Time to Trim
With 32 stocks in our portfolio and a market that’s going through all manner of gyrations right now, it’s time to part ways with a few of our underperforming positions.
Sell
First up is OneWater Marine (ONEW), which we added in June. We had a gain in the stock in the early going and it was strong through IPO lockup expiration, but since then the combination of a secondary stock offering (which should have closed this week), the early release of quarterly results through August, and the acquisition of an online property for listing used boats have all failed to have any positive impact on the stock. It’s not broken, but it’s also not working. Let’s step aside with a modest loss of around 12% and move ONEW back to the watch list. SELL
Liberty Media Formula One (FWONK) is also moved to sell. We entered the position in May in anticipation of a limited F1 racing season and potential for better performance down the line. However, at the moment there appears to be little urgency to get into companies with significant reliance on travel, hospitality, public events, etc., and this stock fits squarely in that camp. I like the idea of investing in car racing, but we can come back to this in the future. We have a modest gain of around 4%. SELL
SelectQuote (SLQT) was added to our portfolio in June and promptly headed south. It firmed up some and then enjoyed a big jump after earnings were reported a couple of weeks ago, but the stock has given that gain back. Without any signals that demand is rising for the stock we’ll step aside with a roughly 25% loss. SLQT goes back on the watch list. SELL
Sell A Half
Schrodinger (SDGR) is a stock I’ve had high hopes for but performance has been dismal, making SDGR one of our worst-performing positions to date. The underlying story appears intact to me and the hook is that this is the type of stock that can run higher for years if/as the business scales. But that potential isn’t permeating the market right now. Potential headwinds were IPO lockup expiration and a secondary offering, as well as a few recent insider sales. Notably, that secondary was oversubscribed and priced at 66, which is nearly 40% above where the stock sits today, so there were plenty of bigger investors who believed in this stock at a higher price. To balance everything out the responsible thing to do here is reduce our downside exposure somewhat by selling a half and look to add back if/when the trend improves. SELL HALF
Keep Holding
Nikola (NKLA) has morphed from an action movie into a drama that nobody wants any part of. It’s not helping that the broader EV stock universe is having a rough go of it right now. The bottom line here is that until there’s some conclusion to the short sellers’ allegations, the stock is likely to get knocked around on all manner of rumors. Should established partners, many of whom are also investors, start to back away that would certainly undermine recovery potential, but public comments from most suggest that won’t happen (yet, at least). This is one of those situations we like to try to avoid but which happen from time to time. I see no reason to get aggressive here right now as we’re not employing a “turnaround” strategy in this portfolio. We much prefer stories going from “good to great,” or at least “just OK to good.” Right now, NKLA is neither. There are plenty of stocks out there to buy that are acting a heck of a lot better. Holding firm at a half-sized position. HOLD HALF