November 21, 2024

NOTE: Just a heads up that, because of Thanksgiving, we’ll be sending Cabot Growth Investor a day early next week, on Wednesday, November 27.

WHAT TO DO NOW: Remain bullish, but again, be sure to keep your feet on the ground. The pullback last week was tedious, and our Two-Second Indicator is looking iffy, but the market’s trends have remained up and growth stocks are still very strong. We sold one-third of our Palatir (PLTR) position earlier this week, booking partial profits in a good winner, and tonight we’re going to average up in Samsara (IOT), buying another 5% stake, which will leave us with around 19% in cash. Details below.

Current Market Environment

It was a decent day for the major indexes today, but another super-strong day for growth titles. Near day’s end, the S&P 500 is up 0.6% and the Nasdaq is up 0.1%.

So, bigger picture, not a ton has changed with the overall market—the intermediate- and longer-term trends of the market are pointed up while leading stocks remain in good (and, for many, great) shape. Moreover, some secondary measures continue to favor growth stocks, including our Aggression Index, which is clearly positive today. Thus, overall, we remain bullish and think the odds favor higher prices ahead.

To be fair, though, the past week has brought a couple of eyebrow-raisers, the first of which was the giveback of much of the past-election pop higher last week in many indexes and growth funds. Happily, nothing cracked any meaningful moving averages and most have stabilized of late, but the quick retreat of most of the move isn’t ideal.

The other more concrete worry is our Two-Second Indicator, which has taken a turn for the worse, with today being the seventh day in a row of plus-40 readings. So far, the number of new lows hasn’t been humongous (usually 60 to 80) and it’s possible some of it is due to post-election crosscurrents. But the longer it goes on, the more weight it carries.

Throw in still-rising Treasury rates and we continue to pick our spots with new buys and aren’t afraid to hold a little cash on the sideline as much of the market (45% or so) is meandering south of 50-day lines. That said, having trimmed three winners in the past couple of weeks, our cash position is up to 24%, which is too high.

Tonight, we’ll make one small move—fill out our position (adding 5% of the portfolio) in Samsara (IOT), which has stormed back from a quick shakeout—and look to add more should the strength continue. Details below.

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AppLovin (APP) remains strong, bolstered by even more analyst love of late, with one analyst upping his price target and outlook, which helped the stock pop above 300. But, of course, the stock is obviously also very extended, miles above its moving averages and even above “gap support” from earnings three weeks ago. We still have a good-sized chunk here, so we’re not ruling out shaving off a few more shares at some point—but having recently sold one-third of our stake, we’ll simply hold on here and give shares room to breathe and possibly shake out if the market gets grumpy. HOLD

Argenx (ARGX) has been tossed around a bit in recent trading days, with the likely appointment of a new HHS secretary hurting most drug stocks late last week, though some positive trial news this week helped the cause a bit. All told, shares remain in the same range they’ve been in, and our view hasn’t changed—a clear move above 600 or so, especially coming after the recent “bad news,” but a break back into the 535 to 540 area could be a red flag. HOLD A HALF

Axon Enterprises (AXON) also remains in great shape, moving to new price and relative performance (RP) highs today after an analyst talked glowingly about the prospects for the firm’s new AI bundle (starts at $200 per month, per user; includes things like real-time translation, Draft One and more), which he believes will entice new and existing users to upgrade subscriptions—which in turn should lead to sustained 25%-plus top-line growth through at least 2026. Like many others, AXON has remained very much “under control” despite the recent upmove, so we’ll stay on Buy—but aim for dips and keep new positions on the small side given that a pothole could arrive at any time. BUY

Unlike many other growth stocks, Cava Group (CAVA) initially got going back in March (you could argue even earlier than that), so its big earnings reversal last week was technically an intermediate-term sell signal; that’s why, despite not having a big position, we trimmed a bit more last week. Still, a big reversal doesn’t change the fact that the underlying growth story here is very much intact—sales growth has accelerated the past two quarters while earnings are still expanding at triple-digit rates, and while that’s sure to slow, there’s no doubt the firm’s growth potential remains huge. We have a half-ish-sized position left (5% to 6% of the account depending on the day), which we’re aiming to hold onto through any reasonable correction that comes—and if the stock motors higher from here, we’ll simply hang on and let our already-large profit build. HOLD

