I intend to continue posting detailed portfolio updates on a quarterly basis. For more frequent updates on the portfolio composition, I post regularly on X (formerly Twitter). The posts there can be seen by following @gauchorico.
PRIOR PORTFOLIO UPDATES
PORTFOLIO PERFORMANCE
Since the last portfolio update on 31Dec 2023, there have been two full months in 2024. During that time the S&P 500 total return (including dividends) index increased by 7.1%. After a slow start in January in which the GauchoRico portfolio closed out the month up 0.7%, the portfolio took off in February with a +20.5% YTD finish to close February. Thus, the portfolio is now outpacing the S&P 500 by a wide margin.
| DATE | GauchoRico Portfolio (YTD) | S&P500 Total Return (YTD) |
|---|---|---|
| Jan24 | 0.7% | 1.7% |
| Feb24 | 20.7% | 7.1% |
| 08Mar | 20.9% | 7.7% |
The GauchoRico portfolio’s cumulative return in the 7.16 years (through the end of Feb2024) since the start of 2017 is now +627% compared to the S&P 500 (TR)’s return of +158.5%. I think that we can now also call the peak of the last bull market as 18Oct 2021 and the trough after that peak as 9Nov 2022. Interestingly, to reach the bottom since the last peak took about 13 months. The decline from 18Oct 2021 to 9Nov 2022 was a drop of 83.2% from top to bottom. The return since that 9Nov 2022 bottom (so far) has been +67.0%. The Nasdaq 100 bottomed in October 2022, and it just hit a new all-time high a few days ago. It sure feels like the bad times are behind, and the returns are supporting that notion.
| Year | GauchoRico Return | GauchoRico Cumulative Return | S&P 500 (TR) Return | S&P 500 (TR) Cumulative Return |
|---|---|---|---|---|
| 2017 | +61.6% | +61.6% | +22.8% | +22.8% |
| 2018 | +55.9% | +152.0% | -5.2% | +16.5% |
| 2019 | +41.8% | +257.3% | +31.5% | +53.2% |
| 2020 | +245.6% | +1134.7% | +18.4% | +81.4% |
| 2021 | +27.7% | +1477.3% | +28.7% | +133.4% |
| 2022 | -71.4% | +350.5% | -18.1% | +91.1% |
| 2023 | +33.9% | +503.0% | +26.3% | +141.4% |
| 2024* | +20.7% | +628.0% | +7.1% | +158.5% |
ALLOCATIONS
| 3/8 | 2/29 | 1/31 | 12/31 | |
|---|---|---|---|---|
| NVDA | 14.5% | 13.2% | 13.2% | 10.6% |
| MELI | 11.8% | 12.4% | 12.8% | 11.8% |
| AXON | 10.1% | 9.5% | 10.0% | 10.4% |
| SNOW | 9.4% | 8.6% | 9.6% | 9.8% |
| ELF | 9.1% | 10.6% | 11.2% | 10.2% |
| CRWD | 7.7% | 8.3% | 8.1% | 7.1% |
| TTD | 7.7% | 8.1% | 6.9% | 7.3% |
| IOT | 5.2% | — | — | — |
| CELH | 5.1% | 10.6% | 11.2%** | 11.9%^** |
| TMDX | 4.7% | — | — | — |
| ASPN | 3.9% | 3.4% | 1.2% | — |
| TSLA | 2.8%** | 3.3% | 3.3% | 4.0% |
| WW | — | 0.1%^ | 0.2%^ | 0.5%^ |
| AEHR | — | — | — | 3.2% |
| Cash | 7.9% | 11.3% | 13.1% | 13.4% |
The allocation details described below are as of March 8, 2024. One of the 12 positions in the portfolio is leveraged with long-term call options. TSLA: of the 2.8% position 1.9% is in shares and 0.9% is in Jun2026 $180 call options. The portfolio is comprised of 0.9% in long call options, 91.3% in shares, and 7.9% cash, 0.9% long-term call options, and -0.1% in short puts.
PORTFOLIO CHANGES
Changes since 1Sep 2023
- AEHR: bought more in early Jan prior to earnings; sold all after earnings (9Jan).
- ASPN: initial buy 9Jan; added 11Jan, 23Feb, 29Feb, and 5Mar.
