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Today, we are moving into the aerospace and defense sector to profile a company that has successfully navigated a complex multi-year recovery and is now entering a higher-growth phase.

After ending 2025 with a record-breaking fourth quarter and its highest backlog in history, the business is now pivoting from “recovery mode” into a period of significant operating leverage.

All the details are inside the March Issue of Cabot Small‑Cap Confidential.

In today’s note, we discuss the acceleration—and potential for overcrowding—of the China stock momentum trend, specifically how it relates to our position in Alibaba Group Holding (BABA).

The market hit an air pocket last week but has since stabilized. It didn’t hurt that revised U.S. GDP figures for Q4 came in 0.2% higher than previously reported. That improvement bumped growth up to 2.1%. On the back of that good news, small caps regained their 50-day moving average line (they’re now up four straight days).

The S&P crashed more than 5% on consecutive days last week for the first time since the onset of the pandemic. The index came within a whisker of a bear market, down 20% from the high on a closing basis.

It’s easy to get spooked out of the market these days. Few people believe the market has hit bottom when it does. Unheeded warnings play over in your mind as Judgement Day seems to have arrived. Stocks were overvalued. The trade war will cause a global recession. Excesses of the last several decades are being called. It’s time to get out of the market and save yourself.

Markets are emotionally driven in the short term. Fear and greed tend to be the dominant forces. But over time, emotions take a back seat to money and profits. When the market tanks, our emotions tell us to run for the hills. But history tells us it’s the best time to invest.

There are some truly stellar stocks in the portfolio that have generated returns comparable to the most successful stocks on the market. The problem is that these stocks are rarely cheap. But the recent market has put these phenomenal investments back within reach.

The recent panic has provided a rare entry point. Even if prices fall further before they rise, these stocks can easily make up for lost time when they move higher again. In this issue, I highlight two of the best stocks in the market to own at valuations not seen in years.

After a brief shakeout last Monday, supposedly on fears that Italy would leave the EU, the market reversed course and has been pushing higher and higher since, supposedly cheering on the continued strong performance of the U.S. economy.

I’m enjoying the ride, and I assume you are, too. But I must remind you that good news is prevalent at market tops, while bad news is what you wallow in at market bottoms. So keep your eyes on the exits—while continuing to hold the best stocks as long as the market supports them.

Value stocks are starting to play catch-up.

The Vanguard Value Index Fund ETF (VTV), a good proxy for value stocks, is up 9% since the first week of August, more than half its year-to-date gain of 16.6%. While value stocks still trail the S&P 500 (+20.9% YTD) and growth stocks (the Nasdaq is +22.4% YTD), the gap is narrowing. Now that the Fed is finally cutting interest rates from multi-decade highs, perhaps this “in name only” bull market will spread to more corners of the market beyond just the Magnificent Seven, artificial intelligence stocks, and the other mostly tech-related plays that have carried this 23-month rally.

While the market is up today, the correction that began a month ago remains in force, making it tough for stocks (growth stocks in particular) to make real headway. Thus we have four Sell recommendations today, as well as one upgrade to Buy.

As for the new recommendation, it’s a solid growth company that dominates a totally unexciting industry in the U.S., and long-term prospects are great.



Details inside.

The world has clearly changed in the past two weeks. We see an exceptionally wide range of possible outcomes, which makes predictions about the future (already a low success rate endeavor) basically futile. We offer our timeless investing advice that can be readily applied in such situations.

In the letter, we also provide updates on all of our Recommended Stocks.

You shouldn’t invest based on analyst upgrades alone. But they’re a good starting point. And right now, analysts are bullish on these three stocks.

Crista has updates on four portfolio stocks.

Investing isn’t something they teach you in school (usually). If you want to learn to be a good investor, you’re going to have to educate yourself.

Cannabis companies remain in hunker-down mode as challenges persist. Those include price compression, competition from hemp-based THC product sales, and uncertainty about potential federal reform.

Not all cannabis companies are going to survive. Ayr Wellness (AYRWF) looks like it is about to go under. I’ve only ever kept a very small position in that name, so the company’s demise did not cause too much damage.

In today’s update, I outline the reasons why I have every intention of remaining invested in various oil industry stocks in the foreseeable future and give a detailed update on all positions in the portfolio.

After years of being either ignored or sold off, value stocks are finally having a moment on Wall Street. The Vanguard S&P 500 Value Index Fund (VOOV) is up 25% in the last five months and is actually outpacing growth titles over the last month. Still, it’s a bull market, and growth stocks are king. How to compete as value investors in a growth-minded market? By seeking growth stocks at value prices.

Today, we do just that, adding a household name that’s been rejuvenated thanks to a shift in industry trends. The stock is up 18% year to date, and yet its shares remain dirt cheap by virtually every measure.

Enjoy!