Despite some wobbles last Friday it has been a constructive week for the market, and especially for growth stocks. Since last Thursday’s close and through yesterday’s close the S&P 500 has inched up 0.5% (back near record closing highs), the Nasdaq has hit a record high and the S&P 600 Small Cap Index is up 0.3%.
Those aren’t eye-popping gains but in the context of the market deciphering the Fed’s meeting last week, the rising prevalence of the Delta Covid-19 variant and ongoing speculation around inflation and fiscal policy it’s hard to say record highs (or close to them) are anything less than impressive.
In our portfolio the last week has been good. Our stocks are up an average of 4%, with leaders Fiverr (FVRR), Revolve (RVLV) and Avalara (AVLR) up 13%, 9% and 7%, respectively.
Detractors from performance over the last week are Cerence (CRNC), Repligen (RGEN) and Thunderbird Entertainment (TBRD.CA), down -3%, -3% and -1%, respectively.
Stepping back, the last three weeks have been incredibly productive. Our portfolio is up an average of 14%, led by Sprout Social (SPT) and Avalara, up 30%, Fiverr and Inspire (INSP), up 20%, and numerous other positions up 10% to 20%.
We have three ratings changes today. Two stocks that have been furiously rallying move to hold, while one stock moves to buy.
Recent Changes
Cerence (CRNC) Moves to BUY
Revolve (RVLV) Moves to HOLD
Sprout Social (SPT) Moves to HOLD
Updates
Accolade (ACCD) is still ticking higher on no major news. The recent tighter trading action is a welcome relief as compared to the wild swings ACCD tended toward before May. Let’s hope it continues. Keeping at buy. BUY
Arena Pharmaceuticals (ARNA) continues to look better. In the second half of 2021 we’re looking forward to Phase 2 data for etrasimod in both alopecia areata and Crohn’s disease. Then Phase 3 trial data for ulcerative colitis (UC) is due out in early 2022. BUY
Avalara (AVLR) has been one of our best-performing stocks over the last three weeks (up 30%). Bank of America recently stated AVLR is one of their favorite small- and mid-cap tech stocks for this year. I agree. BUY
Cerence (CRNC) pulled back after a run to 120 but seems to be bouncing off the 110 level today. There has been a lot of buying activity in the auto space and as a major supplier of automotive software it makes sense that CRNC is benefiting from the attention. I think there is more work to be done before the stock can challenge its February highs but the last month has been encouraging enough to move back to buy. BUY
Everbridge (EVBG) is well positioned to capture rising demand for solutions that automates and accelerate organizational response to critical events as the world emerges from the pandemic. While the company did benefit from some work at home deals last year a return to travel (especially business travel) and office work is likely a bigger tailwind for growth. The stock’s starting to gather momentum. BUY
Funko (FNKO) has perked up this week, rising 4% from last Thursday’s close through yesterday’s close. The stock should have plenty left in the tank, making this an attractive entry point. Keeping at buy. BUY
Fiverr (FVRR) rallied this week, rising 13% and bringing the gain over the last three weeks to 20%. There has been intense buying in some of the pandemic darlings (FVRR was one of them) and investors are beginning to see Fiverr’s freelancing platform as a way to invest in the labor shortage trend. Aggressive investors interested in momentum plays may consider adding a few shares here, though take note that FVRR will have to break above 250 to have a real chance of returning to its February highs. HOLD
Inspire Medical Systems (INSP) has moved back up to the 200 level, which is where it ran into staunch resistance at the end of May. No news, and we’ll keep at hold for now. HOLD HALF
Kornit Digital (KRNT) has rallied back to within a few percentage points of the previous all-time high of 125. A breakout here would be a big deal. BUY
Porch Group (PRCH) has rallied back near the highs from two weeks ago (just over 20), in part because it will be added to the Russell 2000 Index on June 28. Sticking with a buy rating. BUY
Q2 Holdings (QTWO) continues to look solid and the stock has one of the more attractive profiles for relatively conservative growth investors. The company just announced it will offer an integration with Bitcoin specialist NYDIG so that registered users on Q2’s platform can buy, sell and hold Bitcoin. Banking customers on Q2’s platform will need to do their part to allow users to transact. It will be interesting to see how this goes given that data suggests 15% of U.S. consumers own some form of cryptocurrency, and that Q2 has over 18 million registered users. BUY
Revolve (RVLV) has been on fire, hitting multiple new highs this week and up more than 30% over the last three weeks. Our paper gain is now more than 50% since April 1. It has helped that the stock will be joining the Russell 3000 Index on June 28. I like the trend and think it goes higher this year and next, but I’m also seeing that the stock is starting to look a little extended. Let’s move to hold and see how RVLV digests this move. HOLD
Repligen (RGEN) announced this week that it would acquire Polymem S.A., a provider of hollow fiber membranes and modules. This is a product line the company already has and the acquisition will allow it to add production capabilities and talent. BUY
Sprout Social (SPT) continues to post impressive performance as it hits new highs almost daily. The stock is up 50% since May 20. I like the company and the stock, but think you’d have to be pretty darn aggressive to be buying right now. Factoring in today’s early move we’re up over 150% and I think it’s time to reel it in a little until SPT calms down. Moving to hold. HOLD
Thunderbird Entertainment (THBRF, TBRD.CA) hasn’t done much of anything since we’ve owned it. I think that will change in time. I’ve been reading more data-driven research about how the Canadian markets are looking increasingly attractive as compared to the U.S. markets. I don’t think that’s going to lead to a massive rotation north of the border or anything. But it’s another potential plus for a relatively unknown but rapidly growing technology company with global reach. It’s important that this stock holds around its current level and builds a base from which to rally. BUY
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
