It’s been a wild week, much more so than a high-level look at the small-cap index would imply. According to the index, we’re just moving sideways with a little wiggle here and there.
Even if we break it down by sector, movement within the small-cap index was unremarkable over the past week. Energy made an outsized move higher. But given the drop last week, this isn’t major news. The index is unchanged.
But when you look within our portfolio—wow! This was anything but a quiet week. Stocks were jumping all over the place as earnings reports came out.
Since last Thursday, shares of Everbridge (EVBG) are up 9%. Primo Water (PRMW) is down 6% and MindBody (MB) is down 8% (both stocks are rated Buy). Aqua Metals (AQMS) is down around 20% and cut from the portfolio since I think management has been sugarcoating the ramp up at TRIC and it will take longer to get to meaningful revenue than earlier commentary implied. Our newest addition, BioTelemetry (BEAT) is up 4%. And this week’s winner, Asure Software (ASUR) is up 35%!
With all the movement, our portfolio churned out an average gain better than the small-cap index this week (a low bar given the index was flat).
I haven’t done any deep analysis into the broad market, but it seems to me that earnings-related volatility out there is much higher this quarter than in prior quarters. Generally speaking, it seems those stocks that beat rallied more than expected, and those that missed were mercilessly punished.
I’ve already reported on all companies that released earnings, with the exception of Marrone Bio (MBII), which reported after the close yesterday. We only have one company left to report, and that’s Ooma (OOMA). That report comes out in two weeks. Here’s what’s new as of today.
Updates
Airgain (AIRG) The company issued a solid report last week but the stock continues to just putt along. I continue to believe it will come into the limelight and go on a nice run. I advise patience and building a position incrementally so you’re in it if/when that happens. BUY.
Earnings: Done
Aqua Metals (AQMS)
The stock began to fall apart on Wednesday after the company reported Tuesday afternoon and I decided it’s best to step aside from this position for now. I was very displeased with the way management handled the conference call. SELL.
Earnings: Done
Asure Software (ASUR) Our best performing position is up 35% over the past week and rallied over 13% just yesterday after announcing better-than-expected Q1 results. Given the size of the move, I’m advising caution until shares can digest the run. In yesterday’s Special Bulletin, I moved the stock from Buy to Hold, and I’m sticking with that rating for now. HOLD.
Earnings: Done
BioTelemetry (BEAT) I released my report on BioTelemetry the day after the company reported, when shares were selling off due to concerns that it only met expectations, and possibly because of uncertainty on Medicare reimbursements as the House pushed the GOP AHCA health care bill through. That uncertainty seems to be waning as the future of the AHCA bill’s trajectory rests on the Senate, which appears likely to make big changes, or just kill it altogether and come up with a new bill. At any rate, I like BioTelemetry and, while it has significant exposure to Medicare, I think it has a solid business model and a bright future. As I reported in Wednesday’s Special Alert, the proposed LifeWatch acquisition was cleared by antitrust regulators and BioTelemetry is moving forward with the tender offer. The window is 10 days, ending May 23. I expect it to be successful getting the 67% of LifeWatch shares it needs to close the deal in Q3. BUY.
Everbridge (EVBG) The stock rallied on Tuesday after a terrific Q1 report. It is trading near an all-time high. I kept the stock at Hold following the report because I think the near-term upside is limited and I’m not convinced it makes sense to average up at this price. I expect to move back to Buy at some point, just not today. Keep holding. HOLD.
Earnings: Done
LogMeIn (LOGM) The stock gave up last week’s post-rally jump to 120 and is right back near 115. That’s fine; we’re still sitting on a double (roughly) here and can swing with the breeze a little. Let’s keep an eye on 110 as that level was upside resistance in November and January. We’d like to see shares find firm footing above that and march up to the 125–130 range where most analyst price targets are falling. HOLD HALF.
Earnings: DONE
Marrone Bio (MBII) Marrone reported yesterday and I’m in the process of writing up my thoughts and analysis. A dedicated Special Bulletin will be sent to you mid-day today. BUY HALF A POSITION.
Earnings: Done
MindBody (MB) The company reported another good quarter last Thursday but the stock was punished, most likely because of subscriber losses on the low-priced product. We knew this was coming, and it was management’s intended strategy when it axed the product! So what do you do when a stock you like is down 10% following an earnings report? You step up to the plate. I moved the stock back to Buy, preferably below 27. Shares are still in the 25–26 range, and provided the broad market holds up okay, I see them moving back toward 28–30 relatively soon. BUY.
Earnings: Done
Ooma (OOMA) I moved the stock to Hold a couple weeks ago after a massive rally from 9 to 12 over five weeks. Keep holding. Earnings will come out on May 23. I think it will be an interesting quarter. I know the company has been discounting its “Premier” service (a promotion I took advantage of) for those willing to pay for the year up front (though the impact of this won’t hit for another quarter). I finally broke down and ordered an Ooma water sensor after I realized the sump pump in a crawl space under part of our house was broken. I had to hook up the new pump temporarily to drain the two feet of water so that I could glue up the new PVC pipe. It would have been a lot easier had I known the old pump was broken when there was just a few inches! For under 30 bucks, Ooma’s water sensor will let me know if and when the water comes up. I asked if they would waive the exorbitant shipping charges for the sensor, which they did. HOLD.
Announced earnings date: May 23
Primo Water (PRMW) The stock’s reaction to earnings was crazy throughout Wednesday’s trading session. First it spiked from 13 to 13.50, then it cratered to 11.32. Eventually, it came back to close at 12.40 (with another weird spike just prior to the close). I grabbed the chart below (3-day, 5-minute intervals) at about 2:45 pm yesterday to show you what I mean.
Sometimes it’s best to just sit on your hands when this type of thing is going on. I’ve kept the stock at Buy since I believe the report was just fine, even though Water Dispenser sales were down and resulted in a revenue miss. That amount should be made up in Q2/Q3 since it was due to a shift in promotional activity from Q1 to Q2/Q3. The decision was the result of tests run over the last couple of years, and Primo and its customers (Walmart, Home Depot, Lowe’s, etc.) are right, in my opinion, to think results will be better promoting dispensers in spring and summer than in winter. I don’t think they are playing games here to cover up the miss. I believe them. B. Riley and Barrington moved their price targets up to 17.5 and 17, respectively. BUY.
Earnings: Done
Q2 Holdings (QTWO) Shares didn’t do much after the company reported solid results but I moved back to Buy anticipating they would, eventually, and that analysts would help expedite things by upgrading price targets. Canaccord, BTIG and Needham all moved targets to the 43–47 range last Friday. That doesn’t imply a ton of upside given that shares are trading around 39 today. But you’re not going to see wildly optimistic price targets for a company like this given that over 90% of the next 12 month’s revenue is visible, unless there is some major fundamental surprise (positive or negative), like an acquisition, big new customer, lost customer, etc. I think the increasingly favorable sentiment toward financial stocks in general, and for M&A in the banking space, will help shares of Q2 meander higher. And it would make a nice acquisition or merger target for somebody like, say, Jack Henry (JKHY). BUY.
Earnings: Done
U.S. Concrete (USCR) You never expect to utter the words “concrete is hot,” but that’s the case today. The company destroyed expectations and shares moved swiftly back to the 69–72 range, where they’ve been consolidating over the past week. I moved back to Buy on increased confidence in the integrity of the company’s financial disclosures and strength in end markets. BUY.
Earnings: Done
Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.
