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Inflation Busting (Cestrian Stocks Bulletin #75)

Cestrian Stocks Bulletin
Inflation Busting (Cestrian Stocks Bulletin #75)
By Cestrian Capital Research, Inc • Issue #75 • View online
What can we say? We’re here to help.

DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note’s date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
All-Business, For The Price Of A Spark Plug
If you’ve read Cestrian Stocks Bulletin for awhile you may have spotted a pattern in our house view.
We lean bearish on humanity, convinced that civilization is in decline and the Enlightenment firmly in retreat, attacked by the forces of unreason and undefended by those who have benefited the most from its gifts.
But we lean - in consequence of the above, not despite it - bullish on stocks. And see no difficulty in resolving these two positions. The rich be getting richer, and they aren’t doing it by working one more hour of overtime, they’re doing it by riding the up-wave of asset pricing that is still pressing on even twelve years after the central bankers of the world invented free money for the rich saved the world from the apparent implosion of leveraged capitalism.
And if this is how the rich be getting richer, and since by the very fact you are reading this you must fall into the rich camp, since you probably aren’t picking vegetables or working nights as a security guard right now, then riding this wave is something we should all want to continue to do.
At some point the wave will peter out, as waves always do. Markets will reach a top and sell off properly for a couple years, not the just-joshing kind of selloffs we saw in Q1/Q2 in tech this year or the fakeout-breakout we are currently in the middle of, but, properly selling off. When that is, who can say, but we’re sure it isn’t now. Could be a year away, could be three, could be more. But not now.
And so we think there are many long opportunities in which to make bank at present. Our actionable stuff we like to charge for, being committed capitalists and all, but the great news is that for just nine dollars per month - yes, $9/month - you can sign up for the Premium edition of this very newsletter, feat. our best Idea of the Week. The Premium edition has low or no blarney about the Fall of Humanity (freedom from that alone is worth the money) and it has a high quotient of investment ideas.
Some other things you can buy for $9, according to Google, include:
  • A “nail art” pen (no we don’t know what that is either).
  • An apple corer.
  • A metallic eyelash curler.
  • A spark plug (not the fancier kind, mind you, just the honest-to-goodness basic line).
  • Three tall lattes.
Now you may think that any or all of these things are a better way to spend your $9 than on our investment ideas, and we would not attempt to persuade you otherwise, since we offer no investment advice and it may very well be that buying three coffees is a better idea than buying any of our Best Ideas of the Week. Only you can judge that.
But we will ask you to take a risk and try us out. Sign up. If you hate it, just quit. You’ll be down one apple corer is all. And who knows - you might like it! And you get access to all prior Ideas too.
Our next members-only Idea of the Week is out tomorrow, so today is a good day to join us.
Tomorrow’s “Buy” call is a cloud software stock with fundamentals that have been off the boil a little of late - declining rates of recognized revenue growth for instance - but which features major improvements below the waterline in the metric that bores most everyone except us, being, remaining performance obligation (“RPO”).
RPO is the total book of signed contracts that have yet to be recognized as revenue. You can find this number usually in companies’ 10-Qs and 10-Ks, hardly ever in the earnings release. So you have to go digging around to find it and usually wait a couple days after earnings, too. But it is like a little window into the future growth rates of subscription-model software companies, and that window gives you a little insight into the potential direction of the stock too.
Earlier this year, our analysis of RPO at Cloudflare ($NET) led us to call Buy on the name repeatedly earlier this year even whilst others were cooling. RPO was growing way faster than revenue (still is) and represented a big multiple of TTM revenue (still does) and we said that could drag up revenue growth (it did) which could push up the stock price (the price did move up).
And we think similar logic might apply to the stock we feature as our Idea of the Week tomorrow.
Magic bullet it is not, of course, but you’ll see that our logic on tomorrow’s cloud stock idea is checked off against fundamental valuation, valuation vs. growth vs. the cloud cohort, valuation vs. quality of revenue, traditional technical analysis and also wave analysis.
Phew! Don’t worry - we keep these Idea notes mercifully short as we know that whilst we find this stuff fascinating, our readers would sooner just give us the price of a nail art pen to do the work so that they don’t have to.
Oh and by the way, before you go the whole, if-it’s-cheap-it-must-be-useless route? We pull these ideas from our own work used to invest our own staff personal account money. That work forms the basis of all our subscription services including our premium Growth Investor Pro service. So you’re getting work prepared to our best standard, just re-issued, re-packaged re-packaged in this newsletter format.
What more is there to say?
Cestrian Capital Research, Inc - 5 October 2021.
DISCLOSURE - Cestrian Capital Research, Inc staff personal accounts hold long positions in $NET.
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