Hold On Through The Slumps Or You Will Never Make Big Money

I don’t know whether it is just the energy I am getting from the new diet I am on (details below) but I am starting to feel very bullish. I think the US stock market may be poised to explode.

I am looking at the Nvidia chart and thinking of my three-month rule. This is hardly infallible but it is surprising how often it does work. Nvidia is shaping up as a classic example. It peaked in June and has been sliding gently lower ever since. I guess that at some point it will break higher and rise strongly.

Judging by what Oracle is saying about spending on data centres (see previous alert) there is no sign of demand falling away.

Why Patience Pays

My younger brother’s eldest daughter is married to a guy called Henry who is charming and clever. Some years ago he took a chance, left his job and took a stake in a start-up in exchange for a dramatic drop in income. Shortly afterwards Covid struck and the value of his stake plummeted. As the father of two small children, he was in a jam and moved in, en famille, with my brother, who fortunately always has room to spare.

Since then his stake has not just recovered but multiplied in value. As he told me if you don’t tough it out through the bad periods you may never reap the rewards. I don’t know exactly what he does but it is something to do with cryptocurrencies.

There is a moral in that tale that has great application to the stock market. I do not doubt that Henry will become very rich; he is that kind of guy; not nerdy; if anything he looks like a rock star with thick, shoulder-length hair.

All exciting shares are like Bitcoin these days – volatile as hell. Peak to recent trough Nvidia was down 35pc. On the chart, it looks like a blip.

Dipping A Toe In Dangerous Waters

You have to buy these shares just for the name (hence the shark pic to illustrate the story; I guess SharkNinja does seem like a circling great white to the competition). Reading what it is about the business is reminiscent of Dyson.

SharkNinja is a diversified, global product design and technology company that creates 5-star rated lifestyle solutions through innovative products for consumers around the world. The company seeks to leverage its global, agile and cross-functional engineering know-how, product development and manufacturing expertise along with solutions-driven marketing to increase the efficiency, convenience and enjoyment of consumers’ daily tasks and improve everyday lives. Powered by two trusted, global brands, Shark and Ninja, the company has a proven track record of bringing disruptive products to market, and developing one consumer solution after another has allowed SharkNinja to enter multiple product categories, driving significant growth and market share gains. The Company’s products are sold at key retailers, online and offline, and through distributors around the world. Ninja® and Shark® are registered trademarks of SharkNinja, Inc.

SharkNinja website

The products pictured above have all been launched in the last two months. They are busy bees at SharkNinja and it’s working.

The Business Is On Fire

Let me begin with a review of our second quarter performance. Our teams once again delivered exceptional performance in the quarter. We grew adjusted net sales an incredible 38pc. This was on top of 20pc growth in the year ago period and it was all organic and highly profitable growth.

On an adjusted basis, EBITDA increased 48pc, while earnings per share was up 51pc. Our strategic initiatives around supplier diversification, competitive bidding, value engineering and pricing management drove nearly 600 basis points of adjusted gross margin improvement in the quarter.

Adjusted EBITDA margins increased 90 basis points even as we continue to significantly reinvest in our growth initiatives. Our growth in the quarter was broad-based across product categories and geographies, and our innovation continued to drive market share gains.

Each of our four key categories delivered at least double-digit growth. Cleaning grew 20pc, our strongest performance in this category since COVID. Our overall domestic business accelerated, growing an incredible 35pc, and this performance was even more remarkable considering the domestic market was relatively flat.

The International segment had another very strong quarter. Adjusted net sales increased 46pc with emerging markets like Germany and France delivering triple-digit growth. Our performance was also balanced across our three growth pillars, as we continue to increase our share in existing categories, enter new categories and expand our global footprint.

Our first growth pillar, entering new and adjacent categories, remains a key growth driver. With the launch of fans and coolers earlier this year and the recent release of our frozen drink makers, we’ve already entered into three new subcategories in 2024.

We’re now in 34 subcategories, up from 27 at the end of 2022. This is a testament to our conscious and purposeful strategy to drive growth while diversifying and mitigating risk. With each new category, we’re creating new experiences and offering high-quality innovative products that solve key consumer pain points.

Mark Barrocas, CEO, SharkNinja, Q2 2024, 8 August 2024

Everything this company touches turns to gold.

Last month, we launched Ninja SLUSHi our professional-grade frozen drink maker. Our research showed that consumers love slushies, but enjoying one requires a trip to a convenience store, the movies or the mall. With Ninja SLUSHi, consumers can create commercial quality frozen drinks without stepping out of their homes.

Our proprietary RapidChill technology eliminates the need for ice and prevents drinks from getting watered down. It’s early days, but I’m pleased to share that Ninja SLUSHi became the fastest selling new product ever during launch week on our direct-to-consumer site. The initial inventory sold out within a few days.

Ninja SLUSHi has already gone viral and is quickly becoming a social media sensation. Our teams are working hard to fill orders on the waitlist and to support broader distribution to our retail partners later this year.

Our Ninja CREAMi is already the number one ice cream maker in the U.S. And now with the addition of Ninja SLUSHi, we’re on our way to becoming the leader in frozen treats. Shark FlexBreeze, our indoor-outdoor cooling system, launched earlier this year and continues to outperform initial expectations.

