Despite another dip in the Nasdaq today higher growth stocks have mostly come up off of last week’s lows as early indications suggest the Omicron variant can be held at bay with vaccinations (especially booster shots).
That said, the relief rally seen early this week is just the first phase of a potential recovery. There remains considerable uncertainty around big-picture things like inflation, interest rates, supply chain challenges and the trajectory of COVID cases. Those uncertainties will take some time to work themselves out and will likely keep stocks from shooting back to previous highs in the near term (though anything is possible).
In short, while this week certainly feels a lot better than last week a cautiously optimistic stance is still prudent.
On an index level the S&P 500 has barely shuddered lately and is back to within 1% of an all-time high today while the S&P 600 Index is 6% off its high. Small caps had been gaining some momentum in early October but then … Omicron.
As I’ve been spinning through the small-cap sector ETFs this week there isn’t anything super notable, other than the weakness in small-cap healthcare stocks. All of the other small-cap sector ETFs are trading roughly in the middle of their recent ranges (more or less similar to the broad small-cap index), while the PSCH (small-cap healthcare) remains below its recent range.
Turning to our stocks, as of mid-day today our portfolio is up an average of 2% from a week ago. There has been a dearth of company-specific news lately. But I’ve dug up what I could. Here is the latest on each of our positions.
Recent Changes
None
Updates
Arena Pharmaceuticals (ARNA) pulled back with the broader biotech group but there has been no company-specific news behind the move. Shares remain a buy as we inch closer toward the release of the Phase 3 data for the ELEVATE UC 12 and UC 52 studies in the first quarter of 2022. BUY
Avalara (AVLR) was moved to buy a couple of weeks ago and since then the stock has rebounded off the lows. It is still below its 200-day line (barely). BUY
CS DISCO (LAW) is down, but not out. Shares came public at 32 in July and with a current price just below 40 they seem like a terrific value for patient investors. Management recently announced that the COO Sean Nathaniel will leave the company (likely at the request of CS Disco) and his responsibilities will shift over to the CFO. This is a more typical structure for a company of this size. BUY
Everbridge (EVBG) has bounced off the 105 level (again) and remains at buy given attractive valuation and the potential for new contracts as the EU mandate deadline for public warning solutions draws closer (mid-2022). BUY
Inspire Medical Systems (INSP) fell back to the 200-day line last week and has bounced off that level. This pullback is likely a buying opportunity if the Omicron variant doesn’t turn into something that substantially curbs elective procedures (like Inspire Therapy). If it does, then it’ll be back to trying to figure out how long the surge in COVID cases will last and how big of a dent that will put in Inspire’s expected 2022 revenue, which is currently seen up 36%. For now we’ll keep INSP at buy. BUY
JOANN (JOAN) reported late last week and I detailed the results in a Special Bulletin. As I stated then I believe we have a workable low in the stock and that business is doing well enough for shares to begin to form a recovery. Thus far that scenario appears to be playing out, though it is tough to say after a three-day market rally. Keeping at buy based on business trends and a dirt-cheap valuation. BUY
Kornit Digital (KRNT) has held up as well as any growth stock during the market’s recent swoon, especially given that the company just held a secondary offering. We’re continuing to hold our current stake. HOLD
Rani Therapeutics (RANI) has come down meaningfully off highs near 35 in mid-November. There has been no change to the story or fundamentals here. Bank of America recently published a note on the stock following conversations with management, which reiterated their plans to progress the RaniPill through safety testing then on to testing effects on diseases within the next 12 to 18 months. This is still a speculative stock but the massive upside potential could dwarf the volatility we’re experiencing on a weekly basis at this very early stage. Continue to average in. BUY
Revolve (RVLV) continues to evade many of the supply chain challenges faced by other retailers due to the company’s use of air shipping, diversified manufacturing footprint and reliance on data to manage inventory. Shares are roughly 20% off their high. On the next quarterly call we’ll be looking for an update on how the new brand ambassador program is working and if it is indeed driving higher return on marketing spend. HOLD
Repligen (RGEN) is trading 19% off its highs and has bounced off the 250 level several times. I continue to evaluate moving the stock back to buy, but for now will stick with a hold rating. HOLD
SiTime (SITM) was last week’s new addition and has been a strong performer out of the gates (shares are +13% since we jumped in). SiTime is a fabless semiconductor company that provides MEMS (micro-electro-mechanical systems) and silicon-based timing systems. These solutions are central to the functioning of a wide variety of electronic systems, including many products made by Apple (APPL). Beyond consumer devices SiTime has been doing extremely well in the datacenter and networking market (think 5G and cloud computing) as well as in the automotive market (think EVs). Management says revenue growth next year should be at least 30%. BUY
Shutterstock (SSTK) has held up better than many stocks lately and a quick dip to the 200-day line was reversed the next day. There has been no company-specific news and shares are currently near our entry point in November. Keeping at buy. BUY
Sprout Social (SPT) is another stock that has dipped to its 200-day line and firmed up there. At roughly 30% off the high this is a “normal” correction for a stock like this. There is no underlying deterioration in the business. Keeping at buy. BUY
Thunderbird Entertainment (THBRF, TBRD.CA) continues to tick along without doing a heck of a lot, either good or bad. We’ve had a few little rallies and pullbacks since we added the stock in May and the result to date is that we’re up just a few percentage points. The relative calm in the stock has been welcome lately, though I’d like to see some sustained momentum above the 5 level. 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 12/9/21 | Profit | Rating |
| Arena Pharmaceuticals (ARNA) | 2/2/18 | 39 | 53 | 36% | Buy |
| Avalara (AVLR) | 2/1/19 | 40 | 151 | 277% | Buy |
| CS Disco (LAW) | 9/2/21 | 57 | 39 | -31% | Buy |
| Everbridge (EVBG) | 12/2/16 | 16 | 117 | 652% | Buy |
| Inspire Medical (INSP) | 10/4/19 | 59 | 225 | 284% | Buy |
| JOANN (JOAN) | 8/6/21 | 15 | 10 | -33% | Buy |
| Kornit Digital (KRNT) | 3/4/21 | 102 | 155 | 52% | Hold |
| Rani Therapeutics (RANI) | 10/7/21 | 17 | 19 | 12% | Buy |
| Repligen (RGEN) | 11/2/18 and 12/31/18 | 59 | 258 | 336% | Hold |
| Revolve Group, Inc. (RVLV) | 4/1/21 | 46 | 68 | 49% | Hold |
| Shutterstock (SSTK) | 11/4/21 | 121 | 112 | -7% | Buy |
| SiTime Corporation (SITM) | 12/2/21 | 296 | 313 | 6% | Buy |
| Sprout Social (SPT) | 9/3/20 | 36 | 99 | 172% | Buy |
| Thunderbird Entertainment (THBRF, TBRD.V) | 5/6/21 | 3.8 | 3.6 | -5% | Buy |