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Happy Sunday, everyone.
For those of you whose college football teams made the playoffs, congrats! What an exciting few weeks ahead. My Tennessee Volunteers will play the Ohio State Buckeyes in Columbus on December 21st — wish us luck!
Before we jump into the meat and potatoes of it all, I wanted to share an interesting chart I found on X.
@Marlin_Capital on X
Historically speaking, November through January prove to be the strongest period for the Russell 2000 — something I believe will occur again this season. Remember, small cap stocks (IWM, VB, IWMI) tend to be disproportionately impacted by corporate tax cuts and deregulation.
Considering the Trump Administration ran their campaign on those policies, it makes a lot of sense as to why the Russell 2000 index is up +8.5% since November 5th.
If you don’t have some exposure to small cap stocks, either individually or through an index, inside of your portfolio — now might be a good time to add!
Portfolio Updates (YTD Performance):
I’m thrilled to announce the year-to-date performance of the Dividend Growth Portfolio in 2024 is now +41.3% — with both my “Long Risky” and “Long Technology” sections of the portfolio (largest sections) posting 50%+ year-to-date returns!
A few major changes to share, as well as a change I plan to make first thing Monday morning (announced below).
As you can see, I’m doubling down on Ethereum — specifically BlackRock’s (ETHA) ETF. As you probably remember, I’ve owned the underlying cryptocurrency for a while but I moved most of that into Bitcoin earlier this year as I (correctly) believed Bitcoin was going to outperform Ethereum — and now I believe the opposite is true in 2025.
Remember, Bitcoin ETFs were first launched in January of this year — unlocking the asset class to countless retail investors. We’ve since seen unprecedented inflows (as you can see below).
But after studying inflow data for the last few weeks, it’s obvious investors are taking their Bitcoin (and other cryptocurrency) profits and investing them into Ethereum ETFs. As you can see, Ethereum ETF net inflows skyrocketed in December — causing the price of Ethereum to finally break $4,000.
I firmly believe $4,000 is just the beginning for Ethereum’s price, and I wouldn’t be surprised to see +50% upside over the coming months — which is why I put $75K of the $100K I had invested into SPYI into ETHA. Once the upside is had, I’ll sell the ETHA and put the proceeds back into SPYI.
Since November 12th, $1B has flowed into Ethereum ETFs — with record buying taking place this past week. We’re talking about hundreds of millions of dollars being invested into Ethereum ETFs on a daily and weekly basis — just think about how that’s going to positively impact the price of Ethereum!
As you all know, I’m very proud of the returns I’ve been able to generate for our paid subscribers year-to-date.
We’ve had countless single stock winners up +50% or more, with a few up +100% or more just since January. Bitcoin and Ethereum have proven to be great bets, and we plan to continue the momentum into 2025.
If you’re not yet a paid subscriber (unlocking access to the portfolio’s underlying holdings + monthly livestreams) — consider becoming one!
It’s only $31 / month.
Week in Review — Too Long, Didn’t Read:
Salesforce delivered $1.8B in free cash flow, CrowdStrike is eating SentinelOne’s lunch, GitLab announces a new CEO, AWS continues to fire on all cylinders, Robinhood is turning heads with its ambitious projections, the oil industry continues to face challenges, the murderer of UnitedHealthcare’s CEO is still missing, the Jobs Report helped keep the market rallying, and Consumer Credit blew past $5.1 trillion.
Key Earnings Announcements:
Salesforce delivered $1.8B in free cash flow, CrowdStrike is eating SentinelOne’s lunch, and GitLab announces a new CEO.
Salesforce (CRM)
Key Metrics
Revenue: $9.4 billion, an increase of +8% YoY
Operating Income: $1.9 billion, an increase of +26% YoY
Profits: $1.5 billion, an increase of +25% YoY
Earnings Release Callout
“We delivered another quarter of exceptional financial performance across revenue, margin, cash flow, and cRPO. We continue to drive disciplined profitable growth with third quarter GAAP operating margin of 20.0%, up 280 basis points year-over-year, and non-GAAP operating margin of 33.1%, up 190 basis points year-over-year.
