Happy Sunday.
Quick note — we appreciate all of the patience our Founding Members have given us over the last few weeks. Our weekly livestreams have been on a three week hiatus due to travel, sickness, and family matters.
With that being said, you can absolutely expect a livestream Tuesday night at our regularly scheduled time.
We’ll be discussing a few new ideas, so you won’t want to miss it!
If you’d like to join us for our weekly livestreams — where we talk about the markets, my portfolio, new ideas, and more — please use this link to sign up.
Portfolio Updates:
February is almost behind us, unlocking another month of investing — March!
As a quick recap, below is how I’ve invested my money during the month of February:
Bought 100 shares of Tesla (TSLA) stock at $220 / share in efforts to write more covered calls against my growing position
I sold 2 covered call option contracts against my 200 shares of Tesla stock, generating $2,100 in premium — I then rolled those positions forward twice throughout the month as Tesla stock continued to trade sideways. I generated an additional $485 in premium doing so.
I used the $2,100 in premium income from the original contracts to purchase 42 shares of QQQI — more about that ETF can be found here.
I used the $485 generated from rolling the contracts forward to purchase 25 more Chainlink (LINK) — adding to my already massive position.
I withdrew $20K from my brokerage cash account to invest into a privately-held humanoid robotics company — something I think will be one of if not the largest investment opportunity in the coming decade. If you own stock in Tesla, you have exposure to this massive secular growth trend.
Cryptocurrency
The crypto section of my portfolio will finally have new capital deployed in March after taking a hiatus in February. I plan to invest $5-10K toward the two cryptocurrencies shown above, with a major emphasis on Ethereum as the rumors of a spot Ethereum ETF begin to swirl around Twitter.
For those of you who are still learning about how big of an event getting the Bitcoin ETFs approved was for cryptocurrency as a whole — the Bitcoin ETFs now cumulatively own over 287,000 Bitcoin. Remember, the reason these ETFs purchase Bitcoin is to back their assets under management 1-for-1 with Bitcoin.
That’s over $14B invested into Bitcoin via these new spot Bitcoin ETFs in literally 6 weeks. What happens over the next 6 weeks? The next 6 months? Only time will tell.
During the previous 6-months as spot Bitcoin ETF anticipation was building, the price of Bitcoin increased by +95% — as anticipation of spot Ethereum ETFs build… I’m going to bet the price continues to increase dramatically.
At time of writing, Ethereum is roughly ~$3K in value. It’s naive and irresponsible to predict as to where the price might head in the near future — so I’m just going to assume up and to the right.
Week in Review — Too Long, Didn’t Read:
Nvidia’s only downfall is the law of large numbers, Palo Alto Networks is slowing down to speed up, Carvana successfully dug themselves out of bankruptcy, Reddit will officially bring the most ~degen~ social media to the public markets, Japanese stocks continue to soar, a moon mission causes one stock to have a WILD week, the Fed Meeting Minutes revealed a potentially slow approach to rate cuts, and some moon mission madness.
Key Earnings Announcements:
Nvidia’s only downfall is the law of large numbers, Palo Alto Networks is slowing down to speed up, and Carvana successfully dug themselves out of bankruptcy.
Nvidia (NVDA)
Key Metrics
Revenue: $22.1 billion, an increase of +265% YoY
Operating Income: $13.6 billion, an increase of +983% YoY
Profits: $12.3 billion, an increase of +769% YoY
Earnings Release Callout
“Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations.
Our Data Center platform is powered by increasingly diverse drivers — demand for data processing, training and inference from large cloud-service providers and GPU-specialized ones, as well as from enterprise software and consumer internet companies. Vertical industries — led by auto, financial services and healthcare — are now at a multibillion-dollar level.”
My Takeaway
I feel like you all already know what I’m going to say here — Nvidia is quite literally blowing away their competition, and their stock price reflects that.
Every single company asking themselves “Will we have a need for GPUs over the next 2+ years?” is now putting in over-the-top purchase orders, causing Nvidia’s revenue to skyrocket. And don’t get me wrong, I’m not sure this is going to slow down anytime soon — Nvidia has 91% market share and is selling processors with 35,000+ components inside of them that weigh over 70 pounds. These aren’t replicable products — they have a massive, massive moat.
The company is guiding to $24B in Q1 revenue — $2B above Wall Street’s expectations. This sequential growth is catalyzed by continued strength in its Data Center business, as shared above. Despite not guiding to any sort of EPS figure, the company reiterated their expectations for a 77% gross profit margin — outstanding.
There’s no indicator inside of their report that would warrant a sell of their stock — literally the only factor working against the company at the moment is the law of large numbers. As companies grow in size, it’s harder to post double / triple digit growth — but, we’ve never seen an opportunity as large as GenAI, LLMs, humanoids, and everything in between.
I have absolutely no idea where Nvidia’s stock price might trade in the short-to-medium term — however, over the long-term I can say with certainty this company is just getting started.
Palo Alto Networks (PANW)
Key Metrics
Revenue: $1.9 billion, an increase of +19% YoY
Operating Income: $53.6 million, compared to $78.7 million last year
Adj. Profits: $135.5 million, an increase of +60% YoY
Earnings Release Callout
“Beyond our financial results, we achieved a number of notable milestones in Q2, worthy of spotlighting. We continued to drive large deals, including a steady stream of million dollar plus deals and success in our largest deals with 10 transactions that were $20 million in the quarter.
Our 10 highest spending customers in Q2 increased their spend with us by 36% of the period.”
My Takeaway
Slowing down to speed up — that’s how I like to think about this quarter’s results. Like many other investors, I was also surprised to see PANW announce a mid-year pivot to their go-to-market strategy — causing the company to cut revenue and profit expectations. However, it makes sense — as hard as that is to say.
Essentially PANW management is saying “the demand for our products remains healthy, but we’ve begun to see customer spending fatigue.” This is corporate jargon for “our customers aren’t seeing an ROI on their spend with us as more and more competitors continue to compete for their dollar.”
So, as profitable / cash flow positive companies do — they’ve decided to give their customers 3-6 months worth of their entire product suite for free hoping they’ll fall in love and subscribe to the whole thing after that trial period expires. This move gives PANW the opportunity to compete with unprofitable venture-backed startups with much lower price points while legacy competitors are playing defense (trying to hold on to as much of their customer spend as possible).
In response, PANW’s stock price is now trading down to where it was *checks calendar* 6 weeks ago — not a big deal. I understand why the market is pulling their stock price back, but it’s in an effort to dramatically propel revenue and cash flow up and to the right in the medium-term.
I’m a shareholder. I’ll continue to dollar cost average into my position as I believe PANW is the authority in cybersecurity. I trust this team.
Carvana (CVNA)