Sell DDOG, FROG and CERT
Trading action continues to be sloppy as we move toward the end of the first quarter (ends Wednesday) and toward April. News of the Archegos Capital collapse (a hedge fund) has cast a bit of a shadow over parts of the market as well (financials, some China stocks) as forced liquidations drove huge volatility in stocks (DISCA, TME, SHOP, FTCH and more) late last week. These are the types of events that happen during corrections and can sometimes help explain why stocks are moving irrationally.
It continues to be an extremely difficult trading environment and one in which I suspect increasing numbers of investors aren’t doing much. It’s one of those times where the best move is often to do nothing, just sit and watch and wait for a more established trend to emerge.
On the plus side, the late afternoon rally on Friday – even in the face of the big drops in the aforementioned names – was encouraging. There are many stocks in our portfolio (and beyond) that are trading right near support (CHWY, DDOG, SPT, NET, VRNS, KRNT, BILL, UPWK, CRWD, etc.) and if they can hold here and gain a little in the coming days, we’d feel much better. On the flip side, should more stocks break below support things could get ugly quickly.
As you know we try to make incremental moves based on the evidence in front of us and a general sense of where we think our stocks can go in the coming months. Right now, I’m feeling like we can pull in our exposure a little. Doing so could be beneficial if the market falls further (i.e. hopefully limiting some pain while freeing up capital to put to work at lower prices), or if it begins to strengthen (having a narrower focus could help direct capital into what’s working).
With that in mind lets make the following moves:
Sell Certara (CERT). We jumped into the sock in January and it worked well until late-February, then weakened further after reporting quarterly results. We benefited from a nice bounce but a secondary offering priced at 25 (below where the stock is now) seems to have poured cold water on things. Let’s limit losses here and step aside. SELL
Sell remaining stake in Datadog (DDOG). We entered this position just over a year ago and after several partial sales have a quarter position that’s up around 100%. With DDOG trading a fraction below support today the stock looks just a hair weaker than many of our other positions that are also trading near support. This could be a mistake to sell here as a bounce could quickly send DDOG higher. Then again, it’s hard to go wrong when you double your money in a year. SELL LAST QUARTER
Sell Jfrog (FROG). We entered the position in February and it’s never worked for us. While the stock has recently passed lockup expiration and could be trading near a zone of support at 44 we need to limit our downside risk here. SELL