The broad market pulled back 7% in the week after Fed Chair Jerome Powell’s Jackson Hole speech and small caps did a little worse, drifting as much as 10% lower as of Tuesday’s close. But the last couple of days have been better, setting up what could be a little relief rally next week.
Of course, the CPI numbers (to be released next Wednesday) will likely dictate broad market movement in the back half of the week (they should show continued moderating inflation).
That said, there are a lot of conferences going on so don’t discount the potential impact of new information as management teams will likely dribble out some nuggets during these events. I’ve made notes of dates and conferences for our portfolio holdings below.
Everything continues to be evaluated in the context of a rate hike cycle that doesn’t have a well-defined end. It would seem the Fed’s target rate should level out before it gets to 4% (current models show that to be on the high end of expectations for mid-2023) but with everything “data dependent” we just don’t know. And the market doesn’t like that uncertainty.
So the only thing we can count on right now is that uncertainty will persist, so the odds are stocks will bounce around in a broad range.
Of course, there are individual stocks that should do better than the broad market. We’ve been fortunate enough to have a number of those in our portfolio.
TransMedics (TMDX), Procept (PRCT), new addition Evolent Health (EVO) and even Xometry (XMTR) all have very encouraging trends. And I’m seeing plenty of new opportunities that pique my interest as well.
Recent Changes
TransMedics Group (TMDX) moves to HOLD
Xometry (XMTR) moves to BUY
Updates
DigitalOcean Holdings (DOCN) has closed on the proposed acquisition of Cloudways, a managed cloud hosting and software-as-a-service (SaaS) provider servicing small to medium-sized businesses. The $350 million acquisition (paid over 30 months) will add around $14 million to fiscal 2022 revenue (Cloudways total fiscal 2022 revenue should be around $52 million). Cloudways’ three-year compound growth rate is over 50%. Sticking with buy half now. BUY HALF
Evolent Health (EVH) is our latest addition and has been solid since I added it last week. The company’s mission is to help transition the healthcare industry to a value-based model from a fee-for-service (FFS) reimbursement model through the use of clinical and administrative software solutions. Evolent’s platform helps providers and payers streamline operations, lower costs, improve quality and increase patient satisfaction. With revenue up 44% in Q2 and covered lives up 80% to 21.9 million, the trends are very strong. Revenue growth could approach 50% this year, and close to 30% next year. BUY
Flywire (FLYW) pulled back to its 50-day moving average line last Friday and has moved up off that trendline this week. No change to our thesis and it remains a buy. On Monday management will be at a Goldman Sachs conference then on Thursday goes to the Autonomous Future of Commerce Symposium. BUY HALF
Ingles Market (IMKTA) made a new intra-day high a couple of weeks ago then did a quick reversal and landed on its 200-day line late last week. Keeping a close eye on IMKTA but at this stage, I see this as a buying opportunity. BUY
Inspire Medical Systems (INSP) had a dramatic slide last week but, like a lot of stocks, has firmed up this week. This remains a high-potential name and one I’m continuing to consider for an upgrade to the buy list. HOLD
Procept BioRobotics (PRCT) presented at the Wells Fargo Healthcare Conference yesterday and, based on the stock’s action (+18% last two days), investors have been snapping up shares. I moved to hold on August 18, and with PRCT breaking out to a new all-time high today, we’ll stick with that rating for now. We’re up around 95%. HOLD
Rani Therapeutics (RANI) has been weak lately. Perhaps presenting at the HC Wainwright Conference on Monday will give shares a boost. HOLD
Repligen (RGEN) slid with the market but found support this week at its 50-day line (near 210) and has bounced 15 points from there. The key here is that management delivered a beat and raise quarter back in early August and talked about how strong the base business is (i.e., non-Covid revenue). HOLD
Sprout Social (SPT) is going sideways on no new news. Big picture, this isn’t bad given how volatile a lot of software stocks have been lately. We’re continuing to wait it out. HOLD HALF
TransMedics Group (TMDX) has been extremely strong since the Q2 report, even despite a secondary offering that was priced at 40 (the stock hasn’t been that low since the secondary was announced). Management will present at the Morgan Stanley Conference on Monday. With shares up 60% since I added the position just two months ago, I’m moving to hold today. HOLD
Xometry (XMTR) gave back its earnings-related pop in the two weeks after the Q2 report, but the stock has climbed back since then with very steady buying. It’s impressive performance. Upgrading to buy. 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 9/8/22 | Profit | Rating |
| DigitalOcean Holdings (DOCN) | 6/2/22 | 48.7 | 41.4 | -15% | Buy Half |
| Evolent Health (EVH) | 9/2/22 | 36.7 | 38.7 | 5% | Buy |
| Flywire (FLYW) | 8/4/22 | 24.6 | 25.4 | 3% | Buy Half |
| Ingles Markets (IMKTA) | 5/5/22 & 7/28/22 | 94.5 | 88.4 | -6% | Buy |
| Inspire Medical (INSP) | 10/4/19 | 58.5 | 198 | 238% | Hold |
| Procept BioRobotics (PRCT) | 3/3/22 | 25.0 | 49.6 | 99% | Hold |
| Rani Therapeutics (RANI) | 10/7/21 & 7/28/22 | 14.2 | 9.76 | -31% | Hold |
| Repligen (RGEN) | 11/2/18 & 12/31/18 | 59.2 | 225.2 | 280% | Hold |
| Sprout Social (SPT) | 9/3/20 | 36.5 | 59.9 | 64% | Hold Half |
| TransMedics Group (TMDX) | 7/7/22 | 34.1 | 54.6 | 60% | Hold Half |
| Xometry (XMTR) | 1/6/22 | 51.9 | 54.1 | 4% | Buy |