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Changing your expectations based on how you feel or what the headlines say is going to have you out of sync with the market.

Explorer positions had an up week as the S&P 500 has begun a turnaround from bear market territory and is now down “only” about 13% for the year. This means it is up around 6% since hitting its recent low on May 19 as the Fed has softened its tone and China tries to get growth going.

Electric vehicle sales are set to more than triple to just over 20 million in 2025, according to BloombergNEF. This is up from a previous estimate of 15 million.

Today’s Revolutionary Stock is Yelp. The growth potential for the company, which has no debt, is still huge.

Rate hikes typically come when the market is trending up, and investors tend to expect these trends to continue—so they do, for a while. So whether the Fed hikes rates this month, next month or months later, don’t be afraid. Remember that the first rate hike, on average, comes in an environment that is beneficial to investors, and thus you should make the most of it.

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

We include brief updates from investor day presentations by Philip Morris International (PM) and Sensata (ST), as well as comments on our other recommended names. We also share a view on how streaming services are changing the sports viewing experience, along with a thought on why Comcast (CMCSA) should be fine.

Please feel free to send me your questions and comments. This newsletter is written for you and the best way to get more out of the letter is to let me know what you are looking for.

I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.

The deep breath before a toss-up presidential election has arrived on Wall Street, with stocks barely budging in the last two to three weeks. Investors are likely prepared for either outcome but are waiting until a winner is declared before resuming this two-year bull market rally. While we wait, it’s a good time to pare down our portfolio a bit, which we do today by saying goodbye to three recent laggards. We also add a high-growth tech stock with plenty of momentum that Mike Cintolo recommended to his Cabot Top Ten Trader audience a week ago.

Details inside.

The U.S. stock market is doing just fine. More than fine, in fact. On Tuesday, the S&P 500 closed at a new all-time high, and the index is up roughly 4% year to date through the first seven weeks of 2025. That comes on the heels of back-to-back years of gains in excess of 20%. And while the current bull market has been mostly spearheaded by a handful of artificial intelligence and Magnificent Seven stocks, the rally is finally starting to spread, with the Equal Weight index also up 4% this year, the Dow Jones Industrial up nearly 5%, and the Russell 2000 up nearly 3%.

On last Friday’s Cabot Street Check episode, the weekly podcast I co-host with my colleague Brad Simmerman, we welcomed on four different Cabot analysts to help us take the market’s temperature in the midst of an eventful and rather volatile start to 2025. All four of them – Mike Cintolo, Cabot’s Chief Investment Strategist; Jacob Mintz, our options trading expert; Tyler Laundon, our small-cap and early-stage stock expert; and Clif Droke, my fellow value investor who runs the Cabot Turnaround Letter – described themselves as varying degrees of “cautiously bullish.” Given all the headlines of late, that qualifies as a victory.

Less than two years removed from the dual implosions of Silicon Valley Bank and Signature Bank, the U.S. banking industry is thriving again, boosted by a resilient economy, declining inflation, and lower borrowing costs. No sector has reported better earnings growth in the fourth quarter than financials, with banks leading the way. And yet, bank stocks remain cheap. So today, we add a big name in the banking industry to our Growth/Income portfolio – one that’s growing fast, and cheaper than most of its peers. I think it could reach new all-time highs within a matter of months.

Details inside.

California is burning and the rest of the country is in a deep freeze. It seems like a metaphor for the mixed messages we’ve been getting from the market in recent weeks, with stocks running very hot and cold since the start of December as the major indexes have mostly held near their highs but the under-the-surface action has been wobbly at best. The last six weeks have been rough on small caps in particular. As both a value investor and a contrarian, that spells opportunity!

So today, we add one of the highest-profile, more beaten-down small-cap stocks out there to our Buy Low Opportunities Portfolio. The stock is miles from its Covid-era highs, but it’s starting to build momentum for the first time in years: shares have tripled since bottoming five months ago. And it’s a name virtually everyone knows.

Details inside.

There continue to be lots of crosscurrents in the market, with many stocks chopping around, lots of big earnings moves (in both directions) and a few leaders from this summer coming under pressure. Overall, though, the bull market is intact, so the lesson from the action is to pick your spots and remain selective when doing new buying. As for your winners, you should give them a chance to breathe, but it’s also important to have mental stops in place—we’re still seeing plenty of rotation out of this summer’s highfliers and into other stocks and sectors.

This week’s list has few stocks that are on most investors’ radar screens, which we view as a good thing. Our favorite of the week is WisdomTree (WETF), a smaller Bull Market stock with a unique story and huge growth numbers.

