Zen mind. Beginner mind.
My portfolio allocations ended 2024 with the following,
- Astera Labs (ALAB) - 22.9%
- AppLovin (APP) - 21.4%
- Reddit (RDDT) - 20.3%
- Paymentus (PAY) - 12.6%
- Hims and Hers Health (HIMS) - 12.1%
- Credo (CRDO) - 5%
- Natera (NTRA) - 4.2%
- ACV Auctions (ACVA) - 1.5%
My 2024 returns were 146% for the year. The beginning portion of the year saw outsized returns from Supermicro, the middle of the year was mostly flat, and then ending part of the year’s results where driven by AppLovin, Astera Labs, Reddit, and Hims.
An important piece of strategy that has been top of mind lately and this year is that we should expect that not all of our stock picks are going to be successful. If we are executing well we may be selecting 60% winners and 40% losers. The caveat being the winners provide much bigger results than the losers detract from. When we factor this is as part of our expected strategy, the losers no longer cause disappointment.
A key aspect of my strategy focused on the mental game of investing and trading. This topic is covered in depth in the Mark Douglas books The Disciplined Trader and Trading in the Zone, along with Jared Tendler’s book The Mental Game of Trading. As it’s explained in these books if a investor or trading does not put work into improving their mental game, the mental game will end up owning them. Many investors assume this simply means steeling yourself to suppress emotions. However Jared Tendler’s book recommends using emotions as a signal and to get curious what they are trying to tell you.
The mental game relates back to the first point that our strategy should be selecting a fair number of losers. Therefore we should not be despairing on having a losing investment, and if we are angry or fearful based on the results it’s often an indicator of a mental game issue that hasn’t been sorted out. These types of issues will arise again and again if we don’t deal with them, but effectively dealing with them makes investing easier emotionally in addition to being more profitable as we make less mental game mistakes.
Looking ahead for 2025 I am planning on doing investing full time. This past year 2024 was a trial run to see how it would go, and I got a better result than anticipated so it has allowed me to move up this goal of doing investing professionally.
In December my main moves were to sell Micron, The Real Brokerage, and lower my position in ACV Auctions. I started a position in Credo, and added to Paymentus and Natera.
Reviewing my positions in order,
Astera Labs (ALAB) - 22.9%
Astera is my highest confidence position as they have been a roll since their last earnings, combined with a new product release of Scorpio. The company just replaced Broadcom in the UALink consortium, and has tons of design wins for their products from hyperscalers. I believe they can keep beating their guides and raising guidance from the tremendous ramp of hyperscaler spend on AI technologies. As the company says, they are a pure play on AI, and I believe they have the most potential of any company I own to scale up significantly from current levels.
AppLovin (APP) - 21.4%
The e-commerce pilot for AppLovin has a lot of buzz on social media for providing excellent return on add spend from the users. Many users of the new pilot report it has better results than Meta adds and the users that AppLovin is able to find from its network are different or incremental to the entire ad ecosystem. There’s a strong potential the pilot starts to impact this next quarter’s results and will likely be a large driver of growth for the company in 2025.
Reddit (RDDT) - 20.3%
Reddit has a few interesting initiatives going regarding AI. The first is translating the Reddit corpus into ~30 languages, each adding more ad space that can generate additional revenue. The second is partnerships with Google and OpenAI. Since Reddit has mostly human generated data in discussions, this is a great source for AI technologies to learn and train from. Lastly the company has a lot of traditional ad space which has barely begun to be optimized. For example, the company just started adding ads between the comments and this is only going out to a small number of Reddit users so far.
Paymentus (PAY) - 12.6%
Paymentus was recently at the Raymond James conference where I did a write up on the details of that talk. Sometimes these conferences are fluffy questions from the analysts, but in this case I learned a lot about the company from the CEO and CFO in just a short 30 minute presentation. Reviewing these types of conferences is a key part of my strategy as often the leadership teams give important updates on the business
Hims and Hers Health (HIMS) - 12.1%
My confidence on HIMS is slightly lower than before after Amazon has begun entering the market, in addition to learning that Roman is a bigger competitor than I expected. That being said, HIMS last report was really strong and this will be one I’ll continue to hold until the numbers say otherwise. My thesis originally centered around HIMS being greenfield in this style of tele-health, while that may not be the case anymore I believe HIMS can compete effectively in this landscape. I’m not sweating too much the daily gyrations based on GLP news, as the company has a wide variety of options to serve its customers depending on various FDA rulings.
Credo (CRDO) - 5%
I started a position in Credo they day after their phenomenal guide where the said revenue would grow 67% meanwhile OpEx is only growing 10%. There was a thread about this topic where I had some thoughts on the report. What’s holding me back from making this a bigger investment is their are headquartered in the Caymen Islands and have a big business is Asia and China. Additionally, their company has done more a pivot than Astera and will be lower margin than Astera due to having a heavier reliance on hardware.