- AXON: trimmed on 27Feb; added some back 5Mar.
- CELH: sold all LEAPS; sold >50% of position after earnings (taking profits).
- CRWD: trimmed after earnings.
- ELF: trimmed 23Feb, Feb27, 1Mar, and 6Mar.
- IOT: initial position 6Mar; added after earnings on 8Mar through call options (share assignment).
- MELI: added after earnings on 27Feb.
- NVDA: trimmed on 1/6 of position on 26Feb.
- SNOW: added 4Mar and 6Mar.
- TMDX: initial position bought on 1Mar.
- TSLA: added prior to earnings on 11Jan; sold 35% of shares to buy LEAPS (Jun’26 $180Cs) on 7Mar.
EARNINGS RESULTS
Since the last portfolio update, most portfolio companies reported their latest quarterly results. I’ll go through them in the order that they reported results.
AEHR (reported results on 9Jan)
AEHR reported results on 9Jan. I changed my mind about AEHR in late December and reentered a position after the Company received its first gallium nitride (GaN) order from a customer. It shows that some of AEHR’s talk is translating into real business. Unfortunately, the results were not what I was hoping to see, and I sold my entire AEHR position right after the earnings results came out. This was the second time that I got burned by AEHR, and it’s the third time I got burned buying into an EV-related story (ENPH was not a good investment for me in 2023). Perhaps I need to be more cautious regarding allocations to EV investments.
TSLA (reported results on 24Jan)
TSLA reported results on 24Jan. The results were worse than the market expected and the stock dropped. After earnings the disappointing news continued with weakness in China sales numbers, a Delaware court canceling/reversing the Company’s previous stock compensation plan, and an arson fire which shut down Tesla’s Berlin factory. I don’t pay too much attention to TSLA’s operational results for I continue to own TSLA shares as a longer-term bet on future success with autonomy and/or full self-driving success. I have not increased my position size, but I sold about one-third of my shares to buy $180 call options expiring in June 2026. I continue to wait for the long-term thesis to play out for TSLA.
ELF (reported results on 6Feb)
ELF reported results on 6Feb, and after three quarters of similar revenue growth (78.2%, 76.5%, and 76.1%), the business accelerated in fiscal Q3 to 84.9%. The Company increased gross margins YoY by about 3.5%. ELF grew their market share in color cosmetics by 350 basis points to 10%. In skincare, ELF holds only a 1.4% market share, but its top brand has a 14% market share showing the potential to continue to grow share in skincare; and ELF is growing rapidly in skincare with 89% growth in tracked channels compared to the overall market’s 9% growth. ELF’s October 2023 acquisition of Naturism is also helping ELF break further into the skincare category; Naturium has grown sales at an 80% CAGR over the past two years. The company dropped back into negative FCF territory for the quarter due to 1) ELF’s acquisition of Naturium for $333M including $275M cash, and 2) building up of inventory (about $40M in cash was used to build inventory in the quarter) to support rapid expansion. The negative cashflow in Q3 does not concern me as the reasons are both positive and one-time. Also, since ELF’s international revenue only comprised 15.4% of total revenue for the first nine months of the fiscal year, I think ELF’s quarter was great and its future growth prospects remain intact. I intend to continue to hold an allocation in the 9-11% range with an eye toward the eventual growth deceleration. I expect that I will continue to trim shares to keep the allocation from rising further.
ASPN (reported results on 13Feb)
ASPN is a new holding, and the Company reported results on 13Feb. ASPN develops and manufactures thermal barriers for EVs and for the energy industrial market. The thermal barriers provide an added degree of safety for customers that utilize batteries in EVs and for customers that need to transport volatile fossil fuels. The revenue from heat barriers for the EV business has been growing faster than ASPN’s legacy energy industrial business. Specifically for Q4, the thermal barriers business was up 61% QoQ and up 110% YoY while the energy industrial segment was up 12%QoQ and down 9% YoY. The thermal barriers business is not only growing much fasters but it is also now larger than the legacy segment ($52.9M for the thermal barriers segment compared to $31.3M for the energy industrial segment).
