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The financial media over the past weekend and in the early days of this week has been full of stories about the upcoming Fed meeting on Wednesday. It’s remarkable how much ink (or electrons) is being spilled in efforts to predict what the Fed will do, and why, along with all of the implications of this or that outcome.

The last two months have felt historically volatile.

Since Donald Trump took office for a second time and immediately started handing out tariffs like they were surprise take-home prizes at an Oprah taping (“YOU get a tariff, and YOU get a tariff!”), the market has been unsettled. And indeed, from mid-February through mid-March, things weren’t simply unsettled – they were bad. Both the S&P 500 and the Nasdaq entered correction territory – the fifth-fastest correction in the last 75 years, in the case of the S&P. Fears of higher inflation and possibly recession have come rushing back to the surface, consumer confidence is at a 12-year low, and interest rate angst is back in full force.

And yet, actual volatility – as measured by the VIX, a.k.a. the “investor fear gauge” – has been … fairly muted?

Stocks keep reaching new heights, as last week’s concerns about the market starting to show cracks under the surface seem to have been overblown, at least in the near term. Third-quarter earnings season gets underway next week, and expectations are high again, with economists expecting 8% growth. Companies may have to exceed those lofty expectations to keep this rally going. For now, though, the market is rolling.

To account for some possible bumpiness ahead, however, today I’m adding a big-name value stock to our portfolio. It’s one that I recommended to my Cabot Value Investor audience last month, and it’s already off to a fast start. It’s a company that thrives when the global economy is sound – which it is, despite myriad fears to the contrary.

Details inside.

This might be the first time anyone has described singer-songwriter Katy Perry as a sage observer of the stock market. Her song, “Hot and Cold” opens with the lyrics, “You change your mind / like a girl changes clothes.”

This perfectly captures the changes in sentiment in the stock market over the past two months. Going into October, the market was fully locked into the view that elevated inflation would endure, that 10-year Treasury yields were headed above 5% and that there was no hope for small-cap stocks or any group of stocks other than the Magnificent Seven mega-cap tech stocks. Dark days and a hard landing were undoubtedly ahead.

The market remains super strong, and we’re pleased to see many growth stocks that rested during December break out to new highs so far this year. Shorter-term, the lack of good entry points among stocks we’re watching is a reason we’re still holding a chunk of cash on the sideline. But we remain very bullish longer-term and think pullbacks and/or shakeouts will provide some solid entry points.

Tonight, we’re standing pat once again with our collection of stocks, most of which act great. In the issue, we do write about one big-cap name that we think has regained its status as a liquid leader (Alibaba), and it’s probably the top stock on our watch list today. Elsewhere we do highlight some other ideas, and as always, share our latest thoughts on all the stocks we own.

The predictable September selloff got underway last week, though thankfully only one holding in the Stock of the Week portfolio was a true casualty of Wall Street’s usual post-Labor Day foul mood. This week, likely the last before the Fed (finally) starts to cut interest rates, we add a company that should benefit directly from the cuts: a mortgage lender and real estate firm. It’s a new recommendation from Mike Cintolo in his Cabot Top Ten Trader newsletter, and it’s a stock that’s already having a nice year – but could have way more upside once the Fed starts to cut rates.

Details inside.

Current Market Outlook


The market continues to look fine, with both primary (trend) and secondary (new lows, etc.) evidence boding well—not to mention many of the longer-term signposts like blastoff indicators telling us this is a bull market. But for leading growth stocks, it’s tricky out there; while there haven’t been a rash of breakdowns, there’s plenty of iffy action, with low volume rallies, selling on strength and relatively few stocks hitting new highs. (While the Nasdaq tested new-high ground today, the number of stocks doing so was half of what we saw a week and a half ago.) We certainly don’t think you should be holed up in your bunker, and we’re staying flexible, but given the prolonged run and the recent sloppiness, we think moving closer to shore makes sense, especially if you own some sluggish performers.

Interestingly, while the leaders of the April-July move rest, we’re seeing other names (both growth and cyclical) perk up. This week’s list has plenty of both, and our Top Pick is Quanta Services (PWR), which has decisively broken out on the upside.

Stock Name	Price	Buy Range	Loss Limit
Berry Global (BERY)	64.22	51.5-53.5	47-48
Builders FirstSource (BLDR)	44.12	28-29.5	24.5-25.5
Cerence (CRNC)	107.77	53.5-56.5	46-47
First Solar (FSLR)	83.74	69-72	62-64
HubSpot (HUBS)	582.89	267-277	240-246
Innovative Industrial Properties (IIPR)	214.38	116-121	103-105
iRhythm Technologies (IRTC)	51.15	168-174	149-152
L Brands (LB)	79.48	26-28	22.5-23.5
Quanta Services (PWR)	91.45	48.5-51.5	42.5-44
Shift4 Payments (FOUR)	89.97	47.5-49.5	42-44

I have to admit, a couple of weeks ago, on our Cabot Street Check podcast, Chris Preston, host and Chief Analyst for Cabot Value Investor, and I discussed the possibility of a recession and I commented that I thought recession fears were mostly over.

