The big developments over the last week have been the situation with the potential failure of Evergrande (Chinese property developer) and interest rates. As of mid-morning Thursday, we appear to be moving past these potential issues.
I know very little about Evergrande, but the risk of contagion seems extraordinarily low. And China has begun to take steps to ward off a crisis, though we’ll have to see what happens when dollar-denominated debt payments come due.
Of the Fed, after yesterday’s meeting it appears the current focus is inflation (keeping it under control), so the Fed is looking to begin tapering asset purchases in November, provided employment numbers from September are good enough. That would put an end to tapering around the middle of 2022, roughly.
Regarding interest rates, they should stay low for some time as hikes wouldn’t begin until tapering is complete. That implies end of 2022 or beginning of 2023 to begin the rate hike process. That gives us a year, which feels like a lifetime right now.
Add it all up and you get a market rally! Many of our stocks are headed higher and even with the selloff earlier in the week on average our portfolio has moved up this past week.
Beyond the big-picture stuff, a number of companies have held Analyst Days lately and that’s driven numerous upgrades from analysts. We’re responding to one of them with an upgrade to buy for Sprout Social (SPT). This is an aggressive call given the stock’s trajectory, but I like the story and the strength in the stock.
Recent Changes
On24 (ONTF) moves to HOLD
Sprout Social (SPT) moves to BUY
Updates
Accolade (ACCD) recently held a virtual customer service meeting during which management discussed the evolution of the health benefits space and the company’s expansion into a new category of care to address the evolving needs within the employee benefit space. This category, called Personalized Healthcare, is initially being addressed by the company’s new service offerings Accolade One and Accolade Care, both of which focus on value-based care. Not surprisingly, data plays a major role in these solutions. There is a lot of work going on behind the scenes to integrate recent acquisitions Plushcare and 2nd.MD with the legacy Accolade Total Health & Benefits solution in order to create the Accolade One product. The bottom line here is Accolade is doing a lot of work to keep its products relevant and to address the needs of its growing market. We’ll learn more on October 7 when Q2 fiscal 2022 results are due. BUY
Arena Pharmaceuticals (ARNA) recently held an R&D investor call focused on gastroenterology, the etrasimod development program and related commercial potential. The Cliffs Notes version is that management sees etrasimod (if approved) as a first-line treatment for ulcerative colitis that would see significant adoption by physicians and few hurdles for payers as it is an oral treatment. There was some discussion about potential physician reluctance for the newer treatments (biologics, S1Ps, JAK’s) and how Arena’s S1P candidate sidesteps some of the safety concerns with JAK inhibitors. BUY
Avalara (AVLR) is up modestly over the last week on no new news. Shares closed yesterday just 1% below their all-time high. We’re eyeing a breakout above 192 to confirm our buy rating, which we’ve had for some time. BUY
Cerence (CRNC) has been quiet lately. The only news this week was a press release about how the company will power the in-car assistant platform for the new Audi e-tron GT and e-tron electric SUV. BUY
CS DISCO (LAW) has pulled back since the secondary offering was announced last week. We should be getting a press release any day now saying the offering has closed. No new news. BUY
Everbridge (EVBG) has been at buy for some time and with the stock trading above 160 (all-time high is 9% higher), and the pickup in Q2 bookings, the stock looks attractive here. No new news. BUY
Fiverr (FVRR) continues to gain some lost ground and shares cleared the 50-day moving average line this week. The stock is up 7% since last Thursday’s close. No new news. Last week management spoke out saying they see the typical extreme seasonality as being lower this year than in others. That has helped to alleviate some concerns that FVRR’s best days are behind it. I’ve had it at buy since the pullback and am keeping it there now. BUY
