Ryshab - July 2024 Portfolio Review

Investment Analysis Clubs Saul’s Investing Discussions
1

Performance recap

  • 2021: -35%
  • 2022: -76% (Found Saul’s amazing board Jan 2022, started this style of investing in Mar 2022)
  • 2023: +80%
  • 2024 through July: +40%

Current portfolio holdings

  • HIMS - 19%
  • TMDX - 11%
  • ELF - 11%
  • MNDY - 9%
  • ADMA - 7%
  • MIRM - 7%
  • ECOR - 6%
  • CSTL - 5%
  • ZS - 5%
  • ROOT - 4%
  • BSEM - 4%
  • AFRM - 4%
  • DUOL - 4%
  • LFMD - 4%
  • POWL - 4%
  • FENC - 4%
  • NU - 3%
  • APP - 3%
  • CELH - 3%
  • ASPN - 3%

Changes this month

  • New positions ASPN, POWL
  • Bumped FENC, DUOL, CELH
  • Trimmed HIMS, MNDY, TMDX, MIRM, ADMA

Why I hold these positions

  • HIMS (19%)

    • Numbers: Rev Growth: LTM 46%, Gross Margins: 82%, Free Cash Flow: 5%
    • My Expectation: I expect 40% NTM and 303 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 1% avg. beat, NTM revenue analyst consensus wrong by: 20%
    • Commentary: I believe the management team continues to execute their strategy very well. The GLP-1 drug will have a significant impact on the numbers going forward. The valuation is still reasonable though the stock has run up quite a lot. I will be happy to keep trimming this back to 20% if it continues to perform.

  • TMDX (11%)

    • Numbers: Rev Growth: LTM 118%, Gross Margins: 61%, Free Cash Flow: -57%
    • My Expectation: I expect 78% NTM and 131 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 18% avg. beat, NTM revenue analyst consensus wrong by: 64%
    • Commentary: Great execution quarter after quarter and proven now they can get ahead of the logistical challenges and operate new businesses to help their primary organ transplant operations. They went FCF positive for the first time this quarter and in the commentary sounded very confident to improve the margins over the next 12 to 18 months. They plan to purchase more planes which suggest the growth curve should be intact in the near future.

  • ELF (11%)

    • Numbers: Rev Growth: LTM 71%, Gross Margins: 68%, Free Cash Flow: 6%
    • My Expectation: I expect 42% NTM and 324 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 11% avg. beat, NTM revenue analyst consensus wrong by: 57%
    • Commentary: ELF has executed very well quarter after quarter. The growth is phenomenal for a business that is already FCF positive. I am a little worried about the FCF% shrinking, would love for it to stabilize next quarter. But at +70% growth, it allows for a some room to be wrong.

  • MNDY (9%)

    • Numbers: Rev Growth: LTM 34%, Gross Margins: 89%, Free Cash Flow: 32%
    • My Expectation: I expect 29% NTM and 234 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 3% avg. beat, NTM revenue analyst consensus wrong by: 5%
    • Commentary: This is a well oiled machine now. Growth has gotten pretty steady in the low 30% with almost 90% margins and 30% fcf. These are elite numbers and the fcf numbers continues to climb showing the operating leverage they posses. Valuation is pretty much in line with other SaaS companies now. Don’t expect any wild moves on this one but I feel the market will reward this business 25-30% returns if they keep up with what they are doing.

  • ADMA (7%)

    • Numbers: Rev Growth: LTM 44%, Gross Margins: 48%, Free Cash Flow: 6%
    • My Expectation: I expect 42% NTM and 90 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 5% avg. beat, NTM revenue analyst consensus wrong by: 36%
    • Commentary: This business is hitting on all cylinders and markets have taken notice too. The stock run up does worry me, as they have to blowout earnings or there will be some short term turbulence. What I am really looking for is - can they keep up with the 8% rev. guide raise and improve their margins/fcf (lot of room there to gain ground). Their next phase of products doesn’t kick in till back half of 2025. So the operating leverage and continued execution will be key to keep the train going.

  • MIRM (7%)

    • Numbers: Rev Growth: LTM 119%, Gross Margins: 74%, Free Cash Flow: -10%
    • My Expectation: I expect 75% NTM and 77 mil. next qtr revenue
    • Market Sentiment: 3 out of 4 earnings beat with 11% avg. beat, NTM revenue analyst consensus lowered by 4%
    • Commentary: The market has caught up with this story but the story is still growing at 100%+. So this has less room for error. Due to favorable interim data from the VANTAGE study on liver disease treatment and takeover talks, the stock has run up quite a bit. I trimmed my position but will be closely looking at earning this quarter for renewed momentum.

