My thesis on $DM is that I think the supply chain issues have exposed the US to our lack of manufacturing capabilities and I hope we do a 180 and start a manufacturing renaissance here in the US and the only way this is possible is through robotics and additive manufacturing (3D printing) at scale.
For $U Im simply ultra bullish on gaming and UGC (User generated content) and I believe Unity will democratize game development and take a big chunk of the market
Did you make any moves today?
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No moved for me, but I love posts like this. Exactly the use case for Commonstock, educational, transparent, awesome.
Upcoming Earnings Calendar (March 7th - 11th)
Hey guys! Here's the upcoming earnings calendar! I'm interested in:
- $ZIM - Comments on their outlook for shipping prices.
- $CRWD - Another stellar earnings report and I'll probably start a position in this company.
- $MQ - How fast are their non-$SQ revenues growing?
Which earnings report are you looking forward to?
If you'd like an easier way to track earnings dates, you can automatically sync your portfolio's earning dates to your personal calendar with just a couple of clicks here.
Upcoming Earnings Calendar! (Nov 15th-19th)
Earnings season is slowly coming to a close, but there are still several highly interesting events coming up. Here's next week's earnings calendar and what I'll for looking forward to.
- $SE: insights on their global e-commerce expansion.
- $NVDA: comments on their product availability and supply.
- $WMT: Update on their Walmart+ membership and comments on inflation/labor shortage/supply chain issues.
- $DLO although this stock is too richly valued for me, I like their business and I'm following it in case there's a good buying opportunity post-earnings.
Comment below which earnings report you are looking forward to the most!
Friendly reminder: you can automatically sync your portfolio's earning dates to your personal calendar with just a couple of clicks here.
- BMO: $RAIL $TSN $OEG $VBLT $HHR $PHGE $PLX $OTLY $RMBL $BFLY
- AMC: $AAP $IDEX $POWW $MARK $IBIO $CSPR $QFIN $DRIO $DM $NEPT $JJSF
- BMO: $WMT $HD $SE $NTES $DAVA $ITRN $DOYU $DAO $BNR $GDS
- AMC: $STNE $LZB $CRMT $BEST $DLO $SBLK $DLB $VREX
- BMO: $TGT $BIDU $LOW $TJX $BILI $MANU $IQ $ZIM $NNOX $NTIC
- AMC: $NVDA $CSCO $SONO $YY $KLIC $BBWI $VSCO $ZTO $QUIK $MAXN
- BMO: $BABA $JD $M $KSS $CSIQ $VIPS $BJ $ATHM $WOOF $AZEK
- AMC: $AMAT $WDAY $INTU $PANW $WSM $ROST $FTCH $CAL $VNET $AMSWA
I noticed that I’ve started making more opportunity trades recently, and combined with this CommonStock POST, it gave me the idea to discuss them here.
So what do I mean by opportunity trades? I’m talking about a trade that was unplanned when you woke up this morning. Not a stock you’ve been doing active due diligence on, but something in the news or in the daily price action, that triggers an opportunity to buy (or sell).
Opportunity trades may seem like a spur of the moment decision, but they’re only an opportunity if you’re prepared to act on them.
For me, I like the hunt. Sitting on the same positions for 20 years may be the best long term bet, but it’s not enough excitement for me. I need to keep my brain engaged, and swing trading provides me that opportunity.
This also helps me from over trading my long term positions… and give’s me something to write to you guys about! 😊
So for me, preparation is having a set percentage of the portfolio dedicated to swing trading, or opportunity investments; having some basic rules around opportunity investments; and keeping some cash on hand for those opportunities.
I allocate 10% of my account to trading/swing trading. That could all be in cash (no open trades), or all fully invested (rarely below 2%-3% cash for very long). Now some of the rules… 👇
- I don’t allocate more than 1% (or 10% of my trading cash) to any one particular trade. Sometimes that’s in shares, and sometimes I juice the trade with leverage using options. But never more than 1% of the account balance.
- Hedges count as trades for me. So any hedging I do has to come out of that 10% pool of trading funds.
- On trades, I set specific dollar/percent targets, but I also let price action and market conditions drive decisions. I go back to one of my rules on when to sell (you can read about them in “Selling is Hard”) If I need to watch every tick of the stock price, it’s usually time to sell (not looking at you day traders 😉).
- I try to only take trades that I have time to monitor, or ensure the target event (earnings for example) is far enough out that I don’t have to monitor closely on a daily basis.
- Set a loss limit pre-trade. It might be an all or nothing trade, where 100% loss is acceptable, or it might be a tight 5% stop loss. Either way, know your target going in. I’ve lost more money than I’d like to admit watching a price blow through my loss limit thinking it’s going to bounce any minute… then it bounces right after I sell anyway. Every trade is not going to work in your favor, cut your losses as early as possible and move on.
