Cabot Stock of the Week Issue: March 17, 2025

It’s possible the worst is behind us. Last week’s cooler-than-expected CPI print could not have come at a more welcome time, and while stocks haven’t exactly taken off since last Wednesday morning’s inflation reading, they are up in three of the last four trading sessions, which qualifies as progress in this tariff-infested market.

We’ll see if Jerome Powell and company can refrain from derailing what little momentum exists during this Wednesday’s press conference. No one is expecting a rate cut this week. But words matter when it comes to the pace of future cuts, and Wall Street will again be hanging on Powell’s every utterance, especially at this time of great uncertainty.

Thankfully, it was a good bounce-back week for our portfolio, as most of our stocks were up after last week’s bloodbath forced us to sell a quarter of our positions. The only change this week is our newest addition, a dividend payer in one of the most reliable and boring industries that exists – trash collection. It’s a new recommendation from Tom Hutchinson in his Cabot Dividend Investor advisory.

Here it is, with Tom’s latest thoughts.

Waste Management, Inc. (WM)

The average American produces about 4.5 pounds of trash every day. That’s a lot. According to Dumpsters.com the global per citizen average is 1.6 pounds per day. The average American family produces about 18 pounds per day. That translates to yearly trash generation of 1642 pounds per person and 6570 pounds per family every year. Multiply that by about 360 million citizens and you get the idea.

The nation generates over 800,000 tons daily, enough to fill up Busch Stadium in St. Louis more than twice. It’s big business to clean all that up every day. And the business is growing. Grandview Research estimates that the U.S. waste management market will grow by a compound annual growth rate (CAGR) of 5.2% between 2024 and 2030.

Houston-based Waste Management is the largest provider of solid waste services in the U.S., with $22 billion in annual revenue. It operates a fully integrated system of pick-up routes and transfer stations and has unmatched dominance in landfill ownership with 263 active landfills and 332 transfer stations.

The company picks up garbage and waste from around the country. The breakdown in sources of waste for 2024 was commercial (36.7%), industrial (23.1%), residential (21.2%), and other (19%). The waste goes to a transfer station where it is then sent to be sorted/recycled, to a waste-to-energy facility, or to a landfill. WM has growing businesses in recycling, where it is one of the largest players in the country, and waste-to-energy. But the vast majority of revenue comes from landfills.

The landfill business is a key advantage for WM. The company has by far the largest landfill portfolio in the country, which is huge because such holdings are impossible to replicate. That gives WM a huge moat where significant new competition isn’t possible. A landfill releases more greenhouse gases into the atmosphere than just about anything else, except maybe an active volcano. That makes regulatory hurdles to open new ones enormous.

WM already has a massive number of existing properties and the ability to make acquisitions of companies with established landfills. In fact, WM acquired Advanced Disposal in 2020, which was at the time the fourth largest waste service company in the U.S. Last year, WM acquired Stericycle, the largest medical waste services provider in North America. It now has a strong presence in the growing medical waste business.

All right, that sounds good. WM has a big leg up in the waste business. It’s a very practical and dependable business, although not very glamorous. But how does that translate to the bottom line? WM has beaten S&P 500 returns over the last three- and five-year periods with returns of 55% and 113%, respectively. And the stock has done it with less volatility than the market, with a beta of 0.76.

But the relative returns may improve going forward. Management anticipates for 2025 “a step change in the company’s revenue and earnings.” WM posted 8% revenue growth for 2024 from the prior year but projects 16% revenue growth this year, along with 15% adjusted earnings growth and 17.6% growth in free cash flow at the anticipated midpoints.

The higher growth partially reflects the medical waste acquisition as well as growth from investments in recycling and energy. But it is also a product of improving margins. The company is leveraging its massive scale with dense routes and efficient processing to continually hone its processes and lower costs.

The company pays a quarterly dividend of $0.825, which translates to $3.30 per year and a current yield of 1.45%. It’s well supported by a 44% payout ratio. That’s not a great dividend, but it’s growing. WM just raised the current quarterly dividend by 10% and has raised the quarterly payout by 50% over the last five years. Companies that consistently grow the dividend tend to be the best-performing group in the market over the longer term.

