Cabot Small-Cap Confidential Weekly Update

We don’t have much to complain about after a week when our average gain per position was 5.8%, three positions were up double digits, and our worst performing stock was down a mere 2%. Plus, New England’s third string quarterback helped Belichick make the Texans look like a high-school football team (with considerable help from the Texas players themselves).

Last Friday, it looked like a classic buy-the-dip setup. Playing that outlook paid off this week. And the trend suggests we keep moving higher next week. Anything can happen, of course. But until we have evidence to the contrary, it makes sense to stay long small caps and be opportunistic buyers.

That said, today I’m moving two stocks that have just rallied back to Hold, since the near-term upside appears limited in those names. Five of our positions remain Buys. Details below.

Updates

Aerohive (HIVE) July’s addition was up 2% this week as it looks to build a line of support around the 6.20 area. The last time the stock was this oversold was in January, right before it went on to rally 75%. An 18% gain would get us back to the 52-week high from August. The trend remains murky at the moment, with a rally to 6.80 necessary to feel really bullish again. Still, I think it’s a good value at this level. BUY.

Aspen Aerogels (ASPN) The stock jumped 17% this week from very oversold levels to move us back into the black by 6%. An increase in the price of oil helped, as did initiation by Craig Hallum, who slapped a 10.00 price target on shares. That’s roughly 85% above where the stock closed yesterday. Glad to see analysts finding interest in the name. It’s still a recovery play, so don’t be fooled into thinking this will be a steady grind higher. It won’t. But I think it’ll pay off handsomely for those willing to ride the rollercoaster. BUY.

eMagin (EMAN) Shares enjoyed a 7% pop this week. I know of one other newsletter that’s been recommending the stock, so that could be part of what’s driving new interest. Nothing concrete to disclose on new product development or partnerships. But we should have something within a month or two. HOLD.

LeMaitre Vascular (LMAT) Shares were making a move higher early in the week then hit a roadblock at 22.50, and came back to just about where they were as of last Thursday’s close. I think that’s fine—we want the stock to consolidate here and show us that it can hold its recent gain. Sidoti moved it to neutral yesterday. Keep holding. HOLD.

LogMeIn (LOGM) Shares were down 2% this week but held most of their recent gains. They are looking to consolidate in the 87.50 to 95 range. Keep holding half. HOLD HALF.

MindBody (MB) Shares keep trending sideways, even though they were technically up 3% this week. I think it looks like a great buy right here. BUY.

Mitek Systems (MITK) The company announced that Gambit Financial, a wealth management software solution firm, will use Mobile Verify for its Birdee online robo-advisor service. The stock is unchanged on the week. HOLD HALF.

NanoString Technologies (NSTG) It was another strong week for the stock as shares rallied 11% to 19.77 on extremely steady buying. Last week, I wrote that, “My best bullish call is that it could move up near its 52-week high (19.81), but that’s just a guess. I’ll be extremely surprised if it falls below the 16 support zone that has held since August.” I wasn’t expecting it to move so high so fast, but we’ll take it. Given the recent move, and the fact that we’re trading right near a 52-week high, I’m suggesting you be a little conservative now. Moving to Hold. Let’s see if the stock can maintain its strength for a week. We’re up around 28%. HOLD.

Primo Water (PRMW) Last week, I moved the stock back to Buy and said, “Given the recent pullback, but still good outlook, I’m comfortable putting the stock back on Buy here. Like most stocks that I move back to Buy after we have a nice gain, I don’t advise backing up the truck. Just tuck a few more shares in the glovebox.” If you followed that advice, you have a nice little gain to show for it—shares were up 7% over the past week, and are now up seven days in a row. The chart suggests resistance in the 12.25 to 12.50 area, which we’ve failed to break through the past two times (May and August). Third time’s the charm? I think so, so keeping at Buy. But again, don’t overdo it. BUY.

Q2 Holdings (QTWO) The stock is moving sideways. I think this is a good time to be a buyer. BUY.

USA Technologies (USAT) I moved the stock back to Buy after the earnings report early last week, saying that I thought it could bounce around but that it would be higher in a month. Shares have been on a one-way trip higher since, rallying by 18% since last Thursday’s close. At this point, they look a little overbought, so let’s reel in our enthusiasm. Moving back to Hold. We’re up 65%. HOLD.

Please email me at tyler@cabot.net with any questions or comments about any of our stocks, or anything else on your mind.

Cabot Small-Cap Confidential Stocks and Closing Prices on September 15, 2016 at 4pm: