Market valuation as of Wednesday, May 4, 10:30 p.m.
In our May 2 market letter, we said “asset preservation should be the main focus right now” and listed four high-quality speculative stocks that are trading well 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 would only accumulate them using our normal buy strategy, i.e. “Buy 40% of a particular stock NOW , and buy 30% more for every 20% drop from your original value. Purchase price”… to guarantee advantageous purchase prices.
On Monday night, we saw the DOW Tailing, on high volume, which was the selling point we were looking for. And we sent the following market commentary to our followers at 1:07 a.m. – Tuesday morning:
“We would buy…. 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 buy strategy below, for the more expensive ones.
Today we bought Reached (UPST) $93.57 to $90.14, Design Therapeutics (DSGN) $12.52 to $11.77 and Altimmune (ALT) $4.67 to $4.44, $4.47 and 4.50 $. The DOW rallied strongly and closed 932 points higher at 34061.06.
We have 2 actions of the week – Design therapy (DSGN) and Upstart Holdings (UPST) which was a previous Stock of The Week Pick on Wednesday April 20 at $80.84 per share.
COURSE #1- THERAPEUTIC DESIGN (DSGN) $12.52. It’s a very interesting speculative value…it’s a pre-clinical stage biopharmaceutical company. The company was founded to address the known single-gene causes of a range of inherited degenerative diseases, and just 2 years after its launch, it began a clinical trial for DT-216 GeneTAC (accelerated designation granted) for patients with Friedreich’s ataxia and has promising preclinical results for a GeneTAC 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 chairman Pratik Shaw bought $500,000 worth of company stock at $20/share during the last 12 months. And RBC Capital launched an outperformance rating and $30 price target on May 2. We bought the stock.
STOCK #2 – UPSSTART PARTICIPATIONS $93.57. This stock had already been chosen as 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 consumer loan process. Typically, when financial institutions assess potential borrowers, they consider their repayment history, income, assets, and current debts, which are measures partially represented by a FICO score…and may take days or weeks. But when Upstart’s algorithm assesses a borrower, it searches 1,600 data points to determine their creditworthiness and provides an instant decision 70% of the time.
The company makes its money by lending the algorithm to its banking partners and receiving a commission each time it issues a loan. The company ventured into secured auto loans in late 2020 and in 2021 it acquired software company Prodigy and combined its sales platform with its lending system to create a software tool 2 in 1 for car dealers, Upstart Auto Retail, which dealers can now use to both sell cars to customers and offer them financing at the same time. Upstart considers the auto loan opportunity to be seven times larger than the unsecured lending segment.
Upstart went public with an IPO in December 2020 at $20 per share. It then climbed 2,000% to $400 in October 2021 and then started its steep decline at around $75 in January this year. We consider it a solid growth stock sold at a bargain price. Finance.yahoo.com shows he earned $1.43 per share and has a PE ratio of 55.69. They have 84.65 million shares outstanding and a free float of 72.15 million. Shares sold short are 13.82 million, or 18.87% of free float…a bullish factor if stocks start to rally again. Even though we consider it at a bargain price, we would only invest 50% of our allocated funds now and keep the rest in reserve to buy again if it drops to $50.
Joe Cotton has won three national stock picking contests with annual percentage gains over 96%. Its winner of the 2020 Wall Street Best Stocks competition was Inovio Pharmaceuticals (Symbol INO) with a 742% 1-year return.
This article is not investment advice and should not be construed as investment advice. For investment advice, consult a Registered Investment Advisor or Certified Financial Planner. Joe Cotton’s website is www.cottonstocks.net. Joseph W. Cotton of NKY is the 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 registered investment representative of Fidelity Investments. Contact him at [email protected]