WHAT TO DO NOW: There’s still a chance earnings season could save the day, but so far, most reports have led to selling and after seeing many growth stocks set up in recent weeks, the bears are beginning to come out of the woodwork again. Today, we’re selling Pinterest (PINS), which has etched a big double top and has been unable to find support since earnings. Our cash position will now be around 56%.
The market is off to a rough start today, and this time it’s not just growth stocks—as of 10:15 am, the Dow is down 212 points, the Nasdaq is off 307 points and the stocks we own or watch are down an average of 3.9%.
During the past few days, we’ve begun to see the sellers step up again in growth names, with a bunch of low-volume, attempted breakouts being pulled back down and many stocks that had rallied nicely during the prior month hit air pockets. We’re not completely throwing in the towel here—there are still many stocks set up decently that will report earnings during the next couple of weeks—but it’s obvious that the buyers don’t have any interest in stepping up yet.
We’re glad we didn’t do much buying during the recent rally (we’ve been holding 45%-plus cash for at least a couple of months) as most good-looking names have either stalled out or cracked. The bottom line is that we remain open to anything (our Cabot Tides remain positive), but until we see some definitive strength, we continue to advise remaining cautious and patient while growth stocks re-set.
Today’s message is in regards to Pinterest (PINS), which we had high hopes for. But now it looks like perception has changed—not only was the recent earnings reaction poor, but the stock etched a multi-month top, and fundamentally, questions over user growth (was the pandemic-induced gains just a temporary boost?) are likely to persist. Bounces are possible, but we’re going to sell our remaining shares (we’ve already taken two rounds of partial profits) and move on. SELL
We have other stocks acting iffy, and while we’re not anxious to get into a super-defensive mode, we’re also not going to let things run away on the downside. For now, we’ll stick with our other names but will be on the horn if we have further changes going ahead.
Your next issue of Cabot Growth Investor will be e-mailed out this Thursday, May 6. Don’t hesitate to email me mike@cabotwealth.com with any questions.