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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.
Every investor should learn about technical analysis. I’ve been a happy TrendSpider customer for the past 4+ years. Use my discount link to save 65% on Trendspider annual plans… http://trendspider.cc/luptoncapital
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SMCI FY2025 Q1 earnings report: https://ir.supermicro.com/news/news-details/2024/Supermicro-Announces-Fourth-Quarter-and-Full-Fiscal-Year-2024-Financial-Results/default.aspx
SMCI FY2025 Q1 earnings presentation: https://s25.q4cdn.com/632471818/files/doc_financials/2024/q4/Earnings-Deck-Q4FY24-V5-w-2-of-2-at-end.pdf
SMCI FY2025 Q1 earnings webcast: https://events.q4inc.com/attendee/485858492
Super Micro (SMCI)
Overview
I don’t feel like spending the next 5-6 paragraphs explaining what SMCI does so please feel free to read my mini deep dive from December 2023 which provides a nice overview.
Over the past 15 months I’ve had a pretty wild ride with SMCI which began when I was buying the stock in the $180s, then adding aggressive in the low $200s. SMCI gapped up a couple times last May (first time on their own earnings, second time on NVDA earnings) then gapped down in August when they warned about supply chain constraints which I viewed as a great buying opportunity because it meant demand was higher than expected. I thought the supply chain problems would get figured out and SMCI would continue to post strong results…which they did.
Between August 2023 and December 2023, I increased my SMCI position from 1.5% to 13.5%, it was my second largest position coming into this year.
Then on January 18th, SMCI pre-announced FY2024 Q2 earnings [click here] and the stock soared 290% over the next 6 weeks. I started trimming my position in the mid-$600s; I was selling approximately 1.5% of my shares every $15-20 which means by the time SMCI hit $1,229+ on March 8th, I had already sold more than 90% of my position. Obviously if I had known the stock would pullback -58% from those highs, I would have sold all of my shares back in March. I’m genuinely surprised that SMCI has pulled back this much despite strong fundamentals in one of the hottest sector themes we’ve seen in the past two decades (ie AI — artificial intelligence).
I understand that SMCI is in a relatively commoditized business however there are many reasons for me to remain bullish starting with their NVDA and AMD partnerships, then we consider the liquid cooling technology that makes the AI chips more efficient and lastly we have the fundamentals (very strong) and valuation (very compelling). Also worth nothing that SMCI is now in the S&P 500 (SPY) and the Nasdaq 100 (QQQ) so passive inflows are another potential tailwind going forward although it certainly didn’t help them last week or the past couple months. We also have a 10-for-1 stock split coming up in October.
Add it all up and I’ve started rebuilding my SMCI position since they reported earnings on August 6th. As soon as the numbers hit the wires SMCI started ripping after hours and was up +17.9% at the highs but then it started to reverse and closed the after hours session in the red. The following day SMCI was down -20% so we ended up with a -32% reversal from the after hours highs to the following day close. Over that crazy 24-hour period I increased my SMCI position by approx 50% however it’s still significantly smaller than it was coming into this year or at the March highs. At this time I have no intentions of increasing my position back to double digits and I’ll explain why in the following sections.
FY2024 Q4 Earnings Analysis
SMCI gave very bullish guidance for the next 12 months and the only hiccup that I see is the lighter margins which should bounce back to historical averages over the next 6-12 months (according to management from the earnings call).
I’ll admit that gross/net margins were a disappointment in the FY2024 Q4 earnings report but anyone selling this stock or talking bearish is focused on the short-term and skipping over the triple digit revenue growth for FY2024 and perhaps again in FY2025.
SMCI finished up FY2024 with $14.9B of revenues (+110% YoY) and $1.34B of net income (+99.5% YoY). They said revenues in FY2025 (which started on July 1st) would be up another +88% (this is using the midpoint of $26-30B guidance) however the high end of their guidance implies +101% YoY growth for FY2025.
Keep in mind, when SMCI reported FY2023 Q4 earnings last August and gave FY2024 guidance, they were expecting $9.5B to $10.5B in revenues so they ended up beating the original midpoint by 49% so when I hear them say $26-30B for FY2025, it certainly makes me think there’s a good chance they do more than $30B.