WHAT TO DO NOW: Remain bullish, but continue to prune weak names and hold/buy stronger ones. In the Model Portfolio, we’re letting go of the rest of our small position in DraftKings (DKNG), which is breaking down further today after bad news on the tax front. We’ll hold the cash for the moment, leaving us with around 28% on the sideline.
==
The major indexes have begun the short week mixed, with the S&P 500 flat, the Nasdaq up 0.4% and the broad market down a bit.
All in all, the action continues to be mostly bullish, though there are a few flaws. On the positive side of the ledger are our three key market timing indicators, mostly up action in leading stocks and the relative strength seen recently in the Nasdaq (which, relative to the S&P 500, has hit a new peak).
That said, the broad market has taken on some water of late (broader indexes tested their 50-day lines last week as new lows picked up somewhat), sentiment is a bit complacent (meme stocks did well again today) and there remain more than a few air pockets out there among individual names.
As we’ve written a few times lately, we’re definitely bullish as most of the evidence is pointed up, but it’s important to focus on the strongest names, try to get decent entry points and pare back or sell stocks that can’t get going.
We saw some of that pop up last week, when DraftKings (DKNG) took a hit as a few states looked poised to meaningfully hike taxes on sports betting and iGaming. Massachusetts voted it down, but it looks like Illinois is going ahead with their own plan (taxes rising from 15% to 36%!) and others might follow suit. More important than the news is the stock’s reaction to the news, and DKNG sold off on big volume last week and is following through on the Illinois news today, taking out its recent lows.
We had less than a full-sized stake in recent weeks and sold half of that last week—and today we’re forced to sell the rest, taking the small profit that’s remaining off the table. Long-term, it’s certainly possible DraftKings does just fine, but the stock is too much of an underperformer for us to hold onto. SELL
The sale will leave us with around 28% in cash, which we’ll sit tight with that for the moment. Most of our stocks are acting well, though we have a bunch of earnings and events this week to get through so we’ll be on the horn with any changes (buy or sell) going forward.
Don’t hesitate to email me directly at mike@cabotwealth.com with any questions.
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.