Assuming that the performance of the thermal barrier business continues strongly, ASPN’s growth could by far outpace analyst expectations. Initial 2023 revenue guidance was $200-250M and the company delivered $238.7M so they beat the midpoint of guidance but not the high end of guidance. For FY25, ASPN is guiding for $350M in revenue ($150M for Energy Industrial and $200M for Thermal Barriers). This guidance if achieved would represent growth of 82% for the thermal barriers business and 17% growth for the energy industrial business for a blended growth rate of 47%. An initial guide of 47% with three remaining quarters for beats and raises sounds like a great start. While I have some concerns about jumping into another company related to EVs, I think that the risk-reward is favorable given the strong initial FY24 guidance. I’ve added to my position several times since the Company reported its Q4 results.
TTD (reported results on 15Feb)
TTD reported Q4 results on 15Feb. Revenue grew 23.4% YoY which was a slight sequential deceleration after two quarters of sequential acceleration. However, the Company is guiding for 24.9% growth so next quarter the growth should accelerate to around 28%. TTD’s share of the advertising market continues to grow (as usual). TTD continues to win partnership deals with important content providers. In addition, the market trend of moving linear TV to connected TV continues. I think we can expect record political ad spending during 2024. TTD’s business continues to advance on all important fronts, and everything sounds positive as usual. I don’t see any reason to make any allocation changes to the TTD position.
NVDA (reported results on 21Feb)
NVDA is at the center of the current artificial intelligence boom. It’s been a position in the portfolio since August 2023. Results for Q4 FY24 were reported on 21Feb. In Q2 FY24, NVDA’s data center business began to explode with posted revenue growth of 101%, 206%, and 265% in each of the last three respective quarters. Earnings per share rose from $4.02 in Q3 and $0.88 in Q4 last year to $5.16 in Q4 representing an increase of 289% YoY. FCF was $11.2B for the quarter which was a YoY increase of 400% YoY. The stock price has exploded during the last year, but the business fundamentals improvements have kept pace to support the stock price increase. The revenue growth is primarily due to data center growth of 409% YoY. The growth is clearly being driven by AI as cloud service providers, enterprises, and countries utilize NVDA GPUs for training and inferencing. Many investors believe that this AI boom will slow down and others believe that NVDA GPUs are great for LLM training but not ideal for inferencing (which involves utilization of LLMs to return results on specific queries). Will LLMs get built once and then will inferencing be the main application for AI or will LLMs continue to be improved and replaced? And once inferencing is the main AI application, will other companies make better processors for inferencing? Well, according to CEO Jensen Huang, 100% of inferencing is currently being done on NVDA GPUs; yes, that’s mainly due to that fact that other companies haven’t yet introduced viable products. Jensen also said that in the future all computing will be accelerated and that $1T of data center computing will need to be replaced in the coming years. I believe AI will be bigger than can be imagined right now which means that it’s likely that NVDA GPUs will be needed in huge quantities for longer than many other investors expect which means that NVDA’s growth could continue to be very strong for longer. Time will tell how this all will unfold, but, for now, I’m maintaining NVDA as the portfolio’s largest allocation position. However, I do expect to trim the allocation into continued stock price strength. The upcoming GTC conference during the week of 18Mar could be a catalyst for further stock price appreciation.
MELI (reported results on 22Feb)
MELI reported Q4 on 27Feb. Almost all of the important metrics showed the kind of progress that we as investors want to see, except for profitability. Q4 profitability was much lower than expected. The shortfall was due to one-time expenses of $351M for contingent tax liabilities. The effect on the quarter was massive because the income from operations was $240M (would have been $591M without these expenses). I’d say that while the impact on the quarter was greatly negative, the long-term impact on MELI as an investment is negligible. I took the opportunity to add some shares after the stock fell. I may continue to add more shares on continued weakness.
AXON (reported results on 27Feb)
AXON reported Q4 FY23 results on 27Feb. On the surface, the results seemed like a mixed bag with revenue growth decelerating to 28.6% and guidance suggesting further growth deceleration during 2024 to 24%. However, when looking beneath the surface, one can find many reasons for optimism.
