WHAT TO DO NOW: After a nice few days, growth stocks (and the market as a whole) are getting walloped today, a sign that the market hasn’t broken free of the endless chop. To be fair, many growth names are still in good shape, but our Cabot Tides remain on the fence and much of the broad market is flopping around at best. In the Model Portfolio, we put some money to work last week, but today we’re going to punt on one of our weaker names—we’re selling our half-sized stake in Progyny (PGNY) and holding the cash. That will leave us with a cash position around 42%.
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Whether it was a meltdown in Chinese stocks due to regulatory actions, fears of renewed virus restrictions (and mask mandates) or inflation jitters, the market is getting hit sharply today, and growth stocks are going along for the ride—as of 1 p.m. ET, the Dow is off 195 points, while the Nasdaq is down 291 points and growth-y indexes are down 3%-plus.
We’re not going to draw a massive conclusion from one day of trading, especially as it comes on the heels of what was a darn good few days for growth stocks following last Monday’s shakeout. But it is a sign that the endless choppy phase might not be in the rearview mirror.
Looking at the evidence, our Cabot Tides remain effectively neutral, and the broad market remains very narrow; coming into today, less than 40% of stocks on the NYSE and Nasdaq were above their 50-day lines. Moreover, new lows have really begun to pick up, though admittedly a bunch of that is because of the Chinese stock meltdown.
To be fair, though, many growth stocks are still in solid shape, including stocks like DOCU, NET and FND in our portfolio, not to mention SSO (not a growth stock, but it looks good). Thus, as we wrote above, we’re not going to overreact to one day, but how stocks react to today’s selling will tell us a lot.
Today, though, we’re going to sell our weakest stock—Progyny (PGNY) has a great story but hasn’t been able to get out of its own way of late, and today it sank back toward its lows. Our patience has run out, and we’re going to cut the loss in the position and hold the cash.
We also wanted to mention Asana (ASAN), which plunged today on no news. Obviously, the action isn’t what we’re looking for from a new buy, and you could argue it’s abnormal, too. That said, after such a big move, some sort of pothole was likely—we clearly didn’t think this sort of pothole was coming, but shares haven’t broken any key support (still above their recent low, believe it or not). Basically, as with most names, what happens in the days ahead will probably tell the tale: If ASAN can’t get off its knees, we won’t hesitate to fess up to a mistake and cut bait, but right here, we’re going to hold on. And if you haven’t bought yet, we’re not opposed to starting a small stake here, assuming you’re willing to get out if things don’t turn around. We still have it rated Buy a Half.
We’ll have more in Thursday’s issue of Growth Investor—until then, don’t hesitate to email me mike@cabotwealth.com with any questions.