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Early Opportunities
Get in Before the Crowd

May 8, 2020

For the last month stocks have been going gangbusters and this week things have been as hot as any time in recent memory.


Time to Get a Little More Cautious

For the last month stocks have been going gangbusters and this week things have been as hot as any time in recent memory.

In our portfolio we’ve seen double-digit moves higher almost every day. Since we established coverage Livongo (LVGO) is up 94%, Dynatrace (DT) is up 54%, Five9 (FIVN) is up 58%, Deciphera (DCPH) is up 62% and CrowdStrike (CRWD) is up 56%.

Our average gain is 30% and all our stocks that were deep in the red a month or so ago are now solidly in the black.

Data shows that investors have been extremely engaged in the markets lately and that could be driving some of the recent gains. TD Ameritrade said it signed on three times more users this March than in March 2019 and added 608,000 new funded accounts in Q1. All the other online brokers added users too. Finance app usage is up 55% from the end of 2019 through April 18!

I’m not saying that all these new users are the only reason the market is moving higher, or that if they are that’s a bad thing. But I am saying that if this data is accurate they likely play some role, for better or worse. And combined with what seems like a red-hot market right now I think it’s time to make sure we’re being appropriately cautious.

We’ve remained steadfast and heavily invested through the crash and subsequent recovery. Let’s pull back just a little bit today by taking the following actions:

Stocks Moved to SELL

Sell BellRing Brands (BRBR) for a 17% gain. The company issued a good report and has benefited from some pantry stocking but I don’t see shares moving materially higher in the near term.

Sell SurveyMonkey (SVMK) for a 27% gain. Management reported a good quarter but pulled guidance. I think the long term is good but with the recent and rapid recovery there’s probably not a ton of gas left in the tank in the near term. Plus, we doubled down on SVMK during the depths of the crash and that’s worked out near perfectly. Let’s not push our luck.

Sell Conmed (CNMD) at roughly break-even. The report was fine but it’s just not the time for a slow-growth MedTech stock that’s largely dependent on procedures, no matter how good it is. There are too many other options out there.

Stocks Moved to HOLD

Five9 (FIVN) moves to hold. The stock has gone wild following a better-than-expected quarter, but management didn’t raise guidance. I think shares could be a little ahead of themselves.

Freshpet (FRPT) moves to hold. Management issued a good report but the stock wasn’t able to break out to new highs.