🗞 6 Growth Stocks That Just Turned Profitable

Happy Sunday!

Here’s what’s on the docket for this week’s newsletter:

• 💰️ 6 Growth Stocks That Just Turned Profitable

• 📊 What stocks are Super Investors buying?

Let’s dive in!

Featured Story

6 Growth Stocks That Just Turned Profitable

Great investment opportunities can come when the true earnings potential of a business is masked.

This often occurs when a company with a large reinvestment runway chooses to prioritize growth investments over maximizing near-term profitability. As these businesses scale and their underlying earnings power starts to become evident, investors expectations can change drastically.

Here are 6 companies that just turned the corner to profitability:

1. Okta

Okta is a business-to-business software company that provides identity and access management solutions. Given the high retention rates (106% last quarter) of a solution like this within a large organization, Okta has invested heavily to attract new business customers over the years.

They reaped the rewards of those investments with top-line growth and are now finally seeing that come through in the form of GAAP profits.

• 5yr Revenue CAGR: +33%

2. DoorDash

Ever since the pandemic drove a rapid acceleration in demand for food delivery, DoorDash has been investing heavily to expand its network and take market share.

Total quarterly orders on the platform have grown 828% since 2019, and as the business has scaled, DoorDash’s economics have continued to improve.

• 5yr Revenue CAGR: +50%

3. Remitly

Remitly is a digital money transfer app that has grown its active customers rapidly over the last decade. With an increasing percentage of global remittances going digital each year, Remitly has invested heavily in marketing to win customers.

Remitly has grown its operating expenses significantly over the last several years, but with volume growth outpacing expenses, Remitly has seen a major improvement in its profit margins.

• 5yr Revenue CAGR: +47%

4. Toast

Toast is an all-in-one restaurant management platform.

Over the last decade, not only has Toast significantly increased the number of restaurants it serves, but as its customer base has grown, Toast has been able to earn a higher amount of revenue from its customers through value-added services (tableside ordering, inventory management, etc.)

With growth from new and existing customers, Toast has seen its net margins expand by more than 30 percentage points over the last 5 years.

• 5yr Revenue CAGR: +53%

5. Nutanix

Nutanix is a cloud infrastructure software provider that helps companies manage data across private, public, and hybrid cloud environments.

Not only does Nutanix benefit from high switching costs (and therefore growing revenue from existing customers) but they’ve also undergone a transition from a hardware + licensing model to a cloud-based software as a service model, which has improved profit margins.

• 5yr Revenue CAGR: +14%

6. TransMedics

TransMedics is a medical-technology company that provides specialized organ transportation and logistics services.

With demand for TransMedics’ full-service solution increasing in recent years, the company’s predominantly fixed cost model has led to major margin expansion.

• 5yr Revenue CAGR: +85%

Featured Story #2

What Stocks are SuperInvestors Buying?

Every quarter, investment managers with more than $100 million in assets are required to file a Form 13F with the SEC, disclosing all the U.S. listed equities that they own.

Fortunately for everyone else, that means we get to track the latest buys and sell of many of the world’s top investors, and Fiscal.ai makes it easy through the “Super Investors” Page.

Here were some of the most notable new positions for top investors this quarter:

1. Warren Buffett - Berkshire Hathaway

The ‘Oracle of Omaha’ started a new position in America’s largest health insurance company this quarter, UnitedHealth Group.

2. Bill Ackman - Pershing Square Capital Management

Ackman’s lone new position this quarter was the technology & e-commerce giant, Amazon. Within a single quarter, Amazon is already one of Ackman’s largest positions.

3. Norbert Lou - Punch Card Management

Norbert Lou is one of the most selective investors of all time. Despite being known for rarely starting new positions, Lou added 2 new stocks this quarter in Crocs and PayPal.

4. Li Lu - Himalaya Capital

Li Lu, who Charlie Munger once called the Chinese Warren Buffett, added just one new U.S. listed stock this quarter in PDD Holdings. The new position accounts for 17.9% of all Himalaya Capital’s U.S. listed securities.

5. Chuck Akre - Akre Capital Management

Akre Capital Management, which is often regarded as a “long-term, quality focused” fund, added two new positions this quarter in Copart and Fair Isaac Corp.