10X FREE CAPITAL POT - PORTFOLIO REVIEW AUGUST 2021
Time for a portfolio review.
I started 2 different portfolios, which I call “pots” as I don’t want to touch them for years. I want to keep my picks for as long as possible and slowly add to each pot when I develop a strong conviction in a company.
I started both ‘pots’ on May 14 of 2021. Where are we after about 3 months? Simply put:
10X Free CAPITAL POT +10.2% (+3.7% vs S&P500)
10X Small Bets CAPITAL POT -14.8% (-21.3% vs S&P500)
As I am investing for the very long term, these returns do not mean very much.
Let’s have a look at my FREE 10X POT, from highest to lowest conviction.
In essence, I like to see companies with growing Return on Assets (ROA), which means improving profitability.
I want to see companies expanding, which I can see from growing their assets base (Asset Growth or AG) year over year.
Then I want to see growing sales and I look at trailing twelve months total sales (TTM) and compare it with the same number on the previous quarters.
These are the most important numbers I look at from a quantitative point of view.
Then there is my qualitative assessment as I want to see if the company can maintain its profitability over time. A great example comes from companies that are developing strong brands which makes it easier for them to maintain their profitability. Now let’s have a look at the numbers:
10X FREE CAPITAL POT Performance vs. SP500
Key Numbers:
Tesla (TSLA)
The company keeps improving across the board. ROA at 18% is already much more profitable compared to the profitability average of the car industry. Tesla is more than a car company. Tesla keeps investing (10% Asset Growth) and is crushing sales at a +17% TTM vs previous quarter. Already a world brand that stands beyond electric vehicles. What this company with this leadership and execution will be up to in 10 years from now? I think it will be at least 10X bigger. We are up 15% on Tesla.
Square (SQ)
Strong ROA at 19%, Asset Growth at 34%, and TTM Sales at +21% speak of an expanding business. Cashapp is a super app with a growing number of users and Square is disrupting the banking industry and popular among millennials and zillenials. It has barely started its international expansion. I expect SQ to keep expanding and becoming an international brand over the next 10 years. We are up 27% on Square.
Airbnb (ABNB)
Even in a challenging year like 2021, Airbnb is already a high-quality business with a whopping ROA of 51% in 2021. Airbnb is investing heavily this year with an Asset Growth of 131% (consider that in 2020 the level of investments was low ‘cause of the pandemic). Last TTM revenues came at 4,4 billion, +29% versus previous TTM. The stock is moving sideways as everybody wants to see better through the COVID19 concerns. But we are investing for the next 10 years and Airbnb is “the brand” in the space, profitable, expanding, and investing in new products (long term stays, experiences). A company I want to own for the next 10 years. We are up 1.8% on ABNB.
Etsy (ETSY)
Etsy usage, sales and profitability skyrocketed during 2020. ROA went to 80%+ and is expected to be at 90%+ in 2021. These are amazing numbers compared to the broad market average of about 11% this year and 6.5% historical average for the US listed companies. Etsy is also expanding at 23% Asset Growth and still growing sales at 5% TTM, reaching what is seems a more sustainable rate of growth. Etsy is expanding through acquisitions and is becoming the go-to marketplace for independent sellers. Again, a big global brand in the making, with big opportunities on international markets. Strong company to own for the next 10 years. We are up on Etsy 22%
Digital Turbine (APPS)
I like very much the numbers of APPS. I got into it at 25USD the first time, only to see it touch 80+USD and get back to where is today at about 50USD. This company has been consistently improving its ROA from -25% a few years ago up to 200% expected in 2022! And they keep investing at +99% vs 2020, while crushing sales at +49% TTM, accelerating from +22% in the previous quarter. So what? I think some profit-taking and current rotation from growth to value stocks is affecting APPS. Also, the stock at 90+ USD was priced for perfection. Here, I like what the numbers suggest: great execution. Below 50USD I think this is a bargain right now. APPS is a key player for companies that want to advertise their mobile apps on Android or to reach consumers through apps. This is an expanding market and Digital Turbine is demonstrating to be able to grow fast within this market. APPS is a 5B USD Market Cap company that can grow significantly over the next 5 years. We are down -17% on APPS.
Peloton (PTON)
We are still missing sales numbers for Q2 from Peloton. This is a “start-up” in the health and fitness space, a global brand in the making with beautiful products and a cult-like following. In a few years, this company is already selling about 3Bn USD a year in products and services, making a positive ROA (5%), investing at 340% Asset Growth and crushing sales at +25% (TTM) despite supply chain issues and too much demand. If they keep executing like they are doing, this is a stock to own for the long term. We are UP 12% on PTON.
Below is the link to our FREE 10X Portfolio.
[Link]
Shortly I'll be reviewing our 10X SMALL BETS POT (subscribers only).
Also, by the end of the month, I'll add 2 names to the FREE 10X POT and one 2 names to the 10X SMALL BETS POT.
Stay tuned.
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Important: this is not investment advice. Consult a licensed financial advisor before making any investment decision.