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My investment portfolio is up +185% in 2024, after being up +134% in 2023 and now up +2,900% since January 2020 when I got back into investing full-time.
Here’s my investment strategy which focuses on high-quality growth stocks… I own 15-20 core holdings (great fundamentals, compelling valuation) plus another 5-10 non-core holdings (good fundamentals, reasonable valuation) plus another 5-10 swing trades (good fundamentals, reasonable valuation, compelling technicals).
As long as the fundamentals remain strong and valuation remains compelling/reasonable, then I’ll add on pullbacks.
I only want to own stocks that have at least 50% upside within the next 1-2 years and at least 100% upside within the next 3-4 years.
My objective is to maximize the upside in good markets and minimize the downside in bad markets. I accomplish this by being very selective with my stock picking and disciplined on valuations while using a variety of hedging strategies to protect my gains in market downturns.
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ASPN Q2 earnings report: https://ir.aerogel.com/news/news-details/2024/Aspen-Aerogels-Inc.-Reports-Second-Quarter-2024-Financial-Results-and-Recent-Business-Highlights/default.aspx
ASPN Q2 earnings webcast: https://events.q4inc.com/attendee/830911018
ASPN Q2 earnings presentation: https://s28.q4cdn.com/942626632/files/doc_financials/2024/q2/ASPN_Q2-2024-Earnings-vFinal-2.pdf
Aspen Aerogels (ASPN)
Aspen Aerogels has been around for more than two decades, but its story is just starting to unfold. During this period, Aspen refined its aerogel technology to create one of the best insulation materials in the world. This material was initially designed for use in the energy industrial market, from refineries and petrochemical facilities to high-performance turbine systems and demanding thermal environments in power plants.
Among Aspen's customers are the world’s largest oil producers and the owners/operators of refineries, petrochemical plants, liquefied natural gas facilities, and power generating and distribution assets, such as ExxonMobil, Reliance Industries and Royal Dutch Shell.
However, the use case for Aspen's aerogel technology has significantly expanded since 2021, when the company commercially launched the PyroThin product designed to serve the electric vehicle and energy storage markets. This product helps mitigate thermal runaway propagation across multiple lithium-ion battery system architectures, such as cell-to-cell, module, and pack barrier levels.
While the energy industrial business remains stable across all regions and segments, including growth in the LNG (liquefied natural gas) industry, the EV thermal barrier part of the business has been growing at an incredible speed since the launch and already accounts for 68.5% of total revenue as of Q2 2024.
PyroThin product was equipped on six out of 10 new EV nameplates introduced in the US in 2024, while 100% of EVs sold by GM, Toyota, and Honda in the US used PyroThin product. There are many more nameplates from other OEMs using PyroThin that will come to the market in the next couple of years.
In addition to auto OEM customers, the aerogel thermal barrier technology can be used by battery manufacturers. With its unique combination of attributes (like industry-leading thermal performance, limited combustibility, tunable compressibility, and scalable density), PyroThin can help mitigate thermal runaway in lithium-ion batteries that other materials don't possess.
There is so much room for growth within the $1.6 billion global thermal barrier market (as of 2023), which is set to grow at 27% CAGR and reach almost $9 billion by the end of this decade. With its $146.2 million in revenue in the first six months of 2024 (only 9.1% of the current TAM), Aspen Aerogels is barely scratching the surface.
Furthermore, Aspen Aerogels has been investing heavily in various battery materials for the past several years. The company wants to replace graphite in lithium-ion batteries with its silicon-content anode material. These materials can enhance the cells' energy density, resulting in a more extended driving range for electric vehicles. If successful, this will be an additional catalyst that will accelerate revenues even faster and certainly not priced into the current valuation.
Among all my current holdings and the ~100 stocks that I follow closely, I believe Aspen Aerogels has the most upside over the next 3-5 years and is extremely undervalued after the recent pullback. If ASPN comes even close to hitting the current street estimates through CY2028 (chart below) than it’s still the earning innings for this story
Based on the comments provided by management in the 2024 Q2 earnings call, ASPN should be a $30-40 stock by the end of 2024 and could be a $60+ stock by the end of 2025.
I believe ASPN will do at least $425M of revenues in CY2024, perhaps as much as $465M depending on EV sales from General Motors — management said there’s at least $50-60M of upside to their current guidance depending on a handful of factors over the next 4-5 months. If we assume 17.5% EBITDA margins, this means ASPN is trading at less than 24x CY2024 EV/EBITDA with massive growth numbers expected for the next few years which includes more margin expansion from current levels. If ASPN hits the high end of my estimates and does $465M with 18% EBITDA margins, the stock should have another 100% upside from here through CY2024 Q4 earnings next February.
The rest of this earnings writeup is behind the paywall which means only paid subscribers get access to:
Detailed 2024 Q2 earnings analysis
What’s next for ASPN
My Take with the updated ASPN investment model