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MD. Science nerd. Outdoorsman. I’m looking to own companies that have improving margins, high net promoter scores, low cap-ex and debt interest ratios and/or managers with excellent capital allocation
78 following299 followers
Ben's avatar
How Are the stay at home stocks doing post pandemic?
For me the stay at home stocks are $ZM $PTON $TDOC $DOCU $NFLX. Of course you could include others in this category. But these to me exploded in 2020 and their bull case in 2020 could have been "this will be a winner bc we will never do xxxx in person again." Whether that's work in an office, go to a movie theatre or go to a doctor. Some of these have better bull thesis than others. I hold a few. I want to do a 5 part write up to see which remain attractive from an investment stand point today IMO. All 5 stocks are down or flat since pre-pandemic but most of that is market conditions and multiple contractions. I want to know is the business better now after a black swan event.

I want to start with $PTON

revenue: 915 mil.
-10% op margin.
op cash flow neg 108 mil and FCF -190 mil
From 2019 had 3 years of 100ish% revenue growth followed by 10% yoy rev contraction 2022 then 20% yoy rev contraction 2023 (note: TTM revenue contraction factors in estimated q3 2023 PTON revenue estimate to estimate fiscal year 2023 contraction)

TTM 2.8 bil revenue
-36% op income and this is despite shifting 15% of expenses to SBC this past year as opposed to 9% dilution in 2019.
op cash flow was -674 mil TTM and this was made better by adding back SBC 420 mil, 459 mil in restructuring cost, and 320 mil in other activities. add another 133 mil in capex and you burned 807 mil TTM FCF
There may also be some shenanigans in deferring expenses in accounts payable. in 2022 PTON had 93 mil in accounts payable. In TTM this number ballooned to 502 mil.
With only 873 mil in cash remaining. This can support paying what is due to vendors and 2 months of cash burn (or burning cash for 4 quarters and not paying vendors) without raising more debt, at high interest rates, or selling more equity which they did in 2021 at saying a few quarters prior they weren't going to do.

Reported 3.033 mil subs. 10% yoy increase.
product revenue 381 mil (52% yoy decline) with gross margin of -11%
subscription revenue 411 mil (22% increase yoy) with gross margin of +67% by adding subs and raising prices.

Cycling makes up over 50% of the workouts on Peloton, making it the most popular type of activity among connected fitness subscribers. Strength is the second most popular fitness category, accounting for 18%, and it is followed by floor (11%), Yoga (8%), running (8%), and outdoor (2%).

Trying to get to a bull case and TAM
With 3.033 mil subs paying $49/ month we get 1.78 bil in revenue. With a great 67% gross margin.
60% of all subs are using the bike or the treadmill. So let's give them 300k new users that bought 750 mil in bikes. And we get 2.5 bil in revenue. Which is another double digit revenue decline: 10% yoy decline in 2024. Total loss of 37% revenue in 3 years.

The next bull argument is PTON is going to take over gyms bc its cheaper. But most people (50% biking and 8% running) need the hardware to get their desired use out of the product. So for 58% its not only $50 a month compared to in person gyms charging $200+. Note some gyms charge as low as $10 dollars a month. For these users is a 2500 bike or 3200 treadmill are needed. Since a lot of these products are BNPL. The "real" monthly cost to be a user is $119 (avg monthly BNPL cost over 2 years) and $49 monthly subscription. This is $167 per month much more in line with the cost of an in person gym.

The rest of the people who use then PTON pay a smaller fee to have access to some work out videos via the app. Whether you want to strength train (18%) or do yoga (8%) this is the remaining 42% of users at the lower fee. Managements big shift to being fitness as a service. The PROBLEM with this is competition. Not only competition from in person gyms, some people like to be social and work out with others. This IMO is the reason for PTON 50+% yoy decline in product sales.

PTON also has competition from other video platforms and apps. Mainly free ad supported competition from Youtube. But iOS reports 24,00 fitness apps, led in revenue by Myfitnesspal, Strava, Fitbit, Sweat, AllTrails, Muscle Booster etc. You could pay PTON $12.99 a month or you can watch ad supported Youtube videos for free to show you a work out. Or you could pay one of hundreds of other work out apps.

Currently only 14% of US citizens exercise. So PTON management could say "if only 10% of these users become PTON users we'll make a great investment!" But that tailwind passed. The majority of the new people who where going to sign up, signed up over the last 3 years. PTON grew from 360 thousand to 3 mil subs. I don't see another 10x in subs happening anytime soon.

My take: too risky. burning cash. debt risk. I see PTON more like Blue Apron than ABNB. Its fun. Has an audience. But its expenses are too high for what they are trying to do. Its not going away. But an good investments needs growth or cash flow. PTON is not growing and has burned more cash than Heath Ledger's Joker. It can't just flip a switch and have flat growth and throw off cash for a dividend. IMO more likely to be down another 50% then 10x.

