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Industrial stocks are hot. So today we’re jumping into a small-cap precision‑engineering and motion‑technology company that has both a self-help and an improving end-market story.

This company has spent the past several years transforming itself from a niche motor supplier into a vertically integrated engineering platform. After a strong start to 2025, it looks like 2026 will be even better.

All the details are inside the February issue of Cabot Small‑Cap Confidential.

What was promising action two weeks ago got off to a bad start last week, but it was the late-week collapse in regional banks that caused the market to hit one giant air pocket. Clearly, at this point, the intermediate-term trend has turned down and the broad market is under a lot of pressure; we’re not in the business of catching falling knives, so we’re in the better-safe-than-sorry camp. That said, there are still many potential leaders in a variety of fields that are pulling back sharply, but normally—including some (like many from last weeks issue) that are hardly giving any ground at all. We’re moving our Market Monitor to a level 5—but also taking things on a stock-by-stock basis, which means giving some resilient names a chance.

This week’s list has a collection of mostly resilient names, with some steady actors but also a few true growth stories, too. Our Top Pick is a young upstart that’s higher risk, so keep positions small and look for weakness.

First, a housekeeping note: With Santa coming in a few days, there will be no issue next Monday, but we will send a “full” update next Monday (in place of the issue) to keep in touch, and we’ll be around if you have any questions. Merry Christmas and Happy Holidays!

As for the market, the post-Fed action was clearly a downer and is threatening to reverse the intermediate-term uptrend, which was the lone positive piece of top-down evidence. To this point, we will say many individual stocks have bent but haven’t broken, but the onus is once again on the bulls to step up and offer support. We’ll move our Market Monitor down to a level 4, and it could sink further should the bears keep at it.

The good news is we’re still finding many solid-looking charts, though they’re from all nooks and crannies of the market. Our Top Pick today is in the surprisingly resilient housing group.

Investors seem to have abandoned commodity gold and the shares of gold miners like Barrick Gold. The commodity gold price has slipped 11% from its recent peak of $2,043/ounce while Barrick’s shares have tumbled 37% since reaching nearly $26/share earlier this year.

Well over two decades ago, I oversaw the investment strategy for a large branch office of a major investment management firm. Our clients were flush with gains from a decade of tech mania – and highly reluctant to shift from their winning strategy. A major challenge was convincing clients to stay invested in stocks but step aside from high-flying dot-com stocks.

We’ve seen signs of it everywhere. Retail prices for homes, apartments, food, gasoline, cars and everyday services are higher than they were a year or two ago and are going higher. Upstream from these consumer-facing prices, input prices for raw materials, semiconductors, crops, wages, energy and transportation are going up. Inflation is no longer around the corner – it is here.

Cannabis stocks are unloved and in the doldrums.

Typically, in the stock market, that’s the best time to buy.

Neglected stocks offer the best value, as long as there are potential catalysts on the horizon.

I believe that is the case with cannabis. You’ll just have to be patient. I think it is worth being patient for the possibility of 30%-50% gains when a catalyst strikes. There is no guarantee this will happen, but as I discuss below, the odds are good.

Thank you for subscribing to the Cabot Value Investor. We hope you enjoy reading the November 2023 issue.

We discuss recent earnings from our companies and move shares of Sensata Technologies (ST) from Buy to Hold given the company’s lower overall quality compared to our initial understanding.

We also include some thoughts on the current stock market and how rising interest rates and other factors have led investors to unload shares of most companies and riskier companies in particular.

The Goldilocks scenario of falling inflation and a still-strong economy is unlikely to last. Interest rates will have to come down before long or the recession that the market is dismissing might be just a little further down the road. But recent higher-than-expected inflation is making lower rates less likely.

Sure, the rally could last for a while. The economy always seems to be more resilient than people expect. But the circumstances behind the rally since October are unlikely to last. This environment will change. For that reason, it doesn’t make sense to chase stocks that have been working so far this year. It’s better to position ahead of a new dynamic that is likely coming.

Change creates opportunity. There are many great income stocks that are not benefiting from this rally. Yet these stocks are selling at historically very cheap valuations with high yields. These stocks also can thrive in a slowing economy. In this issue, I highlight two stocks in particular that are cheap and high-yielding ahead of a period of likely market outperformance.

