As promised in yesterday’s Special Bulletin today we’re looking past the big picture stuff to focus on our stocks. With one quick note … we just may have a three-day streak going! Yields have backed off and a lot of stocks from different sectors are clicking. Suffice to say, this is a welcome change for those of us with two feet in the growth stock pool.
Still, recent events illustrate that despite what we’ve been programmed to believe over the last twelve months, growth stocks can go down. And do so quickly.
I continue to believe that the long-term trend for most of ours stocks remains up and that a 20% to 40% decline is “normal” for these types of stocks when fear enters the mix. However, we’ll continue to evaluate each position as we work through this and try to maintain the balanced approach that’s helped us get to where we are (average gain of 220% across the portfolio).
Quick reminders of ratings changes over the last week:
Recent Changes
Accolade (ACCD) was upgraded to BUY SECOND HALF last Friday. We now have a full position.
Avalara (AVLR) was upgraded to BUY last Friday.
Q2 Holdings (QTWO) was upgraded to BUY last Friday.
Cardlytics (CDLX) moves to BUY today.
Cerence (CRNC) moves to HOLD today.
On to updates.
Updates
Accolade (ACCD) was moved back to buy last Friday and has responded about as perfectly as one could hope. Shares immediately turned north and, after closing at 40 on Friday, are up to 47 or so today. New coverage from Goldman Sachs and a 59 price target has likely helped. The next earnings report should be in late March. BUY
Arena Pharmaceuticals (ARNA) took a hit last week on news olorinab failed to meet primary endpoints in the CAPTIVATE study, but the big picture story here (etrasimod) is very much intact. Look for management to sell or license olorinab. The stock is recovering. Keeping at buy. BUY
Earnings: Done
Avalara (AVLR) hasn’t performed well since topping out near 185 on February 10 (right around earnings) and is now off 22% and sitting on the 200-day line. At this price the stock is VERY attractive. This wasn’t a company that enjoyed a huge boom because of Covid and business should be stronger in a healthier economy. A valuation reset for growth stocks could easily trim price targets for AVLR but at the moment most are just north of 200. BUY
Earnings: Done
BioLife Solutions (BLFS) was estimated to be releasing earnings today, but the official release date was just announced and will be a week from Monday (March 22). The stock broke below its most established trading range (roughly 35 to 45) last week but is back near 38 today. Earnings are likely to move the stock. Keeping at buy. BUY
Cardlytics (CDLX) reported last Monday and surpassed revenue expectations by roughly 10% and missed modestly on earnings. Revenue was down 3.2% to $67.1 million (beating by $6.2 million) while adjusted EPS of -$0.05 missed by $0.02. Management gave 2021 guidance that called for revenue of $250 million to $275 million, which straddles consensus expectations of $260 million (up 40%). A recent secondary offering priced at 130 was surprisingly well-received given the market mayhem. With CDLX having so far held above support near 112 we can move back to buy as this is a business that should benefit from reopening. If CDLX turns south, we’ll revisit this rating. BUY
Earning: Done
Cerence (CRNC) took a big hit during the recent selloff but has come back with a vengeance over the last three days. The 100 level was the first point of concern to be broken but CRNC bounced near 84 and is back over 100 today. Best guess is the biggest move has come and CRNC will start to consolidate in the 100 to 120 range (just a guess). With that in mind we’ll move to hold and see how things evolve. HOLD
Earnings: Done
Everbridge (EVBG) blasted higher after reporting a couple weeks ago but succumbed to the growth stock retreat soon after. Management also launched a convertible note offering (upsized from $275 million to $325 million). The market will want to hear about more progress with large deals (states and countries) before the stock is likely to go a lot higher, but at these levels it’s hard to pass on for those that don’t own any. BUY
Earnings: Done
Fiverr (FVRR) has bounced back to near its 50-day line (near 245) after a quick trip to 200. The swings have gotten wider as FVRR has grown, which makes for a tougher stock to have conviction in. Another lurking issue is the secondary that was recently pulled (owing to poor market conditions) is likely to pop up again once things look better. On balance it’s a hold. HOLD HALF
Earnings: Done
Goosehead Insurance (GSHD) has also recovered nicely after hitting an all-time high of 175 then sliding back to 118 upon concerns of slowing growth (guidance for 2021 was likely conservative). We took partial gains on a quarter of our position and I’m good with holding a half position now. HOLD HALF
Earnings: Done
Inspire Medical Systems (INSP) retreated from 250 to 188, which was an area of solid support from December. All factors considered it’s a good hold now. HOLD
Earnings: Done
Kornit Digital (KRNT) was last week’s new addition and is an up-and-coming player in digital printing on textiles. It’s a fascinating technology and I think the retreat from an all-time high of 125, which followed a 25% post-earnings rally, is a good buying opportunity. Since reporting analysts have mostly moved price targets into the 125 to 135 price range. BUY
Profound Medical (PROF) reported last week that revenue was up 38% to $2.9 million (beating by $217 thousand) and that adjusted EPS came in at -$0.38 (missing by $0.08). The results were largely in line with the preannouncement from January. The biggest deal here is still that management is still working through the reimbursement process (which it believes will take around three years) and current use of the C code is ongoing at management’s request (to the Centers for Medicare and Medicaid Services) as hospitals and consultants work to see how reimbursement rates develop using just that code. Longer term, completion of additional clinical trials for TULSA-PRO should pave the way for a specific CPT-1 code and payment coverage. That study, TACT 2, should be fully enrolled in the second half of 2021 with 150 patients. The bottom line here is that the stock had a muted reaction to the report, which is a relative victory given the condition of the market last week. PROF has worked modestly higher the last few days and remains a buy. It is still very early-stage but making progress. BUY
Earnings: Done
Q2 Holdings (QTWO) was recently moved back to buy, and trading near its 200-day line and 25% off the high, that rating seems more than appropriate now. A break below 100 would be concerning, but provided growth stocks stabilize it’s not hard to see QTWO back near 150 (roughly 35% higher) this summer. BUY
Earnings: Done
Porch Group (PRCH) sold off hard (not surprisingly) during the market’s recent rout but bounced off 15 and looks to be making a run to 20. This is clearly a volatile stock and should be given a wide berth – don’t expect an uneventful trip if you buy in. Earnings are coming out on Tuesday, March 30 and given all the facets of the business and the strong housing market there is sure to be a lot to unpack. BUY
Repligen (RGEN) below 200 is a buy. It’s that simple. BUY
Earnings Done
Sprout Social (SPT) was just plain scary last week but in the grand scheme of things it’s worth noting that the stock’s “gentle” upward trajectory went into overdrive in January. SPT rallied from 45 to 80 between January 1 and February 15. If not for that spike the stock at 65 now would look very strong. The bounce off the upward trending support line (near 50) was very encouraging. I’m tempted to move back to buy and wouldn’t argue with anybody that wants to add a few shares here or take a small starter position as the company seems early in its development curve (market cap is just $3.3 billion). However, let’s give things a little longer and see how SPT does. HOLD
Earnings Done
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