To date, our total capital returns have surpassed $20 billion and we remain focused on driving shareholder value.”
My Takeaway
As you all know, we’ve been believers in what Salesforce is building for ~18 months now — with reassurance from the above chart.
For much of the company’s history, it’s stock price traded on a multiple against their free cash flow (shown in blue). As free cash increased, so would their stock price (shown in black) — and vise versa.
However, their stock price experienced a bubble during Covid — then that bubble popped in 2022. We believed in 2023 their stock was primed for growth again as the company continued to deliver best-in-class free cash flow growth despite turbulent economic conditions.
We’re up +154% on the stock, and continue to hold shares.
Let’s now dig into their quarterly earnings results — and why the stock popped +9% on the news.
The company reported double-digit cPRO billings growth, which foreshadows continued revenue growth in 2025. Remember, cPRO is revenue that’s under contract but not yet realized in their bank account — which means if their cRPO is growing by double-digits… then their revenue should also grow by double-digits.
The company delivered $1.8 billion in free cash flow (+30% YoY) — which was +$120M above Wall Street’s expectations. Salesforce’s new product “Agentforce” is taking the corporate world by storm — signing 200+ deals in one week, with the number of $1M+ annual deals up tremendously. An interesting caveat to this is their CFO stated the Agentforce momentum is not taken into account for their recent guidance raise nor their cPRO expectations — a very good thing.
With that being said, I’ll be watching their Professional Services revenue (declining) over the coming quarters.
Holding shares and opportunistically buying more!
SentinelOne (S)
Key Metrics
Revenue: $210.7 million, an increase of +28% YoY
Operating Loss: -$89.1 million, compared to -$81.5 million last year
Net Loss: $78.4 million, compared to -$70.3 million last year
Earnings Release Callout
““Our Q3 results demonstrate strong execution and business momentum. We exceeded our topline growth expectations and re-accelerated new business growth. Enterprises are increasingly selecting Singularity Platform for real-time, autonomous security. With our industry-leading innovations and broadening platform capabilities, Singularity is setting the standard for the future of AI-powered cybersecurity.
For the first time, we delivered positive free cash flow on a trailing-twelve-month basis, a key milestone in our journey toward sustained profitability. Based on strong execution and business momentum, we’re raising our revenue growth outlook to 32% for the fiscal year ’25.”
My Takeaway
I should have sold this stock when it was trading in the $30s earlier this year.
I’m a big believer in being as transparent as possible with my investment ideas, thesis, ideology, and losers. Unfortunately, I think SentinelOne will go down as a loser — after me being so fired up about them for the last 12+ months. At its core, the company is an AI-powered cybersecurity name with limitless upside potential — but the sad reality is CrowdStrike is eating their lunch.
Total annual recurring revenue (ARR) of $859.7 million came in above expectations, with net new ARR of $54M up +4% YoY. The company is experiencing rapid adoption of their Purple AI Suite of products as the attach rate (upsell) doubled in Q3 vs Q2. During the quarter, the company also added a new record of customers spending $100K+ per year with them.
But on the flip side, despite management’s continued “We’re taking CrowdStrike’s customers,” the evidence of that is just not apparent. Growth is decelerating, and Wall Street is only expecting the company to grow revenue by +26% in 2025 — whereas current deceleration trends over the last few quarters might mean growth of only +22% next year.
Yes, there is continued progress on margin expansion — but it still lags their peers. They’re operating at a -3% loss, whereas CrowdStrike was operating at a 8% profit when they were SentinelOne’s size. Finally, management disclosed they do not plan to guide for ARR, NRR, customer counts, and other key metrics in 2026 — who in the world would do that unless you were trying to hide something?
I understand Netflix wanting to flip investor’s mindset away from net subscriber count (now that they have hundreds of millions around the world) and instead to revenue and profit — but they’re incredibly profitable and that’s what shareholders care most about. SentinelOne’s decision to cut out these key metrics from their guidance going forward doesn’t make sense to me, especially as an unprofitable technology company. These metrics tell your profitability story and allow investors to make educated decisions as to when you might become profitable — without them, it’s anyone’s guess!
