It continues to be a very bumpy ride for small-cap growth stocks, while those names with a slightly more value-oriented profile are providing a somewhat smoother ride.
Big picture, there is no doubt the risk-off environment continues. The good news for more aggressive investors is that valuations have come down significantly, as have analyst price targets. That latter point often seems to be one signal that the worst of the selling is in the rearview mirror. Though, clearly, there are many factors in play.
It had looked like Monday’s snap back rally might provide some fuel for something of a recovery rally. Hopes for that are being dashed today however, as the Nasdaq has failed to show any meaningful momentum.
Looking through our portfolio we have a couple of names that are dipping just below their recent lows. While I hate to sell at depressed levels, we’ll respect that action and take partial profits on two names. Perhaps throwing the market Gods a bone will satisfy their appetite for the time being.
On a more positive note, we are seeing some recent additions hold up OK and some, such as Rani Therapeutics (RANI), try to put together a string of up days.
Still, we’re not out of the woods so maintaining a defensive stance continues to be right call.
Recent Changes
Sprout Social (SPT): Sell a Quarter
Kornit Digital (KRNT): Sell a Quarter
Updates
Arena Pharmaceuticals (ARNA) continues to trade in the low 90s as we await regulatory approval of the proposed Pfizer (PFE) acquisition. No new news. SOLD HALF, HOLD HALF
Avalara (AVLR) is bouncing around its early-December lows once again. Shares are cheap, trading with an EV/forward revenue multiple of 11.5. The last time you could buy AVLR at this valuation was in April 2020. The stock remains near the top of my buy list even though the chart looks horrible. BUY
CS DISCO (LAW) is trading around its IPO price (32) and with an EV/forward revenue multiple of 11.9. Lockup is set to expire this coming Monday (1/17). We could easily see this acting as a catalyst for shares to move higher. BUY
Everbridge (EVBG) continues to trade near the 60 level following the surprise resignation of CEO David Meredith. His official last day is expected to be January 30. Earnings should be out a week or two later. We’ll continue to hang in there as we await further clarity on the state of the business. HOLD
Inspire Medical Systems (INSP) pre-announced Q4 results last week that were much better than expected. The stock enjoyed a rally that day, but it soon faded as macro issues pulled down many stocks. Management said Q4 revenue should be up around $78.2 million (+70%), well above consensus of $65.8 million (a 19% beat). Management said they saw Omicron coming and filled the schedule between Christmas and New Year’s. It has helped that the new process (two incisions instead of three) cuts procedure time by 30 minutes, to 1.5 hours). Apparently, disruption has been limited. No guidance for 2022 was given but management’s tone has been very positive. BUY
JOANN (JOAN) continues to trade around the 10 level. Management recently presented at the ICR Conference, after which JP Morgan released a note outlining five reasons to buy the stock. Those reasons are: (1) reopening/normalcy should be a benefit, (2) strong competitive position in a niche industry, (3) store refreshes provide additional upside, (4) “Blue Ocean” initiatives on the horizon (think JV with Singer as example), and (5) most attractive valuation in Hardlines. I agree. Shares are yielding 4%. BUY
Kornit Digital (KRNT) management presented at the Needham and CJS conferences on Monday and Wednesday, respectively. Shares dipped below the 200-day line last Friday then settled in the low 120s before breaking below that threshold today. While I’m hoping this is a horrible decision, we’ll go ahead and sell a quarter position today as we respect the technical breach. SELL A QUARTER, HOLD REST
Rani Therapeutics (RANI) has been trying to get in gear, though has yet to move much above 20 with any conviction. This is one of our more speculative positions and there are several potential catalysts in 2022 as studies enter the clinic (assuming the timeline isn’t impacted by COVID). Those studies are RT-101 (acromegaly), RT-102 (osteoporosis) and RT-109 (growth hormone deficiency). BUY