This is a rock-solid company that makes up for boredom with returns. WM has delivered an average annual return of 18% over the last 10 years by collecting garbage. It should continue to perform well in good markets and it’s a nice conservative stock to hold for dicier markets like the current one. BUY

Current Recommendations

Changes Since Last Week:

None

No changes this week after last week’s purge. That’s a reflection of a mildly improving market and, perhaps even more so, the fact that we hung on to stocks that didn’t have much further to fall. Or at least that’s the hope. Several of our holdings had very good weeks, starting with new addition Agnico Eagle Mines (AEM), up 7% in its first week in the portfolio and, amazingly, trading right around 52-week highs.

Here’s what’s happening with all our stocks as the market mercifully takes a much-needed deep breath.

Updates

AbbVie (ABBV), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, tumbled 3% this week after weeks of outperformance. No matter. It’s still up more than 19% year to date. As Tom wrote in his latest update, “As a healthcare company, business isn’t negatively affected by a slower economy or probable tariffs either. Meanwhile, the ascent that began after the earnings report in January continues. Immunology drugs Skyrizi and Rinvoq, collectively, have made up for the lost Humira revenue. The earnings report showed AbbVie has replaced the Humira revenue and is poised for solid earnings growth. The stock made good returns while working through the Humira issues. It should do even better now.” BUY

Agnico Eagle Mines (AEM), originally recommended by Carl Delfeld in his Cabot Explorer advisory, had a very good first week in the portfolio, advancing nearly 7%. As my colleague Clif Droke noted, it was one of only 16 New York Stock Exchange-listed stocks to make a 52-week high last Thursday. There was no major news for the gold miner, but several Wall Street firms upped their price targets on the stock as safe-haven buying of gold stocks continues amid rampant uncertainty.

Clif speculates that there may be another catalyst driving shares that’s specific to AEM: “Agnico’s stock continues to perform well, and another reason could be the latest assay results from a 2024 exploration drilling program the company conducted on the Detour Easter Property in Ontario, Canada, of which Agnico owns an option to earn a 75% interest and which Wallbridge Mining owns a 100% stake. The results were reported by Wallbridge on Thursday,

“Specifically, if Agnico exercises its option to earn the initial 50% interest on the property, a joint venture (JV) will be formed and Agnico will have a second option to earn an additional 25% interest by making additional expenditures of $28 million in skilled work within five years of entering into the JV agreement. Agnico is the operator of the project for the duration of the option period.

“The assay found ‘significant…localized gold mineralization’ at several targets, with 14 holes drilled and nine intercepted gold mineralization that ‘may warrant additional drilling.’ The exploration strategy looks to be working, as the combination of geophysical surveys and drilling appears to be identifying new mineralized structures, which can guide future exploration efforts.

“Granted, the results aren’t decisive but they’re encouraging enough to justify further exploration. And if follow-up drilling extends the mineralized zones and discovers more consistent gold grades, the project could become significant. As one industry source noted, ‘Given its proximity to Agnico’s Detour Lake Mine, even a moderate discovery could be of interest for future development or partnership opportunities.’” BUY

Airbus (EADSF), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up 4.5% this week, with all of the gains coming during Friday’s market rally. There was no major company-specific news. While deliveries were down 18% through the first two months of the year, it did have 65 net orders, roughly double the 33 it took in January and February last year. Plus, the down first two months for deliveries haven’t altered the company’s full-year 2025 target of 820 deliveries, which would be up from 766 last year. Airbus shares are now up 13% year to date. BUY

AST SpaceMobile (ASTS), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, pulled back from 29 to 28 after a big run-up last week on earnings. EPS losses narrowed to -$0.13 versus a -$0.18 estimate. That was also less than half the 35-cent loss in the fourth quarter a year ago. While revenue of $1.92 million came in shy of the $3 million estimate, the company is still mostly pre-revenue, and that $1.92 million represents nearly half of AST’s total 2024 revenue ($4.42 million). The company now has $565 million in cash and equivalents and just $155.6 million in debt, up from a mere $85.6 million in cash at the end of 2023, with $59.3 million in debt. Wall Street liked the results, pushing shares up from 25 to as high as 34 before pulling back in the last 10 days. It’s still up more than 33% year to date, as the promise of this space-based, straight-to-smartphone broadband internet service is enticing for investors. BUY

