My portfolio at the end of the December stands at,
This month my only changes were to start positions in Nvidia and AeroVironment which were created by slightly trimming positions in Monday, Elf, Samsara, and SuperMicro.
While not that active in terms of trades, I’ve been busy reviewing existing companies transcripts for conferences and announcements. I researched six new companies, and one of these resulted in starting a position in AeroVironment. Additionally, I finished reading two trading psychology books.
The two books I read were The Mental Game of Trading by Jared Tendler and Trading in the Zone by Mark Douglas. The Trading in the Zone was truly excellent and gave me some major breakthrough insights on how to improve as an investor. It says that the number one goal of a trader is consistency above anything else. Anything which generates fear or euphoria within the context of trading/investing is harmful.
I realize this was that the way I was operating over the last number of years was harmful to my results. Early 2020 I was operating through fear, and then 2021 there was the euphoria of huge gains, only to see 2022 have my portfolio crash again. The book mentions that after a big loss a common reaction is to double down on research or trying to understand the market - exactly what I did. This is effectively a mistake, that more analysis or research is not the problem, it’s primary a psychological problem by not accepting the unpredictability of the market and that each scenario in the market is completely unique.
I use Koyfin to print out and read through the transcripts of investor conferences, press releases and other company events. There’s quite a lot of material to get through on these, but well worth it. Also providing my take on the information presented.
Morgan Stanley Global Consumer and Retail Conference
- Driver of growth includes prestige quality at extraordinary prices
- Marketing engine is engaging customers in a way to that drives marketing ROIs
- Elf “really soft of pioneered monetizing social media”
- We are an entertainment company, music producer
- Taken marketing and digital spend from 7% to 24% in sales over years, measured pace, making sure they see growth and returns
- Elf skin up 130% in tracked channels
- Huge amount of whitespace for skin, only have 1.6% of market
- International up over 100% in last few Qs, only 14% business international, mostly UK/Canada
- International was up over 150% in the last quarter
- Ulta with no retail space gains was over 70% growth of Elf products
- Community now saying the products are better then prestige brands on quality
- Unaided brand awareness has gone from 13 to 26%
- Consistency of building market share
- Launched in Italy in October, “we have people waiting outside of the doors for ELF”
- Number one brand among Gen-Z with a 29% market share
I really like what Elf is doing here with social media and getting returns on their marketing spend. The growth seems durable and could see this one growing steadily for many years.
Analyst/Investor Day - December 6
- Monday a platform to run the core of your work
- Over 2 million active paying customers
- 25% free cash flow margin and 7% adj operating margin
- Industries like construction plants, clinical research, managed hotels, marketing, finance… nearly every industry using Monday
- Best way to describe Monday is like Lego bricks
- Super flexible software, if there’s an org change Monday can accomodate
- New CRM product growing 4x as fast as company grew initially
- Monday “Dev” growth phenomenal, growing at same rate as company grew initially
- New product “Monday service”, which is service for IT tickets
- Managed to land largest customer yet in last two months with 25,000 seats, these use it to the full extent and “perhaps” interested to increase seat count
- Building AI assistant layer
- 400 different apps on Monday marketplace ranging from small product increments to full solutions
- ARR distribution from sales and partner organization as gone from less then 30% to over 60% now
- Very large partner ecosystem, 210 active channel partners, 2,000 referral partners; coverage all over the globe
- Built one of the best performance marketing engines around the word that provides 200,000 signs every month ranging from SMB to Fortune 500
- BigBrain is internal BI tool for sign up motions
- Consistent returns cash on cash for every dollar spend, in less then 12 months getting a positive return for every marketing dollar spent
- A few years ago 42% of revenue was from expansions, now at 70%+
- See huge untapped opportunity for customer expansion, cross-sell, upsell
- Some add-ons price by volume to make us more diverse and just sell on user count
- Plan to rollout a price increase to users next year
- Huge partner ecosystem, top of funnel very strong
- Enterprise huge opportunity, scratching the surface on many enterprises, majority of customers non-tech
- Two years ahead of where they planned to be at the IPO
- Benefit from low R&D costs in Israel compared to other SaaS
- All growth is organic, we didn’t do any M&A, continue to invest
- MondayDB allows business and use cases to scale massively
Very impressed with Monday still, I’m keeping it as my top position tied with Elf.
