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Roundup - 07/01/2021

Romans Chapter 12 verse 3 states, "For by the grace given me I say to every one of you; Do not think of yourself more highly than you ought, but rather think of yourself with sober judgment, in accordance with the faith God has distributed to each of you."


This is pretty clear, but often a challenge. I always try to be humble, but emotions tend to get in the way. Whenever that happens, I simply need to remind myself that God is above humanity, and I am not always right, and need to recognize God's call to obey Him, and deny myself.


For investing there are some powerful words in this Bible verse, "sober judgement", "in accordance", and "has distributed to each of you". Sound judgment is paramount as emotions will always lead to pressure, and most if not all news is driven by sensationalism to drive emotions. Being in accordance with management strategies and principles is also crucial, and drawing closer to God, yes even for investments (as for all things) is important to help foster all of these elements successfully.


July 1st Sell-Off


The big news today is the growth equity sell-off. To start the quarter, everyone, and I do mean everyone is scrambling to sell growth plays as fast as they can. As of 9:52 am PST:




























There's really no justification. Some will argue that the past two weeks these names have all gone up, and they were due for a pullback. But I suspect it's more related to generating cash as Q2 earnings season kicks off to some degree, and short-term trading strategies primarily, notably milking Q2 performance results for clients before dumping. Growth has outperformed pretty much everything strongly since the mid-May (May 14, 2021) select growth play bottom. The market decided to only hammer the best performers from last year, some that still remain top prospects for the mid-term. And when I say top prospects, I mean 95th percentile or higher out of all public company investment opportunities.


Last Q1 earnings was a major catalyst for sustained selling pressure broadly across select growth plays. Earnings weren't bad, in fact they were excellent, but "concerns" over future quarters was used as an excuse to sell-the-news. I was caught off guard as it made no sense with all major indices rising, even leading growth equity indices. I suspect that Q2 will not lead to a similar drop, but rather will be more selectively driven by ACTUAL performance. However, with traders looking to continue to flourish in these volatile markets, it's anyone's guess. The key theme is being prepared to defend positions, and to do so at appropriate accumulation/initiation Stock Prices, SPs.


The evidence of traders going in big today is clear from unusually active option classes and general activity. But despite this, the fundamentals always win mid- and long-term, no matter how you play the short-term. And the fundamentals for the holdings in the portfolio suggest that today's market manipulation is completely disconnected to valuation over the next two, five, and ten year increments. As such, I continue to see substantial investment return opportunities, even for the short-term for certain holdings:


Anyone can argue against these short-term growth trajectories, but the fundamental valuation analysis is conservative both in inputs deriving mid-term growth financial models, and against industry peers relative to Revenue growth and Cash Flow inflection performance.


I've already raised cash prior to the end of the June, so anyone using today is late to the game. Other than that, as mentioned, today's action is primarily driven by traders, and if there's one thing I know, it's that not many traders win over the mid- and long-term. As such, I wouldn't be shocked to see some recovery tomorrow regardless of how the market opens.


Continued Portfolio Holding Upgrades


The other news is that many holdings in the portfolio continue to receive strong positive interest and analyst upgrades. The analyst upgrades are not as important, although they do typically serve as positive catalysts to SP activity, as do downgrades. Most recent upgrades include DoorDash, Inc. (DASH), CrowdStrike Holdings (CRWD), Twilio, Inc. (TWLO), and Shopify, Inc. (SHOP).


There continues to be extremely divergent opinions on Coinbase Global (COIN), however, concession is already being made that their Q2 could be huge, despite initial estimates. This is the name of the game for Wallstreet. Recognize potential, but don't give it ultimate credit so it can be "played". Five years from now, this game will be dead for Coinbase, among many other holdings in the portfolio.


Tesla Model S Plaid Catches Fire


I'm sure that some have already seen the news for this, but it's a nothing-burger for Tesla, Inc.'s (TSLA) SP. I do believe it will be a great social media discussion topic with such extreme views as this being the downfall for Tesla. It also comes soon after Tesla's announced recall in China. But all things being considered, I don't see any major hiccups on the horizon as a result. The SP is down half a point as I type.


Apple Pays to have a Button on Roku Remote Control


This news propelled Roku, Inc.'s (ROKU) SP strongly the other day, as some see this as evidence that Apple, Inc. (AAPL) will not be able to compete directly as strongly as initially thought. In essence, its a "join them" moment. I see it as highly positive for Roku as they continue to build their agnostic platform and execution remains impressive, especially as the monetization just grows further from these type of events.


When will the Accumulation Opportunity Happen?


There are two companies that I have my eye on accumulating - Roblox Corporation (RBLX) and UiPath, Inc. (PATH). The problem is, since their respective IPO trading days, neither are at any level close to meriting accumulation. Roblox did see a drop from $105 to $82 recently, and now sits at $87. UiPath has dropped as low as $66, and now sits just above $67. But both are around 30% and 20% respectively above my Maximum Action Price, Max AP targets. I am going to continue waiting for Q2 results to see if a sell-off opportunity presents itself. Roblox continues to have a disconnect with published analyst Revenue/other financial estimates due to an error from terminals - there literally is no accurate estimate for 2021, making it difficult for investors to understand quarterly performance. And UiPath just recently had analyst estimates out on terminals and I see them as low.


Shopify Announces Online Store 2.0


This is good news as Shopify has seen such phenomenal Revenue performance pre-pandemic, during the pandemic, and will continue to see post-pandemic. The gist is improving developer tools and functionality for items like check-out among others to better strengthen efficiency and operability for merchants. Shopify's Cash Flow inflection as it continues to scale has been ahead of my initial financial model, and if sustainable, the current SP is definitely at a discount. As the company continues to vertically integrate merchant services and grow both GMV and GPV through additional key partnerships, the run way remains long.


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