WHAT TO DO NOW: Our Cabot Tides are now positive, which means it’s time to put some money to work. There are still headwinds out there, so it’s not a time to plunge headfirst, but with the evidence improved, we’re adding three new stocks to the Model Portfolio tonight—a full position in Okta (OKTA), and half positions in both Cloudflare (NET) and Chewy (CHWY). Our cash position will now be around 47%. Details below.
Stocks closed last week on a strong note, with the Dow gaining 705 points and the Nasdaq advancing 118 points. While this morning is set to start off on a sour note, that doesn’t change the fact that our Cabot Tides have flipped to a buy signal, telling us the market’s intermediate-term trend has turned up.
Combine that with other positives (nine straight days of fewer than 40 new lows, buoyant action among many growth stocks, positive readings from our Aggression Index) and it’s time to begin coming off the sidelines.
Of course, none of this is a reason to go hog wild on the buy side—in fact, with our Cabot Trend Lines still bearish and with many stocks still facing lots of overhead to chew through (62% of Nasdaq stocks are below their 50-day lines, while 76% are still south of their 200-day lines), there’s bound to be plenty of volatility—this morning’s opening drop is a good example of that.
Even so, there’s no question the evidence has improved, which prompts us to take some action. The Model Portfolio, which is solidly in the black for the year, came into this week with 67% in cash. Today, we’re going to add three stocks:
First, we’re going to buy a “full” position (10% of the portfolio) in old friend Okta (OKTA), which looks like favorite new-age cybersecurity title among big investors;
Second, we’ll add a half position (5% of the portfolio) in Cloudflare (NET), a volatile newer issue that’s seeing big demand for its global cloud network from big firms and websites;
And third, we’ll add a half position in Chewy (CHWY), the Amazon of pet supplies, which mixes defensive characteristics (pet supplies aren’t cyclical) and a great long-term growth story.
After these purchases, the portfolio will have seven stocks and a cash position of around 47%.
As always, from here we’ll just take our cues from the market and individual stocks—if our group of stocks head higher and the market does the same, we’ll look to put more money to work. But if these new purchases head the wrong way and/or the market’s rally decisively cracks (another 4% to 5% down after this morning would be needed for that), we’ll hold our good-sized remaining cash position and make sure any losses don’t get out of control.
Don’t hesitate to email (mike@cabotwealth.com) with any questions; we’re here to help in these crazy times. Your next issue of Cabot Growth Investor is coming this Thursday, April 23 after the close.