Axsome Therapeutics, Inc. (AXSM), originally recommended by Mike Cintolo in his Cabot Top Ten Trader advisory, was up another 5% this week on no news. In his latest update, Mike wrote, “Axsome is a drug maker focused on central nervous system disorders, and it has a couple of treatments on the market and is likely to have a few more drugs or indications approved in the quarters ahead, too. The main growth driver today is Auvelity, an oral treatment for major depressive disorder, which affects north of 20 million people; without getting into all the details, it mimics the action of ketamine but without the side effects. It’s been a hit, with Q4 sales and prescription growth in the upper 80% range, and the firm thinks peak sales here could be well over $1 billion (vs. $291 million in 2024). Also on the market is Sunosi for wakefulness in adults with sleep apnea or narcolepsy; growth here is milder (up 16% in Q4), and peak sales could be $400 million or so down the road. But there’s also a lot of excitement is about some new drugs. First is Symbravo, for acute migraines ($500 million-plus peak potential), which was approved in late January and should hit the market by the middle of the year. And Axsome is expected to submit three new drug applications in the first half of 2025 alone—one for fibromyalgia ($500 million-plus potential), one for narcolepsy (also $500 million-plus) and one for Alzheimer’s disease agitation, where trials were good-not-great but management thinks it’s still very likely to be approved ($1.5 billion to $3 billion peak potential). Obviously, with so many trials and FDA submissions, there’s event risk here—some bad news could hit the stock, like it did in December when there were worries about the Alzheimer agitation trial results. But the fact is sales growth here is rapid and should remain that way (66% growth in Q4, 60%-plus estimated this year and next) and, while the bottom line is in the red, losses should start to shrink dramatically soon and turn green next year. As for the stock, AXSM made no net progress for more than two years, but it’s changed character since 2025 began, with a strong move to all-time highs and resilient action during the market’s plunge.” BUY

Banco Santander (SAN), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up more than 6% this week as institutions continue to pour into European stocks. Shares of the Spain-based bank are now up 50% year to date. BUY

Broadcom Inc. (AVGO), originally recommended by Tom Hutchinson in Cabot Dividend Investor, is up nearly 8% since we last wrote, getting a much-needed boost from its recent earnings report. In his latest update, Tom wrote, “After taking the worst beating in years over the last month, this AI superstar soared more than 8% on Friday after another stellar earnings report. But the stock has been bouncing around with the volatile market this week. Broadcom soundly beat expectations with 25% revenue growth and 45% earnings growth and raised guidance for the current quarter. The even bigger news was that AI revenue grew 77% over last year’s quarter and reported that it has scored two more large AI chip customers. It appears well on track to make its lofty revenue goals over the next few years. Tech and AI are getting a comeuppance now. But the AI business is alive and well. Business is stronger than ever but the stock is being dragged lower by the sector. AVGO will be back strong. Patience should be well rewarded.” I agree. Let’s keep holding on to our remaining half position. HOLD HALF

BYD Co. Ltd. (BYDDY), originally recommended by Carl Delfeld in his Cabot Explorer advisory, had a monster bounce-back week, rising 16% as rival Tesla continues to wallow on slipping sales, especially in China (see below). The company reports earnings a week from today, on March 24, so it’s possible another strong quarter is being priced in already. That said, shares are still just shy of their late-February highs, so upside remains as this Chinese EV giant prepares a global takeover. BUY

DexCom, Inc. (DXCM), originally recommended by Clif Droke in his Cabot Turnaround Letter, bounced off 68 after weeks of falling from above 90 and is down only a point or two since last week’s issue. A warning letter from the FDA on March 4 didn’t help matters, as it outlined the company’s shortcomings in the manufacturing process at its Arizona and California plants. But analysts aren’t worried that the letter will have an impact on the share price beyond the temporary embarrassment and overreactive selling in the last couple weeks. In a note to subscribers, a William Blair analysts said they “remain confident in (Dexcom’s) ability to deliver on its revenue guidance” this year. With sales potentially unaffected by the FDA letter, the recent selling is likely overdone, making this a true “buy on bad news” candidate. BUY