Stephens Annual Investment Conference - November 15
Morgan Stanley Global Consumer and Retail Conference - December 6
- Drink was born in the fitness space as a pre-workout dietary supplement
- Pepsi came in as a 8.5% owner of Celsius
- 44% of consumption is new to the category, and 40% is “user intensification” meaning they consume more of the product then typical
- 80% of our consumption is incremental to the category and this is important to retailers
- Over index with females, roughly a 50/50 split on customers
- Celsius has different reputation. In the office if you saw someone with a drink like “Bang” assumption would be this person had a hangover. Celsius seen more as a cleaner sophisticated drink. Also pairs well with food.
- South Florida category market at 24%, jumped from 17.7% to 24% in ten months
- 58% of sales come from connivence channel, still lots of room to grow
- Seeing market share gains in newer markets to us
- Selling close to 2 billion cans this year
- Consumers view as a premium offering
- Really improved gross margins in last 12 months, north of 50% of gross margin in Q3
- Warns that end of year is expected to have slower sequential growth typically, this is because Halloween, Thanksgiving, and Christmas take up shelf space at many stores
- Sports partnerships with F1 and MLS
- Have an unique way of determining best energy markets, don’t want to disclose how they know because of competitors
- Number one in energy on Amazon ahead of Red Bull and Monster
- Plenty of runway left on Amazon and Costco too
- Number one selling beverage at Costco, not just in energy but in total beverage
- Many markets around the USA where in infancy and “tremendous opportunity for growth left”
- Much broader demographic then other energy drinks
- Category is growing and retailers giving more room to energy at the detriment to other categories
Celsius is a high confidence position for me, they seem to have crafted an incredible reputation. The energy category is growing and they have defined themselves a healthier energy drink.
William Blair Public Safety Tech Conference - December 11
- Number one provider of body cameras and cloud based digital evidence around the world
- Extraordinarily early on international
- Microsoft Azure’s single largest cloud customer - ingest more video each year then Youtube
- Secure custodian of data on behalf of customers
- Proud to have over 90 agencies, many having replaced legacy systems
- Very big market
- Began investing in AI well ahead of trend, special team to deliver AI solutions for years now, can auto blur faces and sensitive info to improve evidence process
- License plate recognition solution, can auto identify stolen cars or other problems while an officer is driving
- Texas Medical Center, has police force, going all in on dispatch live stream
- Have DFR, drone first responder, can de-escalate situations
I’m really impressed with their product and international opportunity. Getting more comfortable with the CEO being sidelined to a traveling salesman role. The others operating the company are getting results.
RBC Capital Markets Global Technology - November 14
Wells Fargo 7th Annual TMT Summit - November 28
- Calling themselves the connectivity cloud now, traditional hyper scalers more like a captivity cloud
- Differentiation around technology and architecture, code can run on any edge/server
- GPUs at the edge, only globally distributed network to do that
- Major League Baseball runs whole app on Cloudflare Workers
- Somewhere between 20-25% of web sits behind Cloudflare
- Most common cloud provider across all major AI companies, can provide cheapest GPU resources in the cloud
- 95% of AI GPU resources are deployed in the US
I still like Cloudflare a lot as investment. There wasn’t a whole lot of new information in these conferences about their product, although I was shocked to read 95% of AI GPU is going through the US, just shows what a massive head start the US has in artificial intelligence.
I believe this company is building the platform upon which many AI applications will reside. They are looking to get ubiquitous before upping pricing. They’ve mentioned many times how many newer products are getting much higher usage and interesting use cases then they expected. Their market share is increasing massively and I expect revenue and cash flow gains to follow soon.
