This is the second - well maybe the third, installment in the semi-occasional, weekly Smoky Chili Campfire Report. Its purpose is to determine with approximately 49.9% pinpoint accuracy how the markets will perform in the week ahead.
Part One: What happened last week.
The market wanted to rally last week and did - despite some long term leaders and titans of something or other fornicating the pooch. Major pooch fornicators included PayPal, NFLX and FB, The FB earnings debacle in particular roiled the market which was then saved at the Bell by AMZN earnings. Alls well that ends well but that is not in question here. What is in question here is whether the Bull market run is dead. Why it is in question here has everything on how one might manage his/her/its portfolio.
NOTE 1: IMAGINE A FANCY GRAPH HERE:
If there were a fancy graph here it might show the Nasdaq Index QQQ that shows that for the first time since early 2020 the index is trading below its 50, 100 and 200 daily moving averages. This fact goes solidly Not Good column. This suggests that a market trend change is at least possible if not probable. Something to watch for sure.
Interestingly enough, I had a conversation with a fellow investor this past week which centered on the FED as market savior. She was absolutely sure that the FED will ride to the markets rescue and not let things get to wobbly. In my exceptionally inept and humble opinion investors counting on the FED to Save-The Day - are whistling past the graveyard. Here is what a true Save-The-Day performance looks like:
More to the point - overly aggressive intervention by the FED at this point might have the effect of waging war on Growth. In fact, the FED is in something of a box: It’s allowed the economy to depend on 0 rates for so long that any serious chain of increases stands a good chance of capsizing the economy boat. For that reason - as far as I have read, the FED will surprise to the downside in its rate increases which translates simply to the fact that the FED has left rates at 0 too long and is past the point of rate hikes not destroying an economy that appears near its peak. This bodes well for the markets.
Note 2: The Fear and Greed Thingy
If I could post the image of the current Fear and Greed thingy it would show a current reading of somewhere in the mid fifties - which is a lean toward Greed. I interpret this to mean that the overall we want to rally. In a similar vein the Technical Composite current reads about 42 whereby above 80 represents the market being overbought and below 20 being oversold. I interpret this to be indecisive and an indicator that things could go either way for us.
A quote from the Mises Institute, which has a nice Economics for Beginners Series of videos:
“The FED is trapped in its own web. It does not have much room to raise rates without major complications in the financial market and in the economy.”
About Mises: Mises Institute is the world’s leading supporter of the ideas of Liberty and the Austrian School of economics…the institute seeks a free-market, capitalist economy and a private property order that rejects taxation, monetary debasement, and a coercive state monopoly of protective services.
Find them here:
Part Two: The Port
- MNDY - Software
Here is what MNDY says about MNDY:
“Monday.com democratizes the power of software so organizations can easily build software applications and work management tools that fit their needs.”
MNDY is down approximately 40% YTD and is 58% Below its High.
Here is why an Investment in Monday makes sense:
In its first public report Revenue Growth accelerated to +95% Y/Y and the NDRR for customers with 10+ users was over 130%. Additionally, the number of customers with $50K ARR growth accelerated to 231% Y/Y.
The company provided guidance for 4th QTR total revenue of $87 - 88 million representing Y/Y growth of 74 -75%. In its first report the company featured a Revenue Beat of just over 11%. A similar Beat would put the 4TH QTR Y/Y growth near record territory.
Interestingly enough - thanks to the current weakness in Growth you can buy MNDY close to it’s IPO price. The company reports 4TH QTR on February 23.
- DDOG - Provides Monitoring and Analytics platform for developers.
What DDOG says about DDOG:
“Modern monitoring & Security: See inside any stack, any app, at scale, anywhere!”
DDOG has lost about 15.5% YTD and is about 25% Below its High.
Why an Investment in DDOG makes sense:
Impressive 66% Customer Growth rate. (Customers with ARR of $100K or more)
Most recent ER featured accelerating Revenue Growth of 75% Y/Y
Just Achieved FedRAMP Moderate-Impact Authorization.
DDOG is scheduled to Report Q4 on 2/10 Before the Market Opens
- Sea Limited - Growing Asian eCommerce, Digital Entertainment, Financial Service Powerhouse
What SE says about SE:
“We Believe: Our people define us - Our products and services differentiate us - Our institution will outlast us.”
SE is down about 31% YTD and us about 58% Below its High
Why an Investment in SE makes sense:
SE is a growing Asian Powerhouse that recently invaded Latin America where is will lose to MELI. The company is not Chinese but rather is based in Singapore where is you act up they beat you in public with a cane. That’ll keep SE on the straight and narrow for sure.
The company Doubled its Revenue on its last ER.
Total GAAP Revenue increased 121.8% Y/Y
Gross Profit Increased 147.5% Y/Y
Raised Guidance going into Holiday Season.
The company will report FQ4 2021 in late February.
- Zscaler Inc - World Wide Cloud Security Company
What ZS says about ZS:
“Zscaler, creator of the Zero Trust Exchange platform, uses the largest security cloud on the planet to make doing business and navigating change a simpler, faster and more productive experience.”
ZS has lost about 20% YTD and is approximately 31% Below its High.
The case for investment in ZS:
Cloud security will remain a concern of companies for the rest of our lives and ZS has the zero trust thingy locked up.
Revenue Growth on its latest ER accelerated to 62% Y/Y
Calculated Billings grew 71% Y/Y
Deferred Revenue grew 74% Y/Y
ZS is scheduled to report Q2 2022 Earnings on February 24th After the Close.
- UPST - Cloud-Based AI Lending Platform STILL Revolutionizing the Credit Industry.
What UPST says about UPST:
“Our mission is to enable effortless credit based on true risk.”
UPST has lost about 35% YTD and is approximately 75% Below its High.
The Investment Case for UPST:
On its latest ER the company reported a 250% Increase in Total Revenue.
Loan Originations Increased by 244%
Income from Operations more than doubled
4Th QTR Guidance called for 200% Revenue Growth at the mid-point before allowing for their Beat percentage and did not count for Holiday Season demand for loans.
The company is either gonna kill it or be killed by it on the next ER. I’m betting they kill it and will reap the whirlwind. Or something like that.
This completes the Smokey Chili Weekend Campfire Report on the STARTERS. Since It’s really close to about the time the apple pies are scheduled to be done - I am going to call a temporary hiatus and will finish the Bench and Scout team companies later this evening in Part Two - The Port.
Part Three: What it all boils down to:
Ok so after this exhausting deep dive into the wide wide world of Economics as it relates to the markets in general and the portfolio roster in particular I have come to this conclusion:
- The Markets - unless roiled by international crisis - will continue to be slightly bullish until they are not. Earring season more good than bad results will bolster the foundation for our companies creating some level of stability which, may or may not, be short term.
1a) Odds are good that we have reached a bottom and equally as good that we will retest the lows again.
Volatility will be the Norm.
I see no reason to make any major adjustments to the Portfolio Roster but am considering adding to all STARTERS. I did re-enter the MELI ATM late this week when it dipped briefly below $1,000. It has since recovered for a nice profit but I am looking to a higher percentage of profit before selling - which, I may not execute.
All the Best,