Punch Card Growth Stocks Q3 2024 Model

Summary

  • The Punch Card Growth Stocks Model is for the growth sleeve of your overall portfolio.
  • Consider the risk of each company and the potential reward on the stock. More risk does not generally imply more potential gain.
  • Volatility and risk are completely different. The emotions of the market, that is the madness of crowds, influences price volatility. Use it to find bargains.
  • Buying the dips is a proven winning strategy when buying on double digit percentage dips, but adding to winning positions, aka, “pyramiding,” is a great way to improve profits as well.
Strategy of diversified investment.

I am not a fan of “model portfolios,” however, I am regular practitioner of modeling. What does that mean?

First off, remember that we should think of our portfolio in slices or sleeves. Each sleeve is a portion of your portfolio with a specific purpose.

So, as we build our portfolios, we have an ongoing consideration of how to combine the sleeves into a coherent investment plan.

The Punch Card Growth Stocks are the “growth” sleeve of my portfolio. In general, I weight this sleeve heaviest for myself at about 75% of my total holdings. Many clients only have 25% or 50% of their holdings in growth. You have to decide how much you want in growth.

In the past, I have listed up to 30 stocks in the Punch Card lists. I am reducing that to the stocks I currently own and have on my radar for inclusion this quarter. That is, I am “modeling” this list towards being much more real time and actionable for the coming quarter.

For a broader look at growth stocks I am following, look to the VSLs which includes important data for monitoring companies and when their stocks might become attractive, i.e. keep an eye on the discount to 5-year fair value target.

Here are my holdings now with approximate allocation from capital. Following are a “very short list” of stocks I am very much considering buying in the coming quarter.

Punch Card Growth Stocks Current Holdings

See recent charts in VSL. Buying the dips is a proven strategy when building a position. I like building a position with a starter holding and also selling an out of the money cash-secured put at a 10-20% lower strike price.

