Chart Breakout November – Exciting Times Ahead

Trump’s re-election has had a dramatic effect on the US stock market, with financial shares especially racing higher. His likely vote share of 50.9pc is the same as Reagan’s in 1980 when Reagan won 489 electoral votes to 49 for outgoing president Jimmy Carter.

I have been looking at vote shares in the UK general election. Labour won a landslide with just 33.7pc of the popular vote. The Conservatives plus Reform UK, for which I voted in a tactical vote to bring about a realignment on the right, won a combined 38pc of the vote. Labour won its majority with the smallest vote share in the postwar period which tells you a great deal about the true enthusiasm for Sir Incredibly Boring Starmer, his sunk-in-despair henchwoman, Rachel Reeves and the misguided left-wing beauty, Angela Raynor.

People less likely to reignite growth in the UK economy could hardly be imagined, whereas Trump, with his absurd hair, the weird interplay of expressions on his face, and his enthusiasm for wildly over-the-top superlatives, only has to open his mouth to add percentage points to the Dow Jones index.

I have concluded that my ideal government from the available personalities would be Kemi Badenoch as prime minister, Nigel Farage as chancellor of the exchequer and Boris Johnson back again as foreign secretary. None of them has much specialist knowledge but their hearts are in the right place. For immigration, it would be a choice between Suella Braverman and Priti Patel, anything to annoy the bien pensants at the BBC.

So Many Great Stocks From Which To Choose

I am excited about stock market prospects. This is not unprecedented, I know but both charts and fundamentals are amazing. I am talking about the US, not hidebound Europe or the UK where taking risks is not regarded as either acceptable or deserving of financial reward.

It has become increasingly obvious to me that for a blisteringly successful economy ONLY ‘working people’, say that with your best adenoidal voice, should pay taxes. All other activities involving risk and capital should be completely tax-free.

This would guarantee a smaller state because when ‘working people’ realised it was their money paying for all the people claiming sickness benefits, most of whom they knew were not sick at all, they would go ballistic. At the same time, the amount of risk capital deployed in the economy would explode once the gains were no longer taxed.

The British economy would become a magnet for capital which would pour into the country generating a boom, which would rapidly solve many of our other problems.

There is a name for this approach to running an economy, it is called supply-side economics. The idea is that raising taxes reduces the tax take by depressing economic activity and vice versa for cutting them. Reagan was an exponent as I suspect is Trump though he may not know much about the theoretical basis for his activities.

It should be painfully obvious that if a government is elected with a mandate to tax its political enemies, anyone richer than Kier Starmer, to reward its friends, anyone poorer, it is likely to do this with no regard to the consequences, however disastrous.

The USA is fortunate in this respect because people there who are poorer than Starmer are mostly determined to become richer and what they want is not a money grab on successful people but plenty of opportunities to become one of them. Every young waitress in a Californian restaurant is a movie star waiting to be recognised. This is why the US is so dynamic, as demonstrated by its booming stock market, while the UK stagnates with an FTSE 100 index up less than 20pc in almost a quarter of a century. Over the same period, the Nasdaq 100 is up 336pc.

I am calling this alert Chart Breakout because I want to mention a fair number of shares I think should be in your portfolio. I will list them below. Back in the days of dead tree printing, I had a monthly publication called Chart Breakout which recommended some 20 shares in each issue.

Share Recommendations (7 November 2024)

Carvana. CVNA

Applovin. APP

PROCEPT BioRobotics. PRCT

GeneDX. WGS

ServiceNow. NOW

Nvidia. NVDA

O’Reilly Automotive. ORLY

Palo Alto Networks. PANW

Palantir Technologies. PLTR

Sezzle. SEZL

Sprouts Farmers Market. SFM

United Rentals. URI

Amazon.com. AMZN

Arista. Networks. ANET

Booking Holdings. BKNG

Fiserv. FI

MakeMyTrip. MMYT

Strategy – Buy, Buy, Buy

Can Trump pull it off – a golden age for America? He is starting from a good place with the greatest technology boom in history led by America and picking up speed. Italy had a golden age in the Renaissance when its great city states, led by Florence and Venice, enjoyed an incredible boom and flourishing of the arts. It echoed what happened in Greece, 2,000 years earlier, when a group of city states, led by Athens, boomed and the arts flourished in an unprecedented outpouring of creativity.

The equivalent in modern-day America of those booming city states may be the mega caps, which operate on a similar scale with similar resources and spectacular creativity.