First, initial guidance for FY23 was 20%, yet AXON delivered 31.4%; starting with an initial guide of 24% growth suggests that AXON could once again deliver greater than 30% growth for 2024. Dollar based net expansion of 122% shows that customers aren’t slowing down in their spending growth with AXON. Annual recurring revenue (ARR) grew 47.4%, and remaining performance obligations grew 53.6% pointing to stronger growth ahead. AXON’s Cloud based revenue is higher margin and growing faster than the revenue of the other business segments; assuming this continues as expected, this bodes well for overall growth going forward. Operating expenses continue to grow more slowly than revenue growth. FCF margin was 28% for the quarter. AXON acquisitions also expanded the TAM significantly. The EV/TTM sales ratio is now 14.9 (based on the $314.25 share price on 1Mar).
SNOW (reported results on 28Feb)
SNOW reported Q4 FY24 results on 28Feb. The big news was that CEO Frank Slootman is stepping down from his CEO role but is retaining his Chairman of the Board role. Taking Slootman’s place, effective immediately, is Sridhar Ramaswamy who previously led Google’s advertising business which he grew from a $1.5B business to over $100B. Prior to joining Snowflake, Ramaswamy co-founded Neeva in 2019 so he was acquired when Snowflake bought Neeva in 2023. Since joining SNOW, Ramaswamy has been leading SNOW’s AI strategy efforts which the company says will keep Ramaswamy busy for a few years. This leadership change does appear driven by a combination of taking advantage of AI opportunities that are in front of SNOW and SNOW’s desire to integrate as many AI products into SNOW’s product roadmap as possible. As a shareholder, I wish Ramaswamy great success in pivoting SNOW into an AI leader.
SNOW’s stock price dropped about 20% after SNOW reported its Q4 FY24 results and leadership change. The share price drop likely had as much to do with the weak FY25 guidance as it did with the leadership change. The guidance for FY25 was for 22% growth in product revenue while the Q1 FY25 guidance was for 27% growth. The guidance calls for continued product revenue growth deceleration. There are arguments that can be made that the guidance is too weak compared to the strong Q4 bookings and all of the upcoming products that will soon be released. If SNOW does manage to beat and raise this FY guidance every quarter, it’s certainly possible that SNOW could once again exceed 30% growth in FY25. SNOW’s business continues to churn out loads of cash; SNOW adjusted FCF was a record breaking $324.3M (41.9% FCF margin), and the EV/TTM FCF multiple is 78.7 which is by no means cheap; however, should SNOW’s AI products show better than expected adoption and growth over the coming years, SNOW could still be a great investment.
SNOW valuation was not cheap going into the earnings result. Even after the share price drop, SNOW’s EV/TTM sales is still 20 which is about 50% higher than AXON’s multiple. I make this comparison because AXON issued full year guidance (24% growth) that was not too far off of SNOW’s full year guidance (22%). There is still a lot of hope for growth reacceleration built into SNOW’s valuation. The question for investors is whether the opportunity cost of holding SNOW to potentially realize these rewards is worth waiting for. I’ve decided (for now) to hold my shares.
CELH (reported results on 29Feb)
Once again CELH reported a great quarter with Q4 revenue growing 95% YoY to $347M, gross profit growing 110% YoY to $166M, and non-GAAP adjusted EBITDA growing 387% to $65M! CELH launched in Canada in January and announced launches coming in the U.K. While we can continue to look forward to international expansion, perhaps CELH will roll out new countries at a slower pace than investors are expecting. It’s a risk. The Carl DeSantis heirs likely have now paid all of their estate taxes as more than six months have passed since his death. This would mean that the heirs selling of CELH shares has likely stopped which would alleviate selling pressure that’s been on the stock. I suspect part of the stock’s rally from $50 to about $90 was from the removal of this selling pressure (the great results and all those analyst price target updates certainly didn’t hurt the stock price either). CELH also continued to show strong market share improvements. While there’s a lot to like about CELH and its prospects going forward, I decided to cut my allocation by about half. The reasons are several but the main one is that I wanted to increase my allocation in other positions. Also, with Pepsi being closer to completing its Celsius distribution rollout in the United States, growth will certainly slow. I think international expansion will come, but CELH has already launched in many of the easiest expansion geographies (English speaking countries). I think it’s probable that international expansion could take longer than investors’ expectations which would contribute to lower than expected growth. CELH will probably do great for another year, but growth will eventually slow down significantly once CELH has exhausted all of its expansion opportunities; and the energy drink category is not growing that fast. Therefore, I decided to take some profits and sell about half my shares.
