WHAT TO DO NOW: The market remains in the dumps, and while some beaten-down growth names have found support, many are still getting hit on earnings and we’re even seeing selling spread to the broad market. Today’s bulletin is in regards to SelectQuote (SLQT), whose good-not-great quarterly report is causing a big break today—we’re forced to bail here and make sure a bad situation doesn’t get worse. We’re also placing Floor & Décor (FND) and Five Below (FIVE) on Hold as the selling spreads. Our cash position is now a large 70%.
Stocks are down again this morning—as of 10 a.m., the Dow is off 122 points and the Nasdaq is down 116 points.
Yesterday saw some of the worst-performing growth names (many that fell 20% to 30% just in the past couple of weeks, usually in part due to earnings gaps) find some support, and it’s possible some of these names could bounce a bit. But we’re still seeing a rash of mostly horrid earnings reactions in growth stocks (really one of the worst earnings seasons we can remember), and we’re also starting to see the selling spread to other nooks and crannies of the market (retail names were hit hard yesterday).
Of course, it’s not 2008 out there—our Cabot Tides are still positive as turnaround industrial, financial and many commodity names are holding up. (We still think energy stocks like Devon Energy (DVN) are at decent entry points.) But there’s no question the Nasdaq and growth stocks are in a correction, and there remain a lot more breakdowns than breakouts across the entire market.
While we’re not opposed to a little nibbling here or there, overall, we’re sticking with a defensive stance until we see some real support/buying show up.
Today’s bulletin is mostly in regards to SelectQuote (SLQT), which is down sharply today after its quarterly report—business itself is fine, but management cut cash flow guidance as it plans to spend more money to build out its newer business lines. In this environment, that was enough for the bears to take a bite out of the stock.
There is some support around here, so if you have a lower cost basis than us, you could consider selling some/holding some with a relatively tight stop. But our loss limit has been tripped, and in these sour situations, our goal is to make sure what is a bad situation doesn’t get any worse. We’re selling our half position today. SELL
We’re also going to place both Five Below (FIVE) and Floor & Décor (FND) on Hold—neither looks truly broken, but both are coming under pressure with the market.
We’ll have a full update out tomorrow—until then, don’t hesitate to email me mike@cabotwealth.com with any questions.