Stock Name	Price	Buy Range	Loss Limit
United States Steel Corporation (X)	0.00	25-26.5	21-22
WisdomTree (WETF)	0.00	13-14	11.5-12
Trinity Industries (TRN)	0.00	50-52	47-48
Taser (TASR)	0.00	15.5-17	13-14
Las Vegas Sands Corp. (LVS)	0.00	68-70	62-64
Gilead Sciences (GILD)	75.10	68-71	63-64
CARBO Ceramics (CRR)	0.00	114-122	100-102
BE Aerospace (BEAV)	0.00	79-82	74-75
CR Bard Inc. (BCR)	0.00	133-136	126-127
Amazon.com (AMZN)	2.00	345-355	328-332

Current Market Outlook


The divergence continues, with the broad market looking increasingly weak. Even the rally last week couldn’t lift many stocks off their bottoms. So what comes next? Optimists may claim that low interest rates mean there are no attractive alternatives to stocks, but pessimists will note that divergences such as these seldom end well. Thus our market monitor remains unchanged—in slightly positive territory. You can still make money in this market, but more than ever, skillful stock-picking, combined with proper entry timing, is critical. So we urge you to study numerous individual stocks carefully. Try to buy on normal pullbacks. And above all, keep losses small if a stock doesn’t do what you hired it to do. Today’s roster includes some strong breakouts and a handful of set-ups, and our Editor’s Choice is Vantiv (VNTV), which vaulted out to new highs last week on a positive earnings report and is riding a fine trend of long-term growth.

Stock Name	Price	Buy Range	Loss Limit
Zoës Kitchen (ZOES)	0.00	43-45	39-39.5
WisdomTree (WETF)	0.00	24-26	21-22
Vertex Pharmaceuticals (VRTX)	230.36	135-137	121-123
Vantiv (VNTV)	0.00	42-45	39-40
ServiceNow (NOW)	341.86	76-78	72-73
Masco (MAS)	0.00	24.5-26	23-24
ICON plc (ICLR)	0.00	78-80.5	71-72
Equinix, Inc. (EQIX)	547.73	270-280	260-265
Buffalo Wild Wings (BWLD)	0.00	188-193	174-176
Anacor Pharmaceuticals (ANAC)	0.00	144-151	125-130

Current Market Outlook


The market remains in very strong shape. Whether you’re looking at breadth, the trends of the indexes, the action of leading stocks, or sentiment among investors (mostly apathy with some disbelief thrown in), most of the evidence continues to point to higher prices ahead. Of course, that’s for the market as a whole—for individual stocks, earnings season is likely to rock the boat a bit, with some failing while others take the leadership mantle. You should remain heavily invested, but make sure you have your plan in place when it comes to handling your stocks during earnings season. As always, we’ll ditch any stocks that crack and hop on board new leadership that emerges.

This week’s list has a nice mix of sectors, including a few that have already reported earnings. Our Top Pick is Burlington Stores (BURL), a retailer that’s firing on all cylinders and recently pre-announced bullish earnings. Try to buy on minor weakness.

Stock Name	Price	Buy Range	Loss Limit
Yelp (YELP)	41.30	28.5-30	26-27
UFPI (UFPI)	0.00	100-104	91-92
PulteGroup (PHM)	45.93	20.5-21.5	19.5-20
Proofpoint (PFPT)	113.79	69-72	62-63
MSCI Inc. (MSCI)	0.00	80-82	76-77.5
MercadoLibre, Inc. (MELI)	980.83	145-150	138-139
Ligand Pharmaceuticals (LGND)	267.14	128.5-133	116-118
Ironwood Pharmaceuticals (IRWD)	0.00	13.5-14	12-12.5
New Oriental Education (EDU)	113.97	42-44	39-40
Burlington Stores (BURL)	193.95	71-73	66-67

Current Market Outlook


Last week didn’t see much net change in the major indexes, but volatility has surged, with big swings up and down based on the news of the day. Overall, not much has changed—some stocks and sectors are acting well, but many others are chopping around and some (like MLPs) are literally crashing. By our measures, the market’s trends are still pointed up, but it’s close. All in all, we’re sticking with a relatively neutral stance, meaning we’re holding our top performers, but also holding some cash and being very selective on the buy side. And if something breaks down or trips its stop, it should be jettisoned quickly.

