WHAT TO DO NOW: Growth stocks and the market have remained tricky and challenging, and so far this month we’re beginning to see the sellers show up again—while big-cap tech has held up, many glamour names (and indexes) are coming under pressure. We’ve been nearly half in cash and aren’t eager to sell wholesale, but we’re also not going to hold and hope. Tonight, we’re pulling the plug on our half-sized position in Roblox (RBLX), which cracked support today, while placing Progyny (PGNY) on Hold. That will leave us with around 53% in cash.
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The major indexes were fine today, with the Dow up 45 points and the Nasdaq down 33 points. But that masked a horror show under the surface—the average stock we follow was off more than 2%, similar to growth-oriented indexes like the Russell 2000 Growth Index (IWO, down 2%) or the Ark Innovation Fund (ARKK, off 3.3%).
And we’ve seen this pattern play out so far this month even within the growth complex—while the Nasdaq 100 is up more than 2% this month, IWO is off more than 4% while ARKK (admittedly more volatile) is off more than 8%.
We’ll get into more details in tomorrow’s issue, but the reality is that there’s been a ton of indecisiveness among growth stocks—yes, a few have been in solid uptrends and can be bought on dips (such as DOCU and NET), but most growth stocks have produced only fleeting gains.
On the flip side, we continue to see more decent setups among growth stocks today as we have since late last year, but until we see more real breakouts, we advise staying relatively close to shore.
In the Model Portfolio tonight, we’re going to sell our half-sized stake in Roblox (RBLX)—shares held support for a while but the sellers came around for it today and the stock sliced support. We’re also placing Progyny (PGNY) on Hold as the stock has weakened.
The RBLX sale will leave us with around 53% in cash. We’re not eager to get more defensive here, so it’s possible we could replace any coming sales with some new buys if growth stocks stabilize. Right here, though, we’re content to continue practicing patience and wait for some decisive strength to appear (possibly during earnings season).
We’ll have more in tomorrow’s issue of Cabot Growth Investor—until then, don’t hesitate to email me mike@cabotwealth.com with any questions.