Happy Sunday, everyone.
Before we get started, hereโs your final reminder to sign up for Stonk Madness!
Our friends at AfterHour have made a simple (and free) bracket for picking stock matchups throughout the crazy time of March Madness.
The prizes are very much real (some are shown below), and Iโm honestly surprised that nobody had made a tournament like this before.
Portfolio Updates:
The Dividend Growth Portfolio, thanks to our โriskierโ ideas, has outperformed the S&P 500 year-to-date by roughly +1.5% โ as shown above. Itโs very encouraging to see dividend growth stocks catching up in performance to the S&P 500 โ something that didnโt exactly happen in 2023.
As you all know, 2023 was led by Big Tech and the rise of artificial intelligence. Dividend growth stocks donโt exactly fit that description โ but, thatโs the main reason why the portfolio is only 30% weighting into those names. We want to grow our dividend portfolio while also growing our capital!
Which leads us to the Cryptocurrency portfolio โ wow.
This portfolio is now officially up over 100% over the course of 12-months. Over the last year I invested $73,921 toward it โ as of writing itโs now worth $149,708 (including $3K in cash).
Hereโs a wonderful post my friend Caleb Franzen shared detailing his $175K price target for Bitcoin between now and the end of 2025.
As I shared in this video, Iโll continue to dollar cost average into both Bitcoin and Ethereum at these prices because I believe there is upside to be had. And as I shared during last weekโs livestream with Founding Members โ I plan to exit my cryptocurrency position in its entirety between now and the end of 2025 (when I believe weโll experience a blow-off top).
I want to use this money to pay off my mortgage, invest into covered call ETFs, and own wonderfully-priced dividend-paying stocks. As always, you all will be the first know when I plan to sell.
โก๏ธ Quick Idea (Watchlist):
Robinhood Markets (HOOD) is interesting to me.
The company reported a net loss of -$540M in 2023, with positive adj. EBITDA of $536M. Wall Street expects them to grow their adj. EBITDA to $630M in 2024, while flipping profitable ($190M) from a net income perspective.
And with new all-time-highs in the stock market + crypto markets I feel like the average retail investor is excited to get back in the game โ a positive thing for Robinhood. Love or hate them, profits are profits. Iโll do a deep dive on the company later this month if I find them interest enough to add to my portfolio.
Stay tuned!
Week in Review โ Too Long, Didnโt Read:
Crowdstrike is on track to become a $100B company, Kroger announced 30 major store projects, Broadcom added Meta Platforms to their long list of customers, Apple has international issues, Jerome Powell says the Fed is getting closer to clarity, Drake and LeBron invested into golf, the Unemployment Rate went up, and Consumer Credit makes a big leap.
Key Earnings Announcements:
Crowdstrike is on track to become a $100B company, Kroger announced 30 major store projects, and Broadcom added Meta Platforms to their long list of customers.
Crowdstrike (CRWD)
Key Metrics
Revenue: $845.3 million, an increase of +33% YoY
Operating Income: $29.7 million, compared to -$61.5 million last year
Profits: $53.7 million, compared to -$47.5 million last year
Earnings Release Callout
โCrowdStrike delivered an exceptionally strong and record fourth quarter with net new ARR growth accelerating to 27% year-over-year, reaching a new high of $282 million and ending ARR growing 34% year-over-year to reach $3.44 billion.
Highlights of the fiscal year included, ending ARR growing 34%, four consecutive quarters of GAAP net income, 104% non-GAAP net income growth and free cash flow margin of 31%, exceeding our target for the year. Our achievements in fiscal 2024 represent another high-water mark for CrowdStrike and we remain relentlessly focused on profitably scaling the business to $10 billion ARR and beyond.
My Takeaway
Ladies and gentlemen, this is the next premier cybersecurity company โ period. Crowdstrikeโs stock price traded down after Palo Alto Networks announced their โslow down to speed up,โ go-to-market strategy as Wall Street expected the same from Crowdstrike.
Except, it didnโt happen โ CRWD delivered exceptional results while also reaffirming guidance that assumes +43% growth in 2024. In return, their stock shot up like a rocket โ now reflecting a +127% total return inside of my portfolio in only 14 short months.
