This week’s update will be short and sweet given the short trading week. The Cabot office is closed on Thursday and Friday, so unless there is a major market event, my next communication will be on Friday, December 2. That will be the next full Issue of Cabot Small-Cap Confidential.
I always find that the week after a holiday starts off with a bang as everybody gets back to work and digests whatever global developments have occurred since the market closed. This year, trading action could be a little more subdued given the huge run-up since the election. As you can see from the one-year chart of the S&P 600 Small Cap Index below, we’ve completely obliterated overhead resistance and are now in unchartered territory. Small caps are trading at an all-time high.
We head into the holiday with a trimmed-back portfolio after locking in partial profits on three positions, courtesy of the Trump Bump. It feels to me like the market is ready for a modest pullback given the intense buying since the election (early trading today supports this assertion). I think that would be a good thing, and help the market maintain the longer-term strength that we want. With a little luck, a modest retreat in stocks will help us get a good price on next Friday’s new addition. I haven’t nailed down the stock yet, but have whittled my list down to three candidates, any of which I believe will serve us well over the months ahead.
I hope you eat your heart out and enjoy the company of whomever you’re spending the Thanksgiving holiday with. My wife and I will have her sister’s and cousin’s families, along with their four kids, join our family of four in our little house in Rhode Island. It’s going to be a total disaster! But I think everyone will have a good time so long as the chaos is somewhat controlled.
From all of us here at Cabot, have a happy and safe Thanksgiving weekend.
Updates
Aspen Aerogels (ASPN) Directionally, shares are moving with oil. That means a little strength over the past week. I moved to Buy last Friday, given that the stock has held above 3.75 and long-term support at 3.50 hasn’t been tested. I still think investors will be a little slow to come back to the name, but that the long-term story remains intact. Keeping at Buy. BUY.
eMagin (EMAN) No update. SOLD.
LeMaitre Vascular (LMAT) Shares have pulled back a little this week, mirroring the action in the broader biotech sub-sector. Continue to hold your remaining stake. HOLD HALF.
LogMeIn (LOGM) The stock continues to look very strong. I think the Last Pass password management product is going to be a big winner, and I’m looking forward to hearing how the product is performing next quarter. Every year, LogMeIn completes an audit of its technology and infrastructure to make sure it meets high-level security standards. This year’s audit came in with great marks. Continue to hold half your position. HOLD HALF.
Marrone Bio (MBII) Shares have been on the move higher (again) since I upped the stock to Buy last Friday, once it had settled back below 2.20. I even saw one order go through close to 1.90. I hope that was one of our subscribers! Now that the stock is back above 2.40, I’m moving to Hold, unless you’re adding very small positions. Remember, the goal here is to average into a position, using limit orders. HOLD.
MindBody (MB) No new fundamental developments. Shares have held onto their recent gains and it’s still a Buy on a pullback, preferably in the 21 to 22 area (it should find support at 21). BUY.
Mitek (MITK) No update. SOLD.
NanoString (NSTG) Just like shares of LeMaitre, shares of NanoString have pulled back a little this week along with the broader biotech sub-sector. Nothing to worry about. And no fundamental updates. HOLD HALF.
Ooma (OOMA) There’s still nothing going on with Ooma as investors await next Tuesday’s earnings report. We’ll be looking for growth in the small business segment, given management’s strategic focus on that area. I mentioned in my original report that I thought Ooma would run a price promotion around Thanksgiving for its home version (Ooma Telo). The product was priced at $99 when I issued that report, now Amazon has it available for $84.48, if you’re interested. The handsets and accessories are on sale too. BUY.
Confirmed Earnings Release: November 29
Primo Water (PRMW) I moved the stock back to Buy last week after an encouraging rally, and I’m sticking with that rating today. No fundamental updates. BUY.
Q2 holdings (QTWO) The stock has pulled back this week offering entry points in the 30.50 to 31.50 range, which I think is attractive. BUY.
USA Technologies (USAT) The stock is looking a lot better this week after moving swiftly above 4.00. There’s enough evidence of an upcoming recovery in the share price that I’m comfortable moving back to Buy, especially since, barring any major negative events, the near-term downside seems relatively limited. The company put out a press release this week highlighting an internal study (with 35 vending machines over six months) showing that when its ePort Connect devices advertise Apple Pay, consumers make more purchases and spend more. BUY.