Based on the strong response from consumers as well as our retail partners, we see significant whitespace for us to capture. We’re excited by the upside potential of FlexBreeze and look forward to launching additional SKUs in 2025 and beyond as we build on the initial success and momentum. With Shark FlexBreeze, we’re creating a new market just as we did with Ninja CREAMi.

Mark Barrocas, CEO, SharkNinja, Q2 2024, 8 August 2024

The list goes on and on.

In less than a year following launch, we become a leading player in the deep carpet cleaning market with our Shark CarpetXpert and StainStriker products. With our outdoor ovens, we continue to successfully expand our global presence in outdoor cooking. We expect momentum to continue with additional innovation next year.

Consumers already love our offerings inside the home, and they’re increasingly accepting Ninja as an outdoor brand as well. With our outdoor cooking products combined with fans, coolers, and portable blenders, we’re extending our outdoor portfolio and expanding our global addressable market.

Mark Barrocas, CEO, SharkNinja, Q2 2024, 8 August 2024

It is so amazing it is almost amusing.

The Ninja Luxe Café is an all-in-one espresso, drip coffee, and cold brew system that creates cafe quality drinks at home. Our consumer insight showed us espresso machines are a bit intimidating and difficult to use. They’re quite expensive and offer limited drink options. We’ve created an affordable, multi-functional coffee and espresso machine that’s easy to use and has endless drink options for our discerning global consumers.

The food prep category delivered outstanding performance with adjusted net sales increasing more than 90pc in the quarter. The growth was broad based across ice cream makers, kitchen systems, traditional and compact blenders. Our Ninja CREAMi ice cream maker continues to grow rapidly and is becoming a global phenomenon as we launch in additional countries.

In Q2, CREAMi delivered strong performance globally, especially in Europe. And the Ninja Blast, our portable blender, is driving amazing results and large market share gains in the single- serve blending subcategory.

Our other categories delivered exceptional results, increasing 250pc in the quarter with strength across beauty, sands, and air purifiers. Beauty, led by FlexStyle hot hair stylers remains strong both in our domestic and international markets. We continue to bring newness and excitement to the category and to find key moments in culture to highlight our brand.

For example, at this year’s Met Gala, we launched FlexStyle Sparkle with Chris Appleton, Shark Beauty’s Global Brand Ambassador. And while we won’t be announcing details yet, I’m pleased to share that we’re on track to launch another very exciting subcategory within beauty in Q4 of this year.

Mark Barrocas, CEO, SharkNinja, Q2 2024, 8 August 2024

It seems everywhere they look their engineers bring out disruptive products.

It is hard to imagine a business moving more rapidly than this one.

Our ability to consistently innovate and refresh existing categories remains the bedrock of our strategy to drive market share gains. To that end, we’re on track to launch 25 new products this year, with more than 80pc of the launches in existing categories.

Next, I will turn to our third key growth pillar, expansion in international markets. We grew our international business 46pc in the quarter on top of adjusted sales growth of 66pc in Q2 last year. UK, which was our largest international market, grew nearly 7pc in the quarter and is up 10pc in the first half of this year, in line with our expectations.

While growth has moderated compared to 70pc growth in the first half of last year, our UK business is more diversified, more profitable, and overall healthier than ever before. Within Continental Europe, we drove triple-digit growth in Germany and France, where the overall markets were relatively stagnant.

Our footprint and brand awareness in these countries is increasing and our business is more diversified. From just an idea a few years ago, these two markets have come a long way and are approaching meaningful scale. We also see tremendous growth opportunities in markets like Nordics, Benelux, Poland, Italy, Spain, and the Middle East. Our Mexico business grew strong double-digits in the quarter.

We are well-positioned in the market and expect robust performance in the coming years, especially as we switch to a direct model at the beginning of next year. We are also looking forward to launching in Brazil in Q4 this year and exploring other Latin American markets for launch in the future.

Mark Barrocas, CEO, SharkNinja, Q2 2024, 8 August 2024

What I always like to see is plenty of ambition.

We have a $120bn total addressable market that continues to grow as we add more subcategories. This gives us significant runway for growth.

Mark Barrocas, CEO, SharkNinja, Q2 2024, 8 August 2024

I watched an interview with Mark Barrocas who has been CEO since 2008. He is an impressive guy as you would expect. He explained the company’s strategy in terms of growing market share in existing categories, adding new product categories and growing internationally, which he said was the fastest-growing part of the business.

The business has grown since 2008 at an annual compound rate of 20pc and has a team of 750 engineers worldwide. It is a classic 3G with a fabulous story.

Share Recommendations (12 September 2024)

SharkNinja. SN

GeneDX WGS

MercadoLibre. Meli

Strategy – Keep Believing, Keep Buying

It can be hard to keep faith with shares in a world of extreme volatility but it is the best path to success. I use charts often to decide what and when to buy. I am becoming less interested in sell signals and am impressed by how time is on your side when holding shares in high-quality 3G stocks.

Two shares that look timely to buy are Mercadolibre and GeneDX Corp., both with impressive fundamentals.

