WHAT TO DO NOW: The relentless selling continued yesterday—while the major indexes were up, growth stocks continued to decline as the broad market remained weak. In the Model Portfolio, we’re doing more selling today: We’ll sell one-third of our remaining shares of Cloudflare (NET), and we’ll cut bait with our half-sized stake of Dexcom (DXCM). That will put our cash position in the high 50% range. Details below.
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More bad news on the virus front caused a huge reversal yesterday, with the Dow down 462 points, the Nasdaq off another 284 and growth stocks faring even worse.
Our Cabot Tides remain negative, and to give you an idea of the broad market damage, consider that at the close yesterday, just 41% of NYSE and 26% of Nasdaq stocks were even above their long-term 200-day moving averages!
That doesn’t mean the market is sure to continue imploding, and there are some stocks (even growth stocks) that are holding up relatively well—we’re not ruling out that this will morph into a big, news-driven shakeout if Omicron doesn’t turn out to be much of anything. But there’s no question that the trends of most things are now down, with tons of breakdowns and abnormal action among leading stocks.
While it’s cold comfort, we did come into today with around half the Model Portfolio in cash, and while we don’t want to puke a bunch of stuff after a big decline, we are doing a little more selling today.
First, we’re selling one-third of what we have left in Cloudflare (NET), which is getting caught up in the horrid market action. That will leave us with around half of our original position given that we already booked partial profits last week. SELL ONE-THIRD, HOLD THE REST
Second, we’re cutting bait with Dexcom (DXCM)—we don’t think the story has changed much, but any decrease in elective doctors’ visits due to virus worries could hurt, and we have a growing loss on our half-sized stake. SELL
We’ll have more thoughts for you in tonight’s Cabot Growth Investor issue, including some names we think are holding up well (very impressive in this maelstrom) and what it would take for us to put our optimist’s hat back on. But right here we continue to advise preserving capital until this meltdown ends.
Don’t hesitate to email me mike@cabotwealth.com with any questions.