Cabot Top Ten Trader Issue: March 3, 2025

Staying Defensive—and Flexible

Last week saw the softness in leading growth titles spread to most of the market, dragging down every major index and causing another rash of breakdowns among high relative performance-type names. Just looking at the evidence, most indexes are now in intermediate-term downtrends (or, at least, aren’t in uptrends), and there’s no question market leadership has taken a hit—the odds favor many of the highest fliers that have melted down will need time (at the very least) to repair the damage. That said, the rest of the market isn’t in nearly as bad shape, and what we’re watching closest is if (and if so, how well) the market can bounce: Obviously, a strong, big-volume, multi-day bounce in the market and fresher leading names would be encouraging, but so far upside has been limited to hours at a time before the sellers return. Right now, we think it’s best to play defense (our Market Monitor now stands at a level 4) but to also remain flexible as we see how big investors react to the sudden air pockets in many names.

This week’s list has a lot of names that have gone through corrections in recent weeks and months—likely kicking out most weak hands and, in many cases, resetting their uptrends. Our Top Pick is old friend Nutanix (NTNX), which is trying to break free from a nine-month rest; given the market, we’d keep it small if you enter and see how the market and breakout attempt go from here.

Stock 1

Amer Sports (AS)

Why the Strength
Amer Sports is the parent company of 11 sporting goods brands, with outdoor technical clothing brand Arc’teryx, ski and shoe brand Salomon and ball and racket maker Wilson the three largest, together accounting for 90% of revenue; niche ski and baseball brands including Atomic and Louisville Slugger are also contributors. Though its brands are well known in the U.S. and Europe, it’s China that drives Amer’s growth—they’re rapidly opening Arc’teryx and Salomon stores throughout China, appealing to the middle-class consumers with money to spend and a desire to be outdoors while also being fashionable. Salomon’s hybrid hiking-walking shoe, for instance, has basically created a category of its own with Chinese shoppers. Management is planning to do much the same with Wilson, with Tennis 360 stores opening up across China, driven by Olympics-spurred interest in racket sports and a partnership with Roger Federer. The Asia connection is built into the business, which was bought last decade by four Chinese companies, including Tencent and ANTA Sports, along with Lululemon founder Chip Wilson. So far, it’s been good for business: China sales leapt 54% in Q4, reported last week, making it both the largest and fastest growing area for Amer. Revenue in Asia outside China grew 52%, while the Americas and Europe were well behind though showed growth after essentially being flat in the prior period. For 2025, management expects total revenue to grow around 14% to $5.9 billion, a figure that has analysts projecting $0.69 earnings per share, up nicely from $0.47 in 2024. Foreign exchange headwinds and tariffs will affect the business a bit—Wilson sees the most China-sourced goods entering the U.S. among Amer’s brands—but management says supply chain flexibility means it can lower the impact, as only 10% to 15% of Amer’s sales in the U.S. come from China-made goods. More important is that margins are likely to continue to lift, which should drive earnings nicely higher this year and next.

Technical Analysis
AS has been running higher since August, though the big breakout came in November after Q3 earnings, which prompted a big, persistent rally for the next couple of months. AS finally ran into selling at 34 near the end of January, and the dip reached as low as 26 last Tuesday—but we like the support seen since that shakeout, with last week as a whole looking like big-volume support. We’ll set our buy range up a bit from here, as further strength would tell us that the buyers remain active; use a looser stop if you enter.

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Stock 2

Clearwater Analytics (CWAN)

Why the Strength
Clearwater Analytics has a great growth story that should persist for many years if the top brass pulls the right levers: The firm looks to have one of the best, most comprehensive cloud software suites for big asset managers that increasingly have to deal with ever more complex regulations and risk reporting requirements, with investments in dozens of different currencies in dozens of different asset classes (including “Level 3” and other alternative assets like derivatives, patnerships and more that aren’t traded or priced every day) and, of course, various tax lots and tax rules, too. Most have dealt with these by purchasing limited point solutions that help with one or two of these complications, but Clearwater makes their lives much easier: Its platform (100% subscription-based) ingests, aggregates and reconciles all of a client’s data, with one accounting and risk, regulatory and performance platform for all functions. Clearwater definitely seems to have something special: Over the past four years, bids for new business that have reached the proposal stage have resulted in an 80% win rate (among current clients it sports a whopping 98% gross retention rate, so once they sign up, they stay), and the company thinks it’s playing in an $11 billion (and growing) addressable market for asset managers, insurance firms and even some corporations. Not surprisingly, growth has been rapid and reliable: Clearwater’s Q4 saw revenue growth accelerate to 28%, while EBITDA lifted 40% and EBITDA margin lifted to a very healthy 33%; annualized recurring revenue was up 25% as well, and same-customer revenue growth was up 16%. The firm’s acquisition of Enfusion ($1.5 billion) should broaden its offerings, too; analysts see the top line lifting nearly 20% annually through 2026 while margins expand. We like it.