  • ECOR (6%)

    • Numbers: Rev Growth: LTM 96%, Gross Margins: 84%, Free Cash Flow: -62%
    • My Expectation: I expect 46% NTM and 5.86 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 9% avg. beat, NTM revenue analyst consensus wrong by: 18%
    • Commentary: Tiny tiny company but executing well. Their new direct to consumer product lines of Truvaga and Tac-stim has done quite well since launch. Their core product gammaCore is still growing rapidly. Given they have more product launches in the pipeline and international expansion happening, the execution will be the key. The demand and tam is there if they can perform.

  • CSTL (5%)

    • Numbers: Rev Growth: LTM 74%, Gross Margins: 77%, Free Cash Flow: 0%
    • My Expectation: I expect 37% NTM and 76 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 15% avg. beat, NTM revenue analyst consensus wrong by: 19%
    • Commentary: This business have been growing quite fast and are about to go fcf positive. They also raised their guidance by 10%. They have a varied set of products with more coming in back half of 2025. Management seems cautious but their performance seems better than the commentary. I think if they can just keep executing the way they have, the market is going to wake up and reward them with a multiple expansion.

  • ZS (5%)

    • Numbers: Rev Growth: LTM 32%, Gross Margins: 78%, Free Cash Flow: 27%
    • My Expectation: I expect 30% NTM and 585 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 4% avg. beat, NTM revenue analyst consensus wrong by: 5%
    • Commentary: There is little surprise with Zscaler when it comes to execution. The valuation is getting close to other SaaS companies. So if everything goes boringly well, we are looking at 25% ish performance. I think that is quite great for something that you don’t have to worry about too much. I might get out of this if there is a better opportunity or if I need to raise cash.

  • ROOT (4%)

    • Numbers: Rev Growth: LTM 263%, Gross Margins: 34%, Free Cash Flow: 10%
    • My Expectation: I expect 73% NTM and 290 mil. next qtr revenue
    • Market Sentiment: 3 out of 4 earnings beat with 16% avg. beat, NTM revenue analyst consensus wrong by: 200%+
    • Commentary: This is clearly gone parabolic in terms of revenue growth and stock price. They just went FCF positive and seems like there is still some robust growth ahead. The key will be seeing their margins improve and if they are able to retain these customers when the insurance is renewable in 6-9 months time. This coming quarter has seasonality built into it where the numbers are expected to be softer (commentary by management), so I am looking for operational improvement for now.

  • BSEM (4%)

    • Numbers: Rev Growth: LTM 7134%, Gross Margins: 95%, Free Cash Flow: -4%
    • My Expectation: I have no clue so I modeled a 40% NTM and 44 mil. next qtr revenue
    • Market Sentiment: 3 out of 4 earnings beat with 80% avg. beat, NTM revenue analyst consensus wrong by: 1400% (1 analyst)
    • Commentary: Very speculative play - small company with significant upside. They clearly have started to see product market penetration. QoQ 266% rev. growth and 229% beat is a clear signal of explosive growth underway. Let’s see if they can sustain. If they execute, the business will look ridiculously cheap in 2-4 quarters. But I expect some missteps as they will have to grow all parts of operations parabolically.

  • AFRM (4%)

    • Numbers: Rev Growth: LTM 51%, Gross Margins: 85%, Free Cash Flow: 13%
    • My Expectation: I expect 37% NTM and 642 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 9% avg. beat, NTM revenue analyst consensus wrong by: 20%
    • Commentary: This business has been executing for a 5 quarters pretty well now. The stock has consolidated all of 2024. I believe the stock is undervalued and should they keep executing the stock should be able to reach 2023 December prices - which is a double from here. Let’s see if that happens and we will go from there.

  • DUOL (4%)

    • Numbers: Rev Growth: LTM 45%, Gross Margins: 72%, Free Cash Flow: 35%
    • My Expectation: I expect 36% NTM and 180 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 2% avg. beat, NTM revenue analyst consensus wrong by: 15%
    • Commentary: This business has some elite level numbers but is valued in line with my expectations. So I am looking for few surprises from this company and just boring execution. Key interest for me is how they integrate AI in their new product DuolingoMax. That could be the next leg of their growth curve but meaningful product rollout is still one year away, as per management.