Inspire Medical Systems (INSP) stepped out to a new all-time high on Tuesday and, despite a wobble yesterday, was able to close back at record highs. Shares are up 6% over the last week. No new news. HOLD
JOANN (JOAN) gained 4% over the past week as the stock continues to recover from the selloff in early September. Management recently announced that its store refresh initiative is underway and there have recently been grand reopenings in several locations, including Torrance and Sherman Oaks, California; Fargo, North Dakota; Phoenix, Arizona; Sterling, Virginia; Fort Wayne, Indiana; Scarsdale, New York; Lady Lake, Florida; and Paramus, New Jersey. The revamped store layouts are expected to provide a boost to sales and customer loyalty. BUY
Kornit Digital (KRNT) continues to do what it’s supposed to do – go up. Shares are up 3% over the past week on no new major news. BUY
On24 (ONTF) has been a dog for us. We’ve been waiting patiently to see if signs of life emerge, but as of yet ONTF is doing nothing. Moving to hold. HOLD
Q2 Holdings (QTWO) is another position that’s not doing much well at the moment. Management recently announced a partnership with Plaid to offer customers a secure, reliable means to connect accounts to apps and services and provide the tools needed to manage and monitor those connections. Access to Plaid’s APIs will also allow new customers to quickly link existing bank accounts during the account opening process to allow immediate account funding. HOLD
Revolve (RVLV) continues to look good and shares have risen 9% over the past two weeks. There’s no new news this week. Most recently we learned that the company has added Hims & Hers health products. HOLD
Repligen (RGEN) made another new all-time high this week after rising 4%. Shares are now up roughly 430% since we added the position. No new news this week. Last week we learned the company will acquire Avitide, a leading chromatography developer. Avitide should add to profits in 2023. HOLD
Sprout Social (SPT) has received a number of price target increases this week (Needham, Piper Sandler, Morgan Stanley) after the company’s Analyst Day suggested 30% revenue growth through at least 2025 and higher profit margins as well. The company is building out the portfolio of solutions to better address strategy and commerce and international opportunities, as well as the potential in larger enterprise clients. Sprout is emerging as a force withing social software. We’ll go with the flow and upgrade back to buy as shares are responding well to the Analyst Day and the uptrend here is very much intact. BUY
Thunderbird Entertainment (THBRF, TBRD.CA) recently announced it is working on a total of 27 programs, including both new and returning series. Of these 18 are I the Factual and Kids & Family divisions. Notable kids’ titles include Trolls: TrollsTopia (Hulu and Peacock), LEGO Marvel Avengers (Disney+), Dogs in Space (Netflix), and My Little Pony (platform TBD). The stock has been in a modest uptrend and is trading right at our entry point. BUY
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
| Stock Name | Date Bought | Price Bought | Price on 9/23/21 | Profit | Rating |
| Accolade (ACCD) | 8/6/20 | 40 | 44 | 10% | Buy |
| Arena Pharmaceuticals (ARNA) | 2/2/18 | 39 | 60 | 55% | Buy |
| Avalara (AVLR) | 2/1/19 | 40 | 186 | 364% | Buy |
| Cerence (CRNC) | 10/1/20 | 50 | 104 | 109% | Buy |
| CS Disco (LAW) | 9/2/21 | 57 | 50 | -12% | Buy |
| Everbridge (EVBG) | 12/2/16 | 16 | 161 | 938% | Buy |
| Fiverr Intl (FVRR) | 3/5/20 | 32 | 205 | 534% | Buy |
| Inspire Medical (INSP) | 10/4/19 | 59 | 263 | 349% | Hold |
| JOANN (JOAN) | 8/6/21 | 15 | 12 | -23% | Buy |
| Kornit Digital (KRNT) | 3/4/21 | 102 | 155 | 52% | Buy |
| On24 (ONTF) | 7/1/21 | 38 | 20 | -47% | Hold |
| Q2 Holdings (QTWO) | 4/1/16 | 24 | 86 | 260% | Hold |
| Repligen (RGEN) | 11/2/18 and 12/31/18 | 59 | 316 | 434% | Hold |
| Revolve Group, Inc. (RVLV) | 4/1/21 | 46 | 68 | 49% | Hold |
| Sprout Social (SPT) | 9/3/20 | 36 | 142 | 291% | Buy |
| Thunderbird Entertainment (THBRF, TBRD.V) | 5/6/21 | 3.8 | 3.7 | -4% | Buy |