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Stock of the Week
The Best Stock to Buy Now

May 21, 2020

Long-term, the odds are very good that this recommendation will move higher, so there is an argument for holding patiently. But we will sell.

This morning, Carl Delfeld, who originally recommended Luckin Coffee (LK), sent this update to his readers.

“Luckin Coffee stock began trading again yesterday, fell quickly and then traded very consistently between 2.8 and 3.0 all day. Volume was incredibly high at almost 140 million shares. It is difficult to ascertain what is happening behind the scenes, but we do know that Goldman had a sizable block of shares and can assume it wants the shares to go up. We can also assume that the Chinese want to save face with this coffee company.

Last week, the Luckin board fired its CEO and COO and the company received a notice to delist from the Nasdaq earlier this week, which it has announced it is appealing. Another headwind is that the U.S. Senate passed yesterday legislation that calls for Chinese companies to meet the same disclosure standards as U.S. companies, or delist.

Luckin also points out that the company’s stores throughout China remain open but given all the uncertainty I suggest that most subscribers should sell any remaining shares. For those of you who choose to be all-in to the end, I will continue to carefully watch and report on this unfolding situation.”

And I’ll concur. Long-term, the odds are very good that LK will move higher, so there is an argument for holding patiently. However, I simply hate having “dead money” in a portfolio, especially in a losing position. It’s far better to put the money to work in a positive situation, and to hold long-term winners.

Thus, for the record, Cabot Stock of the Week will sell tomorrow (because our policy is always to act on the day following our recommendations).