WHAT TO DO NOW: Remain bullish but continue to manage your portfolio and pick your spots carefully on the buy side. Our market timing indicators are in good shape, and leading growth stocks continue to impress, though near-term sentiment is getting euphoric. Tonight, we’re going to sell one third of our stake in Shift4 (FOUR), which has fallen sharply on out-of-the-blue news, which will leave us with 16% in cash.
Current Market Environment
The major indexes were quiet today though there was lots of movement in both directions under the surface. Near day’s end, the S&P 500 and Nasdaq were off 0.2%.
It’s been steady as she goes for the overall market, albeit with a big-cap tint—we’ve seen some outperformance from the big-cap indexes in recent days while the broad market mostly rests, though overall, all key major indexes and growth measures we track are in intermediate-term uptrends. That’s obviously a good thing.
The action of leading growth stocks is also mostly good, including some fresher breakouts that look good. That said, we’ve also started to see a couple of wobbles out there—Shift4 is the obvious example, which has slid on some out-of-the-blue news, but rumors of competition or some conference presentations have caused a few extended names to gyrate. It’s something to watch, though again, most of the action is strong, so we’re not panicking over it.
Once again, probably the biggest reason to worry is that very few are worried—we’re not huge on short-term sentiment measures, as they can be notoriously imprecise (sometimes weeks early), but it’s not hard to see that there’s a lot of euphoria out there on an intermediate-term basis, which could easily lead to a rug pull in general or a rotation (possibly out of hot names and into other areas). The infamous “Roaring Kitty” online pumper appeared again today, and historically he shows up when things are hot and heavy.
Thus, we wouldn’t be putting the rent money in a bunch of stuff that’s sticking straight up in the air, but at day’s end, it’s a bull market and leading growth stocks are acting well, so we’re holding our strong performers while paring back if needed and aiming to buy some fresher names as opportunities arise.
In the Model Portfolio, we averaged up in two stocks of late (one of which, Samsara, reports earnings this evening, so we’ll see how that goes). Tonight, we’re going a bit in the other direction, selling one-third of our position in Shift4 (FOUR) due to its big selloff yesterday and OK-not-great rebound today. Our cash position will now be around 16%.
Model Portfolio
AppLovin (APP) continues to amaze, not only making upside progress (not a huge surprise) but doing so without much in the way of selling, with just one- or two-day dips along the way. Obviously, the momentum here is strong and perception of the firm’s advertising engine in the e-commerce arena is going haywire—and given AppLovin’s history of trashing earnings and free cash flow estimates, we can’t say those views are wrong. Still, when it comes to the stock, our thoughts remain unchanged: We wouldn’t argue with you if you wanted to nibble on one of the periodic shakeouts, but we’ll officially stay on Hold and ride the uptrend with our large position while seeing how the stock acts at round-number resistance near 400. If the stock gets rejected in a meaningful way (it faded today), we could trim our position further, but right here, we’re holding on. HOLD
Argenx (ARGX) continues to look good, hitting new price highs, which is never a bad thing. However, it’s not quite good enough for us to average up, mostly because the stock’s relative performance (RP) line is simply treading water. To be fair, it’s a close call: We continue to think Vyvgart has mega-blockbuster potential thanks to it being a pipeline-in-a-product, and on the chart, the recent dip in mid-November (on regulatory fears with the new administration) and big-volume snapback (nice volume cluster late last month) is a good sign that buyers are lurking. Overall, we have no complaints—profits are good—but tonight we’ll again hold what we have but look for a bit more strength (possibly alongside some rotation into biotechs) before filling out our stake. HOLD A HALF
Axon Enterprises (AXON) hasn’t been as explosive as some of the hottest leaders, but it’s catching up a bit this week, powering to higher highs this week after yet another analyst upgrade, egged on by optimism that the firm’s newer AI offerings will be big direct sellers (remember that Axon’s DraftOne offering, which uses AI to analyst body camera audio to produce reports, saw $100 million of recurring revenue within a few months of launch) but also prompt tons of cross-selling into things other than Tasers and body cameras. Back to the stock, there have been a couple of bouts of distribution on the way up, which is something to watch, but a bad day here or there isn’t out of the ordinary given the move AXON’s had. We are watching how the stock reacts to round-number resistance (near 700)—a big pullback could be a signal to take partial profits—but we said the same thing at 600 and shares handled themselves just fine. We’ll stay on Buy, but as with many extended names, keep it small and/or aim for dips of a few percent. BUY
