November 11, 2021

First a quick personal note. Our backup plan for the kids today (out of school because of the holiday) fell through so I’ll be spending much of the day with two young, energetic boys who could care less about the stock market! I’ll be keeping tabs on things but may not get to email responses today unless a response is super timely.

On to the market …

It’s been sort of an odd week because, while the focus has been on individual companies, there’s been some macro stuff driving erratic trading action. First and foremost, Treasury yields plummeted late last week, which I can only attribute to a reaction to the unexpected events in the U.K. where the Bank of England held steady on rates. Then we got confirmation that the Pfizer (PFE) vaccine for kids has been approved.

Treasury yields plummeted and growth stock rallied last Friday and heading into this week small cap stocks finally, FINALLY began to break out of the total nothingburger trend they’d been on. This is true of the IJT (small cap growth) and IJR (small cap core, chart below) ETFs, though a little less so for the IJS (small cap value).

As I looked beneath the surface of the small cap sector ETFs, I noticed PSCF (financial), PSCI (industrial) and PSCT (tech) hitting new highs. The other sectors were generally strong as well, but none broke out in such convincing factors as the aforementioned three.

Moving into the middle of this week, news of disastrous bond auctions and soaring inflation data (which anybody with a wallet and functioning brain knew about anyway) curbed growth stock momentum, but at the moment there’s been no major pullback in the small cap sectors.

To land the plane … the takeaway here is that in my mind the potential exists for a meaningful move higher in many small cap sectors, which for roughly a year have basically done nothing. I think that potential is exciting and will be keeping an eye on resulting opportunities.

Recent Changes
None

Updates
Accolade (ACCD) dipped back to the October low this week as we continue to evaluate recovery potential in the stock. HOLD
Earnings: Done

Arena Pharmaceuticals (ARNA) reported last week and gave an update on the catalyst calendar that was as expected. BUY
Earnings: Done

Avalara (AVLR) fell this week with many growth stocks. The earnings report last week was mixed thought the long-term potential here remains significant. I moved to hold to let the market digest the report. HOLD
Earnings: Done

Cerence (CRNC) hasn’t yet announced an earnings date. The rally from October peaked at 114 and CRNC has pulled back to around 101 over the last week. With so much going on in the auto market (electric vehicles mainly) there should be meaningful opportunities for Cerence to keep growing content in autos. It is also expanding into other markets (like elevators). Keeping at hold until we get more clarity on current and near-term trend expectations. HOLD

CS DISCO (LAW) reported on Tuesday and shares were volatile (to the downside) yesterday. That said, LAW came up off the lows (near 46) to close just over 50. I continue to think LAW will be a big winner long term, so sticking with it. BUY
Earnings: Done

Everbridge (EVBG) reported Tuesday and shares fell yesterday, weakening throughout the day. The quarter was a little less bullish than Q2, but the report wasn’t bad and the EU opportunity is significant, and imminent. I think the day was bad for software/growth in general and made matters far worse for EVBG than it otherwise would have been. Keeping at buy. BUY
Earnings: Done

Fiverr (FVRR) reported a better-than-expected quarter, and the stock rallied. I moved to hold as I want to see follow-through in the coming days. HOLD
Earnings: Done

Inspire Medical Systems (INSP) has been strong (other than yesterday) in the wake of reporting, and the stock remains at buy. Yesterday after the close we got the update that the CMS has officially updated reimbursement rates for 2022 procedures in the Ambulatory Surgical Center (ASC) setting. This was expected, but confirmation was still important and welcome. BUY
Earnings: Done

JOANN (JOAN) has been hanging out in the low-11 range this week on no new news. Keeping at buy. The stock yields 3.75%. BUY

Kornit Digital (KRNT) reported and the stock was a little wild afterward but closed in the green yesterday. Keeping at buy as the report indicates bullish trends remain intact. BUY
Earnings: Done

Rani Therapeutics (RANI) was intensely volatile last week as shares surged to 35 before pulling back into the mid-to-high 20s, where they have continued to trade this week. As mentioned last week, I’ll keep the stock at buy, but please be selective with your purchases and recognize that RANI moves in a wide range even on an intraday basis. Management will participate in a fireside chat at the Stifel 2021 Virtual Healthcare Conference on Wednesday, November 17, 2021, at 7:00 a.m. PT / 10:00 a.m. ET. BUY

Revolve (RVLV) reported last week, and the stock continues to look strong. HOLD
Earnings: Done

Repligen (RGEN) reported Q3 results last week and remains a hold. HOLD
Earnings: DONE

Shutterstock (SSTK) is our latest addition, and the stock is trading right around our entry price. The company has developed an online marketplace for digital commercial imagery, including photos, 3D models, video footage and music. Its platform brings contributors and users of content together so they can supply and/or source high-quality, licensed content. Users of content include brands, businesses, media companies, prosumers and consumers. There are over 1.9 million content contributors that have collectively added over 390 million images and over 23 million footage clips. Shutterstock should be a steady grower (mid-teens revenue growth this year, 20% EPS growth) that also returns capital to shareholders through dividend payments and share repurchases. I think it will work very well for us over the next two years. BUY

Sprout Social (SPT) reported last week and shares have been holding up nicely. I moved to hold to let the stock digest the earnings report and (expected) increase in interest rates (which moved in the opposite direction recently). BUY
Earnings: Done

Thunderbird Entertainment (THBRF, TBRD.CA) will announced Q1 fiscal 2022 results on Wednesday, November 24 after the market close, with a conference call to follow on Monday, November 29 (delayed due to holiday). BUY

Please email me at tyler@cabotwealth.com with any questions or comments about any of our stocks, or anything else on your mind.