This week’s list continues with the bigger-cap, growth-oriented theme that’s been present for the past few weeks. Our Top Pick is Ulta Beauty (ULTA), which just gapped up to new highs after three months of rest following a great earnings report. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Weibo (WB)	98.16	18-19	16-17
Western Alliance (WAL)	0.00	36.5-38	34.5-35
Ulta Beauty (ULTA)	331.95	180-184	169-170
Palo Alto Networks (PANW)	236.92	188-193	172-174
Nevro Corp. (NVRO)	0.00	58-62	52-54
Netflix, Inc. (NFLX)	423.92	123-127	113-115
Southwest Airlines (LUV)	0.00	48-50	44-45
Jabil Inc. (JBL)	41.50	24.5-26	23-23.5
Alibaba (BABA)	254.81	82-85	76-77
Broadcom Limited (AVGO)	266.26	142-146	132-134

The market took a hit last week, as Washington’s ineptitude continued to grab the headlines and cause investors to raise cash and book some profits. The action wasn’t pretty, for sure, but we can’t say it’s changed the big picture—the rally since the mid-November lows is still intact, and many of the stocks and sectors that had been performing well took last week’s dip in stride. Another day or two of big declines would change our outlook, but right here, you should continue to “lean bullish,” holding your better performers and putting some money to work as opportunities arise. You should, however, also hold a decent cash position until we see more power and decisiveness from the market.

This week’s list is almost evenly split between great growth companies and turnarounds, including a couple of well-known names that are looking good. We like many of the charts, but we’ll go with Qihoo 360 (QIHU) as our favorite of the week. The stock is a bucking bronco, but it has great growth and a big story.

Stock Name	Price	Buy Range	Loss Limit
Tenet Healthcare (THC)	0.00	30-31.5	-
Terex (TEX)	0.00	25-26.5	-
Rackspace (RAX)	0.00	69-72	-
Rackspace (RAX)	0.00	69-72	-
Qihoo 360 (QIHU)	0.00	26-28	-
Mohawk Industries (MHK)	0.00	87-89	-
General Motors Company (GM)	0.00	26-27	-
FLSR (FLSR)	0.00	28-30	-
Equinix, Inc. (EQIX)	547.73	198-205	-
3D Systems (DDD)	0.00	48-50	-
Bank of America (BAC)	0.00	10.8-11.4	-

Current Market Outlook


Turkey’s currency crisis is the latest of what seems like a never-ending string of worries this year (volatility implosions, trade wars, rate hikes, etc.) that have hit the market to some extent. That said, we’re relatively encouraged by what we’ve seen during the past couple of weeks, with the major indexes holding and bouncing off important support, some new leadership emerging on earnings and other leading names forming solid bases. It’s still a tricky, narrow and choppy environment, which is a good reason to pick your spots, honor your stops and hold some cash. But we’re nudging our Market Monitor up another notch, as we see a healthy number of good-looking leading stocks and the market’s major trends remain up.

For the second week in a row, we have a growth-oriented list, a positive sign after the late-July selloff. Our Top Pick is Roku (ROKU), a very volatile name with a very big story. Keep it small, try to buy on dips and expect plenty of wiggles.

Stock Name	Price	Buy Range	Loss Limit
Alteryx (AYX)	132.78	51-54	44-46
Carvana (CVNA)	82.90	49-52	42-43.5
CF Industries (CF)	45.23	46.5-48.5	43-44
CyberArk (CYBR)	111.74	68-71	62-64
Match (MTCH)	0.00	47-49.5	43.5-45.5
Michael Kors Holdings Limited (KORS)	73.22	70-72.5	65-66.5
Roku, Inc. (ROKU)	150.46	53.5-56.5	47-49
Seattle Genetics (SGEN)	150.85	71-74	64.5-66.5
Teladoc, Inc. (TDOC)	127.95	67.5-71	59.5-62
Wingstop (WING)	121.52	58-60	53-54.5

Current Market Outlook


The past week saw yet another round of rotation, but this one was the sharpest and most violent we’ve seen all year, with many leading growth stocks getting crunched while other areas of the market (especially those benefiting from likely lower corporate taxes) surged. Our advice, as usual, is to follow the plan—some growth stocks look very toppy after long, uninterrupted runs, and for those, selling (or partial selling) makes sense. But other growth stocks are pulling back normally, and some new leadership is emerging. It makes sense to pull in your horns a bit, possibly holding some cash until the market settles down; we’ve nudged our Market Monitor down to reflect that. Right now, we advise taking things on a stock-by-stock basis, holding your resilient/advancing issues, while honoring your stops and selling names that break down.

