Portfolio Changes:
Butterfly Network (BFLY) – MOVE FROM BUY TO SELL
Virgin Galactic (SPCE) – MOVE FROM BUY TO SELL
Nu Holdings (NU) – MOVE FROM BUY TO SELL
Navigating Challenging Markets
Stocks hopefully have settled down after facing a rough market in recent weeks fed by expectations that the Fed soon will embark on raising interest rates. This has led to sharp pullbacks for growth stocks with high valuations and no earnings. Quality and value are beating risk right now.
We are selling three of our weaker stocks this week to limit losses and preserve small gains. In general, the stocks that went up the most in 2020 and 2021 are pulling back sharply with the exception of higher quality, more stable companies with great balance sheets such as Microsoft (MSFT) and our Oracle (ORCL), Veeco (VECO) and Ford (F) positions.
It is important not to panic when stocks pull back like this. Instead, stick with your plan but also review and make adjustments to your strategy. Here are a few suggestions.
First, keep a list of stocks you like and wanted to buy but didn’t because of high valuations and steep run-ups in price. Monitor these and incrementally add shares to your portfolio.
Second, consider pairing a high quality company with a stock that offers higher growth but comes with more risk. For example, one pairing might be Ford (F) and Rivian (RIVN).
Third, add some real asset plays such as commodities and industrial stocks, which are back in favor, still at relatively low valuations, and present a good hedge on inflation. Extend this to international markets such as Japan, Europe and emerging markets that offer better valuations.
Finally, these sorts of markets also highlight why you should always keep sizable cash positions in your brokerage accounts so that you can scoop up some bargains. Depending on your personal situation, I think usually 10% to 20% is about right.
Portfolio Updates
Butterfly Network (BFLY) shares fell from 6.4 to 5.3 this past week and as much as I love this company, we need to cut our losses on this relatively new recommendation. Butterfly is a revolutionary medical device powered by artificial intelligence. When attached to a smartphone or tablet, it provides a window into the human body. FROM BUY A HALF TO SELL
Exscientia (EXAI) shares tumbled 22.1 to 16.8 in their first week in the portfolio, giving it a chance of rebounding this week if the market stabilizes. Founded in 2012 and based in Oxford, England, Exscientia is using artificial intelligence to develop new medicines and the company is turning this into explosive revenue growth. Exscientia is a rapidly growing pipeline of more than 25 projects in motion with the goal of drug discovery in ovarian and hematological (blood) cancer.
As background, EXAI went public on the Nasdaq in October at 22 a share, so keep in mind that this is a speculative stock. BUY A HALF
Fisker (FSR) shares fell back this week along with many EV-related stocks as the company announced that it would report its fourth-quarter and full-year 2021 financial results after market close on Wednesday, February 16. This is a speculative stock but I confirm a buy rating on Fisker for new investors as the market looks forward to the Ocean SUV going into production in the fourth quarter of 2022. BUY A HALF
Ford (F) shares stayed fairly firm in a tough market this week as the company recently announced a strong fourth quarter of sales. As a result, it will sharply boost production of its F-150 Lightning pickup due to strong demand. Ford remains a conservative way to play the EV boom and I encourage you to buy if you have not already done so. BUY A HALF
Marvell Technology Group (MRVL) shares dipped from 77 to 68 this week despite the semiconductor shortage as technology stocks faced selling pressure. Marvell shares were up 84% in 2021. This is a growth stock that is demonstrating some relative strength so I continue to rate this semiconductor stock a buy. BUY A HALF
Novonix (NVNXF) shares are still solidly in the black with room to spare but fell from 6.7 to 5.6 this past week along with the market. The company announced last week the commencement of the process to list its securities on the Nasdaq, which will boost both its profile and liquidity. Based in Australia, the technology and advanced materials supplier is focused on synthetic graphite for the electric vehicle and storage battery industry. Novonix graphite gives America a domestic source with a higher quality than Chinese graphite. This is an aggressive idea but it remains a buy. BUY A HALF
Nu Holdings (NU) shares did not have much of a chance to rebound this week so I’m moving this stock to a sell. This is an emerging market aggressive stock that already serves more than 1 million small- and medium-sized business banking customers in Brazil and Latin America. MOVE FROM BUY A HALF TO SELL
Oracle Corporation (ORCL) shares held their ground this week reasonably well. Oracle offers us cloud-computing high growth and margins coupled with a reasonable price. The stock is trading at less than 22 times earnings with a high return of equity. This stock is well suited to the current tough tech stock environment. ORCL is a high quality stock in a market going in that direction so I encourage you to buy if you have not already done so. BUY A HALF
Sea Limited (SE) shares continue to pull back, and if you have a medium-term perspective it seems to me the current 136 stock price offers a great entry point to buy or add shares to your position. We have taken periodic partial profits along the way up but also need to use judgment when to buy after a decline. Market sentiment for the time being has clearly moved away from companies like Sea that post 50%-plus top-line revenue growth but, as a result of investing in growth, have sizable losses.
Sea’s Garena unit saw Free Fire become the most downloaded mobile game in the first half of 2021, according to app tracker App Annie. Shopee is the leading retail app in Southeast Asia, and SeaMoney had 39 million users at the end of the third quarter. Sea’s next earnings report is expected on March 1. BUY A HALF
Veeco (VECO) shares were firm, losing only one point this week to finish at 27. This high quality company makes the equipment and technology essential for staying ahead in the chip fabrication game. Veeco is a steady performer with a sterling balance sheet. I recommend that you acquire shares if you have not already done so. BUY A HALF
Virgin Galactic (SPCE) shares, after a series of rapid sharp pullbacks, are treading water, but the story has broken down. Sentiment has changed, management has bungled execution, and new competition like Blue Origin has jumped ahead. We still have a profit and have taken several partial profits as the stock soared but I think it’s best that in the current market we sell our position. It has always been an aggressive concept stock and as usual only speculators may want to incrementally buy shares. MOVE FROM BUY A HALF TO SELL
| Stock | Price Bought | Date Bought | Price 1/26/22 | Profit | Rating |
| Butterfly Network (BFLY) | 7 | 1/6/22 | 5.33 | -19% | Sell |
| ChargePoint Holdings (CHPT) | - | - | - | - | Sold |
| Exscientia (EXAI) | 22 | 1/20/22 | 17 | -22% | Buy a Half |
| Fisker (FSR) | 15 | 2/4/21 | 11 | -26% | Buy a Half |
| Ford (F) | 20 | 11/23/21 | 20 | -2% | Buy a Half |
| Grab Holdings (GRAB) | - | - | - | - | Sold |
| Marvell Technology Group (MRVL) | 50 | 4/1/21 | 68 | 36% | Buy a Half |
| Novonix (NVNXF) | 2.24 | 8/6/21 | 6 | 152% | Buy a Half |
| Nu Holdings (NU) | 11 | 12/9/21 | 7 | -34% | Sell |
| Oracle Corporation (ORCL) | 94 | 11/11/21 | 80 | -15% | Buy a Half |
| Sea Limited (SE) | 15 | 2/8/19 | 136 | 813% | Buy a Half |
| Veeco Instruments Inc. (VECO) | 23 | 9/10/21 | 27 | 18% | Buy a Half |
| Virgin Galactic (SPCE) | 7 | 12/5/19 | 8 | 15% | Sell |