In my last update on February 14, I suggested cannabis stocks had fallen enough to be buyable ahead of the expected rescheduling catalyst. That was an opportune entry point.

As of the close February 23, the AdvisorShares Pure U.S. Cannabis (MSOS) and the leveraged version, AdvisorShares MSOS 2X Daily (MSOX), were up 12% and 20%, respectively.

Then investors got impatient again with the lack of progress on catalysts. As of the close February 27, 2024, volatile cannabis stocks had given back most of these gains. The MSOS was up 2.4% and the MSOX was up 1.7%. I think cannabis stocks have weakened enough to consider adding again (more on this below).

The story remains mostly the same, with the overall market remaining in great shape, though it is a bit near-term extended, while growth stocks are good-not-great, with a lot of names mostly marking time, and even some AI names doing the same. That said, we have seen a little broadening of leadership of late, which should provide some opportunities down the road. Today we’re adding one new half-sized stake in a name that looks to have changed character today (up a lot, but this comes after a two-month correction), but we’re still going to hold 38% in cash as we look for more titles to get going.

Artificial intelligence is the biggest thing in the market these days. But AI doesn’t work without energy.

The world doesn’t run on technology. It runs on energy. Energy is the respiratory system of the modern world that can’t function without it. Technology doesn’t work without electricity powering its systems.

Sure, clean energy is the future, but not yet. In fact, the U.S. and the rest of the world still rely on fossil fuels (oil, natural gas, coal) for more than 80% of energy needs and will likely continue to do so for decades to come. But fossil fuel consumption is changing. A new king is emerging – natural gas.

Natural gas is by far the fastest-growing fossil fuel. It is the number one fuel source by far to generate electricity in the U.S. and much of the rest of the world. There are also powerful trends adding to the already growing demand.

U.S. electricity demand is growing at breakneck speed because of data centers, electric vehicles, and increased onshoring of manufacturing. U.S. natural gas exports, in the form of natural gas liquids (NGLs), are soaring. This country is already the largest exporter, and the growth is staggering. U.S. NGL liquid exports over this past year have grown a whopping 67% over the prior year.

Natural gas was already the fastest-growing fossil fuel. The addition of soaring electricity demand and exploding U.S. exports accelerates that growth. The fuel is shaping up to be a dominant theme in 2026. In this issue, I highlight the country’s largest producer of natural gas.

Two weeks ago, I attended the Value Investing Congress in New York City, and was fortunate to listen to quite a few very successful value investors. I also was able to meet speakers and other investors to learn more about their approach to investing in the current turbulent stock market. The experience was very enlightening, and I came away with some valuable insights that I want to pass along to you.

Last year, I wrote about my former life as a newspaper employee and what I think about the hurting business. A lot has changed since then, with several newspapers shutting down operations (or threatening to), including the Rocky Mountain News and the Seattle Post-Intelligencer, and others laying off even more employees as revenues continue to plummet. But the question remains: Can newspapers be saved?

The broad market is in fine shape, with most major indexes at or near their highs and all Cabot’s market-timing indicators bullish.

Current Market Outlook


In true 2021 fashion, just when the market looked ready to go over the falls last week the buyers stepped in, pushing the major indexes sharply higher (recouping nearly 50% of the month-long correction in just three days and seeing many individual stocks pop as well). It’s certainly encouraging, but we need to see a bit more—by our measures, we haven’t seen confirmation of a new intermediate-term uptrend (most indexes remain below their 50-day lines or stuck in the middle of multi-month ranges) and, while a few stocks have popped to new highs, most individual names are in the same no-man’s-land environment. Longer term, the strong, broad bounce is a good sign the overall bull market is alive and well, but near term, it’s still uncertain whether we’ll see another leg lower or more vicious rotation. You shouldn’t be in your bunker, but keeping new buys small and holding some cash makes sense as we see if the strength can persist.

This week’s list is heavier on turnaround and commodity-related names, with many beginning to emerge from long rest periods. Our Top Pick is LPL Financial (LPLA), which won’t be your fastest mover but has staged a good-looking breakout in recent weeks.

