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Penalty Box Stocks
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?
25%Liquidate my position.
20%Sell a portion.
54%Hold, stop adding.
0%Buy when it feels the worst.
24 VotesPoll ended on: 9/7/2022
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