WHAT TO DO NOW: Remain cautious but stay alert. The five-week drubbing for the broad market and many growth titles has caused sentiment to really drop (a good thing), and this week’s bounce (as interest rates dipped) is intriguing … but at this point, we’ve seen one decent day of action after five tough weeks, so we’ll stand pat with our large (60%-ish) cash position and watch closely to see how this rally develops.
Current Market Environment
The major indexes are largely unchanged (give or take) around noon on Thursday, failing to bulid (but also not giving back) any of yesterday’s rally.
January’s volatile and news-driven ways have continued this week, starting with continued softness in the indexes and growth stocks on Monday and Tuesday, but then came Wednesday’s tamer-than-expected inflation report, which has brought in the buyers for both stocks and bonds.
To this point, the upmove of the past day-plus hasn’t really changed much from an intermediate-term perspective—but it could within a few days. Right here, our Cabot Tides (and, for that matter, our Growth Tides, consisting of many growth funds and indexes) are still neutral-to-negative, and it’s too soon to read much into our Two-Second Indicator (two good readings, but that comes after a wave of bad readings). Indeed, even after the recent pop, we’re still looking at about two-thirds of stocks in the market sitting below their 50-day lines.
Among leading growth titles, things have perked up some and there remain a good number of stocks setting up—but at this early stage of the bounce, there aren’t many names showing power. If anything, we’re still selling on strength as stocks approach key resistance (a common trait of corrective envrionments) among growth titles. Most of the buying has come in specific areas (like financials) and beaten-down names, at least to this point.
To be clear, though, we are intrigued by the latest bump higher, as it comes after a bunch of near-term sentiment measures (AAII and Investors Intelligence surveys, etc.) have started to show investors throwing in the towel (both are now at levels not seen since 2023). Thus, if the market can hold itself together into early next week, we’d like to put a little of our giant cash hoard (60%) to work—and if we see our indicators (Cabot Tides, etc.) turn positive and (just as important) leading growth stocks pop higher, we’ll turn relatively aggressive.
But for the moment, we’ve seen one good day after a rough five weeks for growth stocks and the broad market. Thus, we’ll stand pat tonight with our big cash position and see how this rally develops.
Model Portfolio
AppLovin (APP) has remained mostly rangebound and tested its 50-day line earlier in the week before bouncing on light volume—up is good, so we’ll take it. Following the huge run and severe selling seen in December, we’re still in “prove it” mode with the stock, as more time may be needed for the stock to gather strength for a new advance. As with the market as a whole, though, we’re flexible: This is still a bull market, and AppLovin’s fundamental story is one of a kind, with huge growth likely this year (earnings estimates now $6 for this year, up 49% from 2024) and beyond—a move above the recent swing high of 360 would be very encouraging, while a drop under 300 would be a yellow/red flag. For now, we’ll remain patient and hold our remaining stake. HOLD
Argenx (ARGX) released preliminary Q4 numbers earlier this week (part of its presentation at a key healthcare conference), and the news was bullish, with revenues around $737 million, which would be 76% from a year ago, well ahead of estimates, while some other tidbits (1,000 patients now on the Vyvgart for CIDP, which was just approved in June) pointed to excellent uptake. (Indeed, earnings estimates for this year have now lifted just over $10 per share.) HOLD A HALF
Flutter Entertainment (FLUT) actually found some support even after pre-announcing sour Q4 earnings (due to a string of customer-friendly sports outcomes), though like so many names, it remains choppy and news-driven—FLUT rallied back to its 50-day line yesterday morning before news broke that Maryland would hike its online sports betting tax rate, causing some selling. Thus, the stock remains tedious, but it’s also holding its lows, and the overall correction wasn’t out of character. We’ll stay on Hold, albeit with a tight mental stop in the low/mid-240s. HOLD