DoorDash Inc. (DASH), originally recommended by Mike Cintolo in Cabot Top Ten Trader, bounced back nicely this week, up 4.5% on no news, but still has some work to do to get up off the mat after falling more than 15% in the last month. The online food delivery giant didn’t do anything wrong, as investors were simply coming for stocks with “meat on the bone.” But with that selling wave maybe, possibly in the rear-view mirror, DASH could be due for an extended recovery. We downgraded the stock to Hold last week and will keep it right there until we see more evidence. HOLD

Dutch Bros (BROS), originally recommended by Carl Delfeld in his Cabot Explorer advisory, also bounced back after a rough stretch, rising more than 5%. There was no news. We downgraded this one to Hold on weakness as well, but I don’t expect it to stay down long. The growth story for this upstart drive-through coffee shop is too good. It added 18% more locations last year to reach 982, with ambitious designs on reaching 4,000 stores in the coming years. It’s now in 18 states, just launched a new mobile ordering feature last year, which already accounted for 8% of total orders in Q4, and same-store sales improved 6.9% in the latest quarter, so there’s a lot to like here. You could treat this pullback as a buying opportunity if you don’t already own shares, but I’m going to wait a few days to see if the stock has truly stabilized before restoring a Buy rating. Keeping at Hold. HOLD

Eli Lilly and Company (LLY), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, was off about 2% this week but remains well north of its January lows. It seems recent selling in sympathy with a disappointing clinical trial result for a new weight-loss drug from rival Novo Nordisk (NVO) has subsided. But its own weight-loss drug, Zepbound, is still crushing it, so it’s likely the recent selling was overdone. Keeping holding. HOLD

Flutter Entertainment (FLUT), originally recommended by Mike Cintolo in Cabot Top Ten Trader, regained some of its 16% loss from the previous week, up about 7%. March Madness may be throwing shares of this sports betting stock (which owns FanDuel) a life raft, as Americans are expected to bet a record $3.1 billion on this year’s men’s and women’s college basketball tournaments, which begin this week. But the real driver of the rebound was last week’s Q4 earnings, which were pretty good, with revenues up 14% and EBITDA up 4% from a year ago despite unfavorable outcomes, with huge free cash flow. As Mike wrote, “More important, the top brass said 2025 was off to a good start, with neutral sports betting outcomes so far this quarter (Super Bowl helped offset some not-so-good outcomes in January) and continued solid customer acquisition—all in all, it sees U.S. revenue lifting 23% this year (if you normalize Q4 results) with EBITDA margin likely to expand five full percentage points. (International growth will be slower but still positive, with 6% sales and 10% EBITDA growth this year.) Lastly, the firm began its share buyback program, gobbling up $121 million of stock in Q4 and expecting up to $1 billion in buybacks in 2025 (north of 2% of the current market cap). Of course, even the good news didn’t bring in much buying, and the market’s latest implosion today dragged the stock toward key support in the 250 area. Given our profit and the fact the selling in FLUT isn’t outrageous (the action isn’t good but shares are down 14% from their highs, miles better than much of what’s out there), we advise hanging on here; we still think there’s a solid chance that, once this selling storm in the market ends and big investors refocus on the underlying growth story, FLUT can regain lost ground. Hold for now.” Good advice. We downgraded to hold last week and will keep it right there. HOLD

Kyndryl Holdings, Inc. (KD), originally recommended by Mike Cintolo in his Cabot Top Ten Trader advisory, clawed its way back from 34 to 35 after a 10% drop-off the week before. The latest news was that Kyndryl, the world’s largest IT infrastructure services provider, is teaming with Microsoft to deliver a new AI-powered healthcare assistant. Called Microsoft Dragon Copilot, the new solution uses voice dictation and natural language capabilities to automate clinical documentation, allowing providers more time with patients and less time doing paperwork. Kyndryl plans to begin offering Dragon Copilot this May. The news didn’t goose the share price right away but could loom as a potential catalyst in the coming months. BUY

