Shares of LeMaitre Vascular (LMAT) are on a tear. In early July, the stock traded at 13.50. After reporting a better-than-expected Q2 result in late July, shares gapped up 13.4% from 14.63 to 16.59. Over the next three days, they rallied to almost 18. Yesterday, they jumped from 18.35 to 20.80, a 13.4% move on almost seven-times normal volume.
The upward trend has been powered by better-than-expected growth on both the top and bottom lines. A strong backdrop for healthcare stocks and improving sentiment toward biotech stocks is helping. Another contributing factor are bullish calls by analysts.
After the Q2 report in late July, both Barrington Research and Brean Capital moved their price targets up to 20. Yesterday, Canaccord Genuity bumped up its target to 21. I believe that call was responsible for yesterday’s move.
In any event, we’re now up almost 30% since adding the stock in early May.
These are terrific—and not entirely unexpected—developments. This is what should happen with Cabot Small-Cap Confidential stocks! While I think LeMaitre has more upside in the future, the reality is that the strength of the recent move raises the risk of a near-term pullback. Part of being a good small cap investor is sensing when to be aggressive, and when to be more conservative.
Today, I think we need to take a more conservative stance on the stock in the short-term. Therefore, I’m moving the stock to Hold right now. This isn’t a call to sell the stock. I simply think the near-term upside is limited barring a major positive announcement or rumors of a takeover (which I haven’t seen yet). If you are a conservative investor, you may want to consider booking a partial profit, perhaps around 25%. Otherwise, just hold your position and let’s see where LeMaitre goes over the coming weeks. Should it hold its recent gain and enter a tight consolidation phase (like that which occurred in August), I will consider moving it back to Buy. HOLD.