As China Summit Steals Headlines, I Am Eyeing These Three Stocks

Market action is mixed at midday with the indexes close to flat and the Magnificent Seven tech stars leading mainly due to Nvidia (NVDA). Small caps are lagging with only 32% of stocks higher. New 12-month lows are already over 220 and new highs are around 125. That narrow breadth continues to be a major concern.

The producer price index came in hot at 1.4% month over month against 0.5% expected, and core PPI was 1.0% against 0.4% expected. The annual headline rate jumped to about 6%, the biggest reading since 2022. The futures market has eliminated rate cuts for the rest of the year, and odds of a hike by year-end are approaching 40%. Oil is back above $100, and the 10-year yield is hovering around 4.5%.

Despite the macro pressure, semiconductors are holding up but fading on the news that Pres. Donald Trump landed in Beijing with a delegation that now includes Jensen Huang of Nvidia Corp. The next big event is the Trump-Xi summit Thursday and Friday, and traders are waiting to see what comes out of those meetings with Chinese President Xi Jinping before committing capital in either direction.

This setup is exactly why I have been raising cash and focusing on building a watch list of names showing constructive setups rather than chasing the extended momentum. The strategy continues to be initial positions in stocks that I can track and add to as the action confirms the thesis, with tight management of existing names and patience on the rest. Three positions I am actively building right now illustrate the approach.

Xeris Continues to Execute

I have been long Xeris Biopharma Holdings Inc. (XERS) for quite a while and it remains one of my top longer-term picks. I used the recent pullback to add to the core position while making some shorter-term trades around the edges as I continue to build. The May 7 earnings report was strong, with net product revenue growing 43% year over year to over $82 million and Recorlev nearly doubling to about $50 million. The company swung to profitability with net income of $2.2 million. Management raised the bottom end of full-year guidance to $380 million to $390 million, which represents more than 30% growth at the midpoint. The Recorlev commercial expansion is expected to contribute incrementally in the second half of the year, which sets up another quarter of acceleration. News of a new drug will be a major catalyst and should hit in the next six months. The story is intact, the chart is constructive, and I am continuing to build.

The Oncology Institute Confirms the Setup

I established an initial position in The Oncology Institute Inc. (TOI) on Monday after the strong first-quarter report I discussed in that day’s column. The stock is upticking today and testing recent highs, which is the kind of confirmation I look for after taking an initial stake. I added to the position today and will add more if accumulation continues. The setup remains the same as I outlined on Monday. Revenue grew 41% to $147.4 million in Q1. Free cash flow guidance moved from a midpoint loss of $5 million to a midpoint gain of $10 million, a $15 million swing. Florida operations reached profitability for the first time, and the company is set to scale to 200,000 Medicare Advantage lives in Q3. The affiliated network nearly doubled to 155 from 81 in 12 months. The market has not yet woken up to the structural improvements, which is why I am comfortable accumulating slowly while the chart bases.

The stock trades thinly and can be jerked around so I’m keeping my size smaller and do some quick trades to reduce risk.

Harrow Is the Difficult One

I was long Harrow Inc. (HROW) going into the May 11 earnings report and got hit hard when the stock fell more than 20% on a Q1 miss. Revenue came in at $44.2 million against consensus near $52 million, with most of the miss tied to an $8 million gross-to-net adjustment on VEVYE that came from incorrect modeling of payouts on new prescriptions from high-deductible insurance plans. Management reaffirmed full-year guidance of $350 million to $365 million and guided Q2 to $71 million to $81 million, so they are saying a second-half ramp is intact.

My read is that the underlying story is intact. VEVYE just surpassed XIIDRA on a monthly total prescription basis with about 14% market share in the branded dry eye segment. IHEEZO unit demand grew 18% year over year, and TRIESENCE more than doubled. The sales force was doubled to 100 territories during the quarter. The fundamentals are accelerating, but management now has a credibility problem and has to prove the second-half ramp is real before the stock can recover. Management has made the classic mistake of overpromising and underdelivering and they know it and are trying to fix it.

Cantor reiterated Outperform on HROW this morning with a target cut to $88 from $91. That is a vote of confidence in the business with appropriate adjustment for the credibility hit. If management delivers anywhere close to guidance, the stock is a great value at current levels. I will look for further opportunities to build the position and expect a recovery as we approach the next report.

My Strategy

This is what the initial-position approach looks like in practice. XERS is working and I am building. TOI is in early confirmation and I am adding. HROW is the one that did not work, and the methodology of starting small and being willing to add on weakness rather than panic-sell is what keeps a single miss from doing real damage to the portfolio. The discipline of initial positions with room to grow protects you from the kind of catastrophic loss that comes from sizing too big too early on a name that has not yet proven itself.

The next big event is the Trump-Xi summit Thursday and Friday. Until then, the action is going to be choppy and headline-driven. Cash remains the best position for the macro picture, and patience is the right approach until the next event clarifies the setup.

At the time of publication, DePorre was long Xeris Biopharma Holdings Inc., The Oncology Institute Inc., Harrow Inc.