Performance recap
- 2021: -36%
- 2022: -76% (Found Saul’s amazing board Jan 2022, started this style of investing in May 2022)
- 2023: +80%
- 2024 through November: +130%
Current portfolio holdings:
- HIMS - 23%
- ADMA - 9%
- ROOT - 7%
- BSEM - 6%
- AFRM - 6%
- NVDA - 6%
- ALAB - 6%
- ARQT - 5%
- DCTH - 5%
- SEZL - 4%
- TARS - 4%
- TMDX - 4%
- MU - 4%
- ARDX - 4%
- NXGL - 4%
- TGTX - 3%
Changes this month
- New positions: ARQT, DCTH, SEZL
- Sold: ECOR, POWL, CSTL, ASPN, LFMD
- Watchlist: RDDT, APP
Why I hold these positions
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HIMS - 23%
- HIMS has the potential to become a one stop shop for personalized healthcare at affordable prices.
- Just look at these numbers - ntm revenue growth predicted by analysts is 58% and HIMS historically has beaten estimates by 32%. You add half of that and chances are HIMS does 74% growth on 1.24 Bil. revenue.
- FCF has hit a high of 20%, four quarters ago it was around 8%. It’s not out of the realm of possibility that HIMS can do 30% FCF in next 12 months.
- Put the ntm total revenue with the possibility of 30% FCF and half the current FCF multiple it’s trading at, you get more than a double from today’s prices. That’s why it’s my highest conviction.
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ADMA - 9%
- ADMA Biologics is uniquely positioned to capture a large portion of the IG market
- If you look at the current speed of ADMA’s revenue/FCF travel, the business looks quite cheap on ntm basis. But the big issue is LTM revenue growth is 63% and ntm prediction by analysts is 14%. Huge disconnect.
- The current analyst ltm beat is 44%. So it’s not impossible that ADMA ntm revenue growth will be more closer to it’s ltm number than what analysts are predicting. If they can keep beating and raising then it will continue to hold a significant allocation in my portfolio.
- If not, the trajectory of this business will look a whole lot like CSTL that kinda had a great run and then crash and burned from a growth perspective.
- 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.
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ROOT - 7%
- ROOT is modernizing the car insurance process with the help of technology based on customer behavior patterns.
- ROOT has some tough YoY numbers that are coming up. The upcoming two quarters are going to be competing with 69 and 31% growth. So the YoY growth trend is going to fall off a cliff. But if ROOT can do something around 20% NTM growth, mind you analysts are at 9% currently, I think ROOT will have to get a multiple expansion.
- It’s ridiculously cheap but that’s a couple of beat and raises away from fixing itself. But even if it does just 10% ish growth, the 20% FCF number will keep a floor on the P/S 1.0 valuation.
- So I am looking at this as a low risk high reward play. Let’s see how the next two quarters unfold.
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BSEM - 6%
- BioStem has a superior product in allografts for regenerative therapies.
- The big issue with BioStem is they will stop receiving coverage for Medicare from Feb 2025. However, the evidence of their product being superior is piling up and clinical studies are underway to prove the same.
- The market is trying to figure out how long this non-coverage period is going to last, if at all it gets executed. Because BioStem will take all action possible to stay on the medicare list, including legal.
- Other than that growth is fantastic and so is FCF.
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AFRM - 6%
- Affirm is trying to capture a big piece of the growing “buy now pay later” market.
- NTM Revenue growth (45%) and FCF(21%) numbers are quite good.
- This was undervalued quite a bit when I bought it but have grown into it’s valuation now. So this is on my chopping list if I need to raise capital.
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NVDA - 6%
- NVDA is still the leader in GPU world be a mile.
- If they can come up with a new chip every couple of years and force the giant AI spenders to upgrade, it might have a iPhone type upgrade cycle at hand.
- Either way, with a NTM growth of 50% and FCF of about 50%, these are some ridiculous numbers. It’s definitely expensive but if the numbers hold, so will the returns going forward.
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ALAB - 6%
- ALAB is building semiconductor based connectivity solutions for hyper scalers. The new launch of fabric switches, built for AI infrastructure at cloud scale seems to be a differentiator.
- With 100%+ ntm expected growth and a 40% FCF, it is expensive for a reason. And if they continue to perform, I expect it to stay expensive for quite a while.
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ARQT - 5% (New Position)
- Arcutis is an early commercial stage medical dermatology business with some robust growth metrics.
- This is a speculative play. The FCF numbers are quite red, about -78% but I expect that to improve rapidly. I am hoping for an ADMA like curve for this. Once this gets to FCF+ with continued execution, the current multiples should hold up.
