🔮 "No Brainers" for My 2024 Portfolio

Wow! I didn’t realize you all enjoyed these portfolio “deep dives” so much!

As always, if you have a question about anything I publish you can reply to this email or drop a comment below.

In this post, I’m going to:

• Share a list of 5 stocks I’ll be adding to in 2024

• Explain, using valuation metrics, why I’m doing so

🔮 I’m Not a Fortuneteller

As a quick reminder, my investing style is very simple — I own companies operating in secular growth trends who are printing cash for their shareholders. 

The following names should do just that in 2024 and 2025.

There are a several macroeconomic forces at play here — leading me to believe something might “break” sooner than we think. Expect volatility if this happens.

As you all might remember, 2022 was a bear market.

However, people get rich during bear markets as they present incredible opportunities to buy equity in quality companies at meaningful discounts.

I’m not “predicting” a bear market in 2024 — but even if we did have one, I know the following companies will recover and make new all-time-highs in 2025 and beyond.

👉 Meta Platforms (META)

This company experienced quite the whirlwind — as Mark Zuckerberg decided in 2021 he wanted to invest all of the company’s time, energy, and money into building the metaverse.

Lucky for his shareholders, he came to his senses and instead doubled-down on building upon his existing business segments.

As a quick reminder, Meta Platforms’ stock price for most of his publicly-owned history has traded alongside it’s free cash flow per share figure (as shown below).

Even in 2022, as we saw a massive decline from $13.85 to only $7.09. This decline is what caused their stock price to enter into a free fall. Again, this wasn’t because the business was failing, this was because Mark decided he wanted to spend $100B on the metaverse.

This has since been reversed, as we experience in 2023, with Wall Street expecting $16.89 in free cash flow per share for the calendar year (+139% increase YoY).

As you can see above, the blue line (free cash flow) is expected to continue trending higher — while the black line (stock price) has yet to fully catch back up. For this reason, I believe there’s still 15-20% upside to be realized with Meta Platforms in the coming 12-18 months — with much more upside to be realized over the coming years.

👉 Salesforce (CRM)

This business is very simple — they sell Software-as-a-Service via subscriptions to businesses across the spectrum. Their subscription business made up 93% of their Q3 revenue — ranging from Sales and Services to Platform and Slack.

Similar to Meta Platforms, Salesforce has also had a long-standing history of trading in tandem with a specific valuation metric — not Free Cash Flow, but instead Operating Cash Flow. 

As you can see below, Salesforce’s stock price in black moves with their operating cash flow in blue.

With the CRM industry slated to grow +11% in 2024 — and the data & analytics market to grow at +19% compounded annually through 2029, there’s a lot to be excited about here.

With such strong correlation to a financial metric I’m confident Salesforce will continue to overdeliver on, I believe there’s still 15-20% upside in this name over the next 12-18 months.

👉 SentinelOne (S)

I’ve been talking about this name for a while now, first shared here in 2022. The stock price was around the same $24/share range it’s hovering around now — which means if you dollar cost averaged throughout the last 18-months like I did you’d be up well over 100% by now.

Here’s the deal — they’re operating in one of the most robust secular growth trends in history at the moment, cybersecurity. Operationally, they’re doing everything right.

They’ve expanded their GAAP and non-GAAP gross profit margin by +9% and +8%, respectively.

They’ve decreased their GAAP and non-GAAP operating expenses as a percent of total revenue by -40% and -33%, respectively.

Which means they’ve been able to meaningfully shrink their GAAP and non-GAAP operating losses.

It’s of my opinion that SentinelOne in 2024 will continue to inch closer to operational profitability, and finally flip cash flow positive in 2025 — allowing their stock price the opportunity to skyrocket back into the $40s and $50s in due time.

This represents over 100% in potential upside over the coming 18-24 months. Again, not a fortuneteller, but as long as this company continues to deliver the results they’ve alluded to in their earnings calls — this is such a no-brainer long-term winner.

For perspective, Crowdstrike (CRWD) flipped operating cash flow positive in early-2020 — just look at what their stock price has done since.

👉 DraftKings (DKNG)

This is a weird one, because it feels gross. But, my bank account doesn’t have emotions, and neither should you as an investor.

DraftKings is an online sports betting company that generates revenue through three business segments — Sportsbook, iGaming, and Daily Fantasy Sports. In 2021, this company merged with a SPAC, allowing their stock price to quickly benefit from the 2021 hype cycle — skyrocketing up to $80 / share.

The hype vanished when the Fed hiked interest rates and investors realized this company was incredibly unprofitable while having a ton of competitors.

But, this sell-off was and still is an opportunity as DraftKings has operationally flipped the script and is now doubling-down on efficiency.

As you can see above, the blue bar graph is the company’s reported (and projected) revenue through 2026. Overlayed on top of those blue bars are green and red lines — the company’s EBITDA per share and Earnings per share (profitability).

In 2020, DraftKings reported -$400M in adj. EBITDA.

2021, 2022, and 2023 were similar stories at -$676M, -$721M, and an estimated -$100M, respectively.

But because of the continued maturity of the sports betting market and the company’s focus on profitability (low promotional offers), their adj. EBITDA for 2024 is projected to land around $420M.

This figure is expected to double to $900M in 2025, and grow again to $1.4B in 2026.

Assuming DraftKings and FanDuel continue to have a duopoly on the sports betting market for the remainder of the decade (ESPN Bet could throw this off), the company’s stock price should climb much, much higher over the coming 18-24 months.

👉 Alphabet (GOOGL)

Saving the best for last. I think a lot of people make the mistake of forgetting the potential upside trillion dollar companies still have — as their existing distribution, products, and R&D capabilities only compound on themselves over time.

Similar to Salesforce and Meta Platforms, Google’s stock price has a long-standing history of moving in tandem with a financial metric — operating cash flow.

Sure, their stock price in black has “come back to reality” since it’s unwarranted sell-off in 2022 — but there’s still much to be excited about. Their operating cash flow is expected to grow by +20% in 2024, +12% in 2025, and another +15% in 2026 — from $105B to $160B.

That +52% increase in operating cash flow, in my opinion, will have a very positive impact on their stock price over the coming years.

Plus, did y’all see their new Google Gemini AI product? How cool!

Again, I’m no fortuneteller — but if these companies’ stock prices perform as I believe they should, 2024 and beyond look bright.

At this moment, I own all of these names besides DraftKings inside of the Portfolio Tracker — which means I’ll be adding DKNG to the “Risky” subsection opportunistically over the coming months.

If you learned something interesting by reading this post, be sure to share it!

Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.