WHAT TO DO NOW: The overall market remains mixed, but the under-the-surface action remains a meat grinder, with numerous stocks getting chewed up after making big swings. Today, we’re cutting loose On Holdings (ONON), which had a great Q1 but has nevertheless seen sellers swarm. This will leave us with more than 70% in cash, which is too high given the evidence, so we may have a new addition or two in tomorrow’s issue, though we’ll have to see how it goes given the continued air pockets among potential leaders.
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The market is rallying decently today on some encouraging tidings about a debt ceiling deal—and while few stocks are hitting new highs, today is seeing broad participation while defensive stocks sag. As of 1 p.m. ET, the S&P 500 and Nasdaq are both up just over 1%.
Overall, this remains a very unusual situation, as the big-cap indexes are holding up but the broad market is iffy and very few stocks are doing well—yesterday, for instance, saw nearly three times as many new lows as new highs on the Nasdaq, even as that index nosed to nine-month highs! (New highs are still pathetic even with today’s rally.) Beyond specific stats is simply the meat grinder environment, with lots of stocks being shredded even on “good” news and those that act well unable to sustain upside.
Included among that group is On Holding (ONON), which has all the makings of a leader and released a great Q1 report … but, like so many names, that hasn’t stopped sellers from swarming. Yesterday’s dip was sharp, but acceptable, but today’s heavy-volume follow-on selling has us cutting the loss on our half-sized stake. SELL ONON.
On the flip side, the same encouraging evidence we’ve written about in recent weeks is also still out there, including the fact that we’re not having much trouble filling up our watch list with good-looking (sometimes great-looking) setups in enticing growth stocks, and the resilience in the indexes given all the worries out there is a plus. Because of our huge cash hoard (north of 70% after this sale), we may put some to work in tomorrow’s issue.
That said, we’re also cognizant not to overtrade—a couple of papercuts will happen and aren’t a big deal, but we don’t want to shovel more and more money into a furnace, either, especially as the big money will be made when the environment truly improves. For now, we’ll sell ONON and hold the cash—with more details in tomorrow’s issue.
Don’t hesitate to email me directly at mike@cabotwealth.com with any questions.
