market pulls back, defense should be the best place to be.

I highlight a new buy-recommended stock in the issue. It is a legendary income stock that pays dividends on a monthly basis. It’s also near the lowest price level of the past two years.

The market is positive, but it’s not powerful, with a generally choppy, narrow and rotational environment in recent weeks. Even so, we’re encouraged by the action in some growth stocks, so after getting knocked out of a few names during earnings season, we’ve begun to put some money back to work.

A surprisingly productive July comes to a close with the market near all-time highs and volatility at a relative low. I’ve written in recent weeks about the reasons that could change in August and September – the highest stock valuations since the February high, lingering tariff uncertainty and its potential impact on a heretofore resilient economy, frothy warning signs like new meme stocks and soaring bitcoin prices, and the usual selling that occurs right after Labor Day. But for now, stocks are doing just fine, and that includes value stocks, which have risen more than 6% year to date.

The market has finally started to show some cracks the last couple days, but the bull market remains very much intact. Last week’s 25-basis-point Fed rate cut was expected, but should nonetheless act as a tailwind – or at least a floor raiser – in the coming months, especially as Jerome Powell and company signaled that they plan to cut twice more before year’s end. And yet, there’s no getting around the fact that stocks, as a whole, are overvalued, with the S&P 500 trading at 23.8x forward earnings – its highest point since late February.

Value stocks have outperformed the market of late, with the Vanguard Value Index Fund (VTV) up 2.9% in the last month vs. a 2.3% return in the S&P 500. Granted, that’s minuscule outperformance, but it’s a sign that investors are starting to look for value with the major indexes at or near all-time highs for the last couple months.

Nothing like a little holiday cheer to brighten a grumpy market’s spirits! Salvaging what had theretofore been a miserable November, last week’s Thanksgiving-shortened week brought four straight trading days of buying, nudging the indexes right back to within bad-breath distance of their late-October highs. Is it a sign of things to come in December? Perhaps. If so, now is a good time to pounce on a more speculative biotech play that’s been in favor all year. It’s a name recommended by Tyler Laundon in the November issue of his Cabot Early Opportunities newsletter. Today, we add it to the Stock of the Week portfolio.

Details inside.

The bull market has become top-heavy again.

Since the early-April lows, the top 20 stocks in the S&P 500 by market cap – nearly all of which are in the technology sector, and fueled in some way by the artificial intelligence bonanza – are up an average of 40.6%, versus a net gain of 27.9% for the index itself in that time, according to DataTrek Research co-founder Jessica Rabe.

Welcome to our 2026 TOP PICKS issue! This is one of my favorite issues each year as our Cabot analysts take a deep look at their portfolios and share their top stock ideas for 2026.

You’ll find a well-diversified selection of stocks—growth, value, dividend payers, metals, technology, healthcare, retail, manufacturing, and much more!

I hope you’ll find one or more to your liking!