Ouch. Again…in October we got another big war in addition to the ones already raging in Europe and Africa. And longer-dated US interest rates went up. Not a great back-drop to inspire animal spirits. Lots of red in many of our portfolio’s.
Performance
| 1 Jan 2023 to | YTD Return | mom change as % of starting capital |
|---|---|---|
| Jan | +7.2% | +7.2% |
| Feb | +17.3% | +10.1% |
| Mar | +15.1% | -2.2% |
| Apr | +2.1% | -13.0% |
| May | +23.4% | +21.3% |
| Jun | +31.2% | +7.8% |
| Jul | +37.3% | +6.1% |
| Aug | +43.7% | +6.4% |
| Sept | +30.2% | -13.5% |
| Oct | +14.2% | -16.0% |
Changes
I sold our of Tesla after their results. The numbers came in sequentially down and the CEO’s commentary (and he’s not know for sandbagging) was downbeat and cautious.
I also greatly reduced my AEHR position after their results, and specifically because orders dried up in the quarter and the CEO used the results presentation to implore customers to place their orders for future quarters. Now there’s been debate about the wording (a CEO I used to work for called it word-smithing) - was he begging for orders or just asking very nicely? I don’t really care about the nuances: his asking his customers to please place orders in an earnings call smelled of desperation to me. This is not a recurring revenue business. If they don’t get orders, revenue drops fast and far. It may bounce back in a quarter. Or two. Or three. But that’s a long time to wait and a lot of volatility to stomach. And it’s still not cheap even after the recent sell-off: on a runrate revenue basis it is more expensive than Tesla. If revenue growth and/or profitability and/or cash flow falter, it could fall a lot more. Having said that, I think the massive selloff may be overdone. They could literally get a big order tomorrow which could send it up a lot again. Hence I kept a small position.
Lastly, I took a position in Remitly after taking a closer look at the business and really liking what I saw.
Current portfolio
I’ve concentrated my portfolio more this month and reduced my cash position a lot. My top 5 positions now make up 79% of my portfolio vs 65%, 66%, 65% in the 3 months before.
After reading Saul, Bear and Stocknovice’s reviews I thought to shorten my discussion and highlight some metrics that they haven’t shown - I don’t disagree with any of their positions, only on the relative size, so don’t want to clutter the discussion. Only Confluent, Dlocal and Pure Storage are in none of their portfolios - and those 3 are small, and their continued place in my portfolio is dependent on a near-term catalyst.
In the table above I’ve shown the run-rate revenue multiples for my stocks, their last quarter’s yoy revenue growth rate and the (adjusted) net profit margin. All have grown rapidly last quarter except Pure, and for Pure I’m expecting a significant uptick. All were (adjusted) net profit positive except for Global-e and Transmedics, and for both of them I will want an improvement in the upcoming quarter.
Celcius - remains my top position. Based on Nielsen’s survey data, they should have a killer quarter coming soon.
ELF - looking forward to their results later today. The shares fell off a cliff yesterday on no news that I could see - so either the drop will prove warranted today or we’ll get the good news that I’m expecting and things could rebound. Let’s see. Based on the combination of profitability, very fast revenue growth and a reasonable valuation I am hopeful.
Axon - Axon’s revenue growth could increase further as I pointed out previously as their cloud business makes up a bigger part of the total, and hardware rebounds. We’ll find out on 7 November.
Monday - Monday’s shares fell more than most this last month, probably due to it being an Israeli company. It has appreciated by only 8.8% ytd, the lowest of my portfolio except for Transmedics. I decided to keep my full position into earnings on 13 Nov.
Samsara - great company, doing vehicle tracking and telematics right, and expanding into adjacencies. They seem to have shrugged off the short report released end September, as the stock was down 9.3% in October, which is not out of whack with the rest of my portfolio (actually less than some). I’ll be looking for continued strong growth and improving margins when they report.
Nvidia is already a big beneficiary and driver of the AI revolution. But after delivering an absolute blowout quarter in their Q2 this year, the stock is back to where it was right after Q1. It seems that a good result in Q3 is a near certainty, but worries about China is weighing on the stock. I’m willing to go into earnings with this setup. I’ll reconsider thereafter but don’t see myself increasing this position much from here.
Remitly - is a company that helps expats send money home. Like Western Union, but then better. I feel about Remitly similarly to how I feel about Samsara: they are not doing something new, but they are doing something which has been around for a long time much better. Their strong marketing machine has helped them grow customers by 47% last quarter resulting in 49% revenue growth and a 8.7% adjusted EBITDA margin, up from -3.4% a year ago. Fast revenue growth and rapidly improving margins. We’ll see later today how that has gone in Q3. If you want a refresher before then, here is the Q2 deck. Depending on the results I may increase this one by quite a bit.
Confluent - looking for revenue to stay roughly at last quarters’ growth rates and for profitability to improve. We’ll know later today. Same goes as for Remitly - this is a contender to get a bigger allocation.
Global-e, Dlocal, Pure Storage, AEHR and Transmedics each has an expected near-term catalyst which will be validated or not in their upcoming results. Of course I’m hoping for validation but I probably won’t be right on all of them, so I’m keeping them small.
The catalysts are:
AEHR: they get a significant order (they’ve historically done a press release when they got a big order).
Global-e: the launch of their Shopify product accelerates their revenue trajectory.
Dlocal: a continuation of the inflection in growth Latam and a stabilisation in Africa, especially Nigeria accelerates growth.
Pure: a potential big order from Meta for their supercomputer, which is supported by Pure and which is not included in their forecast, and traction from their new products. The Meta order has become more plausible given Meta’s comments about their capex plans for the future in their recent ER.
Transmedics: showing that growth has not flatlined, and profitability has not gone backwards after the transition to an in-house fleet of (expensive) jets.
In closing
Barring a world war, we should be fine…Good luck to you all!
-wsm
Previous reviews
September 2023
Aug & Jul 2023
June 2023
May 2023
April & Mar 2023
Feb 2023
Jan 2023