WHAT TO DO NOW: The environment has been crazy, and today is seeing another huge rotation out of extended growth leaders and into the rest of the market. We’re already 25%-ish in cash, so we’re not panicking, but we are going to shave off a few more shares of DocuSign (DOCU) today—we’ll sell one-third of our remaining shares, leaving us with 28% or so in cash.
After a huge run in the major indexes and growth stocks in recent days, the market again gapped higher this morning, but the sellers jumped in right away. As of noontime Eastern, the Dow is up 205 points, but the Nasdaq is down 51 and the average stock we own or are watching is down around 2.3%.
Of course, one bad morning isn’t a reason to panic; big picture, this is still a bull market that should carry higher down the road. In fact, as has been the case since March, today’s weakness in glamour stocks isn’t spreading to either the broad market (the Dow and S&P were up) or even across all growth titles.
Thus, it’s best to take things on a stock-by-stock basis. There are opportunities, but the environment remains tricky, with news-driven moves and vicious rotation.
We came into this week with around 25% in cash, so we’re not in a rush to toss a bunch of stuff overboard. In fact, we think many of our names are acting well. But we are going to make one small move right now:
We’re going to again take partial profits in DocuSign (DOCU), which is flashing climactic upside action this week. The company will report earnings tomorrow night, so hopefully we’re “wrong” and the stock just motors higher from here. But with the stock having tripled from its breakout in April, and with the massive spike and reversal this week, we’re going to sell one-third of our remaining position and hold the rest. SELL ONE-THIRD, HOLD THE REST.
For now, that’s our only change, but we’ll obviously be watching the action of leaders closely—we could trim further if the selling continues, though we’re not ruling out reinvesting some proceeds into fresher, more resilient leaders. Our cash position will now be around 28%.
We’ll have a full report on tomorrow’s regularly scheduled update, due out after the close.