Performance recap
- 2021: -36%
- 2022: -76% (Found Saul’s amazing board Jan 2022, started this style of investing in May 2022)
- 2023: +80%
- 2024: +104%
- 2025 through Jan: +14%
Current portfolio holdings:
- HIMS - 22%
- ALAB - 8%
- NVDA - 7%
- TARS - 7%
- DCTH - 6%
- BSEM - 6%
- AFRM - 6%
- INOD - 5%
- SEZL - 5%
- APP - 5%
- TGTX - 5%
- NU - 5%
- CRDO -4%
- ANIP - 4%
- TQQQ - 4%
- KRYS - 4%
- ADMA - 4%
Portfolio is currently 107% long.
Changes this month
- New positions: CRDO, KRYS, INOD, APP
- Sold: ARQT, ROOT, ECOR, OSCR, REAX, LFMD, MU
A little background on why I made all these changes:
Following on Saul’s footsteps, I am trying to build my own set of rules that I call my methodology and trying to align my purchases to it. I know it will change, as it has many times over the last few months but I believe if I can stick to one process, in the long run things should work out.
So let me explain a little bit about my methodology and all my purchases will start to make sense. I assign a score to each of the businesses that is purely measuring what I call quality of business.
The formula is quite simple: NTM Growth + FCF Margin Rate - Dilution
One nuance to the formula is if FCF is higher than Growth, I take the difference and subtract half the points from the overall score. Examples of such businesses are ZS, DDOG, CRWD. The reason for this adjustment is lower growth rates usually don’t get high multiples and shows these businesses are very mature in their profitability curve.
Note for NTM growth rate, I use analyst expectation and then add half the percent of growth analysts were wrong about in predicting ltm growth rate. So almost in all cases, my ntm growth number is higher than the analyst estimates.
Here is my methodology quality score for a few businesses I track:
As you can see, all the businesses in green I own and they are very aligned with being at the top of my methodology score list. The ones I am eyeing are BYRN, RDDT, DUOL PLTR, MELI, MNDY.
Ideally I would like to own businesses that are scoring 60 or higher.
A few things I avoid:
- As Saul says, I am trying to put less emphasis on valuation. As you can see, this is a quality score and does not take into account valuation
- NTM Growth below 25%
- FCF deep in red territory, like 80% negative
- Gross margins below 20%
- Analyst estimates coming down in the last 12 months
- Ideally avoid cyclicals
So with that background, let me dive into the businesses I own.
Why I own what I own:
- HIMS - 22%
- The GLP1 story is still intact. Knowing that as a society we are still getting obese(sad), this business is here to stay. They are going to get into menopause related medication and treatments soon, that’s a big business. And their legacy business of hair loss and ED is still growing very well. If tele-health is the future, I see no reason why HIMS can’t be the face of it.
- All this to say, if growth stays intact for another 2-3 years, the improving profitability margins are going to make this business look very very cheap.
- ALAB - 8%
- The highest score in my methodology by far currently. If they execute, 100% revenue growth over the next 12 months should be achievable. And why would you not own a business that is growing at potentially 100% with 40%+ margins. Doesn’t happen very often in the stock market. So I am planning to ride the wave till I see material growth deterioration.
- NVDA - 7%
- I think this whole tornado of DeepSeek information has created a buying opportunity in Nvidia. It still has the best in class chips product with newer models hitting the market. I still feel Nvidia can create a iPhone like cycle for a few years where all the hyper scalers are forced to upgrade hardware to keep up with the fight for first place in this AI race
- TARS - 7%
- Their primary product XDEMVY kills mites in your eye lashes.
- Only FDA approved product and is just beginning to do commercial launch.
- Since it’s early commercialization stage, I expect them to grow rapidly in the next 12 to 24 months. They are close to getting to FCF+ and I feel the current high multiples will hold if they can get there soon.
- DCTH - 6%
- Delcath Systems. is an interventional oncology company focused on the treatment of primary and metastatic cancers of the liver.
- They have two products in this space and are at an early stages of commercialization.
- Analysts expect them to deliver 110%+ NTM revenue and the FCF numbers should turn position in the next 12 months. So if they deliver, I see a lot of potential in this name in the next 12 to 24 months.
- BSEM - 6%
- As expected, LCD got pushed back to mid-april now, which means q1 results will have full medicare coverage.
