The S&P 500 has finally failed to make a new high every day lately and is 2% below the high-water mark! That doesn’t seem like it should be news but in this market it’s worth noting. We have to go back to this time in 2020 to find the last time the index fell meaningfully below its 50-day line, which is where it currently sits today.
Turning to the S&P 600 Small Cap Index there is basically nothing to say. The index has been moving sideways since it topped in March. I have seen more analysts calling for small cap outperformance later in 2021 and into 2022 as relative value seems more attractive in small cap land (and mid cap for that matter) but I’ll believe it when I see it.
In our portfolio it’s been a week of mostly sideways action when looking at our entire portfolio (net gain of 0%). On a stock-by-stock basis the moves have generally been higher in the 1% to 4% range, but we had a couple detractors (LAW down -15%, ACCD down -5%) that has pulled down our average.
Big picture, there’s nothing major that’s new. We’re continuing to lean cautiously bullish, and I’m intrigued by many of the companies that have come public over the last year. In many ways it feels like 2015 – 2016 to me. That wasn’t a great time for performance, but I found a lot of terrific software stocks that delivered big gains in the years afterward.
Beyond the market, I’m headed out with a friend Saturday to see what kind of fish we can pull out of the ocean. His boat is slightly bigger than mine so we’re going to venture further out and see if we can get lucky and pull some small tuna up. Wish us luck!
Recent Changes
None
Updates
Accolade (ACCD) is off 5% over the past week. We have a Q2 fiscal 2022 earnings date on October 7. No other news. BUY
Arena Pharmaceuticals (ARNA) cooled off this week as the rally off a low of 45 in August seems to have run out of gas for now. No new news. ARNA continues to look like a stock that has a ton of upside provided trial results come through in 2022. BUY
Avalara (AVLR) is flat this week on no new news. The stock is trading 5% below an all-time high. BUY
Cerence (CRNC) is up 3% over the past week but, bigger picture, remains in the lower third of the 101 – 128 trading range that has persisted since mid-summer. Management has been presenting at a number of conferences lately and moves on to the Evercore ISI Autotech & AI Forum next Tuesday. BUY
CS DISCO (LAW) has been a spicy stock lately. We jumped in right before earnings then the stock shot higher, only to pull back sharply on news of a non-dilutive offering from institutional shareholders. That offering priced at 53 yesterday and trading volume has picked up. With shares near 55 now and an offering that’s expected to close by the end of tomorrow this looks like a good place to fill the second half of our position. In effect, we will be buying from the selling shareholder. That said, I expect LAW will continue to be a volatile stock for some time as it is a recent IPO. BUY SECOND HALF
Everbridge (EVBG) posted solid performance in the back half of the summer and rallied as high as 167 earlier this month. It’s pulled back a little since but, overall, I’m feeling inspired by the stock’s recent performance. Looking for a breakout and keeping at buy. BUY
Fiverr (FVRR) has been recovering from the August selloff, and this week management spoke out saying they see the typical extreme seasonality as being lower this year than in others. I’ve been saying I thought they were being overly cautious in terms of forward guidance given the realities of the world (Delta variant, end of summer, people starting to focus on work and less on play, etc.) and have kept at buy. Shares are up 3% this week and I continue to like FVRR now. BUY
Inspire Medical Systems (INSP) has been flat over the last week but at 6% off an all-time high and up handsomely from the summer retreats; there’s little reason to complain. The recent news regarding the CMS panel’s recommendation to increase reimbursement rates in the ambulatory setting is a good sign. No new news. HOLD