Tomorrow, August 2, 2024, marks 25 years since we founded MercadoLibre with the mission of democratising commerce and financial services in Latin America. Over those 25 years, we have built a sustainable company that provides millions of small and medium-sized businesses with the tools they need to compete with larger players. We have enabled the shift to online retail by providing tens of millions of consumers with world-class levels of service. And we have included millions of people into the financial system across the region for the first time.

These are notable achievements, but they are also just a baseline from which we think about our even bigger ambitions to deliver on our mission at an even greater scale. We are as optimistic as ever about the opportunities that are ahead of us, and we’re excited to pursue them with a culture of entrepreneurship, excellence, and innovation that has served us well for the last 25 years. This is, therefore, a great moment to reaffirm our belief that the best is yet to come.

Marcos Eduardo Galperin, CEO, MercadoLibre, Q2 2024, 2 August 2024.

South America is a lot of continent. It is easy to believe that this gives MercadoLibre a huge opportunity.

GeneDX is another exciting business with new, talented leadership.

The second quarter proved to be another strong quarter by all measures. We delivered nearly $69m in revenues, expanded gross margins to 62pc and achieved our ninth consecutive quarter of cash burn reduction. We’ve been relentlessly focused on these three metrics, and that focus continues to pay off.

Given the strength in the first half of the year, I’m happy to say that we’re raising our revenue guidance for the year to $255m to $265m, and we’re even closer to our goal of becoming profitable. This is an important milestone for us as a company because of the massive opportunity in front of us to serve an ever-growing number of families and to positively impact the future of health care.

Today, GeneDx is primarily focused on pediatric patients and the providers that care for these patients, including medical geneticists, genetic counselors, pediatric neurologists, developmental pediatricians and neonatologists. We have now sequenced more than 665,000 exomes and genomes and have performed more than 1m genetic tests, working tirelessly to carry one of the largest and most diverse databases, of disease-associated genomic variants.

This industry-leading data set, combined with our proprietary bioinformatics and variant identification and interpretation capabilities, propel [ph] us to create the most advanced diagnostic exome and genome sequencing options available. And those tests continue to become recommended as first-line test and the standard-of-care resulting in better health outcomes and cost benefits for both patients and health care systems.

Katherine Steuland, CEO, GeneDX, Q2 2024, 30 July 2024

A Diet For The Ages

Most people think I am in reasonable shape but appearances in clothes can be deceptive. My wife and I agree that I am steadily turning into a ball of flab, which I don’t like, having been fit and slim all my life. The thought of having to increase the waist size on the next pair of trousers I buy freaks me out.

So, I am fighting back. I have cut out alcohol, sugar and bread and am focused on rice, vegetables, salads, porridge, fruit (in modest quantities because of the deadly fructose), nuts and generally a wealth of healthiness. I feel proud when I walk out of the supermarket and all my purchases are fruit and vegetables. I look with disdain at trolleys stuffed with gin, pizzas, carrot cake, crisps and other demon foods. No ultra-processed food for me!

Before I eat there is exercise – an hour and a half of YOGA (every other day), other stretches, long walks in the morning and afternoon, and occasional sessions with weights. This is a total reinvention of a previously increasingly decrepit dotard.

I have only just started doing it, hence the fanatical enthusiasm of the convert but I have to say the results are amazing. I am pulsating with energy with a new spring in my step. No more afternoon naps.

I am reading a book called The Human Being Diet, which is so puritanical, at least in the early reset stages that almost everything on my new healthy diet would still be forbidden. I suspect there is an idea that almost all the foods introduced since homo sapiens swapped the hunter-gatherer lifestyle for farming and animal husbandry are dangerous and that is even before total demons like gluten, dairy, sugar and processed foods arrived to speed us to an early grave.

My wife and I are thinking of doing the diet not so much because we believe that more than one cherry tomato a day could be fatal but to learn what it feels like to lose three or four pounds of weight a week!

If we do it I will let you know how it goes if I have the strength to type when consuming only hundreds of calories of food a day.

I should note that my present diet is delicious so it is no hardship to follow it. There is a shop called Bayley & Sage, just down the street from me, which as well as being incredibly expensive (think £7.50 for four of those wagon wheel peaches with holes in the middle) is full of delicious ingredients for my salads – brown and wild rice, lettuce, olives, sun-dried tomatoes, aubergines, walnuts, dried mulberries, rose Marissa, which packs an incredible chilli punch, red peppers, spring onions, celery, chopped apple, anchovies in a spicy sauce, extra virgin olive oil, balsamic vinegar and whatever I can find that seems sort of healthy. Everything is organic, of course. The milk at B&S, which I am no longer drinking, comes in a bottle with everything but the cow’s name on it.

It costs a fortune to buy but lasts so long that it becomes good value and I love the shop. I plan to get exotic on the protein front with mussels, prawns, king prawns, king crab, scallops, maybe the occasional lobster and other goodies. I love seafood and with Whole Foods just down the road, I have more options there for paying through the nose for ingredients that can be found more cheaply at Waitrose and are given away free at a supermarket chain called Aldi.