Joey Hirendernath
You hit the nail on the head -" The PROBLEM with this is competition. Not only competition from in-person gyms, some people like to be social and work out with others. This IMO is the reason for PTON's 50+% yoy decline in product sales."

Speaking as someone who has tried a lot of different fitness offerings the competition in connected fitness is like a piranha tank. I often find it easy to switch from one subscription to another quite easily. I am staying clear of PTON there is no resurrection story... only one that is going downhill.
Total number of commonstock users holding
In the highest portfolio gains this week almost everyone holds $PLTR. In oddly high concentrations (>40%). So I wanted to see how many people on commonstock held $PLTR. It’s the 12th most commonly held stock.

Also DOGE is 8th…And $PTON 20th?
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Nathan Worden
@nathanwordenMay 11
I don’t hold PLTR or DOGE, but if I was picking one I’d definitely go with Palantir 😄
Ben's avatar
Deposit and Security insurance
With the recent bank runs and their subsequent failures I looked into FDIC and SIPC a little bit more. While I don’t have enough money in either to be above the limits I do one day hope to.

FIDC insures bank deposits up to 250k.
SIPC insures equities and cash in brokerage up to 500k.

So if you have a 750k or more in assets what do you do? Only keep 250k per bank, ie open savings accounts in multiple different banks. I know SOFI tries to get around this somewhat by using software to hold up 250k in different banks online up to another limit of maybe 2 mil.

But for me I’m more concerned about SIPC. How many retirees have above 500k in a single 401k or brokerage. If you have above 500k in stocks do you have more than one brokerage limiting the total held in each to less than the insured limit?

Does anyone here have that ‘problem’ and how do you handle it?

Steve Matt
@interrobangbrosMay 8
For FDIC, you can exceed $250,000 by titling accounts differently. Obviously trust is a major factor here but you can have up $250,000 in an account in just your name, and another $250,000 is an account with you and a partner listed as owners and another $250,000 in an account with you and a family relative listed as owners, and on and on (different family relative, friend, Trust, etc.). I believe SIPC is the same although titling an IRA or 401k other than yourself is difficult. Regular brokerages can be opened under different titles though to allow greater coverage.

For me, I do exceed the SIPC limits so I have brokerages at different banks. I don't obsess over it though if I start going over $500,000 because I'm with massive, too-big-to-fail banks. If they go under, me losing my retirement funds are the least of my worries since the global economy with be kaput.
Ben's avatar
April review
2023 YTD performance
Portfolio + 11.5%
S&P 500 + 9.1%
2022 performance
Portfolio - 11%
S&P 500 -19%
2021 performance
Portfolio + 30%
S&P 500 + 26%
Buys none
Sells none
In April we bought a real estate investment to use as a rental. Deal hasn’t closed yet. But should be done in May. Hence the lack of activity in my portfolio. That and I don’t see as many deals compared to Sept ‘22 to Feb ‘23, when I was a much more active buyer.
Watch list is ENPH. Down 50% from its highs and a recent 25% single day correction is looking like a nice entry point. Micro-inverters are only 1.7% of the solar inverter market. Not to mention the tail winds of renewable energy for the next half century at least.
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Real estate investor
I added a new asset to my portfolio. We bought a single family home to use as a rental property. This is in a new development near where we live. These are established developers that have already finished a very nice community in our area. This on is to be set up similarly with restaurants, shopping, a pool and rec center.

The details
200k price
20% down
Mortgage payment at 7.25% interest is 1260 a month.
HOA is 125 a month
Property management is 10% or 165
Rent will be 1650.

100 a month in cash flow. Since it’s a new build hopefully low on maintenance for a while. Once the development gets closer to completion (phase 2 of 8) hopefully equity and rent will increase.

I sent up an LLC to hold the real estate on legal zoom.

Any advice or questions welcome.
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Devin LaSarre
@devinlasarreApril 18
I'll be following along. Hopefully surrounding development will outpace any unforeseen expenses.
March update
2023 YTD performance
​Portfolio + 7.0%
S&P 500 + 7.0%
2022 Performance
Portfolio -11%
S&P 500 -19%
2021 Performance
Portfolio +30%
S&P 500 +26%
Buys: buys $BLD
Sells: none

IMO still believe on an uptrend in sentiment since Oct 2022. it’s not that things aren’t still bad (bank failures, likely recession) it’s that there are less unknowns.

Still building cash. Reviewing some weaker positions $ZBRA $PYPL. No urgent plan to sell. Cash around 4% in a high yield savings (3.75% 🧐)

No change on the real estate front. Everything is set up. Waiting for the right property. Hopefully this quarter I’ll have my first long term rental.

@nathanworden the portfolio viewer seems messed up. Just random order.
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@from100kto1mApril 3
Good performance so far! What’s the thesis on $BLD ?
Biggest loser
I have noticed a trend of everyone posting about their biggest loss. And in a bear market most will have quite a few (me too).

