Ryshab's Jan 2025 Portfolio Update

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!

65 Likes

NIce report. Sometime in the future I would like to understand bit more about the metric relationships driving your numerical quality ranking score process.

I have looked a INOD, however, two issues have kept my on the sidelines. The concentration of revenue in a very few customers and the tendency for these customers to terminate the relationship with INOD when the project is completed.

Have you ignored these issues, or has your investigations confirmed these risks are over blown.?

Gray

5 Likes

Great writeup. I had a couple questions on some individual stocks there, and then one overall question on your approach.


On DCTH,

Analysts expect them to deliver 110%+ NTM revenue and the FCF numbers should turn position in the next 12 months.

Do you have any sense of how Delcath is able be FCF positive this early in their trajectory? Asking because typically these types of therapeutics usually get profitable much later in their journey as a medical company. What I am trying to figure out is if they are just efficient as a business, or have some extra innovation with their R&D that makes them more profitable than other companies.


On BSEM,

And the nasdaq listing should help which should be out over the next couple of months

The numbers looks really good on this one especially for such a small market cap. I was wondering why this company did not show up in my typical screens and it looks like it got filtered out because it is on the pink sheets. Do you know why they listed on the pink sheets first as opposed to a traditional IPO, or even SPAC route?

I am guessing if they get approved to list on the Nasdaq this company could rise significantly. How likely do you think that Nasdaq approval is to go through?


I am curious on the formula,

NTM Growth + FCF Margin Rate - Dilution

Why do you have dilution as part of the formula? Typically I am viewing excessive dilution as negative, but I guess in medical companies it is more common to use dilution as a way to continue funding the business?

Some companies like APP are committing to no-dilution buy using stock buy backs to pay for the employees’ pay packages. Would you just be plugging in a 0 for a company like APP? And then medical companies which may dilute over the course of the year would receive a minus in this category?

9 Likes

Thanks for sharing!

Regarding KRYS

Although this company does have a packed pipeline as listed on the IR website, the trial studies are all at too early stage, with no Phase 3 studies. So it’s likely these products in the pipeline won’t make any impact on revenue in the next 2 years.

The only commercialized drug, Vyjuvek, appears to be an extraordinary innovation, but it targets to a market that is too niche IMHO (only a few thousands patients in the US). I’m guessing Vyjuvek may quickly reach peak sales in the US and then stabilize on revenue. Although they can likely get approval in EU / Japan soon as well, the revenue out of US will be typically way smaller due to lower medicine prices as well as insurance coverages in those countries.

So, I’m afraid this stock may lack catalysts in 2025 to drive the share price up.

Luffy

8 Likes

Thanks graydrake, wpr101 and monkeydluffy for your feedback. I will try and answer each of you to the best of my knowledge.

Blockquote
I have looked a INOD, however, two issues have kept my on the sidelines. The concentration of revenue in a very few customers and the tendency for these customers to terminate the relationship with INOD when the project is completed.
Have you ignored these issues, or has your investigations confirmed these risks are over blown.?

I think you are correct that they do have significant customer concentration. Currently I believe it’s sitting at 59%. However, they are still small business and growing rapidly. They added 3 new big tech customers in 2024 whose contracts should scale up in 2025. And I expect them to land more contracts this year.

But no doubt this is a risk to the business currently.

Blockquote
Do you have any sense of how Delcath is able be FCF positive this early in their trajectory?

You are correct this could be optimistic to think they will turn cash flow positive in the next 12 months. However, their revenue should double if they execute and current quarter is about 30% FCF negative, their lowest ever. So there is a chance. Also, this is a quote from their CEO in the recent earnings call which gives me hope.
“From a financial perspective, the company is in a strong position. Our third quarter operating cash burn was only $3.6 million. And given our revenue ramp, we are on the cusp of being cash flow-breakeven.”

Blockquote
Do you know why they listed on the pink sheets first as opposed to a traditional IPO, or even SPAC route?
I am guessing if they get approved to list on the Nasdaq this company could rise significantly. How likely do you think that Nasdaq approval is to go through?

