I realize you have a choice in the newsletters you subscribe to and my way of saying thanks is to offer original analysis. Most newsletters will wait for breakouts and price momentum and then backfill the analysis. This creates a few issues from my perspective. The first is that conviction gets shaky when basing investments on price only as it requires a herd mentality to remain in a stock. The best gains come from getting in front of the herd. The second issue is that many tech companies go through periods of high growth yet can’t sustain this long-term unless there is excellent product market fit. Momentum investors and trend followers struggle most when it comes to FAANG-like gains because they can’t determine the true gems from those that are simply doing what most tech does (disrupt a market for a period of time).
Case Study: Zoom Video
On a recent Bloomberg interview, I discussed Zoom Video as the stock that is “sitting right under everyone’s nose” due to growth that we haven’t seen in my lifetime or yours and likely won’t see again over the next decade.
This is a stock tip I released in the wake of the coronavirus shut-downs on April 3rd. There was a lot of noise in the market at that time due to the bull/bear market tug-o-war. I said, “If Silicon Valley unicorns are rare, then Zoom Video is a Pegasus.” The company then went on to accelerate from 78% year-over-year growth to 169% year-over-year analysis to 355% year-over-year growth. Keep in mind, I wrote this and maintained conviction even as the market began to question Zoom Video’s security issues.
We track institutional money flows by large volume spikes accompanied with a long candle pattern. We got out first indication that smart money was buying Zoom in bulk as indicated by the black arrow.
Case Study: Bandwidth
Bandwidth is a stock I covered on August 13th with a thesis around archaic telecom hardware becoming eradicated during and following the pandemic. I stated, “One trend I am monitoring closely for the more permanent effects is the disruption of telecom hardware systems through cloud-native communications” while spelling out why everything from SMBs to enterprises would seek to cut their telecom bills. From there, I wrote why I thought Bandwidth could out-perform long-term due to a solid list of customers, including Zoom, Google, Cisco, Microsoft, Skype, RingCentral and Square. I also discuss how Twilio is different from Bandwidth as this is a comparison that often comes up despite there being key differences at the product level.
This trend is still early yet we recently saw large institutional spikes in the stock. This is a great example as to why product-first analysis is key and how I try to give this to my free newsletter readers to help get them in front of trends the market may be overlooking.
Notice the large volume spike below accompanied with a large candlestick.
In conclusion, thanks again for being a newsletter subscriber. We hope to deliver more original analysis in the months and years to come.
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