Risk Management
In this rare, mid-week update I will try to be brief, because I know you have a lot to read, including numerous notices of cancellations and closings.
1. The market is now in panic-selling mode, as fear of the unknown triggers unprecedented defensive actions aimed at reducing the spread of coronavirus.
2. It is possible these actions are appropriate and will later be judged wise. It is also possible they are an overreaction and will later be judged excessively cautious.
3. My opinion in that regard ( and yours as well) does not matter. As Jesse Livermore wisely wrote, “The market is never wrong; opinions are.”
So what does the market say?
4. Our intermediate-term market timing indicator, the Cabot Tides, (charted in every issue of Cabot Growth Investor) has been negative since February 24, telling us some caution is advisable. (Today our portfolio holds 15 out of a possible maximum 20 stocks)
5. Our long-term market timing indicator, the Cabot Trend Lines (also in Cabot Growth Investor), remains positive, and cannot turn negative until next Friday, March 20, at the earliest.
6. Thus, the picture is not wholly negative yet. Nevertheless, it is always important to manage your portfolio, and when you see good stocks weakening, to sell them—to both stem your losses and raise cash for when the environment is more supportive. So, sells I’m recommending today are Axonics Modulation Technologies (AXNX), Trulieve Cannabis (TCNNF) and Verizon Communications (VZ). Details below.
Sell Recommendations
Axonics (AXNX), originally recommended by Tyler Laundon in Cabot Early Opportunities, gapped down this morning on above-average volume to put our loss in double-digit territory, and I don’t see much prospect for a bounce, though the stock could base here. SELL.
Trulieve (TCNNF), originally recommended by yours truly in Cabot Marijuana Investor, remains the market leader in Florida, and it has great growth prospects too, as the company is actually profitable. But the marijuana sector has behaved terribly, and our loss in this position is now too big to justify. SELL.
Verizon Communications (VZ), originally recommended by Tom Hutchinson in Cabot Dividend Investor for his High Yield Portfolio, was bought near its high just a few week ago and now this typically slow-moving stock has given us a loss in the double-digits. Long-term prospects for a recovery are good (Tom is still holding it) but this portfolio doesn’t like dead money. SELL.