Super Micro (SMCI)
Barclays Global Technology Conference - December 7
- Super Micro in an unique position to be able to quickly redesign the very best motherboards
- 50% of company is engineers
- Building Blocks Solutions, designed own chassis/motherboards
- Can quickly incorporate new technologies
- Offer lowest total cost ownership to users
- Supply is improving, additional capacity in Taiwan and Malaysia
- Market is moving from training to inference for AI
- Gross margins moving upwards
I’m planning to stay in Super Micro for a few more quarters to see if the growth is still there. My thesis is they can overcome the supply challenges and benefit significantly from providing the best AI hardware. Admittedly their products are sophisticated beyond my understanding so I don’t fully understand the competitive advantage but they seem to be able to deliver results.
UBS Global Technology Conference - November 28
Wells Fargo 7th Annual TMT - November 29
Special Call - December 5
Arete Virtual Tech Conference - December 7
Special Call - December 7
Special Call - December 14
- Stand out has been data center business
- Sovereign AI and AI factories being built by other countries
- Onset of Generative AI has continued to increase TAM
- Bringing new products to the market faster then any previous generation
- ChatGPT centered around US culture, huge international opportunity
- Still supply constrained, taking a little while to catch up
- Total cost of ownership TCO very good with Nvidia, why many customers choose
- CUDA has 4.8M developers
- Will have solutions for China based architectures within a month to deal with regulations
- Grace Hopper 200 within Amazon AWS now
- 1B ARR for software
- Microsoft using Nvidia to power Bing, translation services, and Microsoft Office
- Triton software let a customer improve AI model speed from 3 months to 15 minutes
- Demand for gen AI is insatiable
- New supercomputer in UK uses Nvidia, rise of AI nations
- Financial services making a big drive to use AI and Nvidia for various tasks
Nvidia is a new position for me. There were a lot of conferences to check in with them on as they are a bigger company. It’s still hard to believe from reading these transcripts the scale at which they operate. I’m looking to build up this position as a little more over time.
The new six companies I researched were,
AeroVironment (AVAV) - started a small position and a write up here
Hims & Hers Health (HIMS) - last Qs growth at 56%, previous 4 quarters growing at 80%+. They provide vitamins, medicines, and tele-health through subscriptions. They slightly raised guidance. This one is pretty interesting considering their revenue has gone up massively since the SPAC and the price is still below $10. Ultimately I ended up passing because of the SPAC, the industry they are in, unknowns about the moat, and a previous thread on here from two years ago talking about quality of their products.
Amphastar Pharmaceuticals (AMPH) - Last quarter saw 50% year over year growth in revenue. Net income is up over 200% from 15.9M to 49.2M in the last quarter. Passing on this one because of unknowns about the BAQSIMI acquisition, and supply chain issues. They mention competitors dropping out of the market, but I’m not sure how durable their growth is, basically if the growth comes from others dropping out and this is a one time factor, or a case where they can keep growing for years.
Freshpet (FRPT) - Revenue growth 33% last Q, conference call is glowing with enthusiasm. The product is high quality food pet supplies. They talked about raising guidance a lot but it was going from 750M revenue to 755M revenue for the year. Based on how the conference call sounded last Q, I was expecting the raise to be larger. EBITDA seems to be improving rapidly because of logistics. Margins are improving rapidly. Growing category with expanding TAM. Industry is impacted by chicken prices and other food prices, uncertainty around food contracts. Very interesting company, but passing for now.
ACM Research (AMCR) - I’d seen this name come up a lot when compared to AEHR and figured to take a look. They provide tools for chip making, and a lot of sales in China. Revenue growth only 26%. They changed their FY guide from 515-585M to 520-540M, not a great a look. A huge portion of sales are in China, easy pass on this one.
Intra-Cellular Therapies (ITCI) - Revenue growth of 75% last Q and huge growth Qs before this. They make anti-depressants and anti-psychotic medicines. They raised guidance this past Q from 445-465M to 460-470M for the full year. Their whole business centers around one medicine CAPLYTA constantly mentioned throughout the call. The product line does not sound broad based although they mention a strong pipeline. Their guidance raise looks like an additive raise for what they just got last Q, not that impressive after all.
Link to previous updates,
Nov 23 Portfolio update