UPST Over Analysis

A brief comment on Upstart (UPST): It seems to me that this board has over-analyzed the company.

Two of the key lessons I learned from Saul were to keep my analysis simple and to not fall in love with the story of a stock. If I remember right, my first big reminder of these lessons was with Infinera (INFN). There was a lot of detailed analysis and I thought I knew exactly what was going to happen with the stock. I could not have been more wrong. I was so buried in what should happen based on the detailed analysis I ignored the harsh reality of a simple look at what was actually happening with the numbers.

I see the same mistake being made on this board with Upstart. An incredible amount of amazing research has been performed on Upstart by members of this forum. Many complex calculations have been performed and many compelling stories have been constructed. I fear that in this dearth of information that the simple perspective is being forgotten. I have seen that being too familiar with a company all too often leads to an excess of excitement about a company and thus an excess of investment into a company. If earnings fail to meet those expectations, even good earnings can feel like a betrayal.

Personally, I have ignored 90% of the UPST posts on this board as I do not want to have the mistaken impression I understand the company better than I actually do. I skim news headlines, read an occasional interview, and twice a quarter update my calculations (before and after earnings). I put no more time into Upstart than any of my other companies.

My own analysis is very similar to the simple perspective recently shared by Saul a week ago, though I feel less certain of the interpretation than Saul is (not surprising given our difference in experience):…

Keep your analysis simple and keep the excitement under control.


I don’t think it’s possible to “know” too much about a company as long as you don’t fall in love with it and try to be as rational and objective as is humanly possible.

If you have a very large position in a concentrated Portfolio, you should live and breathe that company so that you know as much as possible the risks, pitfalls, and direction of the business.

As Saul says, we should first and foremost “follow the numbers.”

However, there is a lot of narrative “beyond the numbers.” Think NET’s TAM expansion. It takes a lot of work to figure out what is happening and why.

An AI company like Upstart that is expanding into new loan products, a new market (Auto Loans), and is subject to many factors such as fraud, macro conditions, regulatory, and it’s own AI tweaks must be followed and studied closely otherwise you aren’t doing your due diligence and that’s where the biggest investing mistakes tend to happen. I’ve never made a mistake in investing because I knew too much, but it it was always by knowing too little. When you know too little, you underestimate the risks or your own risk tolerance.

Case in point, Lightspeed. I should have been focusing more on the execution/acquisition/covid risks rather than the FUD from the short report. I went a little too big (12%) into earnings, which I attribute to a lack of due diligence.

Upstart is a risky stock, with incredible upside. Arguing against due diligence and “too much” analysis makes no sense, in my opinion.

Nobody knows exactly what’s going to happen with a company but reading the tea leaves only comes from putting in the work.

I do agree with your point about too much “theorizing”. Fantastical theories or overexcitement can lead to bad outcomes. Again, setting emotions aside, especially in a concentrated Portfolio is not always easy. Upstart is not SaaS so any attempts to guess at revenue in 2022 are just that, guesses - no matter how well thought out or reasoned.