March 21, 2024

Quick note before we get into it today: Join me and my fellow Cabot analysts Mike Cintolo, Carl Delfeld and Tom Hutchinson next Tuesday, March 26 at noon ET for a FREE special event in which we will discuss the state of the market, how to maximize profits in this bullish environment, reveal our top stocks to buy now, and answer any questions you may have. To join us, simply click here.

Jerome Powell’s press conference yesterday, which followed the FOMC’s March policy decision (hold) and updated Summary of Economic Projections (SEP), went better than expected.

Many investors were primed for Powell to dial back expectations for three rate cuts later this year. Yet the SEP maintained that stance, which was set in the December SEP. That’s despite a slightly higher PCE inflation rate and GDP forecast than was expected three months ago.

Powell said, “... if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”

This was a key statement Powell made a couple of weeks ago in congressional testimony and he repeated it yesterday. That’s a big part of why the S&P 500 rallied 0.93% to new highs.

Also getting a boost yesterday was the Nasdaq (+1.19%). But the S&P 600 Small-Cap Index led the charge, rallying 1.65%.

Of course, there are no guarantees that inflation will continue to moderate and allow the Fed to begin cutting rates. But that’s the expected scenario and the stock market should like it.

Market odds currently forecast a 62% chance of a June cut. That’s slightly higher than the 59% probability from last week. It’s interesting to consider the timing of the November 5 presidential election. Will the Fed want to make its first cut well ahead of the event to avoid any perception of a politically motivated cut, or does it not care?

For now, the bullish case for small caps remains intact given that lower interest rates should have an outsized benefit on this asset class due to higher exposure to variable debt than both mid and large cap stocks.

Turning to our portfolio, there has been virtually no news lately so today’s comments are short and sweet.

Recent Changes
None

Updates

Alphatec (ATEC) held its 2024 Investor Day on Tuesday (March 19) with the key takeaways being that management confirmed its intent to grow at an average rate of 20% to get to $1 billion in revenue in 2027 and also to get to break even in 2025. Breaking down the projected $1 billion revenue mix, management said it sees $100 million of EOS revenue (growing about 14% a year), about $30 million of international revenue, and roughly $870 million of U.S. surgical revenue. Analysts on the call reacted positively to the breakeven in 2025 commentary but thought the average growth of 20% through 2027 seems low, especially in 2026 and 2027, given expectations for well over 20% growth this year. We’ll keep shares of ATEC at hold and see how they act after everybody digests the details from this day. HOLD

Docebo (DCBO) continues to tread water in the low-50s with no major news to report. BUY

Enovix (ENVX) received the bullish analyst note that I expected after management presented at the JP Morgan Industrial Conference last week. That didn’t help shares immediately afterward, but the stock had a good day yesterday with the rally picking up steam during Powell’s press conference. BUY

EverQuote (EVER) is a bit volatile but the uptrend remains intact and shares continue to trade above the key moving average lines. No company-specific updates this week. BUY

Intapp (INTA) looks like it might be starting to recover from the non-dilutive secondary offering from entities affiliated with Great Hill Equity Partners IV. As I said last week, once this offering is flushed out, I expect INTA will bounce back, so keeping at buy. BUY

Liquidity Solutions (LQDT) has been very stable around the 17.5 - 18 level for several weeks now. The only news lately was the deal to liquidate manufacturing equipment from the longest-running firearms manufacturing plant in the U.S., which is moving from New York to Georgia. BUY

Remitly Global (RELY) rallied over 4% yesterday and moved off the key 20 level. Shares have held above that price since management reported earnings on February 21. A breakdown would be short-term bearish. HOLD HALF

RxSight (RXST) sold off in the week after I recommended buying shares but has begun to look better over the last four sessions. This MedTech company is growing north of 40% just in the U.S., has international expansion potential, and is seeing rapid uptake from doctors. Management will speak at RxSight’s Capital Markets Day on April 6. BUY HALF

TransMedics Group (TMDX) has pulled back to its 200-day line around 72.5. Looking for the stock to stabilize here and mount a recovery. HOLD A QUARTER

Weave (WEAV) is up about 8% from our entry point (as of yesterday’s close). There’s been no major news since Q4 results, which came in solid with guidance above consensus. BUY HALF

That’s it for this week. Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.

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