WHAT TO DO NOW: The market has rallied nicely in the past week, which has improved the evidence—though for both our indicators and leading stocks, it’s been good but not necessarily decisive just yet. Even so, we’ve been sitting on a big cash hoard for a few weeks and we’ll start to come off that today, buying half-sized (5% of the portfolio) positions in Marvell Tech (MRVL) and Reddit (RDDT) while also restoring our Buy rating on Shift4 (FOUR). Our cash position will now be around 48%—more details in tonight’s issue of Growth Investor.
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The market is down a bit today for the second day in a row after a solid rally the few days before that. As of 11 a.m. ET, the S&P 500 is up a smidge while the Nasdaq is off 0.2%.
The top-down evidence still isn’t perfect, but it has improved—our Cabot Tides (intermediate-term trend) is back to neutral and could turn positive within a couple of days; after a bad few weeks, the broad market is also improving, with our Two-Second Indicator seeing low readings for five straight days; and our Aggression Index(es) remain positive, which is encouraging.
Individual stocks are generally in the same boat—the action is far from a blastoff, with selling on strength still being seen, but there’s no doubt more names are gaining ground and a few have moved to new highs.
All in all, we’re still in the midst of a typical January, with lots of repositioning, conferences and, now, earnings season, which leads to plenty of volatility. Even so, we’ve been holding a good-sized cash position for a few weeks after booking profits (mostly in December), and with the recent strength and some secondary positives (near-term sentiment measures took a hit of late), we’ll start to come off the sideline today.
First, we’re going to buy a half-sized position (5% of the account) in Marvell Technology (MRVL), which looks like one of the leaders in the AI networking/connectivity boom that is just getting underway. The firm should show big, accelerating growth in the quarters ahead, and the stock has moved to new highs after a well-controlled rest in recent weeks. NEW BUY A HALF
We’ll also start a half-sized stake in Reddit (RDDT), which has a unique social media offering that’s showing booming user growth, accelerating revenues and, despite a huge run in the fall, a stock that has refused to budge. To be fair, the stock is a hot potato, so we’ll start with a half-sized stake and use a loose stop. NEW BUY A HALF
We’ll also restore our Buy rating on Shift4 (FOUR), which has been very peppy of late.
All told, the two moves will still leave us with 48% in cash, so we’re not flooring the accelerator here—though we could get aggressive fairly quickly if the recent rally gains steam. For now, though, we’ll start slow and see how it goes.
We’ll have more details on all our thoughts in tonight’s issue. Don’t hesitate to email me directly (mike@cabotwealth.com) if you have any questions.
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