DISCLAIMER: This article is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this article is not an offer to sell or buy any securities. Nothing in it is intended to be investment advice and it should not be relied upon to make investment decisions. Cestrian Capital Research Inc. or its employees or the author of this article or related persons may have a position in any investments mentioned in this article. Any opinions or probabilities expressed in this report are those of the author as of the article date of publication and are subject to change without notice.
A Reminder - What's "The Fundamentals" All About?
We provide high quality investment research in two sectors.
Yup, space. The final frontier, and all that. Space is a new growth market. But don't worry - it's not all VC dollars and crazy next-year's-revenue based valuations. You can find that if you go looking - but that's not our thing. Our thing is proper, grown-up, US companies with US listed stocks.
Some of the best investments in the space sector can be the old-line US listed aerospace & defense companies that have positioned themselves well in the New Space Race. We'd point to Northrop Grumman (NOC) as a great example of that. As we write, NOC has generated a total return of 31% since we went to Buy in February this year - versus 9% total return for the S&P500. And we think there is more to come from that business.
We've flagged the space sector as a great investment opportunity here on SA for over two years now. It's still in its early stages of growth. We think there are decades of growth ahead - fueled by national security concerns on the government side, and launch cost reductions on the civilian side.
And whatever the 2020 election brings, China, Russia, India, Israel and Europe aren't going to slow their expansion into space - so we don't think the US will either. So we think the market's here to stay for quite some time.
We cut our teeth as technology investors. We learned our trade as technology investors. And we followed the top tech entrepreneurs into space. Jeff Bezos of Amazon, Elon Musk of Paypal and Tesla, and Paul Allen, cofounder of Microsoft, all knew an opportunity when they saw it. So who are we to argue?
But we still love technology investing. How could we not? What other sixty-year old industry devours itself every ten years or so and spits out a whole new generation of high-growth companies that then proceed to devour the last generation? Never a dull moment.
Now tech as a sector is high growth and it's going to stay that way. As Marc Andreesen said in 2011, software is indeed eating the world. In 2019, tech has pretty much digested its amuse bouche, and is ready to start on its entree. Dessert will be a while yet.
But investing blindly in tech as a sector isn't as much fun as it used to be. The Nasdaq and the S&P are so closely correlated - the top S&P stocks are also the top tech stocks - that in the last twelve months there's been little additional gain from the Nasdaq vs the S&P despite taking on more risk. And every few months those headily-valued tech stocks do like to swoon a little. Like they did the last two weeks.
So if you're going to invest in tech, we think you need to get granular. Stock by stock. Step by step. And here's where our service, "The Fundamentals" can help you. We explain why below - the value we offer is common to both the tech and space sectors.
Fundamentals-Based Company Analysis. Market-Based Securities Analysis.
We look at our coverage universe - be they space or tech companies - in the same way.
Firstly - the company. We use fundamental analysis. Revenue growth, gross margin performance, operating margin levels, cash generation, balance sheet strength. Twenty years of professional investing means this is second nature for us. We take you through the fundamentals of each of our covered companies, step by step. Confused by leverage, retirement obligations, cashflow versus earnings? Don't be. It's usually simple if you have a guide - and that's our job. Still confused? Hit us up in chat, DM, or Twitter. We're always live on social.
Secondly - the stock. That's a different thing to the company. We look at valuation levels versus current and past market comps, versus the company's own growth trajectory be it revenue or earnings, versus the rate of share dilution, and we look closely at charts too.
Fundamental company analysis + market based stock analysis = our view on the stock.
We Keep It Simple
Investment market participants often like to blind you with science. But we reduce the noise, and help you focus on the signal.
First up, we focus solely on long equity investments. We don't cover short strategies, complex instruments, options, derivatives, futures, swaps, pair trades or anything other than stocks.
Second, our ratings are easy to understand. Like this:
Buy - Long Term Hold means "we would buy the stock now, at this price, with a view to making money over a three to five year timeframe".
Neutral means "we would not buy the stock at this price".
Sell means "we would sell the stock at this price if we owned it".
Thirdly, we run a real money portfolio. If we're at Buy on a stock, we own it personally. Not with client money - we don't manage client money. Not with a company trading account - we don't trade company money. Personally. As in our own money.
We always disclose our positions in stocks we talk about. If we're going to open a position in a new stock, we'll do so after we publish the idea. If we're going to close a position in a stock, we'll do so after we publish the idea. We're in business to help you invest more effectively. We're not here to try to get ahead of you.
We're Long-Term Focused
As Warren Buffett likes to say - we're long term greedy. We operate on a slow burn, not fast twitch model. If you can make money consistently by flying a trading screen, kudos to you - you have our admiration. We sometimes spot a short-term trade and when we do, we'll tell you about it. But our core service is all about making money over a three to five year timeframe.
We Run A Serious, Grown-Up Business
Investment research is all we do. We're in business to help you invest more successfully. We're 100% independent. And we're SEC regulated. So we have rules - strict rules - about how we operate. We think that's in our members' interests.
What People Have Said So Far
We get great comments on our articles here on SA - we believe investing should be based on discussion of ideas and we always welcome the opportunity to talk over investment matters. Check out the comments streams on our articles, and check out the flattery we've received from around the market. Our checkout page has more.
We'd love you to join the service. We keep our prices low here on Seeking Alpha - it's just $29/month or $299/year right now, rising to $39/month and $349/year on 1 October. We think that's fantastic value. We think you will too.
Sign up here - we look forward to seeing you in our members-only chatroom soon!
Cestrian Capital Research, Inc - 13 September 2019.
Disclosure: I am/we are long AJRD, NOC.
Additional disclosure: We are long AJRD and NOC on a personal account basis.