Technical Analysis
CWAN broke out from a big basing structure last August and had a solid three-month run, with earnings in early November causing a huge spike—but that gap ended up being an intermediate-term top, with a 29% drop into mid-January. Shares began to perk up from there, and the earnings gap two weeks ago has held despite the market’s wobbles. We’ll set our buy range up a smidge from here, thinking a small position on a move above 32 sets up a decent risk-reward situation.

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Stock 3

Eli Lilly (LLY)

Why the Strength
Eli Lilly needs no introduction, being a blue-chip drugmaker for years and, more recently, seeing sales and earnings go through the roof thanks to both Mounjaro (for Type 2 diabetes) and Zepbound (for weight loss), which is the same drug but marketed under different names for the two different indications. Sales for those have gone ballistic and, frankly, will be the main driver of investor perception for the quarters to come: In Q4 alone, the two labels brought in revenue of $5.4 billion and are expected to grow rapidly from here, thanks in large part to official launches in many markets outside the U.S. in the months to come. That said, the firm has plenty of other irons in the fire, with numerous blockbuster drugs on the market, including one for leukemia (peak annual sales likely to be $3 billion-ish in the years ahead; just received positive recommendation for approval in Europe), one for certain breast cancers (sales of $1.6 billion in Q4, up 36%) and an early-stage Alzheimer’s drug that’s on the market and, despite competition, is expected to tally peak annual sales in the $2 billion range down the road. All in, management sees the top line booming another 30%-plus this year while earnings lift 77%, with 2026 likely to see another very solid (nearly 30% earnings growth) boom in the bottom line and with more expected beyond that. (The firm announced a gigantic investment in four new manufacturing facilities in the U.S. to support expansion in the years ahead.) While the valuation is up there (70x trailing earnings; market cap approaching $900 billion), the top brass is returning more and more of its increasing cash hoard to shareholders, with a token dividend (0.7% yield, which was recently hiked) and a new (as of December) $15 billion share buyback program, which it expects to execute over the next three years. It’s obviously not an unknown story, but growth here should remain rapid and reliable for a long time to come.

Technical Analysis
LLY had a huge run from early 2023 into last summer and, like many stocks that did so, it then needed to rest—and it did so, first pulling back 23% in the summer, and then after a quick rebound, dipping 27% from its highs as it (barely) undercut its lows from earlier that year … action which usually is enough to reset the overall advance and knock out most weak hands. After a retest of support above 700 in mid-January, LLY has been perking up, running back to within 5% of its highs, thanks in part to a bullish earnings reaction. If you want in, we’re OK nibbling on dips with a stop in the low 800s.

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Stock 4

Exelixis (EXEL)

Why the Strength
The science of genomics is revolutionizing cancer treatment by allowing researchers to identify specific genetic mutations within a patient’s tumor, in turn facilitating a targeted approach to treating it. At the forefront of this approach to oncology is California-based biotech Exelixis, which uses genomics to develop drugs for treating cardiovascular disease, obesity and diabetes, but with a special focus on cancer therapies. On that front, the firm’s blockbuster Cabometyx (also marketed as Cometriq) is its main commercial offering and a central revenue contributor. The company further leverages its existing medications while expanding research into developing new therapies, including the investigational Zanzalintinib for treating various types of advanced or metastatic cancers (and which Exelixis sees as a future revenue driver). Trial results of Zanzalintinib combined with the immunotherapy cancer drug Atezolizumab for treating metastatic colorectal cancer are expected in the second half of this year. Additionally, Exelixis has an opportunity to get Cabometyx approved for another indication—to treat advanced neuroendocrine tumors—in April. In the latest earnings call, Exelixis said its IND pipeline (which includes investigational compounds that are in clinical development for cancer and other serious diseases) is full for the next several years, with plans for a “significant number” of data presentations at major scientific meetings throughout 2025. The company’s financials are solid, as highlighted by recent Q4 results: Revenue of $567 million increased 18% year-on-year, and EPS of 55 cents beat estimates by six cents. For full-year 2025, it expects revenue of $2.25 billion (up 4% if realized), led mainly by Cabometyx sales. Share buybacks are a big part of the attraction, too—a $500 million buyback plan announced last August should be completed in Q2, with another $500 million program set to launch after that. The trial results will be key, but Exelixis looks like a reliable, profitable and reasonably valued biotech with upside if new indications are approved and the pipeline progresses.