Revolve (RVLV) continues to trade in the low-50s following a roughly 40% correction. In some ways the stock is a reopening play as consumers are more likely to purchase new clothes when socializing than when hanging out at home. Given that, it’s likely the rise of Omicron has heavily influenced RVLV’s retreat. Given that a lot of bad news is priced into the stock, maintaining at buy, though closing watching for a break below 50. BUY
Repligen (RGEN) is searching for support around the 200 level. Management recently presented at the JP Morgan healthcare conference and maintained guidance for $200 million in COVID-related revenue in 2022. The team cited increased demand for both existing and in-development vaccines and reiterated its view that vaccine demand will persist for many years. Beyond COVID, revenue growth in the core business was up 37% in the most recent quarter as Repligen’s four businesses (Protein Products, Filtration, Chromatography, Process Analytics) continue to perform well. The addition of a fifth segment (Fluid Management) is in the works as Repligen rolls up recently acquired businesses into the new division. No doubt this is a painful correction, but it’s hard to envision RGEN not trading meaningfully higher in 2022. Remaining at hold for now but likely to upgrade to buy soon. HOLD
SiTime (SITM) has been bouncing around in the 225 to 260 range for the last week. This is the same zone of support that the stock visited in November and December (a secondary offering was priced at 225 in November). There’s no new news but we have an earnings date. SiTime is a fabless semiconductor company that provides MEMS (micro-electro-mechanical systems) and silicon-based timing systems to a broad array of end markets, including datacenter, automotive, aerospace, industrial and mobile/consumer electronics. BUY
Earnings: Wednesday, February 2
Shutterstock (SSTK) has held up better than many growth stocks, likely because it has consistent cash flow ($3.70 per share in 2020) and pays a small dividend (yield is 0.84%). There’s been no new news. We expect earnings in the first half of February. BUY
Sprout Social (SPT) has taken another step down today so we’ll respect the action and take a small partial profit. As with other recent sells, I’m hoping this is a terrible decision. Though locking in a partial gain of nearly 90% isn’t all that bad. SELL A QUARTER, HOLD REST
Thunderbird Entertainment (THBRF, TBRD.CA) continues to be a relatively drama-free stock. We’re many months into a consolidation phase after the 2020 run. BUY
Xometry (XMTR) was last week’s new addition, and the stock has acted well since we added it. That said, shares have been a little wild today. The company operates a digital sourcing marketplace that addresses many buyer and seller pain points in the $260 billion industrial manufacturing industry. The AI-powered platform allows manufacturers to visit Xometry’s website, upload a 3D design (i.e., a CAD file) and retrieve an instant quote for the necessary parts from Xometry’s supplier network. The platform improves pricing accuracy, helps buyers source parts beyond their local network, provides revenue opportunities for sellers that extends beyond regional demand and gives large companies an enterprise-wide solution that creates work-flow efficiencies. 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 1/13/22 | Profit | Rating |
| Arena Pharmaceuticals (ARNA) | 2/2/18 | 39 | 93 | 138% | Sold Half, Hold Half |
| Avalara (AVLR) | 2/1/19 | 40 | 110 | 174% | Buy |
| CS Disco (LAW) | 9/2/21 | 57 | 30 | -47% | Buy |
| Everbridge (EVBG) | 12/2/16 | 16 | 56 | 264% | Hold |
| Inspire Medical (INSP) | 10/4/19 | 59 | 238 | 306% | Buy |
| JOANN (JOAN) | 8/6/21 | 15 | 11 | -31% | Buy |
| Kornit Digital (KRNT) | 3/4/21 | 102 | 114 | 12% | Sell a Quarter |
| Rani Therapeutics (RANI) | 10/7/21 | 17 | 20 | 19% | Buy |
| Repligen (RGEN) | 11/2/18 and 12/31/18 | 59 | 192 | 224% | Hold |
| Revolve Group, Inc. (RVLV) | 4/1/21 | 46 | 52 | 15% | Buy |
| Shutterstock (SSTK) | 11/4/21 | 121 | 95 | -21% | Buy |
| SiTime Corporation (SITM) | 12/2/21 | 296 | 232 | -22% | Buy |
| Sprout Social (SPT) | 9/3/20 | 36 | 67 | 84% | Sell a Quarter |
| Thunderbird Entertainment (THBRF, TBRD.V) | 5/6/21 | 3.8 | 3.4 | -11% | Buy |
| Xometry (XMTR) | 1/6/22 | 53 | 54 | 3% | Buy |