- They have the better product and the clinical trials should show that. And the nasdaq listing should help which should be out over the next couple of months
- AFRM - 6%
- Affirm is trying to capture a big piece of the growing “buy now pay later” market. It’s a steady eddy in my portfolio and I still feel it is undervalued. I will keep this a mid size on my account for now and let it do it’s thing.
- INOD - 5%
- This is a play on AI and LLM adoption curve. Initially introduced by wpr101 and then later I saw it in Purst04’s portfolio. Ran the numbers and it did quite well on my methodology quality score. The stock has been consolidating since last quarter’s blowout earnings. The fact they are profitable and probably has room to optimize, got me excited and I am in with a starter position.
- SEZL - 5%
- The numbers they are putting up are quite impressive. They are in the same space as Affirm, buy now pay later space.
- I have a starter position based on just high revenue growth and the fact they are already FCF+
- APP - 5%
- I jumped back into APP after it has been consolidating over a month period. I still think they have room to run. Although highly profitable, they are still growing at a rapid rate.
- TGTX - 5%
- TG Therapeutics, Inc., focuses on the acquisition, development, and commercialization of novel treatments for B-cell mediated diseases. Successful launch of their flagship drug BRIUMVI, for patients with relapsing forms of multiple sclerosis. Robust pipeline in place - new indications for BRIUMVI and allogeneic off-the-shelf CD19 CAR-T for autoimmune diseases. Hyper-growth still intact with high margins and very healthy free cash flow.
- NU - 5%
- Lots have been covered about this great business in this forum. So I am not going to get into details.
- Leader in LATAM Banking. Very well run business. Market provided an opportunity to get in and I took advantage of the situation. I expect a steady eddy out of this one.
- CRDO -4%
- Another business in the AI/LLM optimization play. Similar offerings to ALAB but their recent quarter results were stellar. Scored very high in my methodology and with the DeepSeek new opportunity, I got in. Hoping to see great execution from this business going forward.
- ANIP - 4%
- I have owned this pharmaceutical business with success in Q4 2023. Then growth slowed and I exited luckily in time. Now growth is back with a potential of 30% revenue growth in the next 12 months. Also, the stock price has been coiling for over 9 months. Very AFRM like chart. So if they execute I expect a nice pop for a few quarters. They are currently at 10% FCF margin with room for improvement
- TQQQ - 4%
- I am trying to see if I can make TQQQ as part of my long term portfolio. I have read enough papers to know this is a high risk strategy but it works. You just have to have an appetite for 70-90% drawdowns. I am not going to make this more than 10% of my portfolio but this is a grand experiment. For now, of the 17 positions I own, it is already sitting at number 12 as per performance. If it hangs out in the top half of my holdings in terms of performance, I will gladly keep it.
- KRYS - 4%
- New entry for me. Scored extremely well as per methodology. They are a player in the genetic and rare diseases category. The company’s pipeline is impressive and their commercialization has seen good success.I expect Krystal Biotech to diversify into many drugs and have a long run. Obviously, execution will be key.
- It’s not cheap but it’s highly profitable and is growing rapidly. So I am in with a starter position.
- ADMA - 4%
- ADMA Biologics is uniquely positioned to capture a large portion of the IG market
- The big issue is LTM revenue growth is 63% and ntm prediction by analysts is 14%. Huge disconnect.
- Well the CEO came out during the JP Morgan conference and pretty much told us that they are taking the same conservative approach to guidance as last year. And last year they beat analyst expectations by 30%.
- Another important point is ADMA has hit a 40% FCF two quarters ago. If that is their high number and they can trend more towards a 30/40% FCF, then the market will give a higher multiple to the business.
Why I sold these positions
ARQT, ROOT, ECOR, OSCR, REAX, LFMD, MU
In a nutshell, I took out all these positions because it does not fit with the style of investing I am trying to pursue. Either they don’t score high on my methodology or they have one of the “i want to avoid” traits. I am sure some of them will do great and make me look stupid but I am committed to sticking to a process. Hence the exit.
Wrapping Up
January with all it’s ups and downs managed to provide a good springboard for my portfolio. Extremely fortunate to come out ahead of the indexes in the initial showing. Lots more game to be played in 2025. Now shifting focus to earnings season. Last quarter, the earnings season helped propel my portfolio quite a bit. I am hoping for similar results this time around too. Let’s see how things play out. That’s a wrap for my January update.
Always a privilege to post on this board. Thank you for reading. Cheers!