Sell Abiomed (ABMD) and GrubHub (GRUB).
Abiomed (ABMD) is scheduled to release third-quarter earnings tomorrow (Thursday) before the market opens, but the market is acting as if the company has already released a report—and a bad one, as the stock collapsed today on big volume. Our small profit has now become a small loss. It’s tempting to hold on (for fundamental reasons, of course), but it’s more prudent to sell quickly, to ensure that the loss doesn’t grow; the stock could easily fall many more points from here, particularly if investors pull back from companies—like Abiomed—that make expensive medical devices. Selling tomorrow means we’ll join the crowd that reacts to earnings, and in general I don’t like being part of the crowd. But I prefer that to holding and risking selling even lower. SELL.
GrubHub (GRUB), meanwhile, did release third-quarter earnings this morning. Revenue grew 44% from the year before to $123.5 million (analysts had expected $118.5 million), while earnings per share (EPS) grew to $0.23, up from $0.13. Analysts had expected $0.19. Nevertheless, the stock sold off today on big volume, perhaps because management’s projections see growth slowing from this fast pace. With a small loss, and the stock trading below recent support, I recommend selling and moving on. SELL.
Note: both these stocks were recommended by Mike Cintolo in Cabot Growth Investor and Mike is giving the same advice to his readers.