On Holding (ONON) has been struggling some of late, which is why we went to Hold last week; by most accounts, the firm’s fireside chat at the ICR Retail conference this week went well (the stock scored some analyst upgrades), though that hasn’t helped the stock. Like a lot of things out there, ONON is essentially neutral here—it’s not horribly weak (just 9% off its highs) and has set up a nice, low-volume, seven-week launching pad, so we’re comfortable hanging on here. But we’d like to see buyers show up soon, especially if the market’s latest bump gets legs. HOLD
Palantir’s (PLTR) recent slide wasn’t pretty but, having sold a couple of chunks on the way up, we held on and now the stock is in bounce mode—and how this bounce proceeds will tell us a lot about the firm’s intermediate-term prospects. Similar to APP, it’s an egg versus tennis ball situation: The stronger the bounce, the more likely PLTR is resuming its major uptrend, whereas immediate/sharp selling would tell us more rest is needed. Big picture, shares “just” got going from a year-long up-and-down consolidation last August, so we’re optimistic shares aren’t done with their overall run. (That’s compared to many names that originally got going in early/mid-2023, etc.) Thus, we’re sitting tight but will let the stock tell the story from here. Earnings are due February 3. HOLD
Shift4 (FOUR) sagged in recent days on extremely light volume, approaching its correction lows and the century mark, though today’s bounce (also on low volume) looks solid. Still, like the market itself, nothing has really changed here, as shares are hovering in the lower end of their recent range, which from an overall point of view, isn’t abnormal given the prior run (and CEO news). We’ll continue to hold here. HOLD
Watch List
Astera Labs (ALAB) and Credo Tech (CRDO): Both of these are new-age networkers that are seeing growth go wild thanks to the huge acceleration in AI-related spending. We also like MRVL, which is bigger and more well-situated (see below). How all of these names react to the pressure coming off the market will be key (so far, ALAB hasn’t bounced, CRDO has, etc.).
DoorDash (DASH): DASH continues to hang out just a few percent from its highs, resting for the past two months as growth stocks have chopped around. A good couple of days would be enticing.
Dutch Bros. (BROS): BROS has shown no willingness to pull back, actually tagging new highs this week. The firm had a fireside chat at the ICR Retail conference this week and it’s obvious big investors liked what they heard.
GE Vernova (GEV): GEV remains in great shape, popping to new highs this week well ahead of the market and most growth stocks. We can’t rule out another shakeout, of course, but the long runway of earnings and free cash flow growth over the next few years is keeping big investors interested.
Marvell Technology (MRVL): MRVL is slightly different than the ALAB’s and CRDO’s of the world above, but it’s essentially another AI infrastructure play, with custom chips for many of the biggest data center operators (MSFT, AMZN, GOOG). AI-related revenue is already big ($1.5 billion in 2024) and should grow 70%-plus this year, too
Reddit (RDDT): RDDT wobbled a bit after testing new high ground, but the action has been normal, above the 50-day line, which is very impressive given its prior giant run. We think this story is top-notch, though until the market confirms a new uptrend, we’re half-expecting huge volatility.
Rubrik (RBRK): RBRK’s prior advance wasn’t as dramatic as RDDT’s, but the chart tells a similar story, with a controlled pullback after doubling from its breakout. Earnings are in the red here, but free cash flow is positive and the overall fundamental story is outstanding.
That’s it for now. You’ll receive your next issue of Cabot Growth Investor next Thursday, January 23. 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 1/16/25 | Profit | Rating |
| AppLovin (APP) | 662 | 63 | 3/1/24 | 339 | 441% | Hold |
| Argenx (ARGX) | 196 | 540 | 9/13/24 | 661 | 22% | Hold a Half |
| Flutter Entertainment (FLUT) | 959 | 231 | 9/20/24 | 259 | 12% | Hold |
| On Holding (ONON) | 5,251 | 40 | 5/24/24 | 56 | 39% | Hold |
| Palantir (PLTR) | 2,842 | 32 | 8/16/24 | 70 | 120% | Hold |
| Shift4 Payments (FOUR) | 1,675 | 85 | 8/30/24 | 106 | 25% | Hold |
| CASH | $1,778,778 | 60% |
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