Adding to 3 Small-Cap Positions as Russell 2000 Turns Dumpster Fire
It’s time to play some defense.
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Readers have surely noticed that the portfolio has been going through a rough stretch as the broader market and small caps, tech and space stocks have been hit. The portfolio is necessarily exposed to small caps and by (my) choice, exposed to space. In my Market Recon column on Tuesday morning, I showed how the Russell 2000 is currently positioned technically, which is not bullish.
Readers will note that the Russell 2000 has turned into something of a dumpster fire. This index lost contact with its 200-day SMA last week, which implies that professional managers are, at present, in the process of taking exposure to small caps down to minimal levels. This is a byproduct of higher interest rates and increased borrowing costs as smaller businesses are more reliant than are larger caps on deficit spending (debt) in order to maintain or expand operations.
The S&P Small-Cap 600 has done a better job of maintaining contact with its 200-day SMA. The question I have right now is this: Do you see a falling-wedge pattern? That would be a pattern of bullish reversal. Or, do you see a descending triangle? That would be a pattern of bearish continuance.
Talk about a game of inches. Two polar setups, based upon a pattern that isn’t really all that clear. Time will tell. I intend to nibble at the portfolio’s worst performing positions, but will at some time have to create cash once again. I do apologize for taking my eyes off of the ball for a week plus as the portfolio went from -7% to -16%. I could not avoid that on a personal/familial level, but it really looks awful on paper.
Analyst Activity
Ocular Therapeutix (OCUL)
On Tuesday morning, analyst Yi Chen of HC Wainwright reiterated his “buy” rating on OCUL as well as his $25 target price. Chen is rated at 0.5 stars out of five by TipRanks. He has compiled a 33% success rate over the past two years while generating an average return of -3.5%.
Rocket Lab (RKLB)
On Monday, analyst Andres Sheppard of Cantor Fitzgerald reiterated his “buy” rating on RKLB without setting a target price. This is interesting because Sheppard reiterated that buy rating just last week with a $122 target price. Sheppard is rated at 2.5 stars out of five by TipRanks. He has compiled a 33% success rate over the past two years while generating an average return of 1.6%.
Monday’s Intentions vs Actual Trades
Intention: Purchase 20 shares of (ONDS) at or close to the last sale of $6.13
Actual trade: Bought 20 shares of ONDS at $6.099
Intention: Purchase 10 shares of OCUL at or close to the last sale of $7.27
Actual trade: Bought 10 shares of OCUL at $6.475
Intention: Purchase 10 shares of (PL) at or close to the last sale of $13.91
Actual trade: Bought 10 shares of PL at $13.425
Intention: Purchase 2 shares of RKLB at or close to the last sale of $51.58
Actual trade: Bought 2 shares of RKLB at $51.95
Tuesday’s Intention
Purchase 10 shares of ONDS at or close to the last sale of $5.92
Purchase 10 shares of OCUL at or close to the last sale of $6.28
Purchase 2 shares of RKLB at or close to the last sale of $50.09
Current Positions
Long 60 shares of (ASPN) at $5.1083. Target price: $10. Last close: $5.32.
Long 50 shares of (EVLV) at $5.33.92. Target price: $8.50. Last close: $4.18.
Long 160 shares of (OCUL) at $8.2575. Target price: $14. Last close: $6.29.
Short one OCUL $9 December 18 call at $0.80. Last close: $0.22.
Long 300 shares of (ONDS) at $7.823. Target price: $12. Last close: $6.06.
Long 110 shares of (PL) at $19.7084. Target price: $26. Last close: $13.59.
Short one PL $17 November 19 call at $1.70. Last close: $0.25.
Long 60 shares of (PTON) at $5.0263. Target price: $9. Last close: $5.23.
Long 10 shares of (RKLB) at $61.382. Target price: $97. Last close: $51.36.
Long 150 shares of (SOFI) at $15.90. Target price: $24. Last close: $14.30.
Cash: $418.55.
Portfolio value: $8,190.95, -18.1% from inception on March 24.
At the time of publication, Guilfoyle was long ASPN, EVLV, OCUL, ONDS, PL, PTON, RKLB and SOFI.
