Today, I am (1) closing out a bonus position I recommended earlier this year in Celldex Therapeutics (Nasdaq: CLDX); (2) increasing the buy limit on my latest pick Diebold Nixdorf (NYSE: DBD); and, (3) changing my rating on Ambarella (Nasdaq: AMBA) to ‘Hold’. 

I explain the rationale for these moves in further detail below, but I am also concerned about the current macro dynamic of this market.  The combined impact of recent new highs in the major indexes, the notion that the Federal Reserve may raise interest rates in September, along with ramping up of election politics are three significant variables that are likely to give investors reasons to evaluate their portfolios.  Re-evaluation often means that money will move from one area to the other with underperforming stocks likely gettin sold aggressively. Read on for further details.

Celldex Fails the Test of Time and Money

I’ve had a hot and cold relationship with Celldex, a development stage biotech company focusing on immune system mediated cancer treatments.  I first recommended buying CLDX in October 2015 and sold it two months later for a quick 21% profit.  I recommended the stock again on April 2016 as a bonus pick citing that the stock was cheap after it was aggressively sold off when its leading drug candidate, Rintega, a vaccine for brain cancer failed in a key clinical trial.  At that time I found the stock especially interesting because the CFO, who seemed to have a knack for buying the stock after other price dips, was buying.

But since then the stock has done nothing. And frankly, I am concerned because the company has multiple drug candidates at different stages of development but may not have enough money or time to make enough progress during this challenging period in health care.  Money is drying up due to funding cuts throughout the system and those companies that are not well funded are going to face a very difficult environment, especially if the Federal Reserve actually raises interest rates before the election.

The stock popped up on its most recent earnings report which was seen as positive initially by investors, as losses were less than expected. Yet, the stock sold off a few days later.  This is not a good sign as it suggests a lack of sponsorship.  A look the balance sheet also reveals some warning signs.  The company has $20 million in current liabilities offset by only $32 million in cash and $1 million in accounts receivables. That’s just too close for comfort.  My judgment at this time is that unless something extraordinary happens, Celldex will continue to struggle and may become insolvent at some point in the future without raising money through a stock sale which would dilute current investor equity. And given its big-time failure with Rintega, the company has some uphill climbing to do in the P.R. wars, so it’s time to put this one in the sell bin.  The stock was trading around $4.00 on April 25.  It closed at $3.95 on August 19.

Diebold Nixdorf Gets a Very Quick Upgrade

I recommended shares of Diebold Nixdorf Inc. (NYSE: DBD) in the most recent issue of Breakthrough Tech Profits (To get the full story and receive an options recommendation, read the entire article here).. In case you missed the article, here is a quick capsule: Diebold bought Germany’s Wincor Nixdorf for $1.8 billion in a deal that closed on August 16, 2016.  The combined company is now the world’s largest ATM manufacturer and owns some 40% of the market.  But the big story is that the deal gives Diebold access to the global self-service kiosk market at a time when the growth of that sector is expected to accelerate. 

The stock delivered a nice pop on the first day out of the gate, so I’m increasing the buy limit to $32 since the stock closed above the initial buy limit of $28.  Nothing in my view has changed in the stock other than since the merger with Wincor is off and running; money managers are waking up and smelling the coffee after analysts turned bullish on the stock.  We may have beaten them to the punch, which is always nice.

Buy Diebold Nixdorf up to $32.

Disclosure:  I own shares in Diebold Nixdorf.

Raise the Sell Stop on Ambarella and Wait for Earnings

Ambarella, a global leader in high speed high resolution video processing semiconductors, is up 23% since I initially recommended it in the June issue of Breakthrough Tech Profits and in my follow up article on July 18.  The stock remains strong and it could still move higher in the short term. But it has come a long way in a short period of time and there is an earnings report to be released on September 1, which has some fairly high expectations built into it.  I still like the company but I don’t want to chase the stock at this point.

The average estimate is for earnings of 50 cents per share, but the range is for anywhere between 29 and 70 cents per share.  The company beat reduced expectations in the prior quarter and again gave fairly cautious guidance, which is prudent as managements that under-promise tend to over-perform.

Hold Ambarella and raise the Sell Stop to $58.

Disclosure: I own shares in Ambarella

Portfolio Summary

Recent Changes:

Diebold Inc. (NYSE: DBD). Raising Buy Limit: Buy up to $32.  New Pick recommended 8/18/2016 at $28.05.   8/19/2016 closing price $28.98.  Dr. Duarte owns shares in DBD.

Diebold Inc. February 2017 $30 Call Option (DBD_021717C30) – New Pick added 8/18/16:  Buy up to $2.  Recommended 8/18/2016.  Bought 8/19/2016 at $1.40.   8/19/2016 closing price $1.75. 

Ambarella (NSDQ: AMBA) – Hold; Raise Sell Stop to $58. Bought 6/16/16 at $52.77.  8/19/16 closing price $65.01.  Dr. Duarte owns shares in AMBA.

Sell Celldex Therapeutics (CLDX) – 8/19/16 closing price $3.95.  Dr. Duarte will be selling his shares in CLDX.