WHAT TO DO NOW: Growth stocks are finally hitting air pockets today after massive runs, and while many look fine from an intermediate-term point of view, some appear iffy after massive runs. Thus, we’re paring back today: We’re going to take more partial profits in AppLovin (after already booking some profit this morning), as well as selling one-third of Axon (AXON), which isn’t as extreme as some others but is coming under pressure. Details below.
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The major indexes are down some this morning, but as has been the case for a while, the story is more about individual stocks—today, many extended names are finally hitting air pockets. To be fair, many growth names are acting just fine today, and even those that are getting hit haven’t broken any key intermediate-term support, but given the massive runs and elevated sentiment, we’re approaching things a bit cautiously.
AppLovin (APP) is the main mover today, falling sharply supposedly because the stock wasn’t added to the S&P 500 last week. That may be true, but we simply take the action for what it is—and after a stunning moonshot in recent weeks, the stock has quickly given back most of last week’s huge gains and broke some short-term support for the first time since its massive earnings gap. We sold one-third of our position this morning—but we’re going to take further action, selling yet another one-third of what we have left again, taking more profit off the table. SELL ANOTHER THIRD, HOLD THE REST
(We know the one-third sales can be confusing when they come in succession, so as an example. If someone had 90 shares of APP coming into today, they’d sell 30 this morning, leaving them with 60 – and then sell 20 more now, leaving them with 40.)
We’re also going to book partial profits in Axon Enterprise (AXON), which isn’t nearly as extreme as some other high-flyers, but we own a good-sized stake and shares are also cracking short-term support. SELL ONE THIRD, HOLD THE REST
We’ll have to see how the cash position exactly shakes out, but it will likely be in the upper 20% range after the two sales of APP and this sale of AXON. As we mentioned this morning, we’re focused less on the exact cash position and more on managing our holdings. We would say there are a couple of names we’re watching that are approaching decent entry points, but we’ll hold off on new buying for now.
Don’t hesitate to email me directly (mike@cabotwealth.com) if you have any questions.
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