This week’s list is heavier on cyclical, building and retail stocks, all of which have caught huge updrafts during the past few days. Our Top Pick is Warrior Met Coal (HCC), a big turnaround play in the coal sector. Buy on dips.

Stock Name	Price	Buy Range	Loss Limit
Beacon Roofing (BECN)	0.00	60-63	55-56.6
CH Robinson (CHRW)	0.00	84-87	78-79.5
E*Trade Financial (ETFC)	0.00	48-50	44.5-46
Gardner Denver (GDI)	0.00	30-32	27.5-28.5
GrubHub (GRUB)	140.03	64-67	57.5-59.5
Michael Kors Holdings Limited (KORS)	73.22	55.5-57.5	51-52.5
Peabody Energy Corporation (BTU)	43.32	32.5-33.5	29.5-30.5
Tyson Foods (TSN)	0.00	80-83	74-76
USG Corp. (USG)	0.00	36.5-38	34-35
Warrior Met Coal (HCC)	0.00	21-22.5	17.5-18.5

Current Market Outlook


After lots of sloppy and weak action in June, July and the first half of August, the past two weeks have certainly been an improvement—the major indexes have popped higher, often in the face of bad news and uncertainties, and many of the resilient growth stocks did the same. We can’t conclude the market is out of the woods, as the broad market is still iffy, the intermediate-term trend is mostly sideways and relatively few stocks have actually broken out on good volume. Still, this is probably the best action by growth stocks (which have led the way higher this year) since June, so we’re not complaining. We’re moving our Market Monitor up one notch to a level 6 (out of 10); you can put a little more money to work, though we need more upside confirmation before getting bullish.

This week’s list contains a mix of familiar and newer names, all of which are showing great strength. For our Top Pick, we’re going with Match Group (MTCH), which has exploded to new highs; it’s a bit thin, but we like the overall growth story and the recent power. Try to buy on dips.

Stock Name	Price	Buy Range	Loss Limit
BeiGene (BGNE)	170.20	71-75	64-66
Catalent Inc (CTLT)	0.00	41-39	37-36
Franco-Nevada (FNV)	125.51	80-83	74-76
Match (MTCH)	0.00	21-22.5	19.5-20.5
Shopify (SHOP)	585.00	105-110	94-96
SolarEdge Technologies Inc. (SEDG)	124.37	25-27	23-24
TowerJazz (TSEM)	0.00	28-30	25.5-26.5
Universal Display (OLED)	187.54	123-129	113-116
Werner Enterprises (WERN)	0.00	31.5-33	29.5-30.5
Wynn Resorts (WYNN)	121.08	137-143	129-132

The title says it all—overall, the trend remains up for the major indexes and most stocks and sectors, and so our Market Monitor remains in bullish territory. But there’s also no question that the environment is whippy; big moves happen almost daily, and earnings season continues to bring a bunch of big moves in both directions. None of this is bad, per se, but it does mean you have to be more discerning with your buys and make sure your timing is right and your stops aren’t too tight.

This week’s list has yet another impressive crop of stocks with good stories and charts that have shown large recent buying power (usually on earnings). Our favorite is Yelp (YELP), a relatively recent IPO that has a great, sustainable story, rapid sales growth and a stock that just exploded higher on earnings.

Stock Name	Price	Buy Range	Loss Limit
Yelp (YELP)	41.30	29-31.5	26-27
Trulia (TRLA)	0.00	33-35	29.5-30.5
Seagate Technology (STX)	0.00	39.5-41.5	36-37
Parexel Corp. (PRXL)	0.00	42-44	39-40
IntercontinentalExchange, Inc. (ICE)	0.00	165-170	156-158
Hertz Global Holdings, Inc. (HTZ)	0.00	23-24.5	21-22
Hornbeck Offshore (HOS)	0.00	49-50.5	44-45
Guidewire (GWRE)	90.60	39.5-41	35-36
Gilead Sciences (GILD)	75.10	51-54	47-48
EQT Corporation (EQT)	0.00	73-75	67-69

Each day brings something new. Some days every stock falls, other days they all surge, and some days, like Monday, undervalued stocks in the industrial, consumer and financial sectors jump (the Dow Jones Industrial Average gained 1%) while the Nasdaq slipped 2.4% - an enormous and historically unusual 3.4 percentage point gap, particularly as the indices went in opposite directions. Since February 12th, the Dow Jones Industrial Average has lifted by 1.1% while the Nasdaq has plunged by 10.5%, entering what the media call a correction.