February 13, 2025

WHAT TO DO NOW: We continue to stay relatively close to shore as the major indexes remain rangebound and many stocks are hit and miss—but we are impressed given the resilience shown after some worrisome headlines, and earnings season has gone fairly well so far. Today and tonight, we’re making a few small moves: On the sell side, we sold one-third of our AppLovin (APP) stake today and, tonight, will sell half of our On Holding (ONON) position—but we’ll also buy an additional 3% position to Duolingo (DUOL) and start a half-sized stake in DoorDash (DASH). All told, we’ll still have a mid-40% cash position, but we could do more buying if the recent resilience leads to clear buying.

Current Market Environment

The major indexes rose nicely today, and there was a lot of action under the hood as earnings season revs up. Near the close today, the S&P 500 was up around 1% and the Nasdaq was up 1.3%.

Overall, we remain encouraged by the market’s resilience in the face of bad headline news and uncertainties, with this week’s inflation report (which came in hotter than expected) and today’s reports about reciprocal tariffs providing the latest tests—but, so far, the buyers have supported the major indexes and key leaders, with many testing new high ground.

That said, when you look at the collection of evidence, it remains mixed: The major indexes (Cabot Tides) are still rangebound during the past couple of months, our Aggression Index is toying with intermediate-term support, the Two-Second Indicator is looking iffy as new lows have expanded in recent days and the number of new highs remains muted.

Again, the above factors aren’t bearish, but they do reflect the hit-and-miss nature of the market right now, with a few names looking great, many doing OK and a lot getting tossed around by the daily headlines.

All in all, then, we’re still in favor of picking your spots and going slow—but after a few quiet weeks in terms of buys and sells, we are doing a little re-jiggering in the portfolio. First, on a special bulletin today, we sold one-third of our remaining stake in AppLovin (APP), taking a bit more profit out of the stock on today’s pop. Second, tonight, we’re selling half of On Holding (ONON), which has been bobbing and weaving for weeks but is now showing some ominous action.

However, on the buy side, we’re adding an additional 3% position (3% of the portfolio’s value) in Duolingo (DUOL), and we’re also going to start a half-sized stake in DoorDash (DASH), which remains in good shape after earnings this week. Overall, our cash position will still be about the same—44% or so—though we could add more names if the market’s recent resilience continues. Details below.

Model Portfolio

AppLovin (APP) released another “wow” quarterly report last night, with sales and earnings crushing expectations, with enormous cash flow and with profit margins through the roof, all of which caused the stock to stage another wild gap up. That said, after reaching as high as 525 this morning, the stock steadily sold off from there, and given the wild upside action (both today and in recent months), we decided to book a bit more profit, selling one-third of our remaining stake and holding the rest. We certainly think the stock could continue higher, as management did release a great Q1 forecast and talk about its advertising engine being applicable to other areas; one analyst thinks that $100 million of revenue came in from the e-commerce ad business in Q4 (with the core gaming business up 7% quarter over quarter). Thus, we’re happy to hold a chunk and give the remaining stake some rope, but given the overall picture, we decided to ring the register a bit more today given the stock’s pop. SOLD ONE-THIRD, HOLDING THE REST

Argenx (ARGX) has lost a little bit of strength during the past month, with some high-volume selling appearing in early January and a dip to the 50-day line this week, the first kiss of that line since last October. That’s obviously not abnormal action and, in fact, could be the shakeout the stock needs to start its next leg higher. As we have for months, we’ll simply continue to follow the plan: With the uptrend intact, we’re hanging onto our small position and will see whether the latest test and earnings (February 27) can bring in more decisive buying. On the downside, a drop under the 610 area could have us thinking defensively. HOLD A HALF

DoorDash (DASH) is the King of Delivery, expanding within the core restaurant business while also moving into newer categories. And business remains on a steady growth path: The firm reported another steady-as-she-goes Q4 earlier this week, with orders up 19%, revenues up 25% and EBITDA up a big 56%, while also saying that a quarter of its user base ordered from a non-restaurant client (convenience, grocery, drug and liquor stores, etc.) in December. Shares rallied a bit on the news and remain in a solid uptrend, and should the market/growth stocks hit a pothole, there should be solid support in the 175 to 180 area, so shares aren’t super extended. We’ll start with a half-sized stake (5% of the portfolio) here and aim to fill out the position if the market and DASH cooperate. NEW BUY A HALF

Duolingo (DUOL) shook out with most growth stocks earlier this week just after our recent buy, but impressively, it has stormed back the past two days on beefy volume to new highs on no apparent news. We love the action, the setup and the recent strength here, and think the stock is showing a solid setup—the only hitch here is that earnings are due in two weeks (February 27). Thus, we will average up today, but will do so in a size that’s a bit smaller than normal: We’ll buy another 3% position in DUOL (take 3% of the portfolio’s value and buy more DUOL with it) and use a stop for the combined position in the 340 to 345 range (~15% loss limit), which gives the stock room to maneuver. BUY ANOTHER 3% POSITION

