Not surprisingly, this week wasn’t a great one for our portfolio. I had a feeling the party was winding down last week, when we had an average gain of 105% going and had just seen our stocks pop an average of 6% over five days. This past week, our stocks declined by an average of 3%, led down by Upland Software (UPLD), down 14%, Everbridge (EVBG), down 10%, and AppFolio (APPF), down 7%.
But all is not lost. Most of our stocks were a little extended (some were a lot extended) and a pullback seemed overdue.
There was one outlier on the upside. Goosehead Insurance (GSHD) continues to streak higher, up 7% this week after rallying 13% two weeks ago. We now have a 50% gain going there.
As you all know the 4th of July holiday is next Thursday. And that means all of us here at Cabot are working feverishly to get our research and writing done so we can enjoy a break!
On my list of hopeful achievements is to finish the July Issue of Cabot Small-Cap Confidential so it can go out before the holiday and give you a little light reading for when you sneak off for some personal time. Because I’m focused on that and because there’s not a lot of huge news, today’s comments are short and sweet.
And, since there’s only likely to be a few days between this update and the Issue you will (hopefully) get next week, I’m going to skip the full update section in that Issue—though, if something major happens with a stock, I will make it a point to discuss it.
As always, shoot me an email if you have any questions.
Happy 4th of July!
Changes this week
Rapid7 (RPD) moved from Hold to Buy
Updates
AppFolio (APPF) just announced it has launched two new Value+ services for its property management software solution, both of which are aimed at managers with a large number of properties. The two services are Lisa, an Artificial intelligence (AI) Leasing Assistant, and Utility Management, for automating bill processing and for resident billing. The two services build on prior acquisitions of Dynasty and WeGoWise. HOLD.
Arena Pharmaceuticals (ARNA) announced last week that it had dosed the first patient in the first of two Phase 3 trials (ELEVATE UC 52) evaluating etrasimod in patients with severely active ulcerative colitis (UC). No new news this week. Shares are 2% off their high. BUY.
Avalara (AVLR) is 6% off its high and looks good. No new news. BUY.
CareDx (CDNA) just received another patent that helps cement the company as one of the leading providers of genomics-based transplantation information. The patent is US 10,329,607, non-invasive diagnosis of graft rejection in organ transplant patients. Management is reporting that Congress is considering extending Medicare coverage for kidney transplant patients for the lifetime of the transplanted kidney. There is currently a three-year cap on immunosuppressive medications. This would be a positive for CareDx. HOLD.
Codexis (CDXS) was down 3% this week and is trading around the confluence of the 50 and 200-day moving average lines. The stock is still a buy for aggressive investors. BUY.
Domo (DOMO) still has a weak looking chart so remains a hold. No new news. HOLD.
Everbridge (EVBG) gave back most of last week’s gain to drop 10% this week. No new news. HOLD.
EverQuote (EVER) was flat this week. Management announced the launch of its health and renters insurance offerings this week, which we have been expecting. BUY.
Goosehead Insurance (GSHD) was up 7% this week after rising 13% two weeks ago. We’ve been watching closely since the stock began testing the 38 level in mid-May and the June breakout above that level was a bullish sign. We kept it at buy believing this could easily be the beginning of a sustained run. We’re now up 50% and given how far we’ve come in a short time, it’s best to keep new positions small. BUY.
Q2 Holdings (QTWO) just announced a new partnership with PrecisionLender, which specializes in pricing and profitability software for commercial banks. Financial institutions can use the software to offer customized commercial loan pricing and structure, rather than a simple “yes” or “no” option. This improves their competitive positioning. It’s another incremental positive for Q2 Holdings. The stock looks good, hanging just 4% off its high. BUY.
Quanterix (QTRX) tapped the market a few weeks back to raise cash and now we know one reason why. This week management announced it would acquire UmanDiagnostics for $16 million in cash plus $6.5 million in Quanterix stock. Sweden-based Uman produces the best currently available antibodies for measuring neurofilament light (Nf-L) in blood and is a provider to many researchers and biopharmaceutical and diagnostic companies. Quanterix has developed assays based on Uman’s Nf-L antibodies, which have applications in diagnosing and monitoring Alzheimer’s Disease, Multiple Sclerosis, Parkinson’s Disease, traumatic brain injury (TBI), ALS and Huntington’s Disease. By completing the deal Quanterix simultaneously locks up supply of NF-L and lowers its cost (25% of Quanterix revenue relies on Nf-L), which is expected to add 2% to gross margins and speed up the time to reach cash flow breakeven by two quarters. There is also potential to generate revenue and form strategic deals with diagnostic and biopharmaceutical companies that want Nf-L antibodies. I like the deal. HOLD.
Rapid7 (RPD) popped out to fresh highs last week then came back a little this week. But the stock remains above its 50-day line and looks strong. Now that shares have consolidated a little and look ready to move again, I’m moving back to Buy. The company recently announced that its Insight cloud integrates with AWS Security Hub. BUY.
Repligen (RGEN) keeps streaking higher on no new news. It’s extended, but the trend is strong so sticking with a buy rating a little longer. BUY.
Upland Software (UPLD) hit new highs a couple weeks ago and looked terrific, then fell to its 50-day line this week and broke below, rather harshly. I attribute this mostly to sellers that will ditch a stock when it breaks below the 50-day line. But I still like Upland. Watching closely and keeping at Buy. BUY.
