Zen Mind. Beginner Mind.
My portfolio at the end of November 2024 is,
AppLovin (APP) - 21.7%
Astera Labs (ALAB) - 19.2%
Reddit (RDDT) - 19.2%
Hims & Hers Health (HIMS) - 15.1%
Paymentus (PAY) - 9.2%
Micron (MU) - 9.1%
Natera (NTRA) - 2.5%
ACV Auctions (ACVA) - 2.0%
The Real Brokerage (REAX) - 2.0%
My portfolio is up 145% YTD, and that is with no options, margin, or leverage of any kind. Driving the huge results were APP, ALAB, RDDT, and HIMS which were my top positions going into November and each delivered stellar earnings report.
However, I sold out of five positions from last month which were Powell Industries (POWL), Castle Biosciences (CSTL), Harrow (HROW), EverQuote (EVER), Nvidia (NVDA). Additionally, I had a position for most of the month in Argan (AGX) but sold that company towards the end of the month.
I sold out of these positions before finding any new companies. Actually I was on a bit of a drought finding companies at the beginning of the month, but the end of the was extremely fruitful, finding four new companies to invest in: Paymentus (PAY), The Real Brokerage (REAX), ACV Auctions (ACV), Natera (NTRA).
Reviewing the companies I own,
AppLovin (APP) - 21.7%
The company had a good quarter, but I was surprised by how much the stock price rallied on the report. The market finally seems to be waking up to the opportunity here as this company was a laggard in my portfolio for six months. There is a lot of enthusiasm from the web pilot and I typed up some thoughts on the earnings report here.
There was also a really interesting thread diving into the early results on the web pilot. The CEO mentioned there was a lot of buzz on Twitter about the web pilot, and looking at some of those tweets it’s incredibly encouraging. From what I gather, their web pilot is getting better ROI on ad spend than META achieves. If that turns out to be true and the product is automated and self service, I don’t see any reason why AppLovin couldn’t reach a trillion dollar market cap.
Astera Labs (ALAB) - 19.2%
Despite being my second highest allocation, Astera Labs is my top conviction stock. I wrote about how the company surpassed their guidance significantly. Revenue was up 47% quarter over quarter which is crazy. With their biggest competitor being Broadcom at nearly 50x the size and still growing, I see Astera as the company with the most potential for multi-bagger results.
Reddit (RDDT) - 19.2%
Reddit delivered a really nice quarter, also exceeding the guidance by a wide margin. I wrote about the results in this thread. The biggest upside I see is that the entire Reddit corpus is being translated into the world’s languages. It cost the company only 1M to translate the language through an LLM. In turn, they get tons more pages searchable and indexable by Google, or more real estate to sell ads on. The company has barely started putting ads into the comment section on Reddit and there is a lot of greenfield ad space.
Hims & Hers Health (HIMS) - 15.1%
HIMS had a great report which I wrote up here. The company is guiding for 90% revenue growth and getting more profitable.
The big news of the month was Amazon getting more involved in their pharmacy business. The stock dropped from $30 to $20 in a couple days which I felt was an overreaction. Despite that I was a bit panicked at the story and the stock drop and I trimmed some of my position. Previously my thesis around HIMS was that they just had some low tier, low cost competitors who were not providing anything interesting. I do believe that Amazon can potentially chew away at that lower end of the market on the low costs generics. In retrospect, I wish I had taken a little more time before trimming a third of my position because the big drop already priced in a lot of negativity.
Paymentus (PAY) - 9.2%
This fascinating SaaS company flew under the radar in the 2021 IPO class of companies, and they just put up their best result ever. There is a starter thread detailing the prospects for this company. The price/sales is very attractive along with being GAAP profitable already. I believe this stock has the potential to deliver results very quickly as the market learns about the company. This last quarter was 232M of revenue, +52% yoy and that includes 14M of GAAP net income. Yet the company market cap is less than 5B making it attractive from a value standpoint.
Micron (MU) - 9.1%
Micron has been the biggest laggard in my portfolio for companies I am holding, and I’ve trimmed a little bit of the position. I bought into them last time after a phenomenal earnings but the market has trended down on them since. The all time high for this company comes earlier this year getting up to $160 a share and it now sits at less than $100 a share. The market cap is already 110B which is big but the company had 7.75B of revenue, 3.43B of EBITDA, and 0.87B of net income last quarter.