Flutter Entertainment (FLUT) has been base-building with most growth stocks since early December, but now it’s attempting to reassert itself, helped along by reports that Super Bowl betting was very strong; FLUT has popped the past two sessions all the way back to its prior high, which is obviously encouraging. The firm’s closest peer, DraftKings (DKNG), is set to report tonight, and that will likely have an impact on this stock, so we’ll see how it goes. Right here, though, FLUT’s multi-week rest has been tedious but normal, and all indications are that the underlying business is strong and should remain that way for many quarters to come. Continue to hold your shares. Earnings are due February 27. HOLD

On Holding (ONON) is tossing us around again—our move back to Buy a couple of weeks ago was clearly off, and now the action looks ominous, with a good-looking breakout two weeks ago not just giving up some ground (which would be acceptable) but nosediving to a multi-week low as the group has fallen apart and tariff fears ramp up—and even after a day of high-volume support yesterday, ONON was right back in the soup today. All of this is a bad look, making the last many weeks look like an intermediate-term top. To be fair, there is support in the 48 to 50 area (round-number support, 40-week line, etc.), and in this environment, “bad” stocks have often found support while strong names stagnate. Even so, we don’t advise simply holding and hoping: We’ll sell half of our position here, taking some profit off the table, and see if ONON can find buyers soon. If it does, it could round out a real launching pad, but if not, we’ll likely be looking for greener pastures soon. SELL HALF, HOLD THE REST

Palantir (PLTR) continues to bask in the glow of its Q4 report, following through nicely on the upside in the days since the upside gap. Obviously, PLTR isn’t in the first inning of its overall advance and has had a big run, so we’re open to the idea that shares could deflate at some point, especially if the market fades. But given the stock’s action and the accelerating sales growth and strength in other metrics, the odds favor the stock still having gas left in the tank as big investors accumulate positions in the key software enabler of the AI age for tons of big businesses and government agencies. We’ll stay on Buy, though as always, aim to nibble on dips of a few points. BUY

Reddit (RDDT) sold off fairly sharply today after earnings, though it had nothing to do with the sales (up 71%) and earnings (up 227%) figures, both of which crushed expectations. Instead, it was user figures, which in the U.S. actually slipped some in Q4; while alarming, the top brass said it was due to a change in Google’s algorithm right at quarter-end, and all is back to normal now. Odds favor the growth story is intact (logged-in user growth, which wouldn’t be affected by any Google shenanigans, continued to grow at similar rates), but shares did take a hit today … though, while not fun, RDDT didn’t even touch its 25-day line. We’re not complacent, and if the stock cascades into the mid-170s, we might cut bait, concluding RDDT needs many weeks or months to set up again. But right here, we’re thinking optimistically, as the trend in this volatile name is still up and the earnings/cash flow outlook is terrific. BUY A HALF

Shift4 (FOUR) has had some trouble with its December highs (near 116) in recent weeks—nosing above it a couple of times before dipping back—which is par for the course in this market environment. As with just about everything out there, next week’s quarterly report (and Investor Day) on February 18 will tell the tale: Analysts are looking for sales of $959 million and earnings of $1.14 per share, but equally important will be what the top brass says about the future as the CEO likely heads to NASA. A sharp drop after the report would raise the prospects of a double top, but with the major trend up and business doing great, we’ll stay on Buy, though you should keep any new buying small this close to the report. BUY

Watch List

Credo Tech (CRDO): AI infrastructure names are a mixed bag, but as we wrote last week, CRDO is one of the best out there—and after its secondary pullback this week, it could be setting up. We’re keeping an eye on it and still aren’t ruling out the best names in the group re-emerging in the weeks ahead.

Doximity (DOCS): Doximity is the go-to platform for medical professionals, allowing physicians and others to get news, look for jobs/employees and access all sorts of products (scheduling, telehealth, etc.)—as well as allowing big hosptial and pharmaceutical clients to market their wares to these decision-makers. The firm is showing accelerating growth and the stock recently went wild on earnings.

Dutch Bros. (BROS): BROS catapulted higher today after a huge quarterly report (sales up 35%, same-store sales and earnings gliding past estimates). If you own some, we’d hang on (though you could always book partial profits), though for our part, we’re not anxious to chase it after the sustained move and now the gap.

GE Aerospace (GE): We’re always on the lookout for glamour stocks that can double or triple if things go right, but we’re also open to some steady growth titles, and GE is one of our favorites given the reliable trends in the jet engine space and the firm’s huge recurring income. Shares are perched near new highs.

Guardant Health (GH): It’s smaller and more speculative, but GH continues to act well enough, pulling back normally after its huge-volume rally on the Reveal reimbursement news. We continue to think GH has the makings of a winner … if it can get through its Q4 report (February 20) in one piece.

Rubrik (RBRK): RBRK continues to test and nose out to new highs here and there before meeting with some selling—it looks like it wants to head higher if the market can get out of its own way. We continue to like the story here and would note cybersecurity names have strengthened of late, though one big player (Palo Alto Networks, PANW) reports tonight. If that goes smoothly we could take a swing at RBRK with a small position.

Shopify (SHOP): SHOP reported a fine quarter earlier this week (sales up 31%, earnings up 29%; solid 2025 outlook) and, after hesitating near its prior highs (the norm in this environment), it lifted to new highs today.

That’s it for now. You’ll receive your next issue of Cabot Growth Investor next Thursday, February 20. As always, we’ll send a Special Bulletin should we have any changes before then.

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