October 2024 Portfolio Review
Total Return: +22.6% YTD (+3.0% vs S&P)
2024 Results:
2024 Monthly Allocations:
Key:
darker green: started during month
lighter green: added during month
yellow: trimmed during month
red: position exits
positions >10% in bold
*Please note: I rolled an old 401K worth ~2.5% into the cash balance of this portfolio to start 2024. I’ve shaded the January cash cell to make sure the new cash is represented accurately (and honestly to remind myself as well).
Past recaps:
December 2018 (the one that got things started)
December 2019 (contains links to all 2019 monthly reports)
December 2020 (contains links to all 2020 monthly reports)
December 2021 (contains links to all 2021 monthly reports)
December 2022 (contains links to all 2022 monthly reports)
December 2023 (contains links to all 2023 monthly reports)
Stock Comments:
And away we go with another earnings season…
AXON 0.00%↑ – Axon released several October business updates. First was formal completion of the Dedrone acquisition originally announced in May. This tuck-in purchase will play an important role in Axon’s larger strategy to position drones as an option for law enforcement and first responders to assess emergency situations before arriving on the scene.
The close of that acquisition was followed by news Campbell, California became the first police department to receive approval from the Federal Aviation Administration to use Axon’s drone technology for nighttime surveillance as part of its first responder program. This allows the city to deploy a drone as soon as a 911 call is received to provide initial real-time assessment while officers are on route. Campbell had been successfully using drones for daytime assessment since 2022. This approval allows it to integrate drone usage 24/7, improving safety for the public and officers alike.
Next, Axon announced several new nationally-certified curriculum modules for its virtual reality law enforcement training system. These courses are designed to help improve understanding and decision-making for officers in various field scenarios. More specifics on the new topics covered can be found at the link.
Lastly, Axon released enhancements to its digital evidence redaction tool to protect personally identifiable citizen information. These new features help law enforcement officials more easily tag, hide, and show portions of video based on existing privacy guidelines. This is yet another higher margin offering in Axon’s lineup for helping streamline evidence management and administration.
If nothing else, Axon certainly has a lot of things on the go. We’ll get our next formal update when the company reports November 7.
CRWD 0.00%↑ – CrowdStrike provided several updates as well. First, it has expanded its integration marketplace to include over 260 offerings from 140 partners. These integrations allow customers to easily access add-on services from leading partners like Amazon Web Services, NVIDIA, Cloudflare, and Zscaler.
Next, CRWD was named to the Major Player category in the 2024 IDC MarketScape report detailing enterprise-level SIEM platforms. A comprehensive overview of “the competitive fitness of technology and service suppliers,” this most recent ranking reflects many of the next-gen enhancements unveiled by CrowdStrike at its recent Fal.Con 2024 customer conference.
The company then announced a partnership with Fortinet combining the companies’ endpoint and firewall protection services Lastly, CrowdStrike has scheduled its inaugural Fal.Con Europe customer conference in Amsterdam November 5-7. A follow up to September’s main Fal.Con event featuring 6,000 attendees, the European gathering is expected to bring together another 1,200 guests from 400 organizations.
I’d expect CRWD’s next earnings report late November or early December.
DDOG 0.00%↑ – The only formal October news I saw from Datadog was earning a category Leader designation from Gartner Research in the area of Digital Experience Monitoring.
We’ll see how recent positive news on cloud usage from the major providers has impacted DDOG’s numbers when it reports November 7.
IOT 0.00%↑ – Samsara issued an early October case study detailing how major customer Otto Car, Europe’s largest provider of private hire vehicles, cut CO2 emissions by 50,000 tons over the last 12 months using IOT’s fleet management tools. Based in London, Otto Car operates 5,600 vehicles moving 75,000+ passengers around the city on a daily basis.
Later in the month, IOT moved its Drowsiness Detection service to general availability status for current customers. This service monitors driver awareness and delivers in-cab alerts along with notifying managers via email or text when increasing signs of drowsiness or fatigue occur.
Samsara likely reports sometime in December.
MAGS 0.00%↑ – A new (and probably temporary?) position, MAGS is an ETF tracking the Magnificent 7 stocks (NVDA, GOOGL, MSFT, AAPL, AMZN, META, and TSLA). With way more cash on hand than I’d like and this group of names down 3.3% in aggregate today, I decided this was a good a chance as any to throw some idle cash back into the market. I’m obviously overweight on NVDA in this mix given our separate position in it as well.
NVDA 0.00%↑ – Speaking of that separate position, most Nvidia news this month has focused on the continuing interest and demand in its next-gen products, particularly its highly anticipated Blackwell chips. CEO Jenson Huang told CNBC that "Blackwell is in full production, Blackwell is as planned. The demand for Blackwell is insane. Everybody wants to have the most and everybody wants to be first." Blackwell is expected to start selling during Q4 and should lead NVDA’s next wave of recent AI-boom and data center revenue.
It was also reported Foxconn is building the world's largest Nvidia GB200 chip production line in Mexico. A Foxconn VP is quoted as saying the plant aims to meet “massive” demand for AI accelerators with the company chairman adding the plant will be “extremely large.”
Lastly, I saw several reports Morgan Stanley stated Nvidia’s Blackwell GPU’s are sold out for the next 12 months. While this unfortunately suggests a cap to any outperformance the next 4-5 quarters, it does lend credence to the insatiable appetite for NVDA’s products implied in the above quotes. There is always a question of just how long any microchip cycle will last, but all signs so far point to continued expansion of this one.