There seems to be a lot of pessimism on Micron from reports coming out about the memory situation. I haven’t done much digging into the South Korean competitors recently to see if that is driving it. However, Micron has a more energy efficient system than their competitors so they could be taking market share. I’ll wait for the results on December 18 to see how they report before making any big moves here.
Natera (NTRA) - 2.5%
Natera does DNA testing and last quarter came at 440M revenue and 64% revenue growth. The company is still unprofitable but I believe they can reach break even soon as cash flows are improving. I’ve had this company on my radar a few times before but written them off because of profitability concerns. However, this is probably the strongest quarter they have ever had as public company and business is booming. My biggest concern is that the market cap of this company is already 20B, so the market is pricing in a lot of optimism already. However, there is enough for me to be interested in a starter position.
ACV Auctions (ACVA) - 2.0%
This wholesale car auction company is firing on all cylinders. Revenue growth got up to 44% this past quarter and the commentary from the last earnings call is strong. The company is also trending towards profitability as they see more leverage as they scale. Currently the company deals with retail cars, some 10M or so standard driver cars, but they are also entering the commercial market which presents some upside.
The company has a system to auto inspect cars and provide a detailed report. It goes as deep as recording the engine sound, running it through AI to see what problems the car may have. The bidders in the wholesale auction then have a lot more complete idea of the value of the car as opposed to the old fashioned method of “kicking the tires” or just visually inspecting the car. This also allows dealerships of different types to be able to buy virtually any car, even if it is not the same brand.
The Real Brokerage (REAX) - 2.0%
This real estate brokerage is the only one in the industry that is growing, and agent growth is above 70%. This is a fairly unusual business model as I discussed in this thread. Much of the commission for real estate transactions is a pass through to the agents, where REAX keeps maybe ~10% overall when all things are accounted for. This makes the gross margin on the company low, and if that was all there was to the company I would not be investing. However, they have a number other initiatives which are higher margin and gaining traction. This is my lowest confidence position simply because I’d want to see the company prove their transition to a fintech is working before adding more to my position.
Companies I sold this month are,
Nvidia (NVDA)
The company has been delivering between 4-5B of net new revenue for over the past year. On the first quarter of AI sales, the company added 6B of net new revenue and the quarter over quarter increase in revenue was nearly 90%. Now when the company goes from 30B → 35B in revenue it is not moving the needle as much. They guided to 37.5B in revenue which would be an even smaller increase, and even if they beat by the same amount of 2.5B and land at 40B, going from 35 → 40 is smaller than going 30 → 35.
Additionally, the company has had some concerns raised with heating for their designs of the NVL72 system. Jensen was asked about this on the call directly and instead of answering talked about the miracle that is Blackwell. That was not reassuring to me as an investor taking a close look at this issue. If there is even a slight delay and a miss on deliveries on their bigger system it could mean a missing reaching that 40B in revenue next quarter.
Lastly, when the company Astera came up, some on the board mentioned Astera’s solutions could be useless since Nvidia is building the next generation of networking solutions and Ethernet standards that will be a monopoly. Nvidia mentioned this quarter that networking revenue was down quarter over quarter and did not explain why. To me this indicates that their standards are not taking over, and hyperscalers are opting for their own solution. While networking is not a huge portion of Nvidia’s revenue, as investor I would really like to see these new opportunities for a TAM increase to be taking off.
Powell Industries (POWL)
Revenue came in at 275M (+32%) and was down from 288M last quarter. That definitely was not the headline number I wanted, and I had previously thought the company may hit a wall on capacity as they only have some many engineers to build physically. Additionally, the companies revenues are coming from sales that were booked over a year ago so they company is still churning through less data center type projects. I believe this company will do well but probably is not growing fast enough to be interested anymore. It would be smart to check back in on them again once they are processing those data center orders as I believe it will boost growth.
