Both large and small growth stocks continue to advance off their October lows despite all the political turmoil from the impeachment hearings. It seems the collective sense of optimism resulting from earnings season, potential progress on trade talks, an accommodative Fed and what appears like continued (albeit slow) economic growth is helping the market climb the proverbial wall of worry.
Combine all that with fresh highs in the S&P 500 and the takeaway message is that the bull market remains very much intact.
There are some breakouts here and there too that lend support to bullish perspectives. In our portfolio these include Cardlytics (CDLX) and EverQuote (EVER), both of which surged to all-time highs after reporting Q3 results.
Around the rest of our portfolio the story is more about momentum seeping back in and pulling stocks back above their mid-term (50-day) moving average lines.
On average, our portfolio was up 4% this week with only three stocks posting negative returns. Detractors from performance included Construction Partners (ROAD), Cardlytics and Goosehead Insurance (GSHD). But with dips of only 2% to 3% it’s not worth being too harsh on these stocks.
More telling is the strength in our other 12 stocks, which were led by EverQuote, up 13%, Avalara (AVLR), up 8%, Q2 Holdings (QTWO), up 7%, and Veracyte (VCYT), up 7%.
Thus far, our patience and conviction maintaining exposure to most positions has helped our performance snap back in recent weeks. Across the entire portfolio, our simple average gain is now at 94%. Looking just at the currently open positions added in 2019, our simple average gain is 32%, even including our biggest dog, Domo (DOMO).
With what we’re doing working well there are no changes this week. Next week will be a short one. Cabot’s offices are closed next Thursday and Friday for Thanksgiving, so I’ll be sending a short and sweet update on Wednesday.
Have a terrific weekend!
Changes this week
None
Updates
AppFolio (APPF) was formed in 2006 to provide cloud-based software solutions for small businesses in the property management and legal services industries. The stock continues to climb and is up 4% over the last week and trading just 3% below all-time highs. As I mentioned last week a breakout above 109 would likely mean we move the stock back to buy. There’s no news over the last week. HOLD.
Arena Pharmaceuticals (ARNA) is a biopharmaceutical company that develops novel, small-molecule drugs with optimized receptor pharmacology designed to work across a wide range of therapeutic areas. The pipeline includes potential treatments for pulmonary arterial hypertension (PAH), ulcerative colitis (UC), pyoderma gangrenosum (PG), primary biliary cholangitis (PBC) and pain associated with Crohn’s disease. The stock has been moving sideways on no news. The next wave of significant data isn’t expected until later in 2020 and into 2021. We expect big things, but the treatments Arena is developing take time. BUY.
Avalara (AVLR) is a cloud-based provider of sales and indirect tax compliance software. Over 25,000 customers currently use the platform and I’m expecting management will continue to guide the company on the right path in the coming years. The stock was up 5% two weeks ago and 8% this past week, suggesting the move back to buy on November 6 was the right call. BUY.
Cardlytics (CDLX) has developed a purchase intelligence platform that is in the early innings of being adopted by major financial institutions, including Bank of America, Chase and Wells Fargo (launching in phases starting right about now). The platform analyzes purchase data and sends special offers to banking customers through their online banking platforms and mobile apps. It’s a new way for brands to reach customers and it seems to be catching on. Shares exploded higher after reporting and despite a 3% dip over the past week are still up 49% since we jumped in on September 6. It’s a little too hot to buy this stock now. Keep Holding. HOLD.
Construction Partners (ROAD) is a vertically integrated pure-play roadway construction and maintenance company operating in five states across the southeast U.S., where funding for its sweet spot of projects—highway, road, bridge, airport, commercial and residential developments—is going up. Investors should expect high single-digit organic growth, with acquisitions pushing total growth into double digits. Shares continue to churn higher, making a series of higher highs and higher lows. That said, ROAD is a little extended above its 50-day line so I wouldn’t be surprised if we see a dip back below 18. BUY.
Announced earnings date: December 10
Domo (DOMO) has earnings coming up on December 5 so we might begin to see some gamblers step into the stock here. It seems overly beaten up to me, especially given Domo is one of the few public business intelligence/big data pure plays left (the other is Alteryx). But at the same time, I don’t see a lot of incentive to buy more of the stock now. Better to see what happens upon earnings. HOLD.
Announced earnings date: December 5
Everbridge (EVBG) was founded in 2002, shortly after the 9/11 attacks, to provide fast, automated communications services during life threatening situations and mission-critical business events. The software platform powers apps that help organizations and government entities keep people safe, and businesses running. Shares were flat this week (I moved back to buy last Friday) but are well off their lows and still 20% off their highs. I think EVBG can get going again, even if it needs a little pause here just below 88. BUY.