Cava Group (CAVA) has been handling itself pretty well since its huge earnings reversal, tightening up some above its post-earnings low and 50-day line (133 to 137 area) and actually perking up a bit the past couple of days. After such a long run and big reversal, we still think there’s legitimate risk of a “real” correction here—which is why we trimmed a couple of weeks ago and hold a small (about a half-sized, 5% of the portfolio) position. That said, it’s a strong bull market and there’s nothing run-of-the-mill about Cava’s story, so we’re not ruling out a resumption of the uptrend. We could tweak our position in either direction (bullish or bearish) depending on what comes next, but for now, we continue to think sitting tight with a small-ish position makes sense. HOLD
Flutter Entertainment (FLUT) is one of the fresher names we own, having only broken free from a consolidation a couple of weeks ago on earnings. As the leading player in U.S. online sports betting (and a top online casino play, too), Flutter’s FanDuel offering is poised to get more than its fair share of the growth in North America, a market that the company believes can grow four-fold from 2023 to 2030. A pullback is certainly possible, especially as news of some potential competition appears (Robinhood is considering entering the space), but the buyers are clearly in control here. BUY
On Holding (ONON) is holding its recent rally to new price and RP peaks even after another peer got thumped on earnings (Foot Locker), which is a good sign the many weeks of hacking above and below the 50 level is over. Encouragingly, while Foot Locker was a dud, some other retail names have perked up in recent days (even before any Black Friday announcements) after a rough few weeks, which doesn’t hurt. It’s not a go-go situation, but On has all the makings of an emerging blue chip; went back to Buy last week and will stay there today. BUY
Palantir (PLTR) is still in good shape, bolting to new highs this week on good volume; it did wobble a bit yesterday on reports that OpenAI might enter the business, but shares kissed new highs today. As with some other skyrocketing names, we’re not ruling out going back to Buy if we see a normal shake-out that finds support, but having recently booked partial profits, we’ll simply hang onto the rest of our position. HOLD
ProShares Ultra Russell 2000 Fund (UWM) has seen a little slippage in recent days following a big snapback, but it’s still overall resilient, which is a small character change from the wild ups, downs and ups seen right after the election. We decided to fill out our position last week thinking the risk/reward here is solid—a drop much below 45 would likely signify yet another failed breakout (and probably cause us to cut bait), but if the broad market truly kicks into gear (based not just on the chart, but positive macro factors such as easier Fed policy and likely fewer regulatory burdens starting next year), we think the upside could be much, much bigger. Hold on if you own some, and if not, we’re OK buying some here. BUY
Samsara (IOT) reports earnings after the close tonight, with a conference call at 5 p.m.; analysts are looking for sales of $311 million and earnings of four cents per share, though given the fact that the firm regularly tops estimates, it’s fair to say most are expecting even better numbers. As always, we’ll take it as it comes—a plunge all the way to the mid-40s area would be iffy, while upside from here would be great. Bigger picture, IOT seems to have changed character after its last earnings report, with three huge-volume accumulation weeks followed by choppy-to-up action; thus, given that the stock looks fine, we’ll keep our Buy rating but will update you if need be after the report. BUY
Shift4 (FOUR) was tagging new highs earlier this week, helped along by a very bullish analyst report that discussed the firm’s huge runway of opportunities, including in e-commerce and internationally, all while recent acquisitions are looking likely to outperform expectations during the next couple of years. However, shares took a tumble yesterday on out-of-the-blue news—the CEO was named by the new administration to head NASA, causing investors to wonder how Shift4’s leadership will shape up and if it will be up to the task. (Also hurting the cause was peer Toast, which took a big hit on a good-not-great 2025 margin outlook.) Back to Shift4 and its CEO, it’s not superficial news, of course—a couple of analysts have downgraded shares on the news—though it’s also not something that directly affects demand. As always, we’ll let the stock guide us: Yesterday’s decline was abnormal-ish, though shares found support above the 50-day line, the news is out and very obvious and shares bounced decently today.