Technical Analysis
EXEL has made good progress over the past year, but mainly in stair-step fashion, with a nice ramp last July and August and, after a couple of months of sideways action, another rush higher into the 37 area in November. EXEL again went sideways from there, with a big shakeout in January, but shares have marched to new highs in the past three weeks. If you’re game, we’ll set our entry range down a bit toward support.

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Stock 5

Intercontinental Exchange (ICE)

Why the Strength
The rising volatility levels all sorts of assets are currently experiencing have naturally prompted investors to turn their attention to defensive-oriented titles. And while it may seem counterintuitive, financial clearinghouse operators typically benefit from such environments since market turbulence leads to increased trading volumes, hence higher revenues from transaction fees. That’s where Intercontinental Exchange comes into play. Formed in 2000, the Atlanta-based operator oversees some of the world’s largest stock markets, commodity exchanges and global derivatives markets through its clearing platform and regulated exchanges (12 in total). Its three main business segments include Mortgage Technology (digital workflow tools to address inefficiencies and mitigate risks in the U.S. residential mortgage market), Fixed Income (bond pricing and execution services) and Data Services (reference data, analytics and indexes). The company’s business benefits from trading fees as well as recurring subscriptions, both of which tend to expand along with market volatility. Energy markets have been particularly volatile for some time, which has enabled Intercontinental’s energy-related trading segment to become a key revenue driver in the past year, thanks to rising hedging demand amid geopolitical, regulatory and macroeconomic concerns. A 22% year-on-year jump in natural gas and environmental product sales, which represent nearly half of its energy revenues, contributed to total Q4 revenue of $3 billion that increased 14% and per-share earnings of $1.52 that were in line with estimates. Also contributing to the strength was the interest rate business, which grew 38% in the quarter, driven by record trading volume for corporate, municipal and agency bonds. Additionally, 2025 is off to a “strong start,” with January volumes up 21% and open interest 11% higher, led by growth in global energy (up 13%) and interest rate products (up 17%). Earnings should grow at double-digit rates from here, and margins remain spectacular, too.

Technical Analysis
ICE broke out from a two-year base last July and enjoyed a 20% rally before running out of steam in late October. A three-month dip followed, with shares finally bottoming out just south of the 200-day line, but the buyers resumed control in mid-January. Earnings helped the stock return to its prior highs a couple of weeks ago, with follow-on strength since. If you want in, aim for dips toward the rising 25-day line.

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Stock 6

Light & Wonder (LNW)

Why the Strength
Cross-platform global gaming provider Light & Wonder (L&W) is a top provider of casino slot machines, tabletop games, lottery systems and digital gaming solutions. A big part of the Las Vegas-based outfit’s business (around 70%) in recent years was land-based casino gaming, but the company just announced it’s exiting a slice of that business, looking to sell its live dealer offerings (which it had just begun to sell in 2023) in order to focus more on first-person-perspective (dubbed 1PP) content and monetization. In its latest earnings call, the company said that under the newly appointed iGaming segment CEO, the firm will commit more resources to its 1PP online game offerings, including First-Person Blackjack (a simulated experience where a single user plays against AI in a virtual casino setting), First-Person Roulette and immersive slot machines like 88 Fortunes (one of its top sellers overall) and Dancing Drums. To be fair, L&W admits the decision to exit live casino diminishes some of its addressable market, but there’s still “significant growth” potential in states where iGaming is legal (not to mention more states are approving iGaming each year). What’s more, management said its recent acquisition of Grover Gaming, a leading provider of electronic pull-tabs for charitable gaming in the U.S., provides the company with an “attractive recurring revenue base” along with a “sticky customer base.” The company also expressed confidence that it would meet its $1.4 billion cash flow target for 2025, with Grover-derived sales contributing to that goal. The company’s Q4 results were a key reason for the stock’s latest rally, as revenue of around $800 million increased 4% year-on-year, with earnings of $1.42 a share beating estimates by a whopping 53 cents. On a full-year basis, total sales increased 10%, with the growth driven by strong performance across all the firm’s segments. Gaming revenue increased to $2.1 billion (up 12%), driven by continued momentum in Gaming machine sales, which increased 22% primarily on market share gains in North America and Australia. SciPlay (the online and digital arm) revenue rose to $821 million (up 6%) and delivered record payer metrics and expanded the firm’s direct-to-consumer, high-margin revenue channel. iGaming revenue, meanwhile, increased 9% to $299 million, reflecting continued momentum in the U.S. and international markets—and obviously, the company’s renewed focus on all things digital should help going forward. While growth should be modest going ahead, it should be reliable (a good thing in this environment), with estimates likely proving conservative.

