Top 6 Stocks On My Shopping List as Market Calls for Strategy Change
It’s time to change strategy as earnings season closes and seasonal weakness creeps in.
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We have better breadth on Tuesday, with around 60% of stocks gaining. That is primarily due to the Russell 2000 which is up around 0.5%. There is still interest in smaller stocks that have been outperforming but the speculative action is slowing. We only have around 35 stocks up more than 10% today versus 125 on Monday and more than 200 on Friday. There is still speculative interest out there but it’s cooling.
Time to Pivot the Strategy
From my viewpoint, the end of earnings season and the start of the seasonally weakest time of the year is the time to pivot to a different strategy. I was playing more aggressively as earnings reports hit but now I’m playing more defense and staying patient while charts develop during the slower period.
For example, I have a list of smaller cap names that I feel had strong reports and will likely do well next quarter as well.
Xeris Biopharma (XERS) is a profitable specialty drugmaker with a Cushing’s syndrome treatment growing quickly. Precigen (PGEN) has its first approved drug treating a rare airway disease and the launch is running well ahead of expectations. Starling Oncology (STLN) is the former Oncology Institute and it runs cancer clinics in local communities rather than hospitals.
FatPipe (FATN) is a small software company that keeps corporate networks running securely. National Energy Services Reunited (NESR) provides oil and gas infrastructure services across the Middle East. Cullinan Therapeutics (CGEM) is developing treatments that redirect the immune system’s own T cells to attack the cells causing autoimmune disease.
I have positions in all these names and I would like to add to all of them. This is where the patience comes in. I’m waiting for the right chart patterns to develop and I’m also cognizant of when there may be some other catalyst that could impact them. For example, Xeris is holding a webinar on September 9 to discuss study design, the full clinical development plan and the commercial opportunity with an endocrinology key opinion leader for a major drug under development. That event will influence my positioning.
Patience Is Everything Right Now
The important issue is that I’m not looking for these stocks to trade straight up just because they had good news. I’m not going to chase an extended chart but because I’m confident about the fundamentals, it gives me greater confidence to be aggressive on pullbacks to support levels.
On Tuesday, I added to Cullinan because it is exhibiting signs of breaking out of a trading range and it has a heavy schedule of news events on the horizon. Alternatively I’m looking for a deeper pullback in Precigen so I can ramp up exposure.
I’m not feeling especially bullish about the indices right now but that isn’t my focus. My focus is finding more entry points for the stocks I like, and if the market weakens and takes some of them lower I will be ready to move.
At the time of publication, DePorre was long XERS, PGEN, STLN, FATN, NESR CGEM.
