WHAT TO DO NOW: The bleeding out among growth stocks is continuing today thanks in part to Netflix’s (NFLX) implosion, with the Nasdaq and most growth funds under pressure. There are some positives secondary signs out there from a market-wide perspective, but overall, the sellers are still in control and we’re cutting things that crack support. Today, that means ditching CarGurus (CARG), which has a lot going for it, but not enough to resist the broad selling pressures. We’ll sell today, leaving us with around 60% in cash.
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The story remains the same for the market, with growth stocks continuing to bleed out. As of 1 pm EST, the Dow is up by 351 points as defensive stocks take the lead, while the Nasdaq is down 113 points and growth stocks lag.
Really, nothing has changed with our main thoughts: Our Cabot Tides are currently on the fence, but our Growth Tides and Cabot Trend Lines are flashing red lights, so the overarching strategy is “less is more”—yes, there are some opportunities here and there, but overall, there’s little money being made and plenty of stocks getting hit, so we’re content to stay mostly on the sideline and wait for things to firm up.
We aren’t abandoning all hope—there are still plenty of secondary measures that show (a) investor sentiment circling the drain (a good thing), and (b) selling pressures on the broad market actually easing over time. Throw in the fact that the news is terrible and well known (inflation, rate hikes, war, etc.) and we have our eyes open for any decisive change in the market’s character.
So far, though, there’s been little sign of that change—the sellers are in control.
In the Model Portfolio, we’ve sold a couple of names in the past two weeks and have 55% in cash now, and today, we’re forced to sell CarGurus (CARG), which is a good example of what we’re seeing out there—shares looked peppy just a few days ago, but they’ve since fallen sharply, breaking support today on elevated volume. It’s not pleasant, but we’ll cut the loss on the half-sized position here. SELL
That will leave us with 60%-ish in cash, and while we’re not craving more, we’re not opposed to selling other names if the melting action continues.
We’ll have a full update in Thursday’s issue (April 21)—don’t hesitate to email me directly at mike@cabotwealth.com with any questions.