CompanyPosition SizeWhen To BuyPrimary Ownership Factor
Aemetis (AMTX)DoubleBelow $5growing demand for biofuels
Marathon Digital (MARA)FullBelow $25Bitcoin, clean energy & AI (oh my)
New York Community Bancorp (NYCB)FullBelow $12 (reverse split adjusted)Bank consolidation winner
AST SpaceMobile (ASTS)FullBelow $15satellite direct to phone comms
Spire Global (SPIR)FullBelow $14 (secondary price level)RF satellite & data
Heron TherapeuticsHalfBelow $5opiate substitute
Enovix (ENVX)HalfBelow $12battery tech
Block aka Square (SQ)HalfBelow $77small biz, eCommerce, Bitcoin & blockchain
MP Materials (MP)HalfBelow $15rare earth metals
Unity (U)StarterBelow $153D, AR, VR
Rocket Lab (RKLB)StarterBelow $5vertically integrated space
Planet Labs (PL)StarterBelow $2satellite imagery & AI
Blacksky (BKSY)StarterBelow $1.50satellite imagery & AI
Caesars (CZR)StarterBelow $35gambling
New Fortress Energy (NFE)StarterBelow $25LNG
Lithium Americas (LAC)StarterBelow $4lithium
Quick Logic (QUIK)StarterBelow $12AI semiconductor
American Superconductor (AMSC)StarterBelow $20Smart grid
Applied Optoelectronics (AAOI)StarterBelow $105G, 6G & edge computing for AI data centers
  • Aemetis has a series of catalysts over the next couple years that should propel stock to a $2-3 billion valuation. SAF, biodiesel, RNG, India IPO are all coming. Tax incentives are growing and it doesn’t matter who the President is.
  • Marathon Digital is wrongly understood to “only” be a Bitcoin miner. Their combination of flexibly deployed clean energy, Bitcoin mining and data center support is attractive to energy companies, institutions and nations.
  • New York Community Bancorp will benefit as the trend of regional banks merging to get greater access to the Fed window and Repo facility continues and accelerates as rates fall. NYCB is priced for oblivion, but has new capital. It’s a rare chance to own a growing bank with a good footprint and solid balance sheet at a super discount price. They are poised for U.S. Bank type growth from the 1990s and 2000s. Look at the USB chart from that period.
  • AST SpaceMobile is breaking into a trillion dollar industry. Stop. Say that out loud. Satellite 5G direct to your phone is a big deal not just in rural areas, but globally. There are not many cell towers in emerging markets. This is so important that American Tower (AMT) bought part of the company. The potential competition is 3-5 years behind. I think it’s only a matter of time before this $3 billion company gets on the S&P 500, that is, approaches $30 billion market cap, aka, 10-bagger.
  • Spire Global’s RF satellites are unique data collectors for maritime shipping, weather, climate, security and space junk. Their AI tech is driving profitability for their already deployed constellation. The company is at the inflection point I talked about last Labor Day was coming. The stock currently trades below a secondary offering price and is a buy. I like a full position to the next FOMO rally and then take profits on a portion.
  • Heron Therapeutics new management has done a good job pushing the company towards profitability. The wildcard is whether or not the government ever gets serious about closing the gateways to opiate addiction, that is, limiting post-op prescriptions. We’ll see. I like a half position with the idea that we would add if it looks like smart legislation ever gets passed. A starter is fine for the less aggressive.
  • Enovix big edge is in smaller batteries up to EV size. That is a huge market and their recent deal points out the demand. I believe they will license the tech out to cut their capex needs and generate significant high margin royalties over time. It’s easy to see this company much bigger and potentially on the S&P 500 which would be roughly a 10x from here. I am at a half position deployed capital and will add on a correction if the company continues to execute. I would like to see a licensing deal with Panasonic or some other big battery producer.
  • Block, formerly Square, benefits from the combination of small business, ecommerce and blockchain businesses, as well as, Bitcoin holdings. They are somewhat economically sensitive, so be aware if a recession becomes likely. The stock largely trades with Bitcoin emotions. Bitcoin is setting up for a rally as miners have reduced the selling pressure on Bitcoin post halving, that is, they used some Bitcoin to buy new rigs and that’s about done. I have a half position and will add to it when Bitcoin starts to move up again.
  • MP Materials is the only U.S. rare earth production and processing company at the moment. There will ultimately be an oligopoly that they will lead. The company has a projected sustainable growth rate of 35% and is on the verge of profitability. They could produce substantial free cash flow in the next two years.
  • Unity had management issues which seem to have been fixed. They are still one of the two leading companies for 3D, AR and VR development for gaming, education, industry and online applications. I believe the bottoming process is almost complete as everyone hates the stock despite so many using the company’s tools. I have a starter at the moment, was a half but lost half its price, so, looking to add to average down.
  • Rocket Lab is SpaceX’s only real vertically integrated challenger. Government and industry will continue to steer it business to avoid being beholden to SpaceX and Musk. The difference in valuation is approximately $200 billion market cap. That can’t last forever, it must converge one way or the other in coming years.
  • Planet Labs and BlackSky are both imagery satellites observation companies with AI data analysis capabilities. Both are starters now after having been half positions. I am waiting to add more as I believe both will reverse split soon. Once that breathiness is absorbed, I anticipate averaging down on both positions to a half again.
  • I have a starter position in Caesars (CZR) but it moved up so fast that I missed pushing it hard. I expect it to rally to the $50s on an asset sale, I think the Flamingo and maybe the Linq, then start go range bound for a while. That would be consistent with last time Carl Icahn bought shares like he just did. I think it gets to $70ish the next few years and possibly makes a run at $100 in line with the high-end estimates. Buy the dips.
  • New Fortress could be considered a dividend stock with the variable dividend jumping some years, but, it trades with all the volatility of a clean energy stock, but is a dirty energy stock for now in LNG. I think their FAST system will grow fast in coming years and it is priced to buy right now.
  • Lithium Americas is probably my most speculative pick, but is also cheap for the potential gains. Companies like Exxon (XOM) are getting into lithium right now due to bargain prices and a bright outlook. Based on LAC’s likely reserves, the company should fetch a valuation around $3 billion once they are up and running. A higher valuation could come if their production exceeds the current conservative estimates.
  • Quick Logic provides fabless semiconductor products for edge and endpoint AI behind consumer IoT, security, industrial IoT and aerospace/defense. Due to an accounting change, H1 revenue recognition got moved back to H2, thus, it should surprise the uninformed to the upside. Just added to the Russell 2000 so should find price support imminently. A buy right now.
  • American Superconductor offers products and services that enable electric utilities, industrial facilities, and renewable energy project developers to connect, transmit, and distribute power. Major beneficiary of utilities shift to clean energy and a smart grid. Just added to Russell 2000, but that move seems to have been front run. Buy on a retracement into the upper teens.
  • Applied Optoelectronics designs, manufactures fiber-optic networking products used in 5G and edge data centers. Just added to the Russell 2000 which should stem price decline. Huge short interest. I will add on any price support. Screaming for a starter for aggressive accounts without any.

Target Stocks

Enphase (ENPH) is still the leader in microinverters and energy management for solar. Fast growing and with SolarEdge struggling, likely to breakout again on the next clean energy FOMO. It’s currently at a major support level around $100/share. I am likely to add soon and then look to see if it heads to the next major support in the $80ish area. *** SolarEdge (SEDG) is a company to watch for a bottoming process as they likely dilute and then rally a few quarters later. Generac (GNRC) is another company worth buying on big corrections, but it ran on me and I don’t see the margin of safety in the price now.

Palantir (PLTR) is a great company that is growing, but management still sucks money out at a high clip and stock based compensation is still high. I sold it near its peak price a while back. It’s fine if you held, but, I thought the trade made sense for my accounts which are pretty nimble. I’ll buy it on a pullback into the lower $20s to get a margin of safety for lumpiness and a 5-year target price in the $40s.

CRISPR Therapeutics (CRSP) technology is the backbone of gene editing for gene based medicines. It’s really just maturing and not likely to be profitable until 2026, though some estimates are for the end of 2025. I think it’s a takeover candidate. A price in the lower $40s would be a can’t ignore price.

SunRun (RUN) and SunPower (SPWR) both have arguments to buy, but I am going to trade the Invesco Solar ETF (TAN) to mitigate risk and just look for solar rallies to own for a year at a time.

Related Articles

2022 Forecast Review & Update

Here is my midyear review available to all subscribers. It covers my thoughts on how accurate our forecast was, the strength of our cash position and what to do with it soon. Holdings included for my aggregate managed accounts.

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