I could talk about the stocks where I’ve lost the biggest % but still hold or the biggest realized loss for a sold stock. Or about the stock where I lost the biggest dollar dollar amount.

But instead I want to share some wisdom from a stock picker, Peter Lynch. He said the great will be right 60% of the time. As in you can beat the market by identifying 6 winners while also having 4 losers. He beat the market for 2 decades swinging and missing 4 out of 10 times.

For me the more important thing is to learn something these 40% to become a better investor. So I’ve listed some stocks I’ve learned the most from (by losing).

$ALB by selling to early. My thesis in 2019 was there will be more EVs in the future. And more EVs will need more lithium. Missed out on a 3-4 bagger by selling too early.

$TDOC and $OLO valuation matters. I still hold both. And I didn’t buy anywhere near the top. And I still believe in the future of each business. But I’m down. I didn’t have enough margin of safety.

$BIGC if you are going to overpay on valuation, pay for the leader in an industry. Not the 2nd or 3rd best. I have “over paid” for $MELI and considering overpaying for $ENPH. $MELI has been a very nice holding. Or maybe this should read buy great businesses during bear markets, so if you do overlay it’s a little less pricy. Looking at you $ASML.

$BABA and $STNE and $ILMN. Sell sooner when your thesis is broken. In each of the above the thesis broke. Government regulation change, too much risky lending, bought a start up that will eat on margins for a decade (respectively). One I sold for a gain, one a small loss and one a large loss. But in each case I waited months to sell AFTER the thesis was broken bc I wanted to be “a long term holder.” I could have netted a multibagger, a moderate gain and a small loss if I left as soon as the thesis broke.

Don’t let the losses get you down. Let them be lessons.

Lester Leong
@prometheusMarch 20
Good eye for spotting the recent trend! I find that closing a thesis broken trade to be much easier to execute with a little more up to date monitoring along with having another thesis ready to be ran.
Death, taxes and $ASML
I wake up this morning to this seeking alpha headline in my email inbox.
Obviously I open it immediately. $ASML has no competition in EUV. It’s my largest holding. Did competition invent a new method to bypass EUV? I didn’t think that was possible outside of quantum computing. Which is decades off…

So I read seeking alpha click bait headline and then I read $AMAT press release. They don’t bypass EUV lithography. Molten tin lasers are too awesome to bypass. They do have a new technique to stretch wafers to allow foundries to bypass double patterning. Which is good. It saves foundries time and money. But lithography is like death and taxes. It is inevitable.
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Joshua Simka
@tomatoMarch 9
If there were a shadow of a doubt about their dominance: $ASML ended 2022 with total net sales for the year of €21.2B and a backlog of €40.4B. One doesn't need to know a thing about extreme ultraviolet lithography to appreciate this company's gorilla moat! Their machines will be crucial in the proliferation of AI applications.
Feb review
2023 YTD performance
​Portfolio + 4.2%
S&P 500 + 3.8%
2022 Performance
Portfolio -11%
S&P 500 -19%
2021 Performance
Portfolio +30%
S&P 500 +26%
Buys: small buys to $VOO $BLD
Sells: none
VOO up 12% off lows. Sentiment is mixed. Continuing to build cash. Putting in high yield savings account (Ally 3.5%). Cash now 3.1% of portfolio value. Still considering using this for a real estate investment of some sort. I was asked to give an update on this process. So here goes.

So far spoke with the bank and I qualify for a loan at 7.25%. Will need 10% down. But I’d prefer to have 20%. Spoke with a realtor about what I’m looking for, single or multi-family property. Spoke with my CPA about setting up an LLC to place my real estate in.
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Modern Growth Investing
@growthinvestingMarch 3
what do you like about $TREX
Tracking revenue isn’t my preferred way to check in on UPST. Right now UPST uses investors as loan originators. But when the market/investors are scared ie the bear market we are in, less loans are able to be originated. Therefore less revenue for UPST.
But that’s not what I track. Instead keep an eye on $UPST moving away from investor loan origination and into being a SaaS “credit score” for auto retailers and credit unions. And hopefully in the future all lending. Below you can see they have been adding loan originators at a solid pace (nearly doubling both yoy)

The next thing $UPST needs to be a long term winner is to continue to be superior to the competition $FICO.

Which in this most recent quarter in a tough credit market, UPST continues to outperform legacy credit scoring.

For me this is a multi-decade hold. As long as the AI credit scoring continues to outperform and UPST continues to get more lenders on board (credit unions and auto-retailers) then this will be a multi-bagger.
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Steve Matt
@interrobangbrosFebruary 15
Right there with you on B&CU partners and auto dealers. I also keep a tight eye on loans fully automated. If their algorithm isn't able to decide on a loan application, a person needs to step in. That's a failure of my thesis, which is built around their risk grade structure on loans and their algorithm's that make those decisions. 82% of their loan decisions were fully automated in Q4'22, a record.

Also, concentration risk remains a concern but is slowly improving.

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