Punch Card Growth Stocks Q2 2024

  • Punch Card Growth Stocks are companies owned or close to being bought by Kirk and his clients in the coming quarter or two.
  • Every portfolio needs growth and these companies all show the ability to at least double in the next five years, but generally have potential to triple or more.
  • Growth stocks are volatile and can be heavily influenced by traders in the short-term, use oversold conditions to scale into great ideas.

Welcome to “Punch Card Growth Stocks” which is our quarterly focus list of growth stocks that we would love to own at the right price. I include my game plan for each stock. I am breaking the growth stocks into 4 groups:

  • S&P 500 Stocks – Growth gorillas.
  • Midcap – Stocks racing towards S&P 500 inclusion.
  • Small caps – Companies with high growth.
  • Microcaps – Stocks racing towards Russell 2000 inclusion.

Also visit the following stock lists:

  • Kirk’s A Grandpa Stocks for lower risk wide moat companies.
  • Punch Card Dividend Stocks for dividend growth & high dividends.
  • Turnaround Value remembering that turnarounds rarely turn.
  • International Stocks that offer more direct exposure to the world.

On each list you will find stocks that I my registered investment advisory firm is either actually invested in or is considering investing in soon. Use the VSL for broader watchlists, including bottom fishing prices, 5-year price targets and potential upside adjusted in real time.

Follow along each week with my Stocks Of The Week updates where I will cover news, catalysts and charts, as well as, issue the buy/sell alerts.

Punch Card Stocks Concept

The concept of a punch card when making your investment decisions is famously discussed by Warren Buffett:

I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches—representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all… Under those rules, you’d really think carefully about what you did and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”

Punch Card Stocks
Punch Card Stocks (Kirk Spano)

S&P 500 Stocks

The S&P 500 stocks with the most growth upside and not on another list. Of note, there are not many “growth” companies on the S&P 500 and many are cyclical which require some slow handed position trading.

CompanyGame Plan
Nvidia (NVDA)Buy below $800. Risk to $600s.
Enphase (ENPH)Buy below $145. Risk to $90s.
Generac (GNRC)Buy below $115. Risk to $80s.
Caesars (CZR)Buy below $51. Risk to $20s.

Additions/Deletions:

  • Berkshire, Microsoft, Apple, Amazon and Alphabet were moved to Kirk’s A Grandpa Stocks.
  • Tesla (TSLA) was removed because I view it as a trading stock at this point, not a must own growth stock.
  • Paramount (PARA) and Warner Brothers Discovery (WBD) are being moved to the new Turnaround Value list.
  • Enphase has been slaughtered the past 6 quarters as California net metering was slashed. Most surprises will be positive going forward as solar continues to be fastest growing form of energy in electrifying economy. And, the kids love this one, it has very high FOMO potential. Certainly can use Invesco Solar ETF (TAN) for broader solar coverage as ENPH is 10%, but this is the one in the group I want to overweight more.
  • Caesars has been on the VSL a long time and we last invested after Covid panic. The company has consolidated post merger and appears ready to break out technically as its profits rise.

Mid Cap Growth Stocks

Stocks on the S&P 600 midcap index, or, Russell 1000 but not S&P 500 and market cap over $10 billion. These are generally the stocks that find their way onto the S&P 500 sooner than later.

CompanyGame Plan
Square/Block (SQ)Buy below $80. Risk to $60s.
Palantir (PLTR)Buy below $22. Risk to middle teens.
Unity (U)Buy below $35. Risk to $20s.

Additions/Deletions:

  • Teledoc (TDOC) was removed because their growth slowed dramatically and it is likely to be taken over, but not for a huge premium. I think it can bet back to $30ish because the data and client reach is valuable, but I don’t want to wait and risk management making bad decisions. If you own it, decide if you want to wait for M&A that might take a long time. Otherwise, look for an exit strategy on a rebound rally to $20ish.
  • Shopify (SHOP) was removed and is now on International Stocks.

Russell 2000 Growth Stocks

Russell 2000 stocks with the potential for very high growth and stock appreciation.

CompanyGame Plan
Marathon Digital (MARA)Buy below $31. Risk to single digits.
Heron Therapeutics (HRTX)Buy below $5. Risk to $2.
AST Spacemobile (ASTS)Buy below $5. Risk to $1
Enovix (ENVX)Buy below $12. Risk to $3.
RocketLab (RKLB)Buy below $5. Risk to $3.
Immersion Corp (IMMR)Buy below $8. Risk to $6.
Planet Labs (PL)Buy below $3. Risk to $1s.
BlackSky (BKSY)Buy below $3. Risk to $1s.

