Portfolio Changes/Comments:
Coupa Software (COUP) – Move from Buy to Hold
Fed Signals Higher Rates, Less Stimulus
It’s been a challenging week for growth investors as the stocks that climbed the fastest are getting hit the hardest, such as our Cloudflare (NET) position, despite still posting strong numbers. On the other hand, Oracle (ORCL), where expectations are more modest, jumped from 89 to 104 this week on earnings that beat expectations.
Part of this is due to investors and insiders selling stock as tax changes and increases appear on the horizon.
Growth stocks may rebound but the market seems to be looking more favorably on value stocks that have been left behind for some time. The Vanguard Russell 1000 Value ETF (VONV) is up 20% over the last 12 months while Cathie Wood’s Ark Innovation ETF (ARKK) is down 23%.
Fed officials voted yesterday to hold rates near zero but signaled that they are prepared to raise their short-term benchmark rate at least three times next year to cool inflation while scaling back economic stimulus. It has been tough going for growth stocks and this trend could continue in 2022 so I will continue to offer both growth and value ideas going forward.
Value stocks offer investors something else: a greater margin of safety.
Portfolio Updates
ChargePoint Holdings (CHPT) shares held their ground pretty well this week as green tech stocks were a bit out of favor.
ChargePoint has shown some strength in a tough market, perhaps buoyed by the infrastructure bill. The company offers drivers in North America and Europe more than 118,000 places to charge their electric vehicles (EVs) and has 200,000 partner ports. I believe that the EV story is intact and that the stock is a buy at its current levels. BUY A HALF
Cloudflare (NET) shares were trading as high as 217 less than a month ago. They have since fallen all the way to 139 as of this writing.
On the bright side, the company announced that it has acquired Zaraz, a company that has developed technology to speed up and secure websites by reducing the impact of third-party marketing and analytics tools. Zaraz is the first company Cloudflare has acquired built on its own technology, Cloudflare Workers.
Cloudflare’s fundamentals remain sound even though the stock has performed poorly as of late. It recently announced third-quarter revenue increased 51% year over year to $172.3 million. Customers surpassed 132,000 in the quarter, up 31%. Enterprise customers reached 1,260, up 71%. Cloudflare provides network security, performance and reliability services to a growing portion of global web traffic. I’m going to keep this stock a buy for aggressive investors, as its depressed price presents us with an attractive entry point. BUY A HALF FOR AGGRESSIVE INVESTORS
Coupa Software (COUP) shares fell from 173 to 152 this week despite recently reporting third-quarter fiscal 2022 earnings of 31 cents per share, an increase of 72% year over year, and revenues of $185.8 million, up 40% year over year.
Coupa specializes in software providing cloud-based business through its spend management platform. Its platform connects organizations with suppliers globally, and provides visibility into and control over how companies spend money, optimize supply chains, and manage liquidity; it also enables businesses to achieve savings that drive profitability. The company already has 2,000 clients including Amazon and Wal-Mart, with some estimating its potential target market at $94 billion. While the company is still unprofitable, free cash flow reached $643 million in its most recent quarter. However, I’m moving this stock to a hold as it is underperforming to say the least. MOVE FROM BUY TO HOLD A HALF
Fisker Inc. (FSR) shares were up 33% in November and this week, after losing a little ground, made a steady recovery. Fisker offers investors a custom, “asset light” and “Apple of autos” strategy relative to EV maker leaders like Tesla. Its Ocean EV has a sub-$40,000 retail price point, making it a more affordable EV option. However, we have to accept that the Ocean (the company’s first product) won’t be launched until the latter part of 2022, perhaps ahead of some its bigger competitors. This is an aggressive stock but I confirm a buy rating on Fisker even though it won’t go into production until late 2022. BUY A HALF
Ford (F) stock was firm around 20 as rival Toyota announced it was ramping up its electric vehicle plans. Ford says it has received 200,000 preorders for its F-150 Lightning pickup truck, which is scheduled to go on sale this spring. The Ford F-150 Lightning is expected to have a starting price of just $40,000 (minus the bells and whistles) and will have a range of over 300 miles.