Please believe me when I say โThis company is on track to become a $100B market capitalization cybersecurity company.โ
Crowdstrike saw their Cloud, Identity, and SIEM annual recurring revenue more than double year-over-year โ hammering home the thesis that as this company continues to introduce new products, their customers will buy them. Importantly, CRWDโs management team noted theyโre not seeing the fatigue Palo Alto Networks is alluding to.
Iโll continue to dollar cost average into this name as I truly believe thereโs massive upside to be had over the coming 5-6 years.
Kroger (KR)
Key Metrics
Revenue: $37.0 billion, an increase of +6% YoY
Operating Income: $1.2 billion, an increase of +45% YoY
Profits: $736.0 million, an increase of +64% YoY
Earnings Release Callout
โAs customers manage macroeconomic pressures, we are lowering prices and offering even more ways to save with personalized promotions and rewards. We are increasing customer visits and growing loyal households through the strength of our retail business, which positions Kroger for more ways to drive sustainable future growth.
We expect to continue our momentum in 2024 by delivering value for customers, investing in associates and generating attractive and sustainable shareholder returns.โ
My Takeaway
Krogerโs stock skyrocketed +14% after they reported their quarterly earnings due to their better-than-expected forward guidance underpinned by their increased foot traffic, improving unit sales for the 5th consecutive quarter, and gross margins surprising to the upside.
Similar to Walmart and Target, Kroger is in Year 3 of heavy investments into technology and digital capabilities that should pay dividends โ literally. These new digital capabilities should 1) continue to drive more and more foot traffic, 2) increase basket spend for price conscious customers, and 3) recapture market share in pharmacy.
2024 is shaping up to be โthe inflection pointโ for Kroger and theyโre taking the new efficiencies afforded to them from years of digital / technological investments to now expand their footprint โ announcing 30 major store projects for the year.
These 30 major projects include +15 new stores, 7 existing store expansions, and 8 store relocations into higher-traffic areas. Iโm awfully excited to see one of my favorite dividend growth stocks doing what they do best โ deliver a strong ROIC (causing their stock price to increase) while paying a higher and higher dividend to shareholders (up +38% over the last two years).
Iโll continue to dollar cost average into this long-term, stable winner.
Broadcom (AVGO)
Key Metrics
Revenue: $11.9 billion, an increase of +34% YoY
Operating Income: $2.1 billion, compared to $4.1 billion last year
Profits: $1.3 billion, compared to $3.8 billion last year
Earnings Release Callout
โWe are pleased to have two strong drivers of revenue growth for Broadcom in the first quarter and fiscal year 2024. First, our acquisition of VMware is accelerating revenue growth in our infrastructure software segment, as customers deploy VMware Cloud Foundation. Second, strong demand for our networking products in AI data centers, as well as custom AI accelerators from hyperscalers, are driving growth in our semiconductor segment.
We reiterate our fiscal year 2024 guidance for consolidated revenue of $50 billion and adjusted EBITDA of $30 billion."
My Takeaway
While Wall Street reacted negatively to Broadcomโs earnings results as the company didnโt duplicate Nvidiaโs massive AI-levered upside, I believe AVGO delivered a strong quarter.
Free cash flow for the quarter was $4.7 billion and represents nearly 40% of revenue generated โ excluding restructuring and integration spend (acquisition-specific costs) free cash flow was 45% of revenue. During the quarter the company also repaid $934M of outstanding debt, and another $2B of outstanding debt just this week. Management reaffirmed their intention to keep up with this debt payoff rate.
Management stated they expect AI-specific revenue to now account for 35% of their Semi business segment in 2024, up from 25% just last quarter. Management is also expecting their Networking business segment to grow by more than +35% during the year due to AI-specific catalysts.
Wall Street is specifically focused on re-acceleration during the back half of 2024 โ with Semi sales to experience double-digit growth in Q4 and into 2025. Itโs also encouraging to see Meta Platforms becoming an integral customer of Broadcomโs โ paired with their strong relationship with Google.
Iโll continue to dollar cost average into this name throughout 2024.
Investor Events / Global Affairs:
Apple, Jay Powell, andโฆ LeBron James?
Appleโs Drama in China and the EU