Additions/Deletions:

  • Marathon is again on my list as it’s Bitcoin holdings are very attractive. Marathon’s backup business is independent clean energy producer and I think that has a lot of value that is completely overlooked by the market. If Bitcoin follows the trajectory I anticipate, and clean energy production is a thing, then Marathon could be like a utility that also owns Bitcoin. MARA is highly volatile, but has built a base from a low, which offers big opportunity if you can handle the stomach aches. At $6 billion market cap, could be jumping to mid cap list soon and I think has a legitimate change of being an S&P 500 company in a few years. My favorite small cap stock due to my analysis of big Bitcoin and clean energy adoption the next decade. At some point, I can’t see a scenario where Marathon doesn’t pay a dividend.
  • Heron was on our list a while back and went into stasis as the company had to reorganize their focus from growth at all costs to profitability. They have done that with new management and the company is on the path to profitability. While their oncology drugs provide stability, Zynrelef is their potential home run. Zynrelef is a non-opioid dual-acting local anesthetic for post-operative pain for a wide range of surgical procedures. In other words, a potential replacement for using opioids that currently only has one light competitor. The use cases for Zynrelef also continue to be expanded. There is already regulatory movements to limit opioids, I expect more. Heron’s upside it massive, but relies on adoption by doctors, which likely requires a governmental nudge to speed up. I think that nudge comes.
  • Immersion Corp provides haptic technology for gaming, VR, automotive, medical and other industrial uses. They just licensed their tech to Meta after suing them. Their tech is already in 3 billion devices and the company is paying a tiny dividend which I view more as “proof of life.” Haptics are a $10b TAM now and growing at a teen percentage. The Meta contract is what puts them above a rather competitive field and makes them undervalued here. Also, that it is very hard to steal the tech, witness they beat Meta in a lawsuit forcing a $17m payment and you can see if Meta can’t out court them, almost nobody can. Immersion wins every confrontation. This is like investing in the hedge funds that win court cases on debt, except these guys have over 1000 patents that don’t start expiring until late 2030s. They’re profitable, have a share buyback and pay a dividend. They paid a special dividend last year. Immersion could turn into a dividend growth play, but they have so much capital appreciation potential this is their spot now. I expect a FOMO at some point to $20s or higher.
  • I removed SunRun (RUN) and SunPower (SPWR) for now to concentrate on ETFs and Enphase which has at least a small moat. There will be companies that emerge in U.S. residential solar this decade, but, I am not certain who that will be, thus, I’ll play the field rather than picking a number.
  • I removed Ginko Bioworks from the list as it is hard to commit new money until there is a lot more clarity. I am holding my heavily depressed shares at this point, but, it will take material improvements in the business for me to add more. Huge potential, but what decade?
  • I’m looking at 3D Printing stocks now. I expect additions in the next month or so. That industry is bottoming and entering consolidation. Of interest: 3D Corp (DDD), Desktop Metal (DM) and Stratasys (SSYS).
  • Also watching Redwire (RDW), Spok Holdings (SPOK), Climb Global (CLMB), Harrow (HROW), Unisys (UIS)

Microcap Growth Stocks

Microcap growth stocks are highly volatile. I only include those I think have a likelihood of Russell 2000 inclusion this year or next year. Inclusion into the Russell 2000 ETFs (IWM) (VTWO) results in forced institutional buying and generally as big step higher in price and market cap, as well as, cheaper cost of capital which is good for the business. The Russell 2000 inclusion price this year will be about $200 million dollars. The reconstitution begins with a first valuation on April 30th and runs through June 30. There were 297 companies added to the Russell 2000 in 2023.

Very aggressive investors can buy small July and January 2025 call positions in addition to a core stock holding, otherwise. Less aggressive growth investors should scale in small bites looking for upward momentum to add on initially and then sell into as momentum fades, holding onto long-term core positions if that fits your strategy.

CompanyGame Plan
Spire Global (SPIR)Buy under $14. Risk to $10.
Aemetis (AMTX)Buy below $8. Risk to $3.
Radcom (RDCM)Buy below $12. Risk to $8.
Applied Optoelectronics (AAOI)Buy below $14. Risk to $8.
QuickLogic (QUIK)Buy under $14. Risk to $8s.
Red Violet (RDVT)Buy below $19. Risk to $13.
American Superconductor (AMSC)Buy below $12. Risk to $9.

Notes

Spire Global (SPIR)

Spire Global is in the early innings of the space revolution. They have deployed the only RFID satellite network which is being used for tracking weather, ships, space junk and more. This is different that the imagery you see in pictures, these are radio wave data that can “see” through the clouds and deep into space. The company just turned profitable and has added significant recurring revenues the past years. The founder/CEO and other insiders are major shareholders and institutions have been adding. Share price started to turn up in August after their spectacular crash post SPAC merger. Spire Global’s market cap is currently about $270 million, well above the inclusion threshold for 2024. I own a full position in this stock (which I define as 3-5% of portfolio size).