- Leave room to scale in & out of a position. Sometimes there’s a reason to go 100% all in on a position, but 90% of the time I find myself better off scaling in/out of positions. Failing to give myself room to average down, or leaving some exposure to a big run, has cost me way more money than being less than fully allocated to a position.
- Final Note: There is a fine line between getting out when things go wrong and being patient while things develop. I think it’s better for beginners to set rules and stick to them, then analyze wins & losses to adjust the rules. This has been my biggest learning curve while trading… and honestly still is.
I’m always searching for an opportunity. I talked about it some in my “When to Buy” newsletter, but I’m always on the hunt for an opportunity. I’ve got a set of core positions, but I’m always on the lookout for a short to medium term swing trade.
My friend @drowsyinvestor described it as Passive DD, and I absolutely love that description!
Passive DD isn’t digging through 10Ks, earnings, and industry deep dives.
- It’s having the stock on your watchlist and watching price action.
- It’s reading news reports and listening to podcast in your free time.
- It’s seeing and using the product in real life.
- It’s paying attention when you see a post on Twitter, CommonStock, or Wolf Financial.
- It’s watching secular trends like Space, Cyber Security, Semiconductors, Weed, etc.
I think “Passive DD” deserves it’s own full article! Hopefully I can get Drowsy to help me out on it! 😉
Finally, you need a thesis for your “opportunity trade”. You’ve been doing all your passive DD, you browse by the stock on your watchlist every day, then one day… BOOM! Something just hits you upside the head.
`I can't believe Rocket $RKT is trading at $16/share! Wow! I haven't looked at it since I sold out at $30 when it finally broke that $20 base, what's going on?`
`Damn! Desktop Metals $DM has been doing nothing but going down for ever! I remember hearing some news was supposed to drop in the 4th Q, that's right around the corner.`
Both of these were recent ideas that hit me browsing my watchlist. And I have an active swing open on both of them.
It’s not particularly important what your thesis is, but IT IS IMPORTANT that you have one! Something besides “a whole bunch of people on Twitter say they are buying it”. And it’s important, because you need to know when it’s broken.
Let’s take $DM. They are supposed to start shipping their P-50 printer in early 4th Q. So if the price drops 10% tomorrow, my thesis doesn’t change, and there’s no reason to sell. If I was trading it because Jonah said it was going to be great, then I might loose faith and give up on the trade, when the catalyst for the move I’m expecting hasn’t even hit yet.
Active DD & Passive DD are both integral parts of investing. And neither are “gambling” (you can read about Gambling HERE 😊).
Take your time with Active DD, be intentional and build conviction for your long term holds. Passive DD involves being open minded, always searching for new ideas, and consuming information. Then not being afraid to act when an opportunity arises.
If you'd like to read the full article you can find it on my Revue HERE!
I'm excited about next weeks dive into Passive DD, and what it means to different investors around our community. I'd love to hear your thoughts in the comments... You never know, you might make next weeks edition 😉
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Really like the idea of passive DD haha I used to own $DM and find their mission compelling. What drove me to initially invest was their investor syndicate and management team. Both are quite solid but I sold out as I wanted to consolidate my holdings.
Excited to see the results from shipping the P-50. May have to build a position again.
Are SPACs Back? My thoughts on a SPAC Picker’s Market.
Since SPAC sentiment hit it’s peak in February with the announcement of the CCIV and $LCID merger, it has been quite popular for mainstream financial media and financial Twitter alike to bash SPACs, and for good reason. Companies like $NKLA, $RIDE and $MNTS have left a sour taste in the mouth of investors for promising massive growth opportunities and downright lying in same cases. However, just like it has been a stock pickers market for all of 2021, I believe that there are absolutely some diamonds in the rough within the SPAC ecosystem.
Four companies I like moving forward include: $MP (Complete de-SPAC) $LCID (Recently went through PIPE sell off), $ASTR and $RKLB. These companies represent the various stages of a SPAC life cycle and offer very different investing/trading opportunities.