Stock Name	Price	Buy Range	Loss Limit
Acuity Brands (AYI)	206	203-210	182-185
Applovin (APP)	87	83-86	73-74.5
Builders FirstSource (BLDR)	55	54.5-56	49-50
The Goodyear Tire & Rubber Company (GT)	19	18-19	16.3-16.8
Hilton Worldwide Holdings (HLT)	143	139-142	126-128
LPL Financial Holdings (LPLA)	167	165-169	148-150
The Mosaic Company (MOS)	42	39-41	35-36
Pioneer Natural Resources (PXD)	193	187-192	165-168
Teck Resources Limited (TECK)	28	26-27.5	23-24
UPST (UPST)	311	285-300	240-250

Uncertainty is growing while the market is perched at the all-time high.

The S&P 500 soared by a remarkable 29% in just over three months. At the same time, tariffs are back and there is still a high degree of uncertainty regarding the economy.

Sure, the overall market is high. But what is true for the S&P 500 isn’t necessarily true for many individual stocks. Technology drove the S&P 500 index higher. But much of the rest of the market is well below the all-time highs. Some stocks and sectors are barely positive YTD.

Energy has lagged the market all year. At the same time, the fortunes of certain companies are improving. Natural gas volumes are growing at a strong clip as demand for electricity is skyrocketing from data centers. At the same time, overseas demand is expanding with no end in sight.

In this issue, I highlight an energy company with rapidly growing demand for its services that sells at a cheap price and pays a high yield. We don’t have to chase stock prices into the stratosphere. Let’s invest where it’s still April.

*Note: Your next issue of Cabot Top Ten Trader will arrive next Tuesday, September 2, due to the market holiday next Monday, September 1, in observance of Labor Day.

Ever since early July, the market has seen more and more bouts of rotation, and in the past two weeks, that action has accelerated, with more and more growth stocks getting hit while expectations for a Fed rate cut next month have goosed the broad market. So where do we stand overall? From a top-down perspective, the evidence has improved, but there’s also a lot of crosscurrents and leadership is in transition, which keeps things tricky. We’ll stick with our Market Monitor at a level 7 and see how things look after the coming long weekend.

This week’s list has a bunch of names from different groups, including many smaller titles, which goes hand in hand with what we’re seeing in the market. Our Top Pick had five (!) fakeouts in the past six months, this recent breakout look for real. Aim for modest dips and use a looser stop.

Current Market Outlook


If you’re looking at the trends of the major indexes, the price/volume action of leading stocks (both cyclical and growth) or the breadth of the overall market, it’s hard to find much to fault—the buyers are clearly in control as most stocks, sectors and indexes trend higher. About the only thing to worry about is that there’s not much to worry about; sentiment measures of all stripes (money flows, option activity, surveys) as well as some market action (huge moves in many speculative stocks) tell us that things are a bit hot and heavy right now. To be clear, that’s no reason to dramatically alter your game plan, but it’s a reminder that risk is rising, so keep your feet on the ground, look for good entry points and, once you’re in, honor your stops and book some profits (or partial profits) on the way up.

This week’s list features a wide mix of stocks, including many that have recently staged longer-term breakouts. One of those is our Top Pick: Applied Materials (AMAT) sports accelerating growth and a beautiful chart, and while short-term dips are possible, a major advance looks to be underway.

Stock Name	Price	Buy Range	Loss Limit
Applied Materials (AMAT)	89.25	85-90	75-78
Cleveland-Cliffs (CLF)	12.62	11.5-12.3	9.8-10.3
Pinduoduo (PDD)	146.82	140-147	119-123
Qorvo (QRVO)	167.01	158-163	143-146
Snowflake (SNOW)	388.38	360-380	313-323
Tapestry, Inc. (TPR)	29.75	27-28.5	24-25
Uber (UBER)	53.80	51.5-54	45-47
Vale S.A. (VALE)	16.29	14.7-15.7	12.8-13.3
United States Steel Corporation (X)	17.20	15.3-16.3	12.7-13.2
Zscaler (ZS)	178.17	174-180	154-158

Your finances touch almost every aspect of your life in some way or another, and that can make tackling them feel overwhelming. This month, we’ll lay out a monthly “to-do” list that can help you save money on taxes, set aside more money, and plan for the future. Plus, the monthly breakdown will help make sure you won’t miss financial deadlines that you never saw coming.