Argan (AGX)
I sold Argan in tandem with POWL. While not competitors they companies both benefit from increasing energy needs of data centers. They are build agnostic among nuclear, solar, gas, or wind. Their backlog is huge, but similar to POWL they are processing projects from a year+ ago. Again, this is probably a great company to invest in, but I am looking for slightly more consistent growth over the long term.
Castle Biosciences (CSTL)
The company beat the analyst estimates but revenue declined sequentially which turned me off from wanting to own anything here. For those still interesting there was a thread discussing the company over here.
Harrow (HROW)
On the previous quarter revenue had gone from 35M to 49M on some stunning metrics. However, this quarter saw revenue again come in at 49M which was in my opinion a very poor result. I was fine with getting out a ~20% loss on a result which I thought the share price could have lost more. The company mid quarter reorganized how they do some sales and this impacted revenue in a strange way. Additionally, something which was a yellow/red flag to me on this company is that the CFO is non-present on talks and earnings calls, it’s a one man show. I have seen this before with companies like BEEM and AEHR where the one man show is a warning sign. It’s simply not possible to one person to handle all aspects of a business, and a good leader recruits a team.
EverQuote (EVER)
This company actually beat their impressive guidance, landing at 163% yoy growth but they guided down significantly. There was some seasonality in the business I did not know about. I researched into why insurance is doing so well as a sector recently. Apparently legacy providers in both car and home insurance jacked up rates and consumers are scrambling to switch. It seems like a game of musical chairs to me, and companies like EverQuote won’t be getting the same number of referrals once the music stops.
In one of the most bizarre situations I’ve seen in the market, there are two almost identical companies to EverQuote which are MediaAlpha (MAX) and QuinStreet (QNST). It simply was not worth the time deep diving on these other companies after writing off the business model for EverQuote.
Companies I researched this month were,
Innodata (INOD)
They provide a range of services focused on AI and data management, even doing some nitty gritty things like fine tuning of LLMs for company specific projects. Revenue had a huge jump up from 33M → 52M this past quarter and they are profitable. However the company is very heavy on consulting, and has an enormous 5,000 employees for their market cap.
Tempus AI (TEM)
They use AI to advance medicine with genetic information, and clinical trail data. It is one of the largest sequencers of cancer patients in the world, creating intelligent diagnostics. The company is growing 33% but still deeply unprofitable with -76M of net income the last quarter. They made an acquisition recently too. I’d want to see them digest the acquisition and get closer to profitability before looking again.
PowerFleet (AIOT)
They are a competitor with Samsara (IOT) and GeoTab. Hilariously they seem to have practically copied IOT’s stock symbol too. It’s the same marketing apparently, improving driver safety using trackers and AI. They’ve been public awhile though since 1999 and used to be called “I.D. Systems”. There are also two acquisitions on record which is why revenue shot up so big two quarters ago from 34M → 77M. I would really want to see them take market share from competitors before having any more interest.
SiTime (SITM)
They make some semiconductor components and I don’t quite understand their market. Revenue is up 64% yoy which is promising but past revenue bumps seem lumpy. What is holding me back here is the company was not only growing more in 2022 but was more profitable. That is a very different story than most of the other hardware players who have seen accelerations since 2022, leading me to believe there are some negative aspects to the business that I do not understand.
Krystal Biotech (KRYS)
They make genetic medicines for rare and serious diseases in the fields of dermatology, respiratory, and oncology. VYJUVEK is their first FDA approved product which is a re-dosable topical for DEB, a rare skin condition. I decided against investing after learning the company has only 460 patients on their key product. They say they can get up to 700 patients, but this is nearly $187k in revenue per patient if I calculated correctly. The product seems way overpriced and the TAM of patients is tiny. My biggest concern is some therapeutic could treat the underlying condition at some point, although I know next to nothing about this rare skin condition.
Overall I a thrilled with the results my strategy has been producing gaining 145% year to date. I believe the strategy of reallocating to the best risk/reward opportunities for growing companies works far superior to just buying good long term companies.
Surprisingly I looked back at my portfolio since the beginning of the year and discovered I do not hold a single one of those companies any more. Not getting attached to companies is a key part of my philosophy, and I believe that bunkering down on a company which underdelivered on results is going to underperform. I try and make sure that each company I am owning has amazing prospects for the next quarter as a basis for what I own.