This is one of those periods when there’s not much going on in the market. Earnings season is essentially over, the summer is winding down, kids are about to go back to school and it feels like fall is right around the corner.
It’s an easy time to let one’s mind wander. That can be a bad thing when social media storms fire up and get everyone concerned about trade wars, yield curve inversions and so on. Not that I’m saying there’s nothing to be concerned about. Fact is, there’s always something if you go looking for it.
But these days you don’t even have to look. Technology platforms just push that potentially bad news right to you. It’s hard to know what falls into the real category and what falls into the reality show category.
One of the only ways to fend off the onslaught is to get off social media, which I have been relatively successful at doing thus far in my life. I think that makes me more of a skeptic when it comes to a lot of this stuff that moves the market on a daily basis but hasn’t done much over the weekly or monthly time frames.
Stepping back to look at the market, the big picture hasn’t changed much. Small caps are still trading in the same range we’ve been watching for a while, though the trend has been a little weaker lately …
… while the broad market, as measured by the S&P 500, looks relatively strong.
In our portfolio we’ve felt some softening in certain positions, while others have been rock solid. That’s normal. The periods we’ve experienced where all our stocks go up together are not! Yes, we love them. But one of the challenges is they raise our expectations and make us all think these “normal” periods are more concerning than they really are.
All of this is a long-winded way of saying, for the most part, our portfolio is doing fine and we’re not making any big changes today (or any changes, for that matter). Yes, there are a few positions I’m concerned about. But there are also several that I’m maintaining an aggressive stance on.
Without much new information, I have just a few brief comments on each position below. Enjoy the long weekend!
Updates
AppFolio (APPF) was up 6% this week on no news and has extended its consolidation phase by another seven days. It looks comfortable here, shrugging off most of the market’s volatility by moving steadily sideways in the 88.4 to 110 range. HOLD.
Arena Pharmaceuticals (ARNA) was unchanged this week. Management is going on the road to present at the Wells Fargo conference next Wednesday and the Citi conference on Thursday. I don’t expect any earth-shattering developments. Those will come out in a year-plus, we hope! Stay patient. BUY.
Avalara (AVLR) was flat this week on no news. It’s clearly one of the current market leaders as shares are trading just 10% off their all-time high, which was a one-day spike to 94 after earnings. Aggressive investors can still buy here. Shares look solid above their 50-day line. BUY.
Bandwidth (BAND) is still toying with the idea of breaking out above 90. There’s no news, except that Bandwidth continues to fight the good fight against robocalls by signing an agreement with 51 attorney generals stipulating, in part, to launch call-blocking technology at no cost to consumers. The communications technology stock still looks like a good buy. BUY.
CareDx (CDNA) jumped back 6% this week but is still in a funk that means no net progress over the last year. That said, it’s another volatile stock and we’ve experienced the upside moves too. Management announced this week that it has acquired XynManagement, which provides solutions to simplify transplant quality tracking and waitlist management. It doesn’t sound like a big acquisition, but could have strategic implications, which I expect management will discuss on the next conference call. HOLD.
Codexis (CDXS) was cut a few weeks ago after the stock broke down. No change to the story this week. SOLD.
Domo (DOMO) is one of those stocks that I keep looking at in an effort to inspire the stock to rally. We’re definitely hanging on by a very thin thread here as shares have even dipped below my traditional stop-loss level. That said, the 6% jump yesterday was a step in the right direction and the upside potential on earnings is huge. I’m not saying that’s going to happen, but the potential is certainly there. If you’re nervous about this one don’t let me stop you from reducing your position size. But if you have a higher risk tolerance and like to gamble a little, hold on. With earnings coming out next week we should see the stock rise a little going into the event, then move a good amount one way or the other, upon the result. Next Friday is the big day and it will determine what we do next. HOLD.
Estimated Earnings Date: 9/6/19
Everbridge (EVBG) is up 3% over the past week and looks better than it did in the first week of August, when shares corrected about 20 points. I moved it back to buy last week since I think there’s an opportunity here to pick up a few more shares at a slightly lower price (EVBG is 17% off its high). That’s a slightly aggressive call, but it’s worked so far with this stock. No news. BUY.
EverQuote (EVER) hasn’t had any news flow lately but the stock doesn’t seem to be bothered by the quiet period. Shares are up 90% from our entry point and trading just 11% off their all-time high. Given the steady uptrend from January 1 and a gap up of roughly 50% after earnings, I like how this stock is digesting its gains. That said, I wouldn’t be remotely surprised if we do get a decent pullback, so am keeping at Hold. HOLD.
Goosehead Insurance (GSHD) is 40 days into a consolidation phase that’s occurring in the 40 to 50 price range. It feels like a stable period, and with a solid earnings report a few weeks ago my sense is this young stock is aging well. I’m keeping at Buy. Most growth investors don’t think of the insurance brokerage industry as one where they’ll find rapid growth. But Goosehead is delivering it on both the top and bottom line. Revenue should be up 50% this year while EPS should jump 70%, to $0.66. BUY.
Q2 Holdings (QTWO) was flat over the past week but with shares trading just 4% off their all-time high I’d say that’s a pretty solid performance. Part of the reason is that the company is helping financial institutions generate growth in a low interest rate environment. To that end, management just put out a press release detailing a success story with Athena Home Loans, an Australian-based digital mortgage provider. Athena launched its solution on Q2’s Cloud Lending platform and within three days generated $250 million in home loan applications. Now, this is a marketing-driven press release to be sure. But still, little nuggets like this can help tell the story. BUY.
Quanterix (QTRX) has been taking us on a roller coaster ride, which by my estimate is far from over. It’s just the nature of a stock like this. We’re up 9% over the past week and shares are now 25% off their all-time high. That sounds like a big retreat, but it’s all relative; Quanterix surged from 22 to 36 over a three-week period and just gave back some of its gain. Keep holding on. It’s not a buy just yet but if we can go a few more weeks with relatively stable action I’ll likely upgrade it. HOLD.
Rapid7 (RPD) is still at buy given shares of the security software specialist are moving sideways around the 54 level. That said, if it starts to wobble and dip lower, we will likely take a partial gain to preserve our double. For now, it’s still at Buy. There’s been no news for a few weeks. BUY.
Repligen (RGEN) was up 3% over the past week and is looking strong, just 6% off its all-time high of 99.25, which it hit on August 1. With revenue and EPS both set to jump around 40% this year, and the company one of the few pure-play small-cap bioprocessing specialists left, it’s easy to see why shares are doing well. BUY.
Upland Software (UPLD) has pulled back right to its 200-day line since topping out near 55 in early June. The only news recently was the acquisition of Cimpl, which I discussed last week. I’m going to give Upland a little more room here but will be quick to move from buy to sell if the stock breaks below its 200-day line. We’re still holding on to a modest gain, but I won’t let it turn into a loss. BUY.
Veracyte (VCYT) is up 9% over the past week and shares of the company, which specializes in genomic diagnostics solutions that can help detect disease early, are looking to regain their 50-day line. Management will speak at three upcoming conferences: Wells Fargo next Thursday, Janney on September 9 and Morgan Stanley on September 10. Keeping at Buy. BUY.
