It’s another ugly day out there and growth stocks and small caps are taking it on the chin again.
Generally speaking, our strategy is to average in on the way up, and out on the way down. That means we need to take one more step today to protect our hard-earned gains.
One quick note on the market before I get to my recommended actions.
Most of the businesses in our portfolio continue to perform well. There aren’t any new stock-specific issues that have popped up. In some cases, the opposite is true.
Here’s one example. At the end of last week, the U.S. FDA announced its first-ever approval of a hearing aid that allows users to fit, program and control the device on its own. The device, made by Bose, is called the Bose Hearing Aid. As I understand it, the technology used isn’t all that different from that in many of the hearing aids sold today. What this means is that, as expected, barriers to develop the OTC hearing aid category continue to fall. And with this approval it seems more likely that the FDA is approaching a time when it will be ready to release draft language outlining regulations for the OTC category (maybe the first half of 2019?). Theoretically, this should be bullish for IntriCon (IIN), which is developing a business to address the OTC hearing aid opportunity.
We’ll talk more about this in the future. The point today is that, just like stock prices can disconnect from fundamentals on the way up, they can do so on the way down. Our job is to try and take it all in and thread the needle to deliver market-beating gains.
Given that the current weakness we’re experiencing is more about broad market sentiment turning against growth, and the long-term implications of rapidly rising rates, stock-specific growth potential has moved to the background. It will come back into focus at some point, but until it does our focus necessarily turns to avoiding losses and protecting gains. This will set us up to be more opportunistic when it’s time to become more aggressive.
Here is today’s recommended action:
Everbridge (EVBG): Our gain currently stands at over 210% and Everbridge is now below its 50-day line. We’ve already taken partial profits and I don’t want to exit the position entirely since I think this weakness will pass. But let’s not ignore the current environment. Sell a quarter of your position and hold the rest. SELL A QUARTER, HOLD A QUARTER.