I am not too familiar with the history of the company. I know they started with family and friends money back in 2009. The co-founders have vested reasons to solve for this medical issue. Andrew’s father, Chip was a professional race car driver who faced injuries that needed this type of wound healing. So they have personal motivation to solve for this problem. They didn’t do very well in commercialization until they partnered with Venture Medical. Venture is literally driving all the product sales with their experienced team. There is an ethical issue as they have 95% margins on these advanced wound care products.

The Nasdaq uplisting form 10 was submitted on Sept 30, so my expectation is for it to get through in the next few months. There has been no communication from the management team on this yet. This is a quote from the CEO on last quarterly results call, “we filed our Form 10 on September 27 with the SEC and submitted an application for uplisting to NASDAQ at the same time. We are currently working through our initial SEC review comments and expect to submit a formal response in Q4, along with amended Form 10. Uplifting to a national exchange and becoming fully reporting with the SEC is the strategic commitment to enhance BioStem’s visibility and provide wider accessibility to a broader investor base”

There is definitely risks here. Medicare non-coverage that keeps looming on this one and Nasdaq listing getting denied. However, this is like a home run play for me. If things work out, the stock price can easily 3-5x.

Blockquote
Why do you have dilution as part of the formula? Typically I am viewing excessive dilution as negative, but I guess in medical companies it is more common to use dilution as a way to continue funding the business?
Some companies like APP are committing to no-dilution buy using stock buy backs to pay for the employees’ pay packages. Would you just be plugging in a 0 for a company like APP? And then medical companies which may dilute over the course of the year would receive a minus in this category?

I have dilution as part of the formula mainly because I own a lot of med tech firms and they tend to dilute a lot due to the reasons you mentioned. DCTH has 45%, ARQT had 25%, TARS has 15%. And in cases like NVDA or SEZL or BILL since they are buying back, the percentage buy back is a addative to the score. For APP, as you mentioned, it’s 0.

Blockquote
So, I’m afraid this stock may lack catalysts in 2025 to drive the share price up.

Yes, you are correct. A lot of the trials will have meaningful impact in 2 years so this year is all about VYJUVEK expansion this year. U.S. market will be penetrated this year and that should bring in enough revenue, going into second half of 2025 and 2026 it would be the international expansion. Also they are expanding the label that will bring in more customers (potential 50% of 750k = 325k according to the investor deck)

15 Likes

Again this is a great report!

I mentioned earlier that I would pursue some conversation about your Quality Ranking.

I am a long term investor, but short lived in hypergrowth focused investing - about 18 mo., and in this time have sought to develop a process to effectively rank maturing companies in a watch list that also includes new companies that may have exlposive growth using typically available metrics.

Before I saw the results of your efforts this week, I had spent considerable time , and have been unsuccessful in establishing a metrics rating system that delivers an actionable balance between companies in different stages of maturity.

For this post I would like to focus on NVDA and BSEM from your ranking. How are you weighting the metrics to achieve the ranking numbers on these two tickers?

Thank you for any input!!

Gray

5 Likes

Thanks Gray.

BSEM is not a great example as it has too short a history window to make meaningful derivations, so I have used some assumptions.

Here’s the calculation for NVDA and BSEM I have used.
NVDA quality score of 147
BSEM quality score of 73

NVDA
NTM Growth + FCF - Dilution
96 + 50 +1 = 147

The 96% growth is the controversial number here.
Here is the breakdown:
TTM revenue: 113.27 B
NTM revenue expectation of analysts: 177.34
Analysts had to raise LTM guidance: 130B to 196B (that’s 50%)

So instead of using 177.34, I add 25% more to the NTM revenue (half of what analysts were wrong by) = 222B
So 113.27 B to 222B is 96%

This is basically the calculation for all NTM Growth numbers.

For BSEM the breakdown is:
67 + 9 - 3 = 73
The 67 growth number is much lower than if you calculate using the formula. The reason is they just started commercialization, hence the numbers are too large and unsustainable. So I used some assumption and brought up the TTM number to lower the growth score.

Hope this explains the weighting of the metrics in coming up with the quality score.

16 Likes

A few months ago, seeking an overall numerical ranking, I combined FCR margin and NTM revenue growth (no dilution) with several weighting trials for each. Could not find a combo that did not require the addition of a subjective manual addition that prevented a quality ranking auto generated in my data base, so I opted out. I will pursue this again after seeing your ranking.

Thanks for your response.

Gray

8 Likes