WHAT TO DO NOW: Growth stocks are getting hammered today despite a decent day from the indexes, with more cracking support and/or flashing iffy action. We’re still overall bullish, but we’re doing some selling today given the action of our stocks. In the Model Portfolio, we’re selling Dynatrace (DT) outright, selling one-half of Asana (ASAN) and selling one-third of Cloudflare (NET). That will leave us with a bit more than 40% in cash … which we think is too high, to be honest. But we’ll hold onto it for now and wait for buyers to support some of these leading growth titles.
The major indexes are doing well today thanks to some mega-cap names, but under the surface, we’re seeing a ton of damage among leading growth stocks. As of 11:15 am ET, the Dow is up 240 points and the Nasdaq is up 91 points, but most growth-oriented funds are down and many names are off big.
We’re not making any grand call on the market here—as we’ve written recently, we’re in the midst of a near-term correction, with different groups taking hits on a rolling basis and fewer and fewer names headed up with the indexes. (The number of new highs is on pace to be about one-third of what they were in early November, when the Nasdaq first hit 16,000.)
That said, there’s no doubt that we’re seeing more and more damage among individual stocks, and on that front, we’re going to make a few moves today.
First, we’re going to sell Dynatrace (DT), which continues to give up the ghost following news that the CEO left. If you have a profit, we would consider giving it a bit more rope to see if/how well it bounces, but we have to follow our rules (not letting a decent profit turn into a loss) and cut bait. SELL
Second, we’re going to sell one-half of our stake in Asana (ASAN), which is getting hit very hard today. But it’s more than just today, as (a) shares have had a massive run and (b) they’ve stalled out for many weeks in the 125 to 140 range. We can’t say it’s a long-term top but there’s no question the character of the stock has changed, which demands some action. SELL HALF
We’re also going to sell one-third of Cloudflare (NET)—frankly, the stock remains in solid shape despite the slide of the past two sessions, but we’ve been aiming to take some off the table if the stock began cracking, and we think it’s prudent to ring the register on some and hold on tightly to the rest. SELL ONE-THIRD
These moves will leave us with around 40% in cash (probably a bit more). If things stabilize in the days ahead, we’ll be looking to put some of that to work—despite the recent damage, many stocks are still looking fine, just shaking the tree after huge runs.
That said, we’ll hold that cash (and our remaining positions) for now and take it as it comes. We’re still overall bullish, but want to see the buyers step up in some of the growth titles.
That’s all for now. Don’t hesitate to email me mike@cabotwealth.com with any questions.