Put it all together, and we think it’s best to lighten up a bit given the sudden selling, but also hold a chunk with a stop above our cost basis. Thus, we’ll sell one third of our stake here, taking a modest profit, and hold the rest above the low 90s area (call it 92 to 93, give or take) for now. If FOUR can hold here and get going, it’s very possible the overall uptrend can resume, but we think it’s prudent to lighten up, move to Hold and see how things go from here. SELL ONE THIRD, HOLD THE REST
Watch List
Astera Labs (ALAB): ALAB shook out a bit but then roared ahead after a very bullish earnings report from peer Credo Tech (CRDO). No harm in watching it, though we’d need ALAB to calm down for a bit before taking a swing at it.
Credo Tech (CRDO): It’s now a hot potato, but the earnings report this week was a game changer—business has been good for three quarters (sales up 64%, 70% and 89% with the bottom line in the black) and now AI demand has hit an inflection point, with triple-digit top-line growth expected for at least the next four quarters while profits mushroom. Shares are extended but our guess is dips will find support.
DoorDash (DASH): DASH has now been resting for three weeks (no net progress) after a very strong, persistent run higher, which is a good start—a dip of a few points from here, or another couple of weeks of rest, would likely create a tempting entry point.
GE Vernova (GEV): It’s had a big move, but GEV has now rested for four weeks as its moving averages catch up. It’s not as fast-growing on the top line, but this is a liquid, well-sponsored name with its hands in many fast-growing electrification cookie jars.
Rubrik (RBRK): RBRK remains strong, but the near term will come down to earnings tonight: Analysts are looking for $218 million in revenue and a loss of 40 cents a share, but of course many sub-metrics like recurring revenue and the like will be key. Shares are extended here, so a dip of a few points wouldn’t be abnormal, but let’s just see what comes.
Shopify (SHOP): SHOP showed abnormal strength on its massive earnings gap a couple of weeks ago, and it’s held all of those gains since, a positive sign. Merchants using its platform saw a 24% total sales increase over the Black Friday/Cyber Monday weekend.
That’s it for now. You’ll receive your next issue of Cabot Growth Investor next Thursday, December 12. As always, we’ll send a Special Bulletin should we have any changes before then.
Model Portfolio
| Stock | No. of Shares | Price Bought | Date Bought | Price on 12/5/24 | Profit | Rating |
| AppLovin (APP) | 1,482 | 63 | 3/1/24 | 379 | 506% | Hold |
| Argenx (ARGX) | 196 | 540 | 9/13/24 | 625 | 16% | Hold a Half |
| Axon Enterprises (AXON) | 541 | 374 | 8/16/24 | 690 | 84% | Buy |
| Cava Group (CAVA) | 1,101 | 68 | 3/8/24 | 150 | 121% | Hold |
| Flutter Entertainment (FLUT) | 959 | 231 | 9/20/24 | 280 | 21% | Buy |
| On Holding (ONON) | 5,251 | 40 | 5/24/24 | 59 | 47% | Buy |
| Palantir (PLTR) | 4,242 | 32 | 8/16/24 | 72 | 125% | Hold |
| ProShares Russell 2000 Fund (UWM) | 5,612 | 50 | 11/8/24 | 49 | -1% | Buy Another Half |
| Samsara (IOT) | 5,045 | 54 | 11/8/24 | 55 | 3% | Buy |
| Shift4 Payments (FOUR) | 2,501 | 85 | 8/30/24 | 102 | 20% | Sell One Third, Hold the Rest |
| CASH | $380,202 | 13% |
Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.