Technical Analysis
LNW had a tough correction in March and April of last year, and while it rallied for months after that, it never really kicked into gear (new price highs but the relative performance line never did). That led to a sharp break in September and a tough correction into January—all told, LNW made no net progress for about 14 months. But that correction looks to be over now, as shares tightened up near the lows, and the last three weeks have shown excellent, big-volume accumulation. Today’s reversal near resistance isn’t a surprise; if you want in, look to enter on further weakness.

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Stock 7

Nutanix (NTNX) ★ Top Pick ★

Why the Strength
Nutanix provides a software platform for managing hybrid multi-cloud environments that has been called a “one-pane-of-glass” solution. It basically combines compute, storage and networking into a single platform to run apps and data across public and private clouds with unified management and simplified operations, saving huge time and money for big companies that have expansive IT systems. There’s a long-term growth angle here, with firms looking to simplify their systems on one offering, but in addition, the company’s growth in recent quarters has been boosted from enterprises that want to “quickly and efficiently deploy their GenAI applications on real-life use cases.” Last week’s fiscal Q2 (ended January) report was the reason for the stock’s strength, as results came in at the high end of guidance across all metrics. Revenue of $655 million increased 16% from a year ago, with earnings of 56 cents beating estimates by nine cents. Even more important was the fact that annual recurring revenue (ARR, a key metric) of $2.1 billion increased 19% and free cash flow remained strong, growing 15% and coming in nicely ahead of reported earnings (about 63 cents per share). The company saw its second quarter in a row of year-over-year new logo growth exceeding 50%, with strength seen across all segments and with several new Global 2000 customer wins, including a major energy technology company that switched to Nutanix from another platform due to the former’s cost efficiency. Specifically, Nutanix’s customer count jumped by 710 from the prior quarter, to 27,870, which was the highest quarterly increase in 18 quarters. (The company is also seeing “momentum” from customers migrating to the firm from cloud competitor VMware, driven largely by Nutanix’s simplified management platform, while VMware sees some convulsions after its sale to Broadcom.) The excellent results prompted a number of upgrades, with a major investment bank upping its price target on the stock, in part due to anticipated share gain from VMWare and “long-term upside” from partnerships with Dell, Cisco and Red Hat. For the full fiscal year, analysts see top- and bottom-line growth of 17% and 23%, respectively.

Technical Analysis
NTNX was a leader during the market rally that kicked off near Halloween 2023, but the late-May earnings report topped the stock and led to a sharp 41% correction. The stock did rally back from there, but after testing its prior high in November, the stock fell back into another base-building effort—but this one was much more controlled (20% from high to low), with some tightness last month and a nice earnings-induced breakout last Thursday. We’re OK with a small buy around here or further weakness, but keep it small given the weak environment.

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Stock 8

Stride (LRN)

Why the Strength
Stride is a technology-based learning services company, offering tutoring, K-12 classes, continuing education and professional certifications. Though it’s been around for 25 years, Stride got a big boost during the pandemic, when remote schooling, including full class days online, opened many parents and policymakers to the utility of online learning. Stride is the largest operator of online schools, both its own offered as state-certified full-time alternatives when permitted; and schools that partner with local districts to supplement or fill-in class needs. One lesson from the pandemic for investors has been that demand for remote learning is continuing unabated on an annual basis—Stride had 230,000 students last quarter, continuing a run of annual post-pandemic student increases driven mainly in the K-12 area. More parents want their children to be able to study while traveling or to fill in perceived educational gaps with additional classes. Unlike other educational institutions, Stride is also fairly insulated from potential federal funding cuts; it estimates about 5% of its revenue comes from federal sources directly or indirectly. That’s enabled management to hike guidance for the current fiscal year (ending in June) to $2.34 billion or so, a 15% increase over fiscal 2024 at the top end. That’s in line with what the first half of Stride’s 2025 has shown so far. In fiscal Q2, ended Dec. 31, Stride posted 16% sales growth, to $587 million, with the next couple of quarters likely growing in the 13% to 15% range. The only softness has been in adult learning and its medical certificates programs as Stride looks to deemphasize pitching individual adults on programs and partnering with corporations for employee education instead. It’s a solid, steady growth story.

