Good Riddance, September  | | Luke Lango | Well, that was a month worth forgetting. The stock market ended a sloppy September on a mixed note, with the Dow and S&P 500 falling as value stocks lagged, and the Nasdaq gaining as growth stocks powered higher on the back of yields moving slightly lower. Our take? Goodbye September. Let’s move on. The reality is that the market had a bad month because the 10-year Treasury yield surged, and we don’t pay too much attention to this surge because we do not believe this surge will today or in the future impact the fundamentals underlying our stocks. There are really three big things here. One, as outlined in previous issues, we’re firm believers that the long-term trajectory of yields will be lower-for-longer in the big picture. That’s because technology provides enormous deflationary forces by making everything more productive, cheaper, and faster – and ever since technology started taking over the world circa 1990, core inflation in the U.S. has struggled to top 2% (excluding this year, where inflation is roaring due to Covid-19). We’re very confident that, once Covid impacts phase out in 2022 and beyond, we will return to a sub-2% inflation environment because the deflationary impact of technology will only grow as automation, AI, hybrid work, and cloud computing become ubiquitous. On that assumption, our models say that a “fair” 10-year Treasury yield is about 2% for the next several years. Two, our valuation models are already benchmarked to a 2% 10-year Treasury yield. That is, we value our stocks using robust five- to ten-year discounted cash flow models, and the discount rate we use in those valuation models is benchmarked to a 2% 10-year Treasury yield. Therefore, our calculus on how much our stocks are worth will not change unless yields shoot above 2% — and even then, the change will be minor, unless yields approach 4% or higher. At that point, our valuation models would meaningfully change. But we are very confident that will not happen. Three, we’re making multi-year investments, and the multi-year outlooks for our stocks continue to improve, as evidenced by strengthening industry and business fundamentals. Today, for example, Honda announced plans to build an eVTOL aircraft in a sign that most automakers are investing in building the flying car of the future. At the same time: - An Oregon battery company by the name of ESS is claiming to have created a new battery technology built on top of iron (not lithium) which can store renewable energy for longer.
- Electric Last Mile rolled its first electric van off the assembly line – the same assembly line that used to make Hummers.
- A synthetic DNA startup by the name of Catalog raised $35 million to speed up its computation platform.
- Augmented reality glasses maker Nreal unveiled its next-gen Nreal Air glasses, which are very small, lightweight, and designed to stream TV shows and play mobile games.
- Aurora showcased its Aurora Driver autonomous technology at an event.
Folks… innovation is happening all around us. Market prices don’t reflect this reality right now, and that’s OK. Because this is your opportunity. From current prices, our vigorous valuation models imply that many of our stocks that are underwater today, have 100%-plus fundamentally-supported upside potential. So, goodbye September. Hello future. It’s very bright. With that in mind, let’s dive into today’s Daily Notes on our Innovation Investor portfolio and Exponential Growth Report portfolio: Innovation Investor - Roku (ROKU) expands its Brazilian product offerings. Roku has extended an existing partnership with an electronics company to offer customers new Roku products in Brazil. The Roku TV models will roll out later this year and give Brazilians, who continue to ditch traditional TV packages, another super easy way to stream with the platform. Also in Roku news, two top-rated shows (one of which won an Emmy) launched new seasons today on the platform. Great stuff from this company.
- WPP is a giant advertisement company, and it’s just partnered with Snap (SNAP) to create augmented reality experiences for customers. The partnership will focus its efforts on benefiting e-commerce businesses by offering an AR-enhanced shopping experience for Snapchat users. WPP will also work with Snap on improving its data and insights platform. WPP has loads of data and has already invested heavily in AR, so it will undoubtedly bring valuable insights to Snap, and vice versa. This is a huge vote of confidence in Snap’s AR capabilities. We believe AR will unlock the next wave of growth for Snap stock.
- Virgin Galactic (SPCE) is cleared by the Federal Aviation Administration to fly again. It comes as no surprise, but the FAA event was a non-event after all. Virgin Galactic stock is up over 10% today on the good news, and Jefferies came out and reiterated its “Buy” rating and bullish outlook on the company. Time to move onto the next launch, and for Virgin Galactic stock to go higher.