Ford’s strategic plan for electric vehicles commits $7 billion for three new battery factories, in Tennessee and Kentucky, along with a plant to build electric pickup trucks, as part of $30 billion in electric-vehicle investment planned through 2025. Its Mustang Mach-E electric SUV, a competitor to the Tesla Model Y, is off to a strong start with about 22,000 Mustang Mach-Es sold so far this year. Ford estimates global Mach-E demand could be 200,000 vehicles a year in the near future.
Ford is a low-risk way to play the EV boom and I encourage you to buy if you have not already done so. BUY A HALF
Marvell Technology Group (MRVL) shares dipped from 91 to 88 in a tough week for tech after the company recently reported that adjusted earnings soared 72% on a 61% increase in sales. In addition, its data center revenue skyrocketed 109% to $500 million. Marvell’s semiconductor chips are used in a number of growth applications such as 5G wireless networks, cloud computing, automotive, and industrial markets. Credit Suisse recently upgraded the stock, calling Marvell “one of the most strategic assets in semiconductors.” Marvell’s semiconductor products are state-of-the-art and in high demand, allowing businesses and consumers to take advantage of 5G capabilities I recommend buying this stock if you have not already done so. Marvell is up more than 80% this year and it remains an excellent semiconductor play. BUY A HALF
Novonix (NVNXF) shares pulled back less than one might expect, from 6.9 to 6.3. Based in Australia, the technology and advanced materials supplier is focused on synthetic graphite for the electric vehicle and storage battery industry. It is scaling up its synthetic graphite anode operation to fill the gap in the U.S. supply chain as its operations are now almost entirely in North America.
Novonix, as a non-Chinese synthetic graphite producer, is immune to any potential disruptions caused by either Chinese politics or its international trade disputes. Getting Phillips 66 involved in its operations will give Novonix better access to specialty coke and other materials that the energy company makes for electric car battery producers. This is an aggressive idea but this stock is a play on an important clean technology. I still rate this stock a buy, especially since it is strategically important. BUY A HALF
Nu Holdings (NU) shares went public a week ago (when we recommended it) through an IPO priced at 9, with a first trade at 11.6, and finished the week at 10.
Nu is a financial services and payment company with more than 48 million customers in a country and region where fintech is flourishing. Fintech applies to a variety of businesses, such as the transportation, food, retail and telecommunication industries, as well as financial services.
Nubank is a credit-card company operating in the digital world. Nubank’s application for a license to operate as a financial company in Brazil was approved in 2018 and last year it began working with Chubb to offer digital life insurance. Total revenue for 2021 should top $1 billion, nearly twice the $535 million last year. In October, Nubank revealed that it turned its first-ever half-year profit in Brazil, its home market and its biggest one, according to Reuters.
It’s nice to have a profitable company launching an IPO for a change and I recommend you purchase shares if you have not already done so. BUY A HALF
Oracle Corporation (ORCL) shares zoomed from 89 to 104 this week as the company reported that in the last quarter revenue grew 6% as it saw strong growth in cloud-based applications, with 35% growth in Oracle’s financial software for large businesses, and 29% growth in software that serves smaller companies. Oracle’s cloud business overall was up 22%, and CEO Safra Catz said the company expects growth to accelerate to the mid-20% range in that part of the business by the end of the year.
Oracle is the world’s largest database management company. For close to 50 years, the company has offered its software and, more recently, cloud-engineered systems. It has the industry’s broadest and deepest suite of cloud applications. More than 18,000 patents worldwide protect Oracle’s business model and profit margins. Most importantly, Oracle is now taking on the “big three” in cloud services. While most investors still view Oracle primarily as a software company, it is positioning itself as a cloud company, so sales and earnings should expand. Oracle offers us growth at a very reasonable price. The stock only trades at 21 times earnings with big profit margins, a high return of equity, and nearly $23 billion in cash. BUY A HALF
Sea Limited (SE) shares have been underperforming the overall market recently and this week shares were down again, from 263 to 226. In the last month, shares are down roughly 100 points despite very strong top-line growth. Investors may be losing patience with the company spending on growth and intentionally running steep losses.