Technical Analysis
LRN was in a decent uptrend when a nosedive in October took shares below the 40-week line and threatened to break the stock—but shares soared on earnings after that as quarterly results (and enrollment trends) encouraged bulls. Shares kited higher from there, and after a rest near year-end, popped on earnings again and reached 145 touched last month. So far, LRN has pulled in mildly, which is a solid sign of relative strength; if you want in, aim to nibble on a bit more weakness.

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Stock 9

Viking Holdings (VIK)

Why the Strength
Viking Holdings looks like a classic follow-on play in the cruise sector, where for years the big players (especially Royal Caribbean) have thrived due to tight capacity and booming demand—and now Viking looks like the new upstart in the sector, with a different business angle than most others, as well as an aggressive expansion plan and flawless execution of late. The firm is best known for its culture-rich river cruises that feature less (or no) gambling, kids and general raucousness, and more learning-based activities, tours/stops at various cities, nicer food (including cooking classes involving food from destinations) and the like. That said, Viking is also doing a good business in more traditional ocean cruises, too, with both segements producing about half of revenue and EBITDA, and as mentioned above, the top brass is looking to expand in a big way: It currently has 90-ish ships on the water, but has 16 more river ships ordered (all to be delivered through 2026) and 10 ocean liners (deliveries spread out through the next many years), which means overall capacity (up 5% last year, likely up 12% this year) is heading meaningfully higher. And it’s having no trouble filling all that supply—as of November, about 70% of 2025 capacity was already sold out, with ocean bookings (up 30%) and river bookings (up 22%) for this year already well above 2024’s levels, which was itself a boom year. To be fair, Royal Caribbean did announce it would likely be moving into the river cruise business in the years ahead, which increases competition, but it’s unlikely to affect the growth story. Analysts see top-line growth accelerating going forward while the bottom line booms, though earnings (due March 11) will be key.

Technical Analysis
VIK has been in a general uptrend since coming public in May of last year, with its initial breakout happening in October, so it’s still early in its overall advance. That said, the breakout didn’t get very far, with shares effectively forming a base-on-base pattern during the past few months, with a higher high and higher low and support near the 50-day line. Earnings will obviously have an impact, but we’re OK with a small buy should VIK rebound strongly over the next couple of weeks.

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Stock 10

Wheaton Precious Metals (WPM)

Why the Strength
Gold prices have reached record highs in 2025, driven largely by safe-haven demand over a mix of concerns both old and new, including inflation, the tense geopolitical climate and tariff plans. The supportive backdrop for gold is one reason why Wheaton shares are outperforming, as the company is benefiting from higher production and accelerating sales growth. The Vancouver-based operation is one of the world’s largest precious metals streamers with agreements with 20 mining companies for more than 19 operating mines and nine development projects to purchase all or a portion of their gold, silver or cobalt production in exchange for an upfront payment. Most of Wheaton’s silver and gold streams are based on a fixed cost per ounce that is significantly below market prices (typically 20% or less of the prevailing spot price), which provides it with a substantial profit in view of elevated prices. Wheaton just announced total 2024 production numbers of 633,000 gold equivalent ounces (GEOs), up 2% from 2023’s levels, with output expected to nose ahead to 635,000 GEOs this year. But as new projects come online, there should be a real growth story here, as Wheaton sees GEOs lifting to a whopping 870,000 in 2029 and 950,000 by 2034. The strong production guidance prompted several analysts to hike their target prices for Wheaton (another reason for the strength), with one projecting Wheaton’s GEO guidance to reach the upper end of the range this year. The bullish production news was further solidified by the recent addition of two new precious metals streaming agreements, including the Koné Project—one of the highest quality gold projects in Africa—which is forecast to contribute “meaningful near-term production” for Wheaton. When the firm releases Q4 results on March 13, analysts expect 25%-ish growth on both the top and bottom lines, with 30% earnings growth expected in 2025.

Technical Analysis
WPM was stuck in a lateral range for the better part of a year and entered 2024 on a downbeat note when the resurgent gold and silver markets came to the rescue. The stock turned up last March and broke out soon afterward, continuing a choppy uptrend for many months before hitting a record peak at 68 in late October. A three-month correction followed that saw shares pull back 18%, but it found support just under the 40-week line and turned up again in late January, riding to a new high last week and again this morning (before the market reversed). We’re OK taking a swing here or (preferably) on dips.

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Previously Recommended Stocks

The next Cabot Top Ten Trader issue will be published on March 10, 2025.

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