Flutter Entertainment (FLUT) continues to act well in the wake of its Q3 report, which easily cleared estimates, and while the Q4 guidance was good-not-great, that’s due to some already well-advertised bad luck for the bookies. Interestingly, the Q4 guidance was far more buoyant than that seen from peer DraftKings. Big picture, the growth story here has a long way to play out, and we really like how FLUT held up decently during the repeated tax fears and then broke out on earnings. Given the industry, there could easily be further wobbles, but the path of least resistance is clearly up. BUY

On Holding (ONON) looks great today—zooming to new closing price highs—though the past few weeks have seen the stock gyrate wildly, from 51 to 46 to 54 to 50 and back to 56, all in less than a month. That has us keeping the stock on Hold for a bit longer, but that doesn’t mean our conviction is lessening with what we already own, as the story remains outstanding, with huge sales growth and increasing EBITDA margins and as it’s clearly taking share worldwide. We’ll stay on Hold for now, but if the stock can settle down for more than a couple hours, we’ll likely restore our Buy rating. HOLD

We decided to prune our position in Palantir (PLTR) on Monday, selling one-third of our good-sized holding for a great profit and holding on tightly to the rest. Mostly, this was simply an effort to ring the register a bit in an extended stock, though this week as a whole so far does smack of a little bit of distribution (high volume without any further price upside), so further short-term weakness could be in the offing. Still, nothing’s changed with the underlying story, and the recent move to a Nasdaq listing (from NYSE) could usher in some index-related activity. Having just sold some, we’ll keep the rest rated Hold and see how the stock acts from here. HOLD

ProShares Ultra Russell 2000 Fund (UWM) had a tough and frankly disappointing retreat last week and early this week, falling back to the breakout level—but it held up there and has bounced back since. Overall, we still think it’s more likely than not small caps are beginning what could be a long-term breakout, so if UWM really kicks into gear, we’ll be happy to buy more. That said, we still have a small loss here so we’ll simply hold what we have for now; if you’re not yet in, we’re OK starting a position around here. BUY A HALF

Samsara (IOT) can be whippy, and we saw that last week, when the market’s uncomfortable pullback saw the stock dive to its 50-day line ... though volume was very tepid on the decline, and shares have ripped back to new price and RP highs this week. It’s going to be volatile, but we like the risk/reward here—we’ll fill out our position, adding another 5% stake, and use a loss limit for the combined shares in the mid to upper 40s to start. BUY ANOTHER HALF

Shift4 (FOUR) lost some ground after it missed earnings last week, but the damage was reasonable (never touched its 25-day line) and then shares got some support earlier this week when it was announced it would be added to the S&P 400 Midcap Index—and then followed through beautifully today on regular old buying. While earnings estimates came down some after Q3, growth here is still expected to be in the 25% range in 2025, and more often than not Shift4 pushes those higher as the quarters roll by. We’ll stay on Buy, but as with most things, aim to enter on the occasional dip or shakeout. BUY

Watch List

Astera Labs (ALAB): The valuation is definitely up there, but ALAB looks like a classic AI glamour name, with the latest and greatest connectivity solutions being gobbled up by huge clients. The stock exploded to new highs today, so we’ll look for dips.

DoorDash (DASH): DASH hit a bit of a pothole yesterday but looks fine—we continue to think that, after a strong nine-week advance, a pullback toward support (which looks to be underway now) will provide a solid entry.

Duolingo (DUOL): DUOL is still acting fine, moving to new highs after some recent choppiness. The huge recovery starting in August was abnormally good and likely tells us something bigger is up here.

Rubrik (RBRK): Like so many growth stocks today, RBRK popped to new highs after a tight, controlled rest period. The trick here is earnings, which are out in two weeks.

Shopify (SHOP): SHOP is a bit well-known for our usual pick, but the humongous launching pad, powerful breakout last week and excellent growth numbers are enticing. Shares have been consolidating normally (so far) following the earnings-induced breakout.

That’s it for now. You’ll receive your next issue of Cabot Growth Investor next Wednesday, November 27 (the day before Thanksgiving). As always, we’ll send a Special Bulletin should we have any changes before then.

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