It still has room for considerable growth as Southeast Asia’s booming internet economy is set to double to $363 billion by 2025, eclipsing the previous forecast of $300 billion, according to research from Google, Temasek Holdings and Bain. I see further potential upside to Sea because of strong momentum in its gaming portfolio and increasing fintech revenues. Aggressive investors and those with a long-term horizon should be an incremental buyer of this stock after the rather sharp recent pullback. BUY A HALF
Veeco (VECO) shares were up late in yesterday’s trading day to finish flat for the week. This is an American high quality provider of state-of-the-art semiconductor fabrication equipment. The company delivers the leading edge technology to U.S.-based and international high-end class chipmakers, some of which are 100% reliant on Veeco technology. Veeco’s new facility in Silicon Valley features 70,000 square feet of manufacturing and engineering lab space and 30,000 square feet of office space. The manufacturing space will be nearly double that of Veeco’s previous San Jose facility indicating an expected increase in this business.
Revenue growth for 2021 may be up 30% and even better for earnings. Veeco is growing earnings at a 20% clip and represents a backdoor play on semiconductors. My expectation is that Veeco is building a base to move a leg higher.
I recommend that you acquire shares if you have not already done so. BUY A HALF
Virgin Galactic (SPCE) shares were down again this week, and are now down 75% from their 2021 high. Over the weekend, Virgin Galactic’s rival in space tourism, Blue Origin, launched its third successful space tourism flight with a full complement of six passengers. This is what I expected for Virgin Galactic. Unfortunately, it announced in October that it intends to suspend test flights for as long as 10 months, meaning flights will not commence until mid-2022. The company’s $450 million secondary offering, completed in August, also put pressure on shares.
Four weeks ago, I recommended selling half your shares as we are still up more than 100% from our initial entry point. This concept stock on space mania is still intriguing as the company mentioned that $450,000 space-tourism seats are selling faster than it anticipated. However, they have missed targets and there is more competition out there (namely Blue Origin). The company has to end the delays and increase revenue. I recommend that most investors incrementally buy this stock as the potential outweighs the risk. INCREMENTAL BUY
| Stock | Price Bought | Date Bought | Price 12/15/21 | Profit | Rating |
| ChargePoint Holdings (CHPT) | 21 | 8/19/21 | 20 | -6% | Buy a Half |
| Cloudflare, Inc. (NET) | 24 | 4/30/20 | 139 | 480% | Buy a Half |
| Coupa Software (COUP) | 231 | 10/28/21 | 152 | -34% | Hold a Half |
| Fisker (FSR) | 15 | 2/4/21 | 18 | 19% | Buy a Half |
| Ford (F) | 20 | 11/23/21 | 20 | -1% | Buy a Half |
| Marvell Technology Group (MRVL) | 50 | 4/1/21 | 88 | 78% | Buy a Half |
| Novonix (NVNXF) | 2.24 | 8/6/21 | 6 | 180% | Buy a Half |
| Nu Holdings (NU) | 11 | 12/9/21 | 10 | -7% | Buy a Half |
| Oracle Corporation (ORCL) | 94 | 11/11/21 | 104 | 10% | Buy a Half |
| Sea Limited (SE) | 15 | 2/8/19 | 227 | 1424% | Buy a Half |
| Veeco Instruments Inc. (VECO) | 23 | 9/10/21 | 26 | 13% | Buy a Half |
| Virgin Galactic (SPCE) | 7.34 | 12/5/19 | 15 | 101% | Incremental Buy |