Market Assessment as of Wednesday May 4, 10:30 p.m.
In our Market Letter of May 2, we said that “Preservation Of Assets Should Be The Primary Objective At This Time” and we gave a list of four High Quality Speculative Stocks trading way off their highs….Shopify (SHOP) 426.82, Snowflake (SNOW) 171.44, Salesforce (CRM) 175.94 and Intellia (NTLA) 49.03. We said we liked them and thought they were cheap, but that we would only be accumulating them using our Normal Buying Strategy ie., “Buy 40% of a particular stock NOW, and Buy 30% more on each 20% decline from your original Buy Price”…to ensure great buy prices.
On Monday night we saw that on the DOW had made a Tail, on strong volume, which was the selling climax we were looking for. And we sent out the following Market Commentary to our subscribers at 1:07 a.m. – Tuesday morning:
“We would be Buying…. Facebook (FB) 211.13; Netflix (NFLX) 199.146; Shopify (SHOP) 452.98;Salesforce (CRM) 177.58; Snowflake (SNOW) 177.76; Intellia (NTLA) 51.61; Iovance (IOVA) 16.39; Altimmune (ALT) 4.72; Ventyx (VTYX) 16.11 and OvsEva (OBSV) 1.52…..Using our Normal Buying Strategy below, for the high priced ones.”
Today we bought Upstart (UPST) $93.57 at $90.14, Design Therapeutics (DSGN) $12.52 at $11.77 and Altimmune (ALT) $4.67 at $4.44, $4.47 and $4.50. The DOW rallied strongly and closed up 932 points at 34061.06.
We have 2 Stocks Of The Week – Design Therapeutics (DSGN) and Upstart Holdings (UPST) which was a previous Stock of The Week Pick on Wednesday April 20 at $80.84 a share.
STOCKS #1- DESIGN THERAPEUTICS (DSGN) $12.52. This is an interesting very speculative stock… it is a pre-clinical stage biopharmaceutical company. The company was founded to address the known monogenic causes of a range of inherited degenerative diseases, and just 2 years from launch, it has begun a clinical trial for DT-216 GeneTAC (granted fast track designation) for patients with Friedreich Ataxia and has promising pre-clinical results for a GeneTAC a molecule to treat Fuchs endothelial corneal dystrophy. The company had $384.1 Million in Cash and Investments at the end of 2021. Co-Founder and Executive Chairperson, Pratik Shaw bought $500,000 worth of the company stock at $20/Share in the last 12 months. And RBC Capital initiated a Outperform Rating and $30 price target on May 2nd. We bought the stock.
STOCK #2 – UPSTART HOLDINGS $93.57. This stock was previously picked as a Stock Of The Week on April 20 at $80.84. We bought the stock on 5/4/22 at 90.14.
Upstart is an artificial intelligence (AI) company that has built an algorithm to improve the process of consumer loans. Typically, when financial institutions assess potential borrowers, they consider their repayment history, income, assets, and current debts, which are metrics that are partly represented by a FICO score…and can take days or weeks. But when Upstart’s algorithm assesses a borrower, it looks are 1,600 data points to determine creditworthiness, and delivers an instant decision 70% of the time.
The company makes its money by lending the algorithm to its banking partners and receiving a fee each time it originates a loan. The company ventured into secured car loans in late 2020 and in 2021 it acquired software company Prodigy and combined their sales platform with its loan origination system to create a 2-in-1 software tool for car dealers, Upstart Auto Retail, which dealerships can now use to both sell cars to customers and offer them financing at the same time. Upstart views the automotive loan opportunity as seven times larger than the unsecured loan segment.
Upstart went public with an IPO in December 2020 at $20 per share. It then soared 2,000% to $400 in October of 2021 and then began its steep decline to about $75 in January of this year. We consider it to be a solid growth stock selling at a bargain price. Finance.yahoo.com shows it earned $1.43 per share and has a PE Ratio of 55.69. They show 84.65 million shares outstanding and a float of 72.15 Million. Shares sold short are 13.82 million, which is 18.87% of the float…a bullish factor if the stocks begin to move up again. Even though we consider it at a bargain price level, we would only invest 50% of our allocated funds now and would hold the rest in reserve to buy again if it drops down to $50.
Joe Cotton has won three National Stock Picking Contests with yearly percentage gains in excess of 96%. His 2020 Wall Street’s Best stock contest winner was Inovio Pharmaceuticals (Symbol INO) with a 742% 1-Year return.
This article is not investment advice, nor is it in any way to be construed as investment advice. For Investment Advice consult a Registered Investment Advisor or a Certified Financial Planner. Joe Cotton’s website is www.cottonstocks.net. NKY’s Joseph W. Cotton is publisher of the market newsletter, Cotton’s Technically Speaking. He is a graduate of Xavier University, a former bank manager and credit analyst, and a former Fidelity Investments registered investment representative. Contact him at cottonstocks@hotmail.com
