Our first idea is a software company whose shares recently had a strong breakout. Our second is profit-taking on a previous recommendation.
Buy: Asana, Inc. (ASAN)
From Cabot Growth Investor
ASAN was acting sloppy for a few weeks, but a very bullish Q2 report has caused a fresh rush of buying. The big story of the report wasn’t so much the numbers (though they were excellent—revenue growth accelerated again to 72%) but the fact that, after a long time of being deployed in a department here or here, Asana’s work management platform is now seeing widespread adoption among big enterprises.
On the conference call, the top brass talked about a few specific deployments and said that revenue received from its largest customers (those spending at least $50,000 annually with Asana) rose a whopping 45% from a year ago—meaning these whales are ordering more after (usually smaller) initial test runs, including some that have 25,000 employees using the platform.
The stock has zoomed higher on the news and has actually extended those gains this week despite the wobbles in growth stocks. We’re aiming to average up (fill out our stake by purchasing another half-sized position), but given that ASAN is extended and the sell-strength environment, we’ll hold off a bit and see if shares can set up a better risk-reward entry point. We will stay on Buy a Half, though again, aiming for dips is advised. BUY A HALF
Michael Cintolo, Cabot Growth Investor, cabotwealth.com, 978-745-5532, September 9, 2021
Sell: The remainder of Five Below, Inc. (FIVE)
From Cabot Growth Investor
Updated from WSBD 839, March 18, 2021
If you’ve read us for any length of time, you know that we like to think in terms of odds—we always want to try to be with the odds rather than against them, but that doesn’t mean the unusual doesn’t happen from time to time.
FIVE is an unfortunate example, as its beautiful breakout and strong upside follow-through from a multi-month base early last month completely fell apart after fears of higher costs (first on Dollar General’s quarterly report, then after Five Below’s own report last week) ripped through the sector.
To be fair, those fears do seem overblown, but we’re wondering if the market is sniffing out something else—FIVE’s massive-volume break (biggest weekly volume since June 2020) not only crushed the recent breakout but has landed the stock below its 200-day line. Long-term, we could revisit the stock again when things shape up, but given the damage, that probably won’t be for a while. We sold our position on a special bulletin Tuesday morning. SOLD
Michael Cintolo, Cabot Growth Investor, cabotwealth.com, 978-745-5532, September 9, 2021