I’m sending out this week’s update a day early since there’s not much stock-specific news and I’d like to help lighten the load on Cabot team members who are holding down the fort for the final hours before everybody gets a well-deserved break (Cabot is closed Friday).
Big picture, the prominent topics of debate out there continue to be the potential economic impact of Omicron and the longer-term market/stock valuation/investor risk tolerance impact of a rate hike cycle (assuming the Fed can pull that off).
The evolving thinking on Omnicron seems to be that it comes in hard but isn’t too damaging and infection waves may fade almost as quickly as they hit. But it’s early days still and we all know people (or are those people) with holiday plans that are messed up because friends or family members have come down with Covid or are close contacts. The glass half full perspective is we’re all learning to live with this and more treatments are coming to market so it seems like each wave has less of an impact than the preceding one.
On interest rates, clearly there’s been some indigestion in the market as investors ponder what a rate hike cycle could do to stocks, especially those with more growth than value characteristics and those that are more speculative.
The shine has been taken off a lot of stocks falling into those categories. And there was plenty of shine to come off as a lot of stocks had soared beyond what most investors thought was reasonable.
The key thing to remember is that this correction/pullback/whatever you want to call it is a process and there’s no light switch that will tell us when it’s time to buy or sell. From my vantage point I see a number of stocks that seem overly beaten up, including several in our portfolio.
I’ve elected to try and stick with most of our names through this volatility because – with some exceptions – we have a portfolio or relatively high-quality names that have durable revenue and cash flow. Some even pay modest dividends. These types of characteristics tend to do well in late-cycle economic expansions (where many analysts thing we are).
That said, we also have exposure to some names – like Rani Therapeutics (RANI) – that are speculative in nature. If investors continue to shun risk names like this could suffer. On the other hand, even a modest increase in risk tolerance could send them soaring.
Given that tax loss selling should be winding down and that these types of riskier stocks have come in quite a bit it’s not hard to envision a scenario where we have a decent start to 2022. But we’ll take it as it comes since there are enough cross-currents out there to warrant keeping an open mind.
Moving on to our stocks, there are no ratings changes today. And since news flow is so sparse we have very few updates.
I hope you have a happy holiday!
Recent Changes
None
Updates
Arena Pharmaceuticals (ARNA) is still trading just north of 90 as we await regulatory approval of the proposed Pfizer (PFE) acquisition. No new news. SOLD HALF, HOLD HALF
Avalara (AVLR) retested its early-December lows last Friday and held up. No change. BUY
CS DISCO (LAW) also retested the early-December low recently and held. Keeping at buy. BUY
Everbridge (EVBG) has been inching a little higher but there’s been no more clarity on the CEO departure situation. HOLD
Inspire Medical Systems (INSP) has popped back up over the last two days, likely on greater investor confidence in the growth trajectory during an Omicron wave (or a short-lived disruption). I’ve kept at buy and am sticking with that rating. BUY
JOANN (JOAN) continues to trade around the 10 level on no major news. BUY
Kornit Digital (KRNT) bounced off the 200-day line on Monday. The last test of that technical trend line was in May, after which KRNT rallied back to its previous high. I’m not calling for a move back to 181 in the next few weeks but do think this is a buyable dip. BUY
Rani Therapeutics (RANI) remains a buy. BUY
Revolve (RVLV) has now pulled back 39% from its recent high and is trying to find support around the 54 level. It was able to do so during a 27% correction in August. I returned to buy last week and will keep there now. BUY
Repligen (RGEN) continues to hold up just above 250 on no news. HOLD
SiTime (SITM) found support at 250 this week and appears to sticking with the pattern of pulling back to around the 50-day line and then moving higher. No guarantees that’ll happen again this time but the fundamental trends and the story suggest the stock can work in 2022. BUY
Shutterstock (SSTK) has bounced off its 200-day line twice in the last three weeks. At 15% off the high it’s a buy. BUY
Sprout Social (SPT) has been banged up lately (36% off its high) but has held up roughly around the 200-day line. Last week’s dip to 79 was nerve-wracking, but this is one of my favorite stocks in small cap software so we’re sticking with it. BUY
Thunderbird Entertainment (THBRF, TBRD.CA) is moving sideways on no news. That’s fine by me. 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 12/22/21 | Profit | Rating |
| Arena Pharmaceuticals (ARNA) | 2/2/18 | 39 | 91 | 133% | Sold Half, Hold Half |
| Avalara (AVLR) | 2/1/19 | 40 | 136 | 239% | Buy |
| CS Disco (LAW) | 9/2/21 | 57 | 36 | -36% | Buy |
| Everbridge (EVBG) | 12/2/16 | 16 | 69 | 342% | Hold |
| Inspire Medical (INSP) | 10/4/19 | 59 | 231 | 294% | Buy |
| JOANN (JOAN) | 8/6/21 | 15 | 10 | -35% | Buy |
| Kornit Digital (KRNT) | 3/4/21 | 102 | 138 | 36% | Buy |
| Rani Therapeutics (RANI) | 10/7/21 | 17 | 18 | 7% | Buy |
| Repligen (RGEN) | 11/2/18 and 12/31/18 | 59 | 269 | 354% | Hold |
| Revolve Group, Inc. (RVLV) | 4/1/21 | 46 | 55 | 21% | Buy |
| Shutterstock (SSTK) | 11/4/21 | 121 | 110 | -9% | Buy |
| SiTime Corporation (SITM) | 12/2/21 | 296 | 274 | -8% | Buy |
| Sprout Social (SPT) | 9/3/20 | 36 | 94 | 157% | Buy |
| Thunderbird Entertainment (THBRF, TBRD.V) | 5/6/21 | 3.8 | 3.5 | -10% | Buy |