JOANN (JOAN) is a small cap value idea. Given how different it is from the other stocks I usually recommend and the sharp selloff so soon after being added to the portfolio, JOAN has made me look like either an idiot or a lunatic, or both. While I’m wary of digging in my heels and defending the pick to save face, I do honestly think there is considerable upside from right here. JOAN remains dirt cheap, a unique asset in the crafting space (only publicly traded company, arguably the best in the biz), lockup expiration on a chunk of shares has passed and management has initiated a share buyback program ($20 million). I also think this type of business is entering what should be a stronger time of the year as people look for more crafty-type activities in the fall and winter. On the negative side of the equation, global supply chains are still all messed up (JOANN is being affected) and COVID concerns aren’t just positive for the business as they also have the apparent impact of curbing some social crafting activities. Taking it all in, I’m keeping JOAN at a buy. BUY
Kornit Digital (KRNT) is turning into the stock equivalent of a fishing lure “producer.” Those are the go-to lures that you have confidence in and which you throw out there over and over because you know if the fish are around, they’ll eventually bite. Pull up a chart of KRNT and you’ll see what I mean – other than the 2020 market crash and a few other retreats here and there KRNT has been filling the freezer since 2018. What more can you ask for? BUY
On24 (ONTF) continues to struggle. As stated before, at this price level and given the realities of the world around us, I think it’s a buy. BUY
Q2 Holdings (QTWO) had a little momentum going in August but has stalled out here in September. We will remain patient. HOLD
Revolve (RVLV) has been gaining ground lately and is up 8% over the last two weeks. Today’s news of resilient retail numbers should help. And it doesn’t hurt that the company continues to round out its offerings, the latest being the addition of Hims & Hers health products. HOLD
Repligen (RGEN) went shopping again. Today management announced the acquisition of Avitide, a leading chromatography developer with diverse affinity ligand libraries and best-in-class ligand-to-resin development timelines. In plain English, the acquisition helps build out Repligen’s Proteins business. The purchase price seems pricey; $150 million (50-50 cash and stock) for a company that is seen adding $10 million in revenue in 2022. That said, it’s a relatively small asset and Avitide should add to profits in 2023, so maybe 15-times 2022 sales isn’t a bad deal. HOLD
Sprout Social (SPT) continues to hold up extremely well and shares are hitting a new all-time high today. Nothing to add. Love the stock and keeping at hold. HOLD
Thunderbird Entertainment (THBRF, TBRD.CA) announced it will begin filming a new reality show for HGTV Canada. The show is Gut Job, and stars Canadian contractor Sebastian Clovis who was also featured in $ave My Reno. The show will begin to air in 2022 and casting is underway in the Greater Toronto Area (GTA) now. Shares of the stock have been looking better lately and have climbed from 4 in mid-August to 4.64 today. BUY
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
| Stock Name | Date Bought | Price Bought | Price on 9/16/21 | Profit | Rating |
| Accolade (ACCD) | 8/6/20 | 40 | 45 | 12% | Buy |
| Arena Pharmaceuticals (ARNA) | 2/2/18 | 39 | 59 | 52% | Buy |
| Avalara (AVLR) | 2/1/19 | 40 | 187 | 368% | Buy |
| Cerence (CRNC) | 10/1/20 | 50 | 105 | 111% | Buy |
| CS Disco (LAW) | 9/2/21 | 57 | 55 | -3% | Buy |
| Everbridge (EVBG) | 12/2/16 | 16 | 160 | 934% | Buy |
| Fiverr Intl (FVRR) | 3/5/20 | 32 | 195 | 502% | Buy |
| Inspire Medical (INSP) | 10/4/19 | 59 | 239 | 308% | Hold |
| JOANN (JOAN) | 8/6/21 | 15 | 11 | -28% | Buy |
| Kornit Digital (KRNT) | 3/4/21 | 102 | 148 | 45% | Buy |
| On24 (ONTF) | 7/1/21 | 38 | 20 | -46% | Buy |
| Q2 Holdings (QTWO) | 4/1/16 | 24 | 84 | 253% | Hold |
| Repligen (RGEN) | 11/2/18 and 12/31/18 | 59 | 295 | 398% | Hold |
| Revolve Group, Inc. (RVLV) | 4/1/21 | 46 | 66 | 46% | Hold |
| Sprout Social (SPT) | 9/3/20 | 36 | 131 | 259% | Hold |
| Thunderbird Entertainment (THBRF, TBRD.V) | 5/6/21 | 3.8 | 3.7 | -4% | Buy |