EverQuote (EVER) offers an online shopping place where consumers can compare and buy insurance policies. It was started in 2011 and went public in 2018. With over 11 million consumer visits per month, EverQuote operates the largest online marketplace for insurance shopping in the United States. While we’re still early in the shift to online insurance shopping, the trend is unmistakable, which is why insurance carriers continue to integrate their marketing efforts with EverQuote and pay the company for referrals. It’s been expanding its products by offering commercial, health and renters’ insurance. And that’s one of the reasons the stock exploded after reporting a couple weeks ago. EVER hit a fresh all-time high this week and is up 13% since last Thursday’s close. Our total gain is now 168% since June 7. HOLD.
Goosehead Insurance (GSHD) is shaking up the insurance brokerage market by building an independent personal lines insurance sales and support platform and deploying it at a national scale, through a hybrid corporate and franchise distribution model. It’s the only publicly traded insurance broker of its kind out there. Its focus on auto, homeowners’ and other personal lines (boat, umbrella, etc.) gives it access to a sticky market with high renewal rates. The stock is moving sideways these days. BUY.
Inspire (INSP) is a specialist in obstructive sleep apnea (OSA) and has developed an implantable medical device to help patients with the condition. The stock bottomed near 52 in October and has been trending higher since, with a little volatility around earnings two Tuesdays ago. Shares are up 5% over the last week. Revenue is still seen up 60% this year and 38% in 2020. BUY A HALF.
Q2 Holdings (QTWO) is a pure-play provider of digital banking solutions to the highly personalized community banking and credit union market. It offers a purpose-built platform that brings small banks and credit unions up to speed with solutions for deposits, money movement, lending, security and fraud, giving them the power to compete with the mega banks for depositor accounts. The stock’s been on fire since bottoming near 64 a few weeks ago, when it reported, and is now back above 80. It was up 7% this week. Respect the strength. Keeping at Buy. BUY.
Quanterix (QTRX) is commercializing a disruptive protein analysis technology that has the potential to detect disease in seemingly healthy, asymptomatic people, with simple blood draws taken as part of routine health screening. The industry term for this emerging field is proteomics. It encompasses both genomic and protein research. Just like the sequencing of the human genome advanced our understanding of the human body, proteomics has the potential to change the game with respect to diagnosing, treating and even preventing disease and injury. The stock took off after reporting a couple weeks ago and after a pause looks ready to get going again (up 6% over the last week). But with QTRX still 35% off its high and no real trend here the conservative thing to do is keep at Hold. HOLD HALF.
Rapid7 (RPD) offers cloud-based security software solutions that help customers better understand, prioritize and address the threats facing their physical, virtual and cloud assets. It is landing larger deals, more multi-product deals, and more customers. The stock jumped around after reporting a couple weeks ago and has been trending higher since (up 4% over the last week). With the trend looking strong I’m keeping at Buy. BUY.
Repligen (RGEN) sells bioprocessing supplies to life sciences and biopharmaceutical companies around the world. It plays in a highly specialized field, and with the trends pointing toward more personalized medicine and small batch drug production, the company’s equipment is more critical to its customers’ long-term success than ever. Shares have been chopping higher on no news but are still 15% off all-time highs. Remember that RGEN dropped quickly back in September when the stock moved from the small-cap index to the mid-cap index. I didn’t expect the gap to fill immediately and see this incremental progress as a signal that RGEN will ultimately get back to new highs and beyond. BUY.
Veracyte (VCYT) specializes in genomic diagnostics solutions that can help detect disease early and inform treatment decisions. Veracyte has four commercialized first-to-market genomic tests that address significant unmet needs in disease diagnosis; Afirma for thyroid cancer, the companion Afirma Xpression Atlas (XA) test for genomic alteration content, Percepta for lung cancer, and Envisia for idiopathic pulmonary fibrosis (IPF). They’re all minimally invasive, requiring just a single fine needle aspiration (FNA biopsy), nasal swab, airway brushing, or sample taken during bronchoscopy. All tests are covered by Medicare. The company has an addressable market of around $2 billion now, but that could surge to $30 billion if some of its current projects come to fruition, including a nasal swab test that could detect more types of lung cancer. Veracyte is working on this project with Johnson & Johnson Innovation. We jumped into the stock near all-time highs in early July so have been in the red for most of the time since. But VCYT has been trending higher since bottoming near 20 after it reported in August and is up 7% over the last week. Stepping back, the chart’s mid-term trend is sideways. Continue to Hold. HOLD.
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
