While I try to consistently dollar cost average into my Core 34 positions over time, I currently have six of them relegated to a type of " penalty box."
This designation doesn't necessarily imply a broken thesis but means that something has gone sideways far enough that I want to slow down my DCA'ing on them.
Here are those six and what got them there:
$TDOC - Goodwill of $4.8B, a market cap of $4.8B -- even after the writedowns.
$TWLO - Stock-based compensation over 20% of revenue, -7% free cash flow margin, even with this SBC boosting the figures. Management is pointing towards streamlined profits over the next year, but I'll wait to see it.
$DOCU - Profit margin improving (almost positive), but FCF of $500M gets buoyed by SBC of $440M. Instead, I would add to my other core holding in $ADBE for now.
$U - Too big of a position in my portfolio to be as volatile as it is -- waiting for more certainty regarding M&A before I add any more.
$SE - I'm throwing a temper tantrum over Sea's use of its "adjusted EBITDA before HQ costs" metric. These "HQ costs" are just expenses that it backs off EBITDA. Worse yet, even after pencil-whipping these earnings to hell and back, this adjusted EBITDA was still -$500M in Q2.
$UPST - Much like Unity, I have too much exposure to Upstart's volatility. Furthermore, management seems to have reversed course by admitting that it would like to keep some loans on its books, which is a direct contrast to my original investment thesis.
There are fundamental issues underlying each as well, but I wanted to keep things concise and point out my least favorite thing here.
Curious what you think as to why these are in the penalty box -- do you agree or disagree with them?
What do you do with "penalty box" stocks like these?
Lol at $SE not being able to make triple adjusted earnings to look good
I completely ignore most companies goodwill. Net cash and share count are more important. $TDOC has a similar share price today is it did in 2018. But it’s revenue is 4x higher. Op margins better -15 to -9%. And most important think that’s changed is the 95 modifier. This changed in 2020. It allows doctors to charge regular in office billing codes for telemedicine visits. Prior to this change you could only bill telemedicine codes which paid 80% less.
I hope $UPST management will figure out what they want to do with the business aspects. Bc if the algorithm keeps out performing credit scores, they have a golden ticket
I sold a put first then after Jackson Hole Symposium, counter went south. I was not expecting it to fall that fast. Thus when the day the price went above my put strike price i short sell tdoc and use the put expiry to close my short.
My goal here is to close the sell put safely without having to fork out any cash for the assignment of shares.
I hold $U also and it definitely isn't too dramatic to say the $IS acquisition will only bolster or break the thesis. If management can't pull this off, it'll be major dilution with nothing to show for it. A massive setback and a loss of trust in the executives in my book. However, a successful integration could cement Unity's place as an industry-leader.
As always, only showing my taxable brokerage account. Keeping my IRA, 401k, and Crypto all separate. Just over 2-month old account.
$ZM continues to be my largest position. I think this is probably one of the most important companies of the future. Covid made the company a household name, but their primary business was always to enterprises. If I was less responsible, I would only buy Zoom.
$PLTR and $ROKU are my second and third holdings. I bought more shares at $62 after ROKU earnings and sold them yesterday at $72 a share so have a small amount of cash from that, which will be put into either company. My conviction in both companies has been rock solid. Nothing about last weeks earning changed that at all. Noticed a lot of positives hidden by the negative ad numbers. We will see how $PLTR fairs this quarter with commercial customer growth and hiring. I think in a downturn PLTR can hire a lot of talented people, who would otherwise be taking positions at companies that are now freezing hiring.
$DDOG, $S, and $SNOW are three positions that may end up as just two. I don’t have the highest conviction in SentinalOne and am hoping their rev growth will provide me with a higher upside so I can sell the position to increase SNOW and DDOG. I have been tempted to just make the move now but I rather no touch my SaaS until after this week.
$APPN and $TDOC longterm plays. Conviction is higher than my position sizes but my cash is finite.
$TWLO was a new position started last month. Not sure how much I will increase it, while I still have positions above it that I would like to increase it first. I honestly just love what the company does, aside from dilution and employee satisfaction , but I am hoping these things can and will change
A busy week with mostly positive earnings reports from the big tech companies.
17 of the 40 companies from my selection reported earnings last week. Overall, the results were encouraging. Even with the obvious macro headwinds of inflation, a strong US dollar and economic downturn, $AMZN, $MSFT and $GOOG did very well.
But even quality companies are not immune to macroeconomic conditions. The advertising business from $META is slowing, while $NOW cut its subscription revenue forecast.
However, this is a far cry from the speculative growth stocks that got bid up to the moon during the recent tech bubble and are now coming down to earth. In downturns, quality companies show strong relative strength compared to the likes of story stocks like $TDOC or $ROKU
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