Take Profits on Alight (ALIT) and Construction Partners (ROAD). Update on Gen Digital (GEN)
We’re going to continue with our strategy of taking relatively quick, modest gains on slower-growth names while holding on to our faster, more aggressive positions in hopes of larger gains.
The first position we’ll sell today is Alight (ALIT). There’s nothing wrong with the stock/company. But we have a stuffed portfolio and a roughly 10% gain in just over six months. From a technical perspective, ALIT is consolidating at around the 9 level after a nice rally in mid-January and will need to mount a serious upside attack to move higher through the gap that opened when the stock fell after earnings back in August of last year. Let’s take some risk off the table and book the gain. SELL
Next up is Construction Partners (ROAD). Similar to ALIT there’s nothing “wrong” here – I’m trying to manage our portfolio size & exposure while balancing risk vs. reward. ROAD was slow out of the gates after I added the stock in December, falling soon after and then starting a slowish recovery. However, last week upside momentum really picked up and ROAD broke out to new all-time highs above 45. The stock looks extended to the upside which, for this name, typically means a “pullback and chill” period is coming. Let’s take a quick gain (about 5%) now and keep an eye on ROAD for the future. SELL
Lastly, Gen Digital (GEN) slumped last Friday after Q3 fiscal 2024 earnings missed expectations. Revenue was up 2% to $951 million, about $5 million shy of expectations, while adjusted EPS of $0.49 missed by a penny. The cybersecurity products company now expects $3.8 - $3.82 billion in revenue in fiscal 2024, compared to prior guidance of $3.81 - $3.84 billion and adjusted EPS of $1.95 - $1.97 versus prior guidance of $1.95 to $2.00. These aren’t big adjustments, and keep in mind there’s only one quarter to go in fiscal 2024, but they represent a modest downside surprise for the upcoming few months, and that caused GEN stock to be all over the place on Friday. It closed well off the lows and is stable today, largely because analysts remain mostly bullish on the company’s future in fiscal 2025. The basis for this bullishness is that direct customer net adds was 330K, well above expectations of 100K to 150K, thanks to mobile users and growth in emerging markets. The company is also about to get a roughly $900 million cash tax refund and announced a share buyback program, both of which should help EPS. Bottom line, we’re down single digits on the name and might need a little patience here to see GEN erase that loss, but there’s no apparent pressure to dump the stock now. I believe it will go higher. Keeping at buy. BUY