A Wonderstock Is Born

Applovin, which thankfully I finally alerted before a spectacular set of results, looks every inch a wonderstock.

Read this quote from those results. Talk about American get-up-and-go in action. I love these guys.

We’re excited to welcome a growing group of investors this quarter. Before we dive into our strong Q3 results, I want to emphasise the role that our culture plays as a fundamental strength in our business. Recently in Silicon Valley, much has been said about the importance of founder mode.

While I’m a very hands-on founder, I believe that the key to our success lies not only in my hands-on approach but more importantly, in surrounding myself with a team that shares a similar mindset and drive. Here are some defining traits of that mindset. We act like owners, treating the business with personal accountability. We approach each day with urgency and purpose.

We have an insatiable desire to learn. We are driven by a relentless pursuit of excellence. We’re constantly optimising for diversity of thought and unity of ambition. We prioritise automation wherever possible.

We don’t get bogged down in overthinking. Instead, we make decisions and take action, adjusting quickly when needed. Our managers aren’t just managers, they’re doers, and expected to lead by example. We take pride in our profitability, with our business generating over $1.5m in run rate adjusted EBITDA per employee, an efficiency we aim to improve.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2024, 6 November 2024

No wonder Applovin is so successful and automation and AI play to their strengths and have become an exciting ‘something new’ for the business.

The business is buzzing.

We continue to execute well, expanding our core business and laying the groundwork for sustained growth. Last quarter, I shared our confidence in achieving 20pc to 30pc year-over-year growth for the foreseeable future.

We continue to expect 4pc to 5pc quarterly growth through self-learning and market growth, with occasional step changes resulting from enhancements to our AXON algorithm. This quarter, we saw one of those step changes, with meaningful growth driven by advancements to AXON. While we can’t predict the timing of these breakthroughs, we’re in the early stages of AI software development, both within our company and in the broader industry. We expect ongoing research advancements to continue driving our technology forward.

While we remain confident in 20pc to 30pc growth for mobile gaming advertisers alone, we’re also exploring new areas, as shown by our recent e-commerce pilot. Early data has exceeded our expectations, with the advertisers in the pilot seeing substantial returns, often surpassing those from other media channels, and in many cases, experiencing nearly a 100pc incrementality from our traffic. We’re increasingly confident this vertical will scale significantly in 2025 and become a strong contributor for us over the next year and beyond. To support this, we’ve streamlined resources and are reallocating talent from other initiatives to our e-commerce go-to-market team.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2024, 6 November 2024

As I said in my previous piece, this one could be a monster.

We’re in the early stages of building one of the world’s most innovative technology platforms.

Adam Foroughi, CEO and co-founder, Applovin, Q3 2024, 6 November 2024

A Spectacular Chart

Quite a chart! MMYT is an Eastern Bookings.com.

With our 3 leading brands—MakeMyTrip, Goibibo and Redbus—we are the pioneers of online travel bookings in India. We empower the traveller with easy & instant travel bookings providing comprehensive choices—from flights, hotels & homestays and holiday packages to cabs, buses and trains. What makes our story even stronger is the performance of our newly launched segments that provide travel solutions to corporates & employees, and our comprehensive travel suite for travel agents. Entering the Gulf market is our latest feat, where we offer travel solutions on flights & hotels.

MakeMyTrip, website

The business is in great shape with powerful following winds from the strength of the Indian economy.

We have been consistently outpacing the industry’s growth on the back of continued supply-side expansion, catering to a variety of travel needs of the Indian consumer, implementing several AI and data science-driven product features, leading to personalised recommendations to improve customer experience and high proportion of repeat customers.

On the macroeconomic front, India’s strong growth trajectory remains a compelling narrative on the back of advancements across sectors. As per IMF estimates, India is expected to become the world’s third-largest economy by 2027, after the U.S. and China. The economic rise is fueling the growing consumer class, leading to higher discretionary spending. Travel and tourism industry is one of the biggest beneficiaries of this increased discretionary spending.

Furthermore, our younger generation, aged between 25 and 34, are increasingly willing to travel and explore more. A 5th of the population will age into that group soon, helping the travel segment to grow further.

As per Bernstein estimates, the annual spending on foreign travel by Indians will nearly triple to $89bn in three years. The number of valid Indian passports has also nearly doubled from 52m a decade ago to 93m this year.

On the other hand, India’s digital economy has been tagged as one of the fastest-growing in the world, and the government’s path-breaking Digital India initiatives are playing a critical role in increasing internet and e-commerce penetration.