- TuSimple (TSP) walks the walk. It’s easy to talk the talk, but backing that talk up is something that’s far more difficult to do. And that’s exactly what TuSimple has done with its latest tech demo. The company successfully demonstrated its autonomous technology, and remains on track for its “Driver Out” test later this year. This is a leading autonomous trucking company, and its stock price will move significantly higher in a multi-year window.
- Nio’s (NIO) entry into Norway could be the key to Nio’s European success. The Chinese EV maker launches one of its SUVs in Norway today. Norway loves EVs, and is far ahead of the EV adoption curve, so this SUV launch is a big deal. Success in Norway could pave the way for eventual success throughout the broader European market. We see European expansion as driving NIO stock to new highs in 2022.
- Engaging with fuboTV’s (FUBO) gaming platform gets a lot easier thanks to a partnership with Paysafe. Paysafe is a company that facilitates payments for online businesses, and fuboTV will gain access to Paysafe’s full suite of payment solutions including digital wallets for customers, card payments, ACH withdrawals, and more. FuboTV is making a lot of moves in preparation of its sportsbook launch. We think it’ll be a game changer.
- UiPath (PATH) is named a Robotic Process Automation Leader and Star Performer for the fifth year in a row. The recognition comes from Everest Group’s Robotic Process Automation Products PEAK Matrix Assessment 2021, and UiPath is unique in its attainment of two recognitions. UiPath also just signed a lease for a 26 thousand square-foot floor in a New York building. This stock has been beaten and bruised. But its way undervalued here, with room for tons of growth in 2022.
- Businesses are so keen on using Matterport’s (MTTR) platform that the company is expanding its U.S. footprint. Matterport just announced it would be launching its On-Demand capture service in 13 more cities across the U.S. in order to help even more companies digitize physical locations. We love what Matterport is doing, and so does its customer base. Many customers are already repeat customers, in fact. And that’s a great leading indicator of future business success.
Exponential Growth Report - Although we’re still waiting on Hyzon’s (HYZN) response to the short report, there’s some good news from today for the hydrogen industry as a whole. Competitor Nikola is working with OPAL Fuels to develop and construct hydrogen fueling stations across North America. This is good, because building out the hydrogen fueling infrastructure is integral to hydrogen carving out its market in the future and take on EVs. Though by no means has Hyzon recovered, it’s up over 10% today. We’re staying on “Hold,” however, until the company issues a more proper response to the short accusations.
- Genius Sports (GENI) makes its way to Connecticut. The sports betting company’s new license means it now has the ability to operate in 17 states. Genius Sports also recently expanded its agreement with Entain and BetMGM. Both of these two companies will have access to full NFL data feeds, sportsbook content, and fan engagement solutions. Genius continues to impress with its business execution, and we continue to remain bullish on Genius stock.
- AppHarvest (APPH) completes its “Summer Refresh,” which means lots of tomatoes will be ready for harvest by Q4. The company expects modest Q3 sales but a great tomato-filled Q4, as the plants fully mature and become most productive. AppHarvest also reiterated its plans to offer additional produce options by the end of next year. The company experienced some issues with their previous harvest “season,” but we’re confident in the team’s ability to learn from its mistakes and achieve far superior results this time around. This remains our top pick in the indoor farming megatrend.
- Velo3D (VLD) begins trading under “VLD” after a successful business combination. The additive manufacturing company will have access to $274 million in net proceeds to fund future growth. Remember: SpaceX has called Velo3D the best 3D printing company in the world by a long shot. Let’s see if they’re right.
That’s a wrap on our Daily Notes today. We’ll see you again tomorrow for our final update of the week. Sincerely, 
Luke Lango
Editor, Innovation Investor & Exponential Growth Report New to Innovation Investor? Click here to access Innovation Investor's Special Report archive. Get more from your subscription by reading our owner's manual and watching our introductory video. Exponential Growth Report Disclaimer: Small-cap stocks that can rise 10X over the long run are often volatile. If you are interested in these stocks, understand the risks and buy them like a professional. Learn more about the risks of nano- to small-cap stocks and how to buy them here. |
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