  • LFMD (4%)

    • Numbers: Rev Growth: LTM 33%, Gross Margins: 85%, Free Cash Flow: 10%
    • My Expectation: I expect 33% NTM and 50 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 3% avg. beat, NTM revenue analyst consensus wrong by: 21%
    • Commentary: This is another play on the GLP-1 drug. They have the tailwind of demand right now. I expect this business to keep performing over the next few quarters. So far their execution has been pretty good. And I am impressed by the amount of operating leverage they have created over the last 4 quarters

  • POWL (4%)

    • Numbers: Rev Growth: LTM 50%, Gross Margins: 28%, Free Cash Flow: 20%
    • My Expectation: I expect 47% NTM and 326 mil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 16% avg. beat, NTM revenue analyst consensus wrong by: 33%
    • Commentary: This is a new addition to my portfolio. Their electrical equipment business in Oil and Gas, Petrochemical and Utility sectors is seeing great traction. The business has hit explosive growth curve over the last few quarters. Over the last two quarters their average revenue beat was 25%. I am not sure how to value this kind of business but I am counting on them to stay on this growth curve for a while. (based on the commentary coming from management and execution)

  • FENC (4%)

    • Numbers: Rev Growth: LTM 1409%, Gross Margins: 98%, Free Cash Flow: 61%
    • My Expectation: I expect 72% NTM and 11.21 mil. next qtr revenue
    • Market Sentiment: 3 out of 4 earnings beat with 40% avg. beat, NTM revenue analyst consensus wrong by: 47%
    • Commentary: These numbers don’t make any sense, it will take about 2-3 quarters for the numbers to stabilize. The numbers are super bloated as they have secured a commercialization deal with Norgine for Europe launch. They actually had a miss in revenue for last quarter and management said it was a one time thing. So I will be closely watching if they can get back on track in the next 2 quarters. The downside is what I will scrutinize closely because if they execute for a couple of quarters, the upside will take care of itself. The key will be 11 mil. revenue growth from product alone, excluding the Norgine money that will flow in for the next few quarters.

  • NU (3%)

    • Numbers: Rev Growth: LTM 84%, Gross Margins: 70%, Free Cash Flow: 14%
    • My Expectation: I expect 42% NTM and 2.9 Bil next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 13% avg. beat, NTM revenue analyst consensus wrong by: 19%
    • Commentary: A lot has been covered on this great business in this forum already. I am really impressed by the growth and operating leverage at this scale. So I have dipped my toe while I learn more about this business.

  • APP (3%)

    • Numbers: Rev Growth: LTM 48%, Gross Margins: 71%, Free Cash Flow: 32%
    • My Expectation: I expect 38% NTM and 1.12 Bil. next qtr revenue
    • Market Sentiment: 4 out of 4 earnings beat with 5% avg. beat, NTM revenue analyst consensus wrong by: 37%
    • Commentary: This is same as NU, a FOMO play for me. The business has been performing excellently and it’s well covered in this forum. This recent pullback gave me an opportunity to dip my toe, so I am in.

  • CELH (3%)

    • Numbers: Rev Growth: LTM 37%, Gross Margins: 51%, Free Cash Flow: 19%
    • My Expectation: I expect 34% NTM and 447 mil. next qtr revenue
    • Market Sentiment: 3 out of 4 earnings beat with 1% avg. beat, NTM revenue analyst consensus wrong by: 11%
    • Commentary: Celsius has underperformed since I entered the stock. That’s the sad part. The beauty of it is because of underperformance, it has become my smallest holding. I added a little to this around $45. Really eager to see next quarter’s results. If they have another hick up, I might pack up here.

  • ASPN (3%)

    • Numbers: Rev Growth: LTM 107%, Gross Margins: 37%, Free Cash Flow: -65%
    • My Expectation: I expect 95% NTM and 109 mil. next qtr revenue
    • Market Sentiment: 3 out of 4 earnings beat with 1% avg. beat, NTM revenue analyst consensus wrong by: 11%
    • Commentary: This is a speculative play for me and a new position. Their Pyrothin product has been getting a lot of market traction and growth seems to have entered explosive territory. I am looking forward to their next quarter earnings as a blowout will solidify some of my assumptions. THE FCF has been improving rapidly, though they are a few quarters away from becoming a positive cash flow business.

Wrapping Up

My portfolio is currently 120% long, taken an additional 6% leverage this month. This is the most leverage I am comfortable with. So from here on, have to ride out any more market correction. Would like to get back to ideally 90% long and 10% cash. I haven’t been able to figure out which positions to let go yet. So I will wait for new information in the upcoming earnings season before making a decision. Ideally down from 20 to 12 stocks or fewer. Truly appreciate the opportunity to post here. Cheers and best to all.

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