WHAT TO DO NOW: The growth stock environment remains challenging, with lots of selling on strength and, this week, more than a few air pockets showing up, and this morning is showing ugly action. We’ve been holding plenty of cash for weeks and probing small new buys here and there without much luck, while paring back or kicking out names that break. Today we’re going to pare back further based on the action of individual stocks: First, we’ll sell one-third of our remaining Palantir (PLTR), while also ditching our half-sized stake in Reddit (RDDT). That will leave us with around 58% in cash—as always, we could redeploy some of that soon, but we want to see institutions step up.
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The major indexes are getting hit today, fading from the top of their multi-month ranges—and growth stocks are getting trounced, with names of all sizes falling sharply.
A lot of the market’s top-down evidence remains mixed, but in that situation, we key more off individual growth stocks—if their action is great (like last fall), we’re happy to buy hand over fist, but if it’s hard to make much progress, we tend to stay relatively cautious.
It’s been the latter situation for many weeks, with some names here and there doing OK, but selling on strength is commonplace, including a lot of stocks that haven’t been able to decisively break out to new highs despite several attempts.
None of that means the bears are about to take control, but just going with what we see, it’s hard to make (and keep) much money in growth stocks, so we continue to advise remaining close to shore. Eventually, there will be another sustained, smooth run with winners kiting higher, but for now, we’re focused on managing our portfolio.
Today that means paring back further: We’re going to sell one-third of our remaining stake in Palantir (PLTR), which was one of the strongest growth stocks out there but has hit a major air pocket this week. SELL ONE THIRD, HOLD THE REST
And we’ll also cut bait with Reddit (RDDT), which has a story we still love, but the post-earnings action (straight down and, today, through the 50-day line) tells us the stock likely needs time to set up again, and it’s also left us with a small loss on our half-sized position. SELL RDDT
That will leave us with a cash position in the upper-50% range. We’re willing to put some of that to work, but we want to see big investors truly step into growth titles for us before starting a real buying spree.
Don’t hesitate to email me directly (mike@cabotwealth.com) if you have any questions.
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