Main Street Capital Corp. (MAIN), originally recommended by Tom Hutchinson in the High Yield Tier of his Cabot Dividend Investor advisory, held firm at 57 and is a veritable oasis in a desert in the current climate due to its reliability and monthly dividend. The business development company’s portfolio not only makes high-interest loans, but it also takes equity stakes. The equity stakes are the primary reason the total returns have been better than just about every other BDC. If the economy hangs on, the BDC should continue to deliver. BUY

Netflix, Inc. (NFLX), originally recommended by Tyler Laundon in Cabot Early Opportunities, rebounded in a big way this week, up more than 11% to regain most of its March losses. MoffettNathanson upgraded the stock to Buy and raised the price target to 1,100. The analyst, Robert Fishman, sees “greater profits” for the streaming giant in the years ahead and estimates $6 billion in advertising revenue in 2027 and almost $10 billion by 2030. Last week I recommended buying the dip on this unstoppable growth stock; it’s still a Buy even after gaining back 100 points this week. BUY

Sea Limited (SE), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up about 3% this week to shake off the recent selling. As Carl noted, in the latest quarter “Sea’s e-commerce group, Shopee, became profitable in Asia and Brazil. SeaMoney maintained steady profitability and increased revenue by 55%. Meanwhile, Sea’s digital entertainment group grew quarterly active users and gross bookings by 17% and 19%, respectively.” Sea remains a strong way to play one of the fastest-growing economic regions in the world, Southeast Asia. And the stock still trades at roughly a third of its 2021 highs. BUY

Sirius XM Holdings (SIRI), originally recommended by Clif Droke in his Cabot Turnaround Letter, has pulled back from 25 to 23 in the last couple weeks. Clif explained why in his latest update: “Sirius XM (SIRI) saw some share price weakness this week after comments the company made regarding recent advertising softness at an industry conference.

“‘In the last week-and-a-half we are starting to see a drop-off,’ Sirius XM CFO Tom Barry said at the 33rd Annual Deutsche Bank Media, Internet & Telecom conference. ‘We had some softness on CPG and retail in the last couple weeks. We are also seeing more softness in other categories in the last couple of days.’

“He added, ‘Right now we are a little concerned and cautious about where ad sales are going,’ due to tariffs, inflation and ‘just overall uncertainty in the market.’

“While he believes there are some risks due to macroeconomic factors, Barry said he feels ‘very comfortable’ with the company’s financial guidance for 2025. I have no comment to make on this right now other than I see a host of companies reacting to the escalating tariff war in similar fashion, so I suspect this is more of a knee-jerk overreaction and not a reason for long-term worry. For now, I’m maintaining the Buy rating on the stock.” Let’s do the same. BUY

Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, is off its lows, up 4% since our last issue, but remains out of favor on Wall Street, as evidenced by today’s 6% selloff. The stock has now recorded eight consecutive weeks of losses due to a combination of running up too fast following the election, its worst quarter in more than a decade, and the increasing unpopularity of CEO Elon Musk due to his newfound position in Trump’s administration. Tesla’s sales in China imploded in February, down 49% due to increased competition from BYD after it announced new self-driving technology, God’s Eye, and accompanying AI features. Some perspective, though: TSLA stock is still up 91% in the last year, and the stock has a long history of bouncing back every time investors count it out. This week wasn’t exactly a rousing start, but perhaps the worst of the recent selling is over. HOLD

If you have any questions, don’t hesitate to email me at chris@cabotwealth.com.

Here, too, is the latest episode of Cabot Street Check, the weekly podcast I host with my colleague Brad Simmerman. This week we welcomed on Cabot analysts and Stock of the Week contributors Mike Cintolo, Jacob Mintz and Michael Brush to talk the state of the market, how to navigate the choppy waters, and where it could go from here. It’s worth a listen!

The next Cabot Stock of the Week issue will be published on March 24, 2025.

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