100 baggers/ Growth Stocks

It is the question. I think in the boom most companies had big revenue growth. Now we’re going to see differentiation. Rule of 40 becomes brutal when revenue growth slows. It means that margins have to improve which is difficult with revenue growing slower. It will mean expense cuts for a lot of companies.

Yes, every company expense cut is reducing demand side which is what FED wants. When they reduce infra expense, it is compensating supply chain. When they lay off, it creates domino impact on demand reduction.

The unknown or unexpected outcome is how many small, medium and large debt-ridden businesses are going to file bankruptcy like FTX issue. The FTX 32B will have domino impact on investment community. Similarly, every bankruptcy will have domino impact across the world.

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Another interesting post. Jamin looked at operating margins of high growth vs slow growth companies:

I went back and looked at the last ~50 software IPOs and benchmarked them across a number of metrics. One chart I found interesting was tracking how each business grew from the time they hit ~$75m ARR. The below chart shows the top decile, top quartile, and bottom quartile ARR growth, where Q1 represents the first quarter each company was ~$75m ARR.

I then fixed the set of companies in the each of the the 3 buckets (top decile, top quartile, bottom quartile), and looked at how they preformed in a series of other metrics. The below chart shows GAAP Operating Margin.

So initially the high growth companies had terrible margins, but having solved the growth problem, operation leverage soon kicks in and they end up in the best of both worlds: high growth and profitable.

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That makes sense. Profitability is about leveraging OPEX in S&M, R&D, and G&A better which takes size to do. There’s a tipping point where those areas start becoming a smaller and smaller percent of revenue as revenue continues to grow. The faster a company achieves that size, then the faster they are profitable.

That’s why I screen on gross margin and revenue growth rate. Gross margin is the most difficult area to improve once pricing and hosting costs are established. Even with annual efficiency gains in hosting costs, it’s difficult to improve gross margin due to pricing pressures. No one is paying list price for services, and the battle for free periods or discounts is intense. Now that everyone runs on open APIs it’s such easier to switch services. Gross margin might even decrease as price erosion is greater than the cost optimizations.

Start with a high gross margin then grow until the other expenses start to gain efficiency from scale and shrink as a percent of revenue. That’s the model that works.

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So? New leaders? What are they? NET SNOW? AEHR MRNA?

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MRNA is really good, but it has already bottomed at $120 range, now doubled.

AEHR has also gone up high,tripled, but this is very small company and it can grow for some more time and then will be merged/takenover by some big company.

Only way, if they come down, just DCA at some place, may be when market bottoms.

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Some1 got a message for @manch

Yes, we’re trying to identify the right one.

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Assuming S&P bottoms on Oct 13, 2022. Since then, it outperforms NET and SNOW. Stalwart NVDA :+1:
SAAS and cloud computing stocks :-1: Prove to be overhyped stocks due to QE.

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If October is the start, then who will create the biggest returns in the new bull market?

Not IPO yet :wink:

Backtested, TQQQ or SOXL until next peak ATH!

May also be oil sector (XOP) due to shortage and war. They are already up. The 3x Oil sector may be winner until war is over (guess work)

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I’m buying soxl again. I made a mistake and sold in December for quick gain. Missed out on the large appreciation.in Jan.

Value was in vogue in 2022. Now that liquidity seems to be coming back maybe growth names will outperform instead.

Don’t stare at the rear mirror for too long.

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Exactly past leaders usually are not future leaders. NET was one of the previous bull market leaders… 10x over 2 years.

Don’t you dare say bad things about the sacred stock TSLA??!!

:scream:

Is TSLA a past leader? Btw, TSLA stands for what? Didn’t monitoring this stock.

Joking aside, SNOW could be a leader. Wasn’t a previous leader.

FSLY trounces NET

From Nov 2021, Fed starts to hike rate.

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I own all three.
NET 300
SNOW 200
NVDA 500
Obviously I favor NVDA :+1: Turned out to be correct :money_mouth_face:

Assuming stock market bottoms on Oct 13, 2022 (highly likely unless Fed or Congress farts).