Aemetis (AMTX)

Biofuels company heavily supported by long-term government support in the form of investment tax credits and production tax credits at the Federal level, Low Carbon Fuel Standard incentives in California and USDA 20-year low interest loans to build out their Renewable Natural Gas dairy digesters. Has about $7 billion in contracts for future delivery of biodiesel and Sustainable Aviation Fuel. Tax credits over the next 5-7 years are substantially higher than current market cap and expected capex. So, on net, additive to normal fuels margins. Financing has been falling in cost. Their risk is future financing costs if financial system seizes up. Currently at $140 million market cap, so needs to rally late to be added to Russell 2000. Earnings are March 7th and a key California Air Resources Board meeting are in late March. I expect good news or great news from the CARB meeting. Heavily shorted, if a rally starts, the squeeze will likely be bigger than summer 2023 squeeze. If not this year, then next in my opinion. I own a full position in this stock (which I define as 3-5% of portfolio size), and more in aggressive accounts.

QuickLogic (QUIK)

QuickLogic operates in fast growing markets for consumer IoT, security, industrial IoT and aerospace/defense. QUIK reported record revenue and a large new contract for its eFPGA IP. eFPGA IP allows SoC (system on chip) designers to easily program custom functions, hardware accelerators, and security capability after an SoC has been manufactured. It also enables hardware re-programmability. Insiders own over 8% and institutions just started buying standing at 26%. Small short percent so far. The company’s market cap is about $225 million right now, so just above the inclusion threshold. The stock has shown momentum to the upside since last summer more than doubling. I am scaling into this stock as part of a basket of companies that benefit from AI adoption.

Radcom (RDCM)

Radcom uses AI and machine learning to manage standalone 5G networks in the cloud for tier 1 operators such as Rakuten. Radcom’s GenAI applications improve customer experience and costs by monitoring and optimizing 5G networks, i.e. operator knows everything going on in real time and the AI manages the architecture. Their Radcom Ace system helps to build GenAI applications on cloud platforms. The company just turned profitable and has no net debt with net assets about $70 million, roughly half the market cap. The stock is nosing up against Russell 2000 inclusion. Insiders own a quarter of the company, institutions 40% and there is no discernible short interest. If not this year, then next in my opinion. I am scaling into this stock as part of a basket of companies that benefit from AI adoption.

Applied Optoelectronics (AAOI)

Applied Optoelectronics targets 4 end markets supported by high bandwidth demand growth: network-connected devices, video traffic, cloud computing and online social networking. Per their 10Q: “To address this increased bandwidth demand, CATV and telecom service providers are competing directly against each other by providing bundles of voice, video and data services to their subscribers and investing to enhance the capacity, reliability and capability of their networks. Our internet data center market is also experiencing substantial growth as hyperscale data center operators build and upgrade their infrastructure to support artificial intelligence (“AI”) applications which are compute and bandwidth intensive. As a result of these trends, fiber-optic networking technology is becoming essential in all four of our target markets, as it is often the only economical way to deliver the desired bandwidth.” — AAOI is handily above the Russell 2000 market cap cut off and is very likely to be added. It is currently 21% shorted so there are some doubters, but that could be fuel for a squeeze. I am scaling into this stock as part of a basket of companies that benefit from AI adoption.

Red Violet (RDVT)

Red Violet develops AI/ML-driven identity intelligence and fraud prevention solutions that are coming into higher demand. The company has margins in excess of 70%, over 75% of their revenue is contractually recurring and their levered free cash flow doubled last year on 13% revenue growth. The company is net debt free with no long-term debt and $34m in cash. Their market cap is about $245 million, so well into inclusion territory, but no sure thing. Insiders own nearly a third of the company, with institutions owning over 55%, so there is very little float for new buyers. There is a very low 5% short position. I am scaling into this stock as part of a basket of companies that benefit from AI adoption.

American Superconductor (AMSC)

American Superconductor market cap is well into Russell territory around $495 million. They are doing a secondary to raise $60m in capital which is stalling upward stock momentum a bit. It seems like a good time to get involved. The company designs, develops and deploys power control systems for the grid and alternative energy, including wind and solar. Their Gridtec solutions provides the engineering, planning services and advanced grid systems that optimize network reliability, efficiency and performance. They seem to be in the right place at the right time and I expect high growth to continue for many years. Insiders own about 5% of the company and institutions about 45%. So, there is float to be absorbed and some short interest at about 5%. I am scaling into this name as clean energy stocks get a lot of volatility.

I stayed away from clinical stage biotech despite some big potential upside. Those stocks require an iron constitution and I’ll cover a few in a separate piece.

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