Well, I’m going to reconsider that (a bit) after Monday’s 1,000+ point loss in the Dow. Last week’s jobs report came in at 114,000 jobs—considerably less than the 185,000 expected—spooking the markets and causing economic gurus to once again bring up the possibility of the dreaded “R” word. Additionally, the unemployment rate edged up to 4.3% and manufacturing and construction spending were also less than expected, furthering economic worries.

Housekeeping: Seeing as next Monday is Presidents’ Day, your next issue will be Tuesday, February 18.

When we look at the overall evidence, we continue to see more good than bad out there: Most indexes are testing the top end of their ranges; we see more breakouts than breakdowns among growth stocks; earnings season has gone well so far; and all of this has happened as headline uncertainty has crept into the picture. That said, we’re still waiting for buyers to truly step up, as most peppy stocks are still seeing lots of selling on strength and most every index is trending sideways. We’ll leave our Market Monitor at a level 6 for now but could move that meaningfully by week’s end depending on how things go.

All that said there are opportunities out there, and this week’s list has many of them, with a ton of recent earnings winners. Our Top Pick has turned super-strong after earnings as investors look forward to what should be a huge 2025 and 2026.

The market has been bouncy but slightly higher for the year so far, but it’s a different story under the hood.

Eight of the eleven S&P stock sectors are outperforming the market, and none of them is technology. That’s a stark difference from most of this bull market, where technology and AI drove the market higher while most other sectors underperformed. Now, the rally is broadening.

The market isn’t as expensive as it may seem, as the valuations of many stocks are below that of the overall market and don’t reflect the index returns of the bull market so far. Most of the expensive stocks are in technology, but those stocks are getting cheaper as well.

In this issue, I highlight two of the most promising dividend stocks for 2026. Both stocks have been in the portfolio before and have provided great income and total returns in a short period of time. They also can generate huge call premiums.

The evidence has continued to worsen on balance, which has us remaining in a cautious stance. That said, we’re also flexible given some longer-term positives and a couple of near-term secondary readings that popped up last week, which have typically occurred near market low points. Given that the indexes aren’t horror shows, we’re still open to the action this month being a shorter-term shakeout —but with so many things having rolled over, the onus is on the market to prove itself on the upside. Right now, we favor staying close to shore; we’ll stick with our Market Monitor at a level 4.

This week’s list has something for everyone, with AI, fresh medical names, recent earnings winners and some turnarounds, too. Our Top Pick is a steadier name that’s strong partly due to the AI wave; the stock just gapped on earnings and delivered a solid outlook that should keep buyers interested. Aim to enter on weakness.

We had written lately that the market had been extremely quiet in recent weeks ... possibly a bit too quiet, as the market has a way of hitting a pothole after a period of calm. Sure enough, we saw some growth stocks ease early last week, and then the Middle East attacks and counterattacks caused selling on Friday. Even so, it’s been a normal wobble so far, and while things are likely to be tricky and news-driven in the near term based on the happenings in the Middle East, just about all of the intermediate-term evidence remains bullish. We’ll leave our Market Monitor at a level 7 today.

This week’s list is surprisingly growth-y, with many names from different sectors at or threatening new high ground. Our Top Pick looks to be near a decent entry after a humongous rally from early April to late May.

Stocks trading on U.S. markets faced some resistance as hopes for some sort of stimulus bill fade and as mixed earnings report begin rolling in. A key question is whether the pandemic boom stocks will have the revenue and earnings growth to support their sharp advances.

The markets have continued to flirt with new highs—pulling back and then moving forward—for the past month.

The Fed’s 50-basis-point rate cut inspired investors, home buyers, and those folks wanting to refinance their homes. The Mortgage Bankers Association reported that refinancing applications rose 20% right after the rate cut!

While most active managers fail to beat their benchmarks, this hedge funder consistently knocks his investments out of the park. Here’s how.

Over the past seven weeks, we’ve been steadily lightening up in our marijuana stock portfolio, initially taking profits within a day of the top, and more recently continuing to shift to cash as the sector weakened.

Today we’re raising just a little more cash, with the sale of Aphria (APHA)—a sale that will take us to a roughly 52% cash position.



But overall, I’m still very bullish on the sector as a whole as a long-term investment and I fully expect to be moving back into the leading stocks in the sector once the tide starts coming in again.



Full details in the issue.

As the futures indicated, the market is down sharply this morning, though the major indexes have bounced from their lows. As of 10:45 am, the Dow is sinking 454 points while the Nasdaq is down 118 points.

Over the past week, marijuana stocks have been particularly strong, with the strongest being the four leading U.S. multi-state operators that we own—and that means it’s time for another brief update on strategy.