Quarterly earnings season is the four times each year in which companies give investors an inside look as to what’s going on. They not only reveal their sales and profits, but, typically, they provide guidance (either specifically or in generalities) into their expectations for their future.
Due to this peak under the hood, it’s also a time where investors’ hopes can get easily elevated or dashed. This results in increases in volume and volatility as portfolios get repositioned in real time around the waves of new information.
For Tailwinds, the latest earnings season resulted in several changes within the portfolio. Four of our companies simply said things too compelling to ignore. These are stories we know well, but, as they make progress in their business, the risks associated with potential success diminish and they become more compelling.
Conversely, some companies failed to achieve the goals set before them. These companies didn’t derisk their businesses for investors. On the contrary, they played into investors concerns and left additional work to be done before there is excitement to their stories…and their stocks.
Below are the four stocks that, over the last month, are now larger positions in the portfolio than prior to earnings season, along with the four stocks that left us feeling that we could wait to own them, as well as the logic behind these thoughts and opinions.
On a side note, it’s important to remamber that we find every stock in the Tailwinds coverage universe interesting…it’s just that, at any given point in time, some are more timely and compelling. Certain stocks, such as CATS and FTNW, are fully positioned and we learned nothing new over the last month; loved them before, still love them. The list below is only the companies that are incrementally more or less favorable to Tailwinds.
The four stocks that Tailwinds bought this last month…
Atomera (ATOM): first, a quote from Scott Bibaud, CEO, on the earnings call. “What we believe the momentum of the last three months represents is an increasing critical mass towards an inevitable outcome, MST licenses with a number of important industry players.” Atomera is a potential home run investment; they just need to sign their first license for this to be realized. This latest earnings call left us more confident than ever that a licensing deal is coming…possibly quite soon. We want to be there, and in a big way, when this occurs. Tailwinds was compelled to buy more the morning after the earnings call.
Bioasis (BIOAF): we put Bioasis back into the Tailwinds Select Portfolio this last week after they announced a financing. This had been the big risk associated with the stock and had prompted our move to the sidelines a few months ago. With insiders stepping up in the deal, new (highly qualified) employees joining the company, data coming soon, and a potentially blockbuster platform, BIOAF is another home run stock we don’t want to miss.
Resonant (RESN): like both of the prior two stocks, RESN said compelling things on their call and completed a financing. CEO George Holmes details what got us most excited, customer traction and raised guidance.
“Given the customer plans, revenues are expected to increase significantly quarter-over-quarter to the balance of the year, trending towards mid seven digits for the fiscal year 2018. We’ll be expanding our customer footprint, adding additional capabilities in our ISM platform and increasing our intellectual property footprint as well.”
Based on this call, we think that business will ramp for the foreseeable future, likely faster than expectations with increasing guidance. Meanwhile, the Company is fully funded and the stock is trading at a very low valuation.
SG Blocks (SGBX): “As we move forward, I couldn’t be more excited about our pipeline of opportunity that now stands over $275 million with multifamily residential, humanitarian residential, schools and hospitality in the United States and abroad,” CEO Paul Galvin.
I hesitate to say that we learned anything new on SGBX, but the company is a unique combination of compellingly cheap with a great future in front of them when you look at the pipeline and current contracts in place. The Company is fully funded and will be cash flow positive sometime in the next few months. If they achieve their targets, EPS could be well over $2 in 2019 and beyond.
The four stocks that Tailwinds is waiting to buy…
Aqua Metals (AQMS): there’s good and bad at Aqua. The good is a management change, as Steve Cotton is the right guy to move their joint venture with JCI forward. The bad is that operationally there is still a lot to prove. And, the worst news, there will likely be another financing soon. So, we moved to the sidelines and will stay there until there is more visibility into the operating model and financing.
ChromaDex (CDXC): a great long term story, we need to see some execution before we can get too excited that they are on the track to achieving this. With revenues not expected to start ramping until the fall, it’s less compelling right now. Still a holding, we had reduced after their Boulder study was released, meaning the best positive catalysts were behind them and slow near-term growth awaited. When growth picks up, our position will as well.
Endra (NDRA): Simply put, these guys are walking a tightrope of needing to get data out and raise money before their existing capital runs out. Positive data will be the next catalyst, but financing will likely be right behind. We own small as we don’t want to miss it, but won’t buy more until they have put capital raising risks to bed.
Vuzix (VUZI): while the talk is always about massive growth, the earnings are continually showing it’s in the future. Meanwhile, there is increasing competition. We moved to the sidelines a few months ago and this earnings report left us with more questions than answers. A compelling space, when VUZI can demonstrate that they will be a profitable leader in AR, we’ll get back on board.Tailwinds' Disclaimers & Disclosures: For a full list of disclaimers and disclosures, please visit http://