WHAT TO DO NOW: After selling half of DoubleVerify (DV) yesterday, we’re going to prune our position in Celsius (CELH), which has been stalling out for about a month and a half and is now cracking some near-term support. The big-picture chart isn’t bad, so we’ll hold a good-sized stake, but we’ll trim here and hold the cash. That will leave us with around 36% in cash.
==
As of 10:40 am ET this morning the sellers are active, with the S&P 500 off 1.1% and the Nasdaq down 1.6%, with many growth stocks faring worse.
While the news of the day is a downgrade of the U.S.’s credit rating by one major outfit (leading to another backup in interes rates), market-wise, one of the bigger “themes” playing out near term is a very tough earnings season for growth stocks, be it big-cap names (NFLX, NOW, TSLA), stocks in strong groups (RMBS, ALGM in chips yesterday) or others (DT today), earnings reactions have definitely dented some names with a few really cracking.
That doesn’t change our big-picture outlook—and, to be fair, even some of the above names haven’t really died, but simply taken on water and likely need time to rest. But there’s no doubt that growth has taken some lumps, and there’s growing near-term evidence that a market pullback could be here.
Don’t get us wrong: Many stocks continue to look good, and the odds favor the market heading higher down the road, so we’re aiming to give strong, profitable stocks some rope, as we think it’s likely some are in the early-ish stages of what should be bigger runs. But we also think it’s best to pare back on names that are showing weakness, as the money should be put to better use in more resilient names after this sloppy period for growth stocks ends.
We’ve been paring back on stocks for a couple of weeks now, and today we’re continuing that, selling one-third of Celsius (CELH), which has been stalling out since mid-June, with repeated rejections near the 150 level and with shares unable to bounce off support. It’s not the worst chart—mostly sideways for weeks—but we’re going to trim our position and see how things go on earnings (due August 10).
Our cash position will now be around 36%—which we view as plenty of dry powder to jump on some new names. There are many potential buys going ahead, such as Noble Corp. (NE) on dips (it has earnings tonight); possibly something like On Holding (ONON) if it settles down; Samsara (IOT) on a powerful breakout; or maybe even averaging up on one of our names if they react well to earnings.
Right here, though, we’ll hold the cash and see how things play out.
We’ll have more details on all our stocks in Thursday’s regular update. Don’t hesitate to email me directly at mike@cabotwealth.com with any questions.