Natera (NTRA) - 4.2%
My investment in Natera has been growing in confidence since reviewing a couple conferences and learning more about the company. I’ve been looking to do a write up on them at some point, although there’s a lot to ramp up on with their products. They started in women’s health with screening tests for babies, and have been expanding into other diagnostic and cancer tests based on DNA. Revenue, net income, and OpEx are all trending well as the company gets closer to sustainable profitability.
ACV Auctions (ACVA) - 1.5%
ACV Auctions depends heavily on the car market being a wholesale auction company for cars. With interest rates not coming down as much as anticipated and seeing a few news items about the slow car recovery market I’m taking a more wait and see approach here.
Companies I sold this month include,
Micron (MU)
Micro reported a disappointing guide where the long trend of sequential revenue growth would be broken. Unfortunately this quarter was hit by the roughly half of the consumer side guiding for poor sales. This is apparently the result of phone and computer makers having stock piled memory, and now they are burning through that inventory before processing more. This glut in the market is still playing out so I’d like to see more clarity around that. The other side of the business which does memory for AI systems is doing extremely well, however these sales are already booked far in the future so not a lot of surprises there.
The Real Brokerage (REAX)
Whenever I think of how to explain this company to someone else it always starts with how they recognize revenue in an unusual way. Technically they have 300M+ of revenue this past quarter but much of that is based on commission to real estate brokers who take 85% of that, before adding on bonuses that REAL gives to their users. I’d almost rather see REAL account that only 15% of what they keep from the commissions in theirs. I would like to see that the company can pivot to higher margin products and services as well. They’d mentioned the titling business is growing strongly but I’m not sure what the base is off of.
Companies I researched in the quarter,
Tradeweb Markets (TW)
This is my second pass at looking into this company as they just reported 36% revenue growth and strong profitability. They are a OTC marketplace for bonds, derivatives, ETFs and money markets for institutional clients. The company seems to have a higher valuation with a 32B market cap for 448M of revenue. There’s lots of recent acquisitions: ICD, YieldBroker, r8fin. Usually I want to see companies like this digest the acquisitions before getting in to show that the growth is not just from jumping revenues together.
Applied Digital Corporation (APLD)
They do infrastructure solutions from data centers, GPUs as a service and setup specific types of projects whether this is high performance computing, data center hosting, or crypto projects. Their gross margin is somehow slightly negative so they haven’t really seemed to find any sort of way to sell more than at cost. While revenue growth is 67%, the gross margin would have to come up a lot from these levels to have further interest.
American Superconductor Corporation (AMSC)
They manufacture solutions from power grids and renewable energy systems. Revenue was 55M and yoy growth of 60%, but they guided the next quarter for 55-60M or basically flat. They have a recent acquisition with NWL, a company in the wind business. I’m interested to keep following this company as they recently got to GAAP profitability, but I’m a bit skeptical the yoy growth rates can stay impressive.
Perimeter Solutions (PRM)
Revenue is 288M with 102% yoy growth as they sell fire safety specialty products. They’ve had a huge jump up in revenue sequentially the last year but they still have lumpy results on EBITDA and net income. It turns out this lumpiness is from “Founders Advisory fees” and in one quarter there was 184M of these and other quarters this is a negative number. I’m not really clear why these advisory fees are so massive.
MACOM Technology Solutions (MTSI)
Semi conductor solutions company that has some offerings in optical and photonics along with GaN and other tech. It’s 1700 employees founded in 1950 but IPO’d in 2012. The company itself says its not getting products fast enough to market, although revenue did grow 33% this past quarter. Similar to other companies I passed on this month, there’s two recent acquisitions making growth comparisons on a apples to apples basis hard to do.
Rubrik (RBRK)
I learned about this one from the thread on the boards and the 43% revenue growth was enough to take a look at this one. My take aways were that they are giving a down sequential guide and still unprofitable. When I compare Rubrik to Paymentus, they have less growth, less profitability and over 2x the market cap.
Nasdaq (NDAQ)
Strangely Nasdaq has different data and numbers than all the data providers. Some sources show 31% revenue growth, but then other places show 1.9B of revenue but 1.2B of “net revenue”. You wouldn’t really expect it to be this hard to decode what the real numbers are so this was a pass for this well known company.
ZIM Integrated Shipping Services (ZIM)
Founded in 1945 in Israel this shipping company has about 5000 employees. The company seems to be in deep value territory with a PE of less than two. They transport dry cargo like ceramics, clothing and electronics, in addition to fruits, meats and medicines. Cash and Debt are both around 4B which is kind of crazy for a company with a market cap of 3B. My big take aways were there’s a lot of variance in this business and they don’t pay down their debt but offer a dividend instead.
Overall I’m really pleased with the results for the year having outperformed the markets significantly. I am looking forward to 2025 with a renewed focus on investing as I make the transition to doing this style of investing professionally.
. And ALAB is also a position I have because of your November write-up, so THANK YOU!