CRWD (reported results on 6Mar)
CRWD reported another outstanding quarter on 6Mar. Although revenue continued its slow deceleration to 32.6%, the guidance suggests that CRWD revenue growth will not decelerate further during FY25. Q1 guidance is for 30.8%, but the Company will probably beat that and report a similar revenue growth as Q4FY24. The full year guidance is for 30.6% growth, and with likely beat and raise quarters coming, CRWD should growth similarly in FY25 to the 36% posted in FY24. Recall that CRWD recently (Sept 2023) updated its long-term operating financial model. During the Q4, CRWD made progress toward achieving some of those improved targets: S&M OPEX as a percentage of revenue fell to an all-time low of 28.8% and the non-GAAP operating margin jumped to 25%, a high for the Company. RPO grew 24% sequentially so we can expect continued good numbers for at least the next few quarters. Pretty much every metric that I follow continues to improve or track nicely. CRWD announced the acquisition of Flow Security to add a cloud data runtime security solution for its customers. CRWD continues to make acquisitions using predominantly cash which means very limited dilution to shareholders. The fact that CRWD can acquire new companies/technologies using its CFFO demonstrates the advantages of a highly profitable and scaled business. CRWD is truly a money machine that keeps getting better.
More on the Portfolio’s Allocations
The cash in the portfolio is the cash that I’m willing to reinvest into stock investments. Recently, the cash declined from around 13% a few weeks ago to around 8% today. Part of the decline was due to reinvestment into stocks while the other part was due to the permanent removal of cash for non-investment or non-stock investment purposes. Around November 2023, I began to trim positions and raise more cash. I’ve continued to do this as the market has risen over the past four months. I’ve permanently removed cash from the portfolio on several occasions during the past year.
I’m satisfied with the portfolio’s current positions. I can classify my investments into various buckets; there is some overlap as some companies can fit into multiple buckets.
High Growth Today but Eventual Slowdown: I still hold four positions that are currently showing tremendous revenue growth but will eventually slow down. These are CELH, ELF, ASPN, and TMDX. I’ve been trimming CELH and ELF and I expect that I will eventually exit them, hopefully before they slow down too much; CELH will probably leave the portfolio before ELF, but we’ll see how their results progress over the coming quarters. TMDX is a new position, and I’d expect it to keep growing fast for a few more years. ASPN is also a new position that was recently added to the portfolio; it’s growing fast today, and as long as that keeps up I expect I’ll keep it.
AI Investments: I hold three companies in what I consider my AI basket: NVDA, SNOW, and TSLA. NVDA is currently a monster. SNOW is a long-term bet on it becoming a juggernaut. TSLA is a long-shot high-risk/high-return investment.
High Growth SaaS: I have four positions in a high growth SaaS basket: AXON, SNOW, CRWD, and IOT. All are still growing revenue above 30% and are dominant market leaders in their target markets.
Very Dominant Businesses: They are AXON, MELI, TTD, and CRWD, and I’d be hard-pressed to sell them because they are so dominant in their markets. When these companies report results, I don’t need to spend too much time analyzing them because I’ve found their results to be so consistently good. The other advantage of owning shares in these businesses is that as they grow and continue to become more dominant in their markets the likelihood of them getting disrupted drops; this can provide reliability and stability to the portfolio.
FINAL THOUGHTS
We’ve had quite the rally over the past five months. Will it continue or will see a correction soon? No one can know the answer, but the outlook looks a lot more positive than it was a year ago. There will be another Fed meeting on March 20th. The expectation is that rates will be left unchanged, but a surprise cut could unleash the continuation of the rally. Rates will eventually start dropping, and, with $6T stashed in money market funds and $2T in bank accounts, there will be plenty of funds available to buy stocks and push prices even higher.
The opinions, thoughts, analyses, stock selections, portfolio allocations, and other content is freely shared by GauchoRico. This information should not be taken as recommendations or advice. GauchoRico does not make recommendations and does not offer financial advice. Each person/investor is responsible for making and owning their own decisions, financial and otherwise.