- And if current multiples hold with improved metrics and 80% potential growth, chances of high returns are favorable. Let’s see how it unfolds.
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DCTH - 5% (New Position)
- 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.
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SEZL - 4% (New Position)
- Thanks to @wpr101 for bringing SEZL to this board! I looked at them and the numbers they are putting up are quite impressive. They are in the same space as Affirm, buy now pay later space.
- I took a starter position based on just high revenue growth and the fact they are already FCF+
- I am still learning more about how they differentiate themselves in this space.
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TARS - 4%
- Their primary product XDEMVY kills mites in your eye lashes. Who knew there is a market for this.
- So they are the only FDA approved product and is just beginning to do commercial launch.
- Very similar play here for this medical business for me. 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.
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TMDX - 4%
- No change in position for TMDX here. Just waiting to see if they can turn around this ship for the next quarter.
- Here’s what I wroth in the last portfolio update - I never want to see my growth stock have a sequential lower revenue quarter. It’s a no-no. There is a lot of excuses being thrown around about seasonality, plane maintenance, ability for doctors to support the number of surgeries. So I did nothing after the stock dropped significantly post earnings. Based on their really good execution, I will give management one more quarter to right the ship. I expect the stock to hang out in the dumps till then. However, if it drops another 20% it will be attractive to me.
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MU - 4%
- Another high growth, FCF+ business in the right tailwind sector.
- Micron is a little bit of a technical play for me as it needs a 50% rise to get back to all time highs. And the numbers have improved a lot from the last time it was at ATH. So I am in.
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ARDX - 4%
- Ardelyx, Inc., a biopharmaceutical company, discovers, develops, and commercializes medicines to treat gastrointestinal and cardiorenal therapeutic areas.
- Early commercialization stage with high growth and about to turn FCF position in the next 12 months.
- Very impressive execution so far. Looking for momentum to continue in the near future.
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NXGL - 4%
- NEXGEL is a leading provider of ultra-gentle, high-water-content hydrogels for healthcare and consumer application. Hyper growth in multiple product lines of branded consumer products and contract manufacturing. Landed deals with STADA and AbbVie. AbbVie launch scheduled for next year will be a huge tailwind. Rapidly improving margins and revenue pickup can be major catalyst for multiple expansion. Risk: AbbVie deal takes longer than expected to hit the ground and operational efficiency falters. Btw, tiny tiny company so very speculative play here.
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TGTX - 3%
- 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. Allows for a lot of options. Risk: One drug wonder, maybe! Need pipeline to turn into real product launches and use FCF for growth. I took a starter position mainly because of the efficiency of their launch and I like their numbers.
Why I sold these positions
- ECOR
- This is the other side of owning a medtech firm. As soon as the revenue numbers starts to flatten out and they are still not well into the FCF+ territory, I am out. That’s what happened with ECOR, the revenue numbers were ok and not great. Not enough to justify the risk, so I am out.
- POWL
- This is still undervalued but POWL is running into capacity constraints. This in turn will slow down growth for the next few quarters. So I stepped aside and will return if the business gets back in the hyper growth curve.
- CSTL
- Revenue decline for a growth business. Big red flag!
- Also, I was waiting to see who wins out. CSTL has a analyst beating trend of 50% but analysts going into this earnings was predicting revenue to come down by 19% ntm. With the current quarter results, I believe analysts are right about CSTL and revenue might fall off the cliff. So I jumped off the ship.
- ASPN
- This was a bad decision. Needed to do more due diligence before entering. With the sequential revenue decline and capacity build up still 12 months or so away, I fee ASPN will linger/trend down for a bit.
- Will keep an eye an return if numbers start showing more strength next year.
- LFMD
- Growth slowing and always underperforms HIMS. GLP1 space is super volatile. If I am going to play in this space, might as well stick with the best run business.
- LFMD may still have a great run because it’s quite undervalued. But with growth slowing, I am not planning to stick around.
Note: I have added my one pagers for my businesses. Sorry I was not able to update all of them in the last month and hence sharing only the ones I got to update. A few of them were last updated during October. The date stamp will be on the bottom right of the one pager.
Wrapping Up
November turned out to be one of the best months with 28% return, mainly driven by an 11% move in small caps. Since most of my holdings are small/micro cap businesses they rose with the tide. Please let me know any feedback you have on the one pagers. Would like to improve the quality of information presented there. I always appreciate the opportunity to post on this board. The best investing deep dives I have seen out there. Thank you for reading. Cheers!