8/14/24 - $nxt - Top pick sub $40

8/14/24 :: VROCKSTAR :: NXT
Top pick sub $40

- find it so tough to find stocks that check most nevermind all of these boxes A) beating earnings consistently and by a large margin B) growing at high (high) double digits C) tech solution providers and C.2) that are NOT being disrupted by AI, D) i like the mgmt and E) valuation is very reasonable, which includes awesome cash gen.

- we can talk on all other topics. industry ebb and flow. cycle timing. state of the tape. balance sheet specifics (nxt is nicely net cash)

- but realistically when i think "where are we today" i need to ask myself if i'd feel comfortable taking a 20% drawdown and adding. for many names that i like, the answer to this question *has* to be yes. EVEN IF i think i'm buying value + growth today, and unless there's something fundamentally that's changed... "would i be buying lower" has to be "yes". not "i'd keep holding" but "i'd add". that's how i determine larger sized positions today.

- could we go to the low 30S? yes. anything can happen. is it probable? i'd say 50% chance.

- but what's this thing worth that's crushing EPS, cash flow conversion (net income -> free cash flow) is 80+%... and you're growing double digit in a category that is finally catching it's wings? i'd posit 1.5x PEG on $4 of EPS power puts this at 10% cagr (too low/ but for conservatism) times 1.5x PEG = 15x on $4 = $60.

$60 is what i believe is the fair value today. but the market will say "muh regulation", "muy election", "muy tape risk". and this is all valid. it's valid if you have a short term perspective and are forced to make money today. if you're fully invested, not nimble and don't rotate and size properly. but the market is just that. it will do what it wants in the short term.

- and you better believe $30 would be an absolute steal for these results, a great chart (dented by tape risk/ industry peers sucking wind out of flows, that's all).

- so here i am pounding the table on this. i topped it off at $38 today to keep the size at 5%. it's now my largest position. and i'm fully prepared to size it up lower. i'd look to add at $36 (to 6%), at $35 (to 7%), at $34 (to 8%), $33 (to 9%) and below $32 i'm at 10%. i'll need to assess how/ why if we get there my M.O. but that's what my game plan is today 8/14. i'd likely be doing a lot more work as this size starts to increase.

- i love having large positions w/ conviction that i think are LT compounders and unique moats. NXT checks those boxes. and we can start to monetize it in '25 if/as it starts to run above 50... about OTM c's for income. etc. etc.

- but for now it's blocking, tackling and staying solvent and remaining level headed when the market is giving us curveballs and weird reads on macros.

keep your eye on the ball.

this pitch is still coming at me. but i'm looking at you center field.

have a nice night and blessed rest of the week

tell someone u love them. i love those of u who made it this far. i appreciate your DMs and comments.

V