I’ll be selling this stock Monday morning and moving my proceeds into CrowdStrike or Palo Alto Networks.
GitLab (GTLB)
Key Metrics
Revenue: $196.0 million, an increase of +31% YoY
Operating Loss: -$28.7 million, compared to -$40.3 million last year
Profits: $28.3 million, compared to -$286.3 million last year
Earnings Release Callout
“We delivered record non-GAAP operating margins as our third quarter fiscal year 2025 revenue reached $196 million dollars, an increase of 31% year-over-year. I am very pleased with our results and the team’s execution as we continue to deliver against our commitment to responsible growth.”
My Takeaway
Despite SentinelOne being a loser, our recent callout of GitLab was a major winner! We’re now up +34% on the idea in only 3 short months.
As you might remember, we called out the name in August of this year, and have been dollar cost averaging into them ever since — with an average price per share of $50.
GitLab reported strong results across the board, as well as raised their guidance beyond Wall Street’s expectations. The drivers of the outperformance were broad-based from its core land-and-expand strategy — with large new logo activity and adoption of add-ons like Duo.
Alongside solid earnings, the company announced a succession plan for their CEO. The incoming CEO, Bill Staples, has served in various executive roles at Adobe and Microsoft and is believed to be an industry expert who will catalyze the company’s next leg of growth.
Lastly, with AI becoming a bigger part of the GitLab story, it was alluded that new consumption-based pricing models (pioneered by Snowflake) may be considered. Wall Street believes these models will drive even higher usage of the company’s platforms.
Wall Street’s $90 / share price target implies +34% upside and is based upon 12X forward revenue expectations.
Holding shares and opportunistically buying more!
Investor Events / Global Affairs:
AWS continues to fire on all cylinders, Robinhood is turning heads with its ambitious projections, the oil industry continues to face challenges, and the murderer of UnitedHealthcare’s CEO is still missing.
AWS re:Invent Conference Recap
Amazon Web Services (AWS) showcased its advancements in AI at Re:Invent, emphasizing its proprietary Trainium2 chips and the launch of "Project Rainier," a high-performance AI supercluster for Anthropic.
The "Ultracluster” is a supercomputer built with its Trainium chips, and its “Ultraserver” is designed to lower AI costs and compete with Nvidia's GPUs. While Nvidia remains dominant, AWS aims to carve a niche by offering cost-effective, scalable solutions for training large AI models through its custom silicon.
Overall, AWS is positioning its hardware, cloud services, and AI innovations to strengthen its foothold in the competitive AI landscape.
Amazon (AMZN) Stock Performance, 5-Year Chart, Seeking Alpha
There was also interesting news this week about how important AWS developments have become to Apple (AAPL):
“[Apple] came to us, and said to us, ‘how can you help us with our Generative AI capabilities, we need infrastructure in order to go build,’ and they had this vision for building Apple Intelligence.”
Robinhood (HOOD) Upgraded After Impressive Investor Day
Robinhood's stock surged +5.3% to $41 after Goldman Sachs upgraded it to Buy and Bank of America raised its target price to $53, citing its evolving business model and growth potential. The company has transformed from a fast-growing online broker for younger investors to a "best-in-class" asset compounder with features like IRA rollover matches and low-cost cryptocurrency trading.
Goldman predicts earnings of $1.21 per share in 2024, with growth fueled by active traders, international expansion, and ventures into wealth management. Robinhood hinted at using AI for low-cost investor advice, supported by its acquisition of fintech startup Pluto.
Bank of America highlighted Robinhood’s appeal to Millennials and Gen Z, as well as its recent expansions in the U.K., Europe, and Asia.
Robinhood Markets (HOOD) Stock Performance, All-Time Chart, Seeking Alpha
One of the most interesting callouts from the Investor Day was CEO Vlad Tenev’s answer when asked about Robinhood potentially expanding into sports betting…
“We’re keenly looking into that space. Nothing to announce just yet, but it’s so important to our customers and in culture that we’re excited about it,”
OPEC+ Meeting Recap
Oil prices fell as investors balanced an ample 2025 supply outlook with OPEC+ delaying its output hike to April 2025 and fully unwinding cuts by late 2026. Brent crude settled at $72.09 per barrel, and WTI at $68.30, reflecting concerns over oversupply amid slowing global demand and rising production outside OPEC+.