$MP is a rare earth materials mining company located in Las Vegas, Nevada that owns and operates the Mountain Pass Mine, the only currently operation rare earth minerals mine in the Western Hemisphere. MP Materials looks to grow the rare earth materials supply chain and return it to the United States after China has taken over 90% of the worlds supply chain. With the adoption of batteries for electric vehicles, increased use of wind turbines and other applications, look for this $6 billion dollar market cap company continue to make moves to the upside. Current analyst price target average: $45 (32% upside)
$LCID Lucid Motors is most certainly a household name for all investors by this point, engulfing retail traders in excitement and anticipation for the announced merger with CCIV in February, after which coincided with the significant drop we saw at the end of February and into March. Consistently labeled as the $TSLA killer, Lucid has yet to deliver a single car. Rightly so, there are a lot of questions about its high valuation just over $37 billion. While $37 billion is a high valuation for a company with 0 deliveries (this will change in October with the first vehicles slated for delivery), $LCID, like $TSLA, is a technology company. Batteries in development currently have over a 500 mile range and there are talks about licensing and manufacturing these batteries for other legacy automakers looking to get involved in the EV trend. With deliveries incoming, there are many positive catalysts on the calendar over the next few months. Current analyst price target average: $28 (22% upside)
$ASTR is a company I made a post on recently, with its recent earnings report along with its first commercial launch conducted for the DOD and Space Force. While the launch was not a complete success, getting to space is extremely difficult. I believe that the space sector of the market will only continue to grow its important and prevalence in our society. With possible contracts in the pipeline and a successful commercial launch on the horizon this stock has the ability to move. Current analyst price target average: $13 (36% upside - only one analyst initiated coverage)
Lastly, my current personal favorite - $RKLB. The only publicly traded direct competitor to SpaceX, Rocketlab has been named the “highest quality space asset to enter the public market so far.” With a proven track record of successful launches under its belt, $RKLB will look to continue building out its “Satellite-as-a-Service” business model along with its contracts with NASA and other government agencies. Perhaps most exciting is the mission planned to the moon for NASA’s Artemis mission later in 2021. With a rocket in development, the Neutron, a direct competitor to the Falcon 9, a mission to Venus and a mission to Mars, this company is a leader in the space sector. However, the lock up expiration period will end on the 22nd of September, so there may be movement to the downside over the short term. Yet, with missions planned for September 30th and throughout October, I will continue to DCA. Current analyst price target: $24 (37% upside)
Honorable SPAC Mentions:
Not your Grandma's printer $DM
- Formed a starter position in Desktop Metal, waiting on a correction + holding for the long term
- Manufacturing space is moving from old tools and machinery to a new era with printers
- Investor syndicate, board of directors, and team is very solid
- Market is expected to grow to $146B by 2030 (currently $12B)
- Still a decent amount of execution (beginning stages of rev growth) and product (early stages of market formation) risk
- Reduces waste and is better for the environment
Traditional industrial production (Era 1.0) is done slowly and with a large amount of waste and cost. The future of manufacturing (Era 2.0 aka Additive manufacturing) relies on innovations in materials and the assembly of those materials (via parts and printing).
Additive manufacturing is estimated to grow 11x to $146B as companies shift from using 3D printers for prototyping to manufacturing.
The Founding Team is made up of mostly MIT professors, with the CEO and CTO coming from companies within the hardware space (A123 Systems, Bose, Stanley Black & Decker). Other executives have backgrounds in Venture Capital (NEA) and other hardware companies (Kodak, Stratasys, and A123 Systems).
What I really like about this team is that they have a history of working together (MIT, A123 Systems, and Stratasys) and have been in the hardware + 3D printing space. Further, the fact that the VP of Global Sales and VP of Customer Support come from another 3D printing company instills confidence in future execution.
Great investors and strategics fill the company's board. VCs from Google, Kleiner and Lux (a very sci-fi focused VC firm) plus strategics like the CMO of Ford and former CEO of GE make me confident in the network and assistance Desktop Metal will receive over the long run.
There are currently four main products from the company. These range from composite and metal printers to office-friendly and factory floor suitable.
While the market, team, and product are solid - the financials aren't as compelling and clearly show how early this opportunity is (thus why I am looking so much at the team and market). That said, they estimate that in 2022E they'll near positive EBITDA and by 2025E close in on a billion in revenue. While these estimates are certainly years in advance, they already have 90+ Production System (see product graphic above) reservations that provide visibility through the first half of 2024E. I'm hoping that the sales cycle for these products, while I'm sure long, more predictable. Additionally, more near-term, they've experienced a 30% MoM growth in Studio System pipeline in 2020 YTD. It is worth noting that this is also all done via organic growth.
The current price has TRINE around $900M market cap which, based on 2019A is around 40x revenue. This is the biggest risk right now, as the market is incredibly frothy, and while this valuation makes sense in 2023 revenue numbers (see estimates above and benchmarks below) it doesn't right now. Basically, given current benchmark numbers, Desktop needs to drastically outperform estimates or the stock is overvalued.
I bought Desktop Metal to get skin in the game and because I'm a believer in the market and team. Its current valuation is extremely high and doesn't make much sense given revenue numbers. However, I will keep an eye on the team's execution and look to slowly form a more concentrated position (or get out quick). This buy was also about diversifying away from traditional SaaS and gaining more exposure to "hard sciences". I've now done this through my $MP and $SPCE investments.
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Commonstock is a social network that amplifies the knowledge of the best investors, verified by actual track records for signal over noise. Community members can link their existing brokerage accounts and share their real time portfolio, performance and trades (by percent only, dollar amounts never shared). Commonstock is not a brokerage, but a social layer on top of existing brokerages helping to create more engaged and informed investors.