Pulling Back A Little: BLI Moves to SELL. ARRY, CSTL, CRSR, FOUR, TFFP, VRNS Move to HOLD
The market has been searching for direction this week and we’ve seen an uptick in “the crazy.” If you don’t know what I mean just Google “Short Squeeze GME” and read about the likely collective impact of retail investors teaming up on some stocks to put pressure on those with significant short interest.
Also, on Monday we felt a tremor rip through the market as stocks were up early, then quickly dropped into negative territory before turning back up. It’s possible this reversal was related to market dislocations as some hedge funds/institutions hit max pain and needed to arrange capital infusions. For example, this situation was reported to have hit Melvin Capital Management.
I bring this up to illustrate some of the odd market action out there and the shifting dynamics of the market during these unprecedented times. And to raise our awareness level another notch as we head into what’s going to be a VERY busy earnings season.
The action started last night when Microsoft (MSFT) reported terrific earnings. Apple (AAPL) is up tonight. For us, things don’t really get going until next week. Buckle up!
On to a few of our stocks. We’ve been leaning quite bullish lately and today we’re dialing things back. The market is acting up, and in my view systematic risk has taken a significant jump. It’s impossible to predict what the impacts of the odd market action might be, but in these times it’s wise to be extremely cautious.
Berkeley Lights (BLI) is moving to SELL today. I like the stock and the story and think it’s a long-term winner. However, the stock’s recent action is eerily similar to that of Schrodinger (SDGR), a position we held on to for too long during a downtrend (though it has since recovered) and which, just like BLI now, had a tough time immediately following lockup expiration. I don’t know that history will repeat here, but we have a very full portfolio and there’s not a lot of incentive to hold stocks trending in the wrong direction when we don’t have gains to cushion the fall. I’ll keep an eye on BLI and look to add it back when the trend improves. SELL
Array Technologies (ARRY) Moves to HOLD out of caution. Stock went below 50-day line this morning but has recovered some.
Castle Biosciences (CSTL) Moves to HOLD out of caution and given the downtrend that’s emerged since we entered.
Corsair Gaming (CRSR) Moves to HOLD. The stock is up around 20% today and it smells like a short squeeze. There’s likely some speculation that Corsair will deliver a big quarter given the outstanding performance in Microsoft’s Xbox business in the just-reported quarter, but I don’t think that explains the whole move. Don’t chase it – just sit back and watch and let’s see what happens.
Shift4 Payments (FOUR) Moves to HOLD out of caution. Stock broke below 50-day line today.
TFFP Pharmaceuticals (TFFP) Moves to HOLD. The potential here is still big but we’ve had at buy for a while and I suspect those that wanted to buy have already done so.
Varonis (VRNS) Moves to HOLD. There’s nothing wrong with this stock and I still like it. However, earnings isn’t out until the week after next and I’ve had it at buy for quite some time. I suspect those that want to buy have done so. It’s time to sit back and see how VRNS performs leading up to, and after, the Q4 report on February 8. HOLD
Virgin Galactic (SPCE) On Alert: We are likely seeing something of a short squeeze here as the stock is up significantly over the last two days (we’re up 195% at the time of writing). I like the stock and the story and don’t want to get out of SPCE because of what may be short-term moves. However, let’s not be blind – it’s hard to justify the stock’s recent moves without accounting for some speculation. My plan is to keep watching and see what happens, but if you feel like locking in gains on a quarter or half of your position, nobody will fault you for that! HOLD