The group plans gradual monthly increases of +138,000 barrels per day starting April 2025, aiming to stabilize the market. A cooling U.S. dollar lent some support to oil prices, with expectations of Federal Reserve interest rate cuts further easing dollar strength. Analysts remain cautious, pointing to a market surplus and limited factors to drive significant price gains in the near term.
"There were questions coming into the meeting as to whether there was cohesion or not (among OPEC+), they are definitely coming out of this unified but this also shows the challenging supply landscape they have before them while trying to prop up this market.”
UnitedHealthcare CEO Murdered, Suspect Still Missing
Sources: Business Wire / AP Photo / Patrick Sison
UnitedHealthcare CEO Brian Thompson was fatally shot in a targeted attack in Midtown Manhattan while heading to a company investor conference. Surveillance footage captured the suspect waiting for Thompson and fleeing the scene on an electric bike, leaving behind a burner phone, a water bottle, and a smudged fingerprint. Police suspect the gunman may have military or law enforcement training due to his handling of firearm malfunctions during the attack.
Investigators are examining potential motives, including threats against UnitedHealthcare executives and a shell casing inscribed with industry-related terms. Thompson's widow described the family as devastated by the loss, while the company expressed shock and is cooperating with authorities.
UnitedHealth Group (UNH) Stock Performance, 5-Year Chart, Seeking Alpha
“We have every reason to believe that this was a targeted attack on an individual, rather than a random act of violence. We have released the photo yesterday. We would appreciate you getting that photo out to your audience because we also have reason to believe that the person in question has left New York City.”
Major Economic Events:
The Jobs Report helped keep the market rallying, and Consumer Credit surpassed $5.1 trillion.
U.S. Jobs Report
U.S. nonfarm payrolls rose by 227,000 in November, surpassing expectations of 214,000, rebounding from October’s revised 36,000 due to prior disruptions from strikes and storms. The unemployment rate edged up to 4.2% as the labor force participation rate decreased slightly to 62.5%. Key job gains were seen in health care (54,000), leisure and hospitality (53,000), and government (33,000), while retail trade shed 28,000 jobs.
Average hourly earnings grew by +0.4% month-over-month and +4% year-over-year, slightly exceeding forecasts. The data reinforced expectations of a Federal Reserve rate cut later in December, with market odds for a reduction rising above 88%.
"While I am pleased at how well the labor market has held up under restrictive monetary policy, I am less pleased about what the data have been telling us the past couple of months about inflation.”
Consumer Credit / Sentiment
Federal Reserve data reveals that U.S. consumer credit rose to $5.113 trillion in October, with revolving credit, including credit card debt, increasing at an annual rate of +13.9%.
Non-revolving credit, such as auto loans and student debt, grew at a slower pace of +1.1%. Simultaneously, consumers are facing greater difficulty accessing credit, as rejection rates for various loan types have risen throughout 2024, according to the New York Fed.
The University of Michigan’s Consumer Sentiment Index showed a rise in consumer optimism to 74 points in December, driven by a surge in durable goods purchases due to inflation concerns. Anticipated tariffs under the incoming Trump administration and differing economic expectations between political groups are shaping consumer behavior. Despite the sentiment uptick, rising debt levels and inflation fears highlight ongoing economic challenges.
“A surge in buying conditions for durables led Current Economic Conditions to soar more than 20%. Rather than a sign of strength, this rise in durables was primarily due to a perception that purchasing durables now would enable buyers to avoid future price increases (from tarrifs).”
Smart Money, Smart Machines
Dubbed "the rocket fuel of AI" by Wired, this innovation is causing a stir on Wall Street. With projections hitting $80 trillion – that's 41 Amazons – the potential is huge. But here's the deal: sharp investors who are ahead of the game have the opportunity to invest in a technology poised for domination. Thanks to The Motley Fool, you can access the full story in this exclusive report.
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