Earnings November 20.
TMDX 0.00%↑ – TransMedics entered Q3 earnings under the same narrative as each of the past two years - an exceptionally strong first half with a flat second half guide due to anticipated seasonal softness. In both 2022 and 2023 TMDX overcame this softness and kept marching upward. The question was whether management could pull off the same trick in 2024. Unfortunately, the answer is no. TMDX posted a surprisingly disappointing $108.8M driven by lower sequential volumes in both the US and internationally. That’s the first sequential revenue decline in twelve quarters, which was before TMDX even launched its current commercial program.
The shortfall was driven by a nationwide decrease in US transplant volumes across the board. Heart and liver declined by 5% during Q3 with liver contracting 3%. CEO Walid Hassanein noted TMDX’s internal volumes matched national trends and repeated three times “we have not seen any fundamental or competitive dynamics playing any role in the slight sequential decline.” The CFO backed this statement by saying “While we did see a pause in our consistent sequential growth trajectory that we have maintained since our initial commercial launch, we believe this is short-lived and is more reflective of the overall U.S. national transplant volume and quarter-specific dynamics than a slowdown in our commercial momentum.” That’s small consolation.
Being honest, there’s not much to get overly excited about with this report. After having pretty much everything break its way the last 10-12 quarters, TMDX’s business momentum hit a surprising speed bump in Q3. Not only did revenue fall short of expectations, but management’s reiteration of the $425-445M FY guide broke a long string of healthy beats and raises. While management attributed everything to normal seasonality and variance, it is clear the severity of this slowdown was unexpected. In fact, after being pressed Hassanein admitted “maybe the headwinds in Q3 were slightly higher than what we anticipated.” If he would just replace “maybe” with “definitely,” I’d say he was spot on.
Hindsight is 20/20, but I’d feel better if management had only bumped the FY guide from $400M to say $410-$415M last quarter. As it is, jumping all the way to $445M is a major unforced error for what had previously been a consistently underpromise-and-overdeliver management team. What I can’t fully wrap my head around is why volumes dropped given standing waitlists for most organs. Management was clearly caught off guard by this. That makes me wonder whether the system might be further constrained somehow. While TMDX has lessened transportation concerns, is there something else in how clinics/surgeons/operating rooms/patients play off each other? If volumes are down across the board simply because of summer vacations by medical staff, is there a cap to how many surgeries can be completed in these seasonal lulls regardless of how many organs TMDX can deliver? We already know TMDX's tech outgrew the transportation infrastructure enough it bought planes to solve the issue. However, if it somehow outgrows the current surgeon infrastructure, the TAM (or more specifically the Serviceable Addressable Market) here might be even smaller than we thought.
Yes, management still expresses confidence in its overall plans especially the expected ramp in 2025. In fact, Hassanein was pretty feisty about it. However, this step down in revenue has certainly lowered and probably flattened the slope of TMDX’s previous growth curve. This quarter also illustrates TMDX is likely to be increasingly sensitive to fluctuations in overall US transplant volumes as it continues to grab a larger part of the market. Given all that, I can’t say the street’s initial response to this report is unwarranted. TransMedics exits this report with a little less luster and a lot more uncertainty. I’ve cut our position considerably as a result.
TTD 0.00%↑ – Our main piece of October news on The Trade Desk is an expanded partnership with Spotify. Spotify is launching a supply side platform, the Spotify Ad Exchange, with TTD being its first demand side partner. The service will initially feature Spotify’s video ad inventory before expanding to audio. Testing on the partnership began mid-month with TTD’s North American clients getting access to to Spotify’s inventory. Under the terms of this arrangement, Spotify will be featuring TTD’s Unified ID 2.0 technology for tracking and targeting customers while still protecting consumer privacy.
As for the stock, TTD spend most of October challenging new all-time highs. It’s been quite the round-trip since November 2021’s previous highs, but kudos to CEO Jeff Green & Gang for keeping their noses to the grindstone while keeping TTD positioned as an industry leader in programmatic advertising. Earnings November 7.
ZS 0.00%↑ – Zscaler released two notable October business updates. First, it hit an impressive milestone with its Zero Trust platform now processing over 500 billion daily transactions. That positions Zscaler’s offering as the industry’s largest cloud security platform.
Next, ZS announced four new integrations with security and identity authentication company Okta. These integrations will enhance network security performance for joint customers.
While Zscaler has admittedly left itself some things to prove as it revamps its sales motion, its base technology continues to show efficiency and effectiveness at scale. Earnings should be late November or early December.
My current watch list…
…remains just monday.com (MNDY) and MercadoLibre (MELI). I’ve also taken quick looks at Applovin (APP) and Shift4 Payments (FOUR). In APP’s case, I’m not seeing enough differentiation with The Trade Desk yet, which we already own. With FOUR, I’m still trying to piece together its relationship of organic versus acquisition growth. I owned a similar company called Lightspeed in the past where acquisition-fueled growth looked great until it didn’t. I want to make sure it’s not similar math here.
And there you have it.
October was a pretty steady month for our portfolio including a new YTD high before TransMedics’ late-month earnings stumble. On the bright side, our $77 cost basis for TMDX left moderate profit after our $95 exit. Unfortunately, that small consolation given the paper losses on the way down from $170. Oh well. The market giveth, and the market taketh away.
As it stands, we enter the broader earnings season with considerably more good news than bad from the companies which have reported thus far. Hopefully, that continues through the first wave of reports for our holdings.
As usual, thanks for reading, and I hope everyone has a great November.