A quick reminder that Cabot will be closed tomorrow and Friday for Thanksgiving. I hope you have a great holiday and enjoy a break from the market, especially after such a dismal beginning to the week.
The big recent developments since I wrote last Thursday are the rise in Covid cases in Europe, and that Jerome Powell got the nod for another term leading the Fed.
On the Covid cases, I find it interesting that the typical pandemic beneficiaries have not enjoyed a boost this time. I would have thought a player like Maravai (MRVI), which provides technology to manufacture the Pfizer (PFE) vaccine, would have at least enjoyed a little bump. And stocks like Fiverr (FVRR) have received no love whatsoever. This suggests that the market continues to look well beyond the pandemic, even though the evidence is that this thing be with us for some time.
On the Fed, my two cents (I’m far from an authority on the matter) on the nomination is that it’s fine, probably a good decision. We can all gripe about some decisions that have been made and how things have worked out. But I’m certainly not in the “Powell is a disaster” camp. There are a lot of paths the Fed could have led us down and at the end of the day the path taken wasn’t the worst one. A little continuity is probably wise.
The rub here is that the 10-year Treasury rate jumped on news of Powell’s nomination. At just over 1.6% today the rate isn’t the highest it’s been (it hit 1.68% in October) but the market seems to be trying to get ahead of likely increases (which we’ve been expecting). Add it all up and we have a major growth stock selloff.
This is the convenient explanation for what’s happened this week. As always there are other factors at play (holiday week, also seems like some fund has blown up or there is some sort of market inefficiency out there, etc.).
We’ve made a few moves recently to reduce our downside risk during a market retreat and we’ve added some names that I think can do very well in the face of rising interest rates. Recent sells, including Accolade (ACCD) and Cerence (CRNC) speak to the former, while recent additions, Rani Therapeutics (RANI), Shutterstock (SSTK), and Thunderbird Entertainment (TBRD.CA, THBRF) speak to the latter.
Not all of our moves have worked out perfectly, of course. Both JOANN (JOAN) and CS DISCO (DSCO) are well below our entry points. However, as has been the case in previous growth stock corrections some of the current pullbacks will provide very nice entry points.
Since it’s only been a few days since last week’s update there are only a few stock-specific updates today.
Recent Changes
Avalara (AVLR) moves to BUY
Kornit Digital (KRNT) moves to HOLD
Updates
Accolade (ACCD) has been sold. SOLD
Arena Pharmaceuticals (ARNA) reached target enrollment (70 participants) in Study A of the Phase 2/3 CULTIVATE trial (etrasimod in moderate to severe Crohn’s disease). BUY
Avalara (AVLR) being below the 200-day line with no company-specific issues following one of the best quarters as a public company seems overdone. Could easily see more weakness ahead but hard not to flag AVLR as becoming a very attractive buy. Moving to buy. BUY
Cerence (CRNC) has been sold. SOLD
CS DISCO (LAW) is getting into the vicinity of its IPO price (32). Keeping at buy for now. BUY
Everbridge (EVBG) management will speak at a series of conferences in the coming weeks, including Credit Suisse (November 30), Stephens (December 2) and Barclays (December 8). With the pullback in shares, the valuation has come way down. The EV/forward multiple, currently just below 12, is near a trough. EVBG is testing our patience but keeping at buy for now. BUY
Fiverr (FVRR) cracked the 150 level two days ago, putting the stock on red alert. While we are reluctant to part ways with a long-term holding that appears to have plenty of growth potential left, the stock’s weakness is hard to ignore. HOLD
Inspire Medical Systems (INSP) got caught up in the market’s selling yesterday as shares fell below the 50-day line for the first time since May. This is another company where a recent beat-and-raise quarter suggests good fundamentals being overwhelmed by broad-based selling in growth. BUY
JOANN (JOAN) will pay its next dividend on December 29 to shareholders of record as of December 15. Earnings are set to be released next Thursday, December 2 after the market closes. We’re looking for signs that demand in the U.S. is picking back up enough to pacify investor concerns around supply chain challenges, which should work themselves out in time. Valuation is dirt cheap for the best retailer in the arts & crafts category. BUY
Kornit Digital (KRNT) has done a good job working its way past its secondary offering. Still, with the market on edge KRNT could come under pressure if the selling spreads. We’ll be a little conservative and move to hold, just in case. HOLD
Rani Therapeutics (RANI) is a volatile stock with a great story (oral delivery of injectable drugs) and a number of clinical studies set to begin in 2022, including for acromegaly (RT-101), osteoporosis (RT-102) and growth hormone deficiency (RT-109). While these programs are all very early and conventional biotech stock probabilities of success are in the traditional 10% to 20% range, the big picture opportunity is billions of dollars in potential revenue, if all goes well. Keeping at buy and, once again, reminding you to use limit orders and respect the volatility. BUY
Revolve (RVLV) is 13% off a recent high (as of this morning) and still well above its 50-day line. The company is one of the newer online retailers that has continued to shine, while many of the older names have faltered (look at GPS and NWS today as two examples). Keeping at hold as I continue to see RVLV at risk of some profit taking. HOLD
Repligen (RGEN) is moving sideways on no news. HOLD
Shutterstock (SSTK) has pulled back 14% from the stock’s recent all-time high and is down around 8% from our entry point. At this stage the pullback (to 109) is on par with those from February and May (neither of those touched the 200-day line, which is at 101.6). I think this is a buying opportunity. BUY
Sprout Social (SPT) has been roughed up during this correction (shares 26% off the high) but are (so far) holding in the 100 to 110 support zone. Admittedly, it could go either way but given the fundamentals and the support area I’m a buyer. BUY
Thunderbird Entertainment (THBRF, TBRD.CA) will announce Q1 fiscal 2022 results today (November 24) after the market close, with conference call to follow on Monday, November 29. Expect management to discuss new programs, video games and merchandise. 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 11/24/21 | Profit | Rating |
| Arena Pharmaceuticals (ARNA) | 2/2/18 | 39 | 58 | 49% | Buy |
| Avalara (AVLR) | 2/1/19 | 40 | 141 | 253% | Buy |
| Cerence (CRNC) | - | - | - | - | Sold |
| CS Disco (LAW) | 9/2/21 | 57 | 39 | -31% | Buy |
| Everbridge (EVBG) | 12/2/16 | 16 | 112 | 623% | Buy |
| Fiverr Intl (FVRR) | 3/5/20 | 32 | 144 | 346% | Hold |
| Inspire Medical (INSP) | 10/4/19 | 59 | 243 | 315% | Buy |
| JOANN (JOAN) | 8/6/21 | 15 | 10 | -36% | Buy |
| Kornit Digital (KRNT) | 3/4/21 | 102 | 164 | 61% | Hold |
| Rani Therapeutics (RANI) | 10/7/21 | 17 | 26 | 55% | Buy |
| Repligen (RGEN) | 11/2/18 and 12/31/18 | 59 | 269 | 355% | Hold |
| Revolve Group, Inc. (RVLV) | 4/1/21 | 46 | 80 | 77% | Hold |
| Shutterstock (SSTK) | 11/4/21 | 121 | 112 | -7% | Buy |
| Sprout Social (SPT) | 9/3/20 | 36 | 109 | 200% | Buy |
| Thunderbird Entertainment (THBRF, TBRD.V) | 5/6/21 | 3.8 | 3.5 | -8% | Buy |