WHAT TO DO NOW: The market remains in good shape, but leadership is still developing, with many resilient stocks getting hit while buying moves elsewhere. Today we’re cutting bait with our small position in Penumbra (PEN), which is slicing through support, and replacing it with Rubrik (RBRK), which looks like a new leader in the strong cybersecurity group. Details below.
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The market is mixed today, and we wouldn’t be shocked if some further weakness comes in the days ahead following the big run of late in the indexes. Even so, our Cabot Tides and Two-Second Indicator are positive, and given the many other encouraging factors (Three Day Thrust, horrid sentiment), we’re optimistic higher prices are in the offing.
However, growth stock leadership is still developing—we’ve seen some improvement on that front in recent days, but most of the action has come from off-the-bottom names, while those that held up during the market’s implosion have actually been getting hit.
The latest in that line is Penumbra (PEN), which isn’t in awful shape, but after surging on earnings in late April, shares stalled south of 300 and, this week, have fallen off. Our loss on a half-sized stake is reasonable, and if you want to hold and give it a few more points, that’s fine.
That said, medical names have been a sinkhole of late, partially due to tariffs (pharmaceuticals), partially due to regulations and some just due to bad earnings reports. A government probe of United Health (UNH) is causing that stock to plunge 15% today; that has nothing to do with PEN but adds to the sector anxieties.
All in all, we’re going to cut bait with PEN here—if it truly gets going in the weeks ahead, we could revisit it, but we’d rather move the money into a stronger situation. SELL PEN
That situation is Rubrik (RBRK), a cybersecurity name that we’ve been following for a while. It’s has had some big downs and ups in recent months, but has impressively stormed back to new highs this week. We will say that many names in the group still have earnings to report (in two to three weeks), including Rubrik (June 5), and combined with the big recent run is a risk—but we love the story here, and to this point, cybersecurity has been the best looking growth group out there. We’ll start with a half-sized stake and use a loose leash in the upper 60s in case we see some near-term weakness. BUY A HALF of RBRK
We’ll have full details in tonight’s issue of Cabot Growth Investor.
Don’t hesitate to email me directly (mike@cabotwealth.com) if you have any questions.
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