WHAT TO DO NOW: Take partial profits in Twilio (TWLO) by selling one-third of your shares and holding the rest. The move will boost the Model Portfolio’s cash position to 21%. Regular (and more detailed) update will be emailed tonight after the close.
The major indexes slipped yesterday, with the Dow losing 163 points and the Nasdaq dipping 46 points, though the selling was even worse under the surface—the broad market and most technology-oriented growth stocks took fairly large hits.
This morning’s message is in regards to Twilio (TWLO), which reported a great quarter on Tuesday night, including another round of accelerating revenue growth, earnings that easily topped expectations and a hike to 2019 guidance. Shares did open up a few points but quickly reversed and finished sharply lower on heavy volume.
Does this mean TWLO’s overall run is over? Probably not. We still think the stock is one of the leaders of this advance, and even after the ugly move, shares are still above their 50-day line.
However, TWLO has lost a little steam over the few weeks (it’s no higher now than mid March) and there’s been a lack of buying power (no above-average volume up days in more than two months), so yesterday’s reversal raises the odds that the stock will cool off going forward.
Combine all of that with a good-sized position in the Model Portfolio (12.6% as of last Friday) and we think it’s prudent to take partial profits—we’ll sell one-third of our position today and give our remaining shares room to correct and consolidate if they want to.
There are no other changes this morning—the TWLO partial sale will leave us with around 21% in cash, some of which we’re looking to put to work if the right setup emerges and/or if some stocks we’re watching get through earnings unscathed.
We’ll have more in tonight’s regularly scheduled update, due out after the market close.