We have been capitalising on some of these macro trends by constantly improving our product and value proposition for the international outbound travel market. We enhanced the business class funnel experience for international flights and have revamped the premium economy class booking flow as well.

Ragesh Magow, CEO and co-founder, MakeMyTrip, Q2 2025, 23 October 2024

As usual with 3G growth stocks, a lot is going on at Sprouts to keep strong growth happening.

Well, I think the first thing we want to say is there’s a huge upside in our customer base. We’ve still got a very small share of our customers’ wallet, and we’re doing some things that seem to be stimulating the customers pretty well. I’m very excited by how our marketing teams are shaping the message and using media effectively and being very thoughtful about that. I think we’ve learned a lot this year, which we’ll be able to use even more effectively next year. So I think that’s an encouraging sign for us. And as I said in the script, the execution at store-level continues to get better and better and stocks are getting better, the execution behind that.

We’ve invested a lot of money in infrastructure and systems over the last couple of years in terms of getting our business more in-stock and more in-tune with what needs to happen on a day-to-day basis in the stores. So I’m very encouraged that our operation execution will continue to drive some comp sales for us, encouraged that our marketing teams will continue to get better and better at picking the right messages and sending those messages in the right place. So there’s a lot of encouragement in our business and there’s a lot of upside to go with our customers. 

Jack Sinclair, CEO, Sprouts Farmers Market, Q3 2024, 30 October 2024

World In The Midst Of An AI-Driven Revolution

This company is on fire.

This is still only the beginning.

The growth of our business is accelerating, and our financial performance is exceeding expectations as we meet an unwavering demand for the most advanced artificial intelligence technologies from our U.S. government and commercial customers.

The world is in the midst of a U.S.-driven AI revolution that is reshaping industries and economies, and we are at the centre of it.

Our revenue last quarter reached a record $726m, representing a 30pc increase from the same period last year as we continue rapidly scaling our business.

The year-over-year growth rate of our revenue has increased over the past six quarters, rising from 13pc in Q2 2023 to 30pc in Q3 2024. This is an ascent that we always believed was possible and have worked tremendously hard to achieve.

Letter to shareholders, Palantir, Q3 2024, 4 November 2024

The group has attractive fundamentals.

Palantir’s management claims that there is a divide between those who use AIP (Palantir’s Artificial Intelligence Platform). AIP is clearly important for businesses. Here’s an example of what Ryan Taylor, the company’s CRO and CLO, said in the Q3 earnings call:

In this winner take all AI economy, the divide is widening between those who are leveraging AIP and those who are not. At a leading global insurance organization, AIP has helped automate key underwriting workflows, reducing the typical underwriting response time from over two weeks to 3 hours. We implemented over 10 business use cases in just nine months at Associated Materials, increasing its on time in full delivery rates from 40pc to 90pc.

Ryan Taylor, CRO and CLO, Palantir Technologies, Q3 2024, 4 November 2024

The positive effect AIP can have is huge. For instance, reducing underwriting time from two weeks to 3 hours is huge. As Shyam Sankar, Palantir’s CTO, said regarding the underwriting example:

More than the labor savings, this presents the customer with an asymmetrical advantage in the marketplace to bind contracts before the competition has even gotten through 15pc of their process.

Shyam Sankar, CTO, Palantir Technologies, Q3 2024, 4 November 2024

With results like this, along with the high switching costs I mentioned earlier, customers will choose to stick around. This was again proven by Palantir’s net dollar retention rate of 118pc for the quarter, which grew by four percentage points sequentially and by 11 percentage points compared to Q3 2023.

Notably, the net dollar retention rate doesn’t factor in revenue from new customers acquired in the past year. Thus, it doesn’t “yet fully capture the acceleration and velocity” in Palantir’s U.S. business in the last year, according to management. That, combined with an acceleration in revenue growth, makes me expect the net dollar retention rate to tick higher in the next few quarters.

Seeking Alpha, 6 November 2024

Amazon shares are worth an alert because the chart shows a classic breakout after four years of trading sideways. Amazon is one of the most innovative businesses on the planet with a massive global footprint into which to launch all these exciting new developments. It’s always going to be worth buying these shares and all the other listed above on a breakout or whenever if you do not already own them.

I am writing at greater length above mainly about shares that have not been covered extensively in previous alerts but I like all of them which is why they are being recommended. They have great charts, great fundamentals and something else, some special magic.