Dividend Ten

Freelance & personal finance journal

Stock Talk

NVDA – Today, I Win at Life

Yeah, so NVDA just did that.

A 30% jump in one day to $87/share.

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Let’s face it. Picking a winner and being a winner are two different things.

But to me, I like to think my prescient selection makes me a winner here. And as I’m finding out, being a winner is tough. Just look at Charlie Sheen, does he make it look easy?

Anyway, in this post I’ll explore what happened today to our hero NVDA, and how I plan to handle this hot potato going forward.

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So why did NVDA pop today?

Usually a jump like this would mean it’s getting bought out.

But no, it simply obliterated already high growth earnings estimates of $0.57 EPS on $1.69 Billion of revenue to $0.94 EPS on $2 Bn in revenue.

Turns out when you beat what analysts think by a lot that’s a good thing.

And Nvidia is providing guidance of higher growth than expected in Q4 – with revenue expected to increase to $2.1 billion.

Seriously guys? Only a measly $0.1 billion increase over Q3?

Between you and me, my conspiracy theory is they’re aiming a bit low based on their trajectory, so they can pull off the same “beating analyst expectations” thing next time around, since it’s obviously working so well for them.

Which reminds me of a story of how a talented co-worker of mine lost his job and was going on job interviews for months and couldn’t land a job. When I asked him what was going wrong, he said that he would tell them he was terrible at things so when they hired him they would be so impressed with him since he set expectations so low. So maybe that’s what NVDA is doing here a bit for Q4 guidance. But I digress.

Anyway, if you’re here you probably like dividends, right? Well, the company just voted to hike their dividend by 22% to $0.14/ share, and instituted a buyback program, which isn’t bad either.

Why I love NVDA more than my girlfriend

What’s more exciting exciting than just beating some analysts expectations is that they’re just getting started. Their areas of strategic focus are all winners and their technology is essentially becoming the standard “Intel Inside” technology so-to-speak powering gaming, virtual reality, deep learning, self-driving cars and artificial intelligence computing. all high growth areas that will transform how we live and work over the next 5-10 years.

So to me NVDA beats my girlfriend anyday. Since a) I don’t have a girlfriend, and b) girlfriends won’t just give you 30% more love one day without asking for something in return like a diamond ring or going to an expensive restaurant.

So I think you agree with my assessment here.

The New FANG?

NVDA is going to take the place of Netflix in FANG. Or FANA – since Google became Alphabet.

So I hereby declare N to be NVDA. And FANG is FANA.

Yes, you heard it here first.

I should also add that a full 56% of my current portfolio after this increase is made up of FANA. A high concentration, but as Warren Buffett says, Diversification is just protection against ignorance. And I’m not ignorant. I hope.

In my view we are entering a new era of technology, and these are my top bets to win. So we’ll see how it goes.

The psychological game of picking a winner

First, anytime the market is rising, it’s not hard to feel like Buffett.

But truly after a recent 30% increase, it does become a question on how to play this going forward.

Based on a pure DCF basis, I think NVDA is currently overvalued, but you could argue perhaps it was before today’s increase, too.

Here you’re paying up bigly for growth.

As far as I can see, I have 3 choices after today:

  1. Buy more
  2. Sell it all
  3. Sell some of it and let the rest ride

Selling part of it – trimming the fat, so to speak – is probably the most principled and safest decision.

As for me, I decided to hold for now, for the following reasons:

  • I believe in the company and long term thesis.
  • With it’s increase, it’s now my 4th largest position, and I’m good with that level of risk.
  • Frankly I don’t have a better idea than this.

How to play this IMHO if you are on the sidelines and jelly of all this winning

What if I had no exposure. Would I want to buy in at this price?

It depends on your outlook.

If you’re a deep value guy, I’d say you’d have a hard time making the case.

Now if you want a good way to play AI and autonomous vehicles and deep learning, with a small dividend but future growth prospects, you could give it a looksee.

So for me, I would look to buy on dips, recognizing that it’s psychologically hard to buy on the way up and increase your cost basis. I did this last time, and it seemed like it was stretched then.

But I think if your time horizon is 10 years or more, I’m betting you won’t be disappointed with the stock, and you’re buying low from that perspective. At least, that’s my bet. It could still go back to whence it came, but I highly doubt it. This could be a buy on the dips as there’s profit taking and additional volatility around potential interest rate increases that may be in the cards.

So put it on your watchlist, and maybe do some research if you’re feeling the NVDA love.

In conclusion

Keep your eye on this hot potato, I think as hard as it might be to believe this, it may get even hotter.

At least, that’s my take.

What do you think? Is this a buy, sell, or hold? Why?

Thanks for stopping by!

Full Disclosure: Long NVDA

Legal Disclaimer: I am not an investment professional, just a dude on the Internet chronicling his journey to being a winner. This post is purely for informational/ entertainment purposes and also because I may just be a closet narcissist and want a public forum to pat myself on the back for being such a winner. Have a nice day!

 

14 Comments

  1. Wow! 30% jump ain’t no joke! That’s some serious gain there, congrats! I feel good picking a business to own that perform well and management reward shareholders with great dividend.

    Keep up the great work! Keep sharing!
    Cheers!

    • Greg Gee

      Thanks Vivianne, I’m still a little stunned by the magnitude of the jump. Never been on that side of a one day increase before and it’s pretty cool!

  2. Nice! Handy little boost, particularly seeing as though it seems like a pretty big portfolio weight.

    Always hard to balance the growth and valuation for these types of stocks. I’ve often regretted selling companies that are growing on the basis of valuation – it seems to me that quality companies can tend to “grow into” their valuation over a number of years.
    AustralianDividendInvestor recently posted…What are Hybrid Securities?My Profile

    • Greg Gee

      Yes, definitely paying for growth on this one. As always, the market is a market, and whether it’s momentum or value strategy, the price is always what the market is willing to pay. Cheers.

  3. DTen –

    Now that my friend is called dividend growth : ) Nice job and soak it all in!

    -Lanny

  4. Hey Greg,
    Congratulations on winning!
    30% in 1 day is a nice jump. And the 22% dividend increase is not too shabby either. Based on the jump and future projections, NVDA is probably a hold right now. I would probably do the same as you if I was in your situation. I would just keep holding because everything on the planet will need an intel chip soon. Also as far as FANG and FANA, I want to add Snap Inc after the IPO to my own version of it. I don’t usually buy IPO’s, but I think Snap Inc has a lot of potential. Thanks for sharing your thoughts on NVDA.
    Graham @ Reverse The Crush recently posted…Blog Traffic, Social Media & Income Report for October 2016My Profile

    • Greg Gee

      I like Snap a lot. You gotta respect a dude in his early twenties who says no to a billion dollar offer. Also from what I can see they’re doing some interesting stuff with regards to hardware. Might be a good IPO to get involved with depending on the details as well. Thanks for stopping by!

  5. I actually bought some shares at Friday’s opening, surprised they’re already up 15.5%. I agree it’s a good stock to catch the AI revolution.
    Dividends are Coming recently posted…November additions: YUM China, Novo Nordisk and NVIDIAMy Profile

  6. Congrats on NVDA!

    What I like about the story is that it is actually based on earnings & NVDA still has a relatively low p/e ratio of 48% compared to NFLX at 309%.

    NVDA also pays a dividend!

    Are you selling any of your position to lock in some of the profits?

    • Greg Gee

      Thanks – I actually thought about trimming some NVDA at $93 but decided against it since I didn’t really have any better ideas at the time. You could argue shares are overvalued, but I am bullish on AI and deep learning, etc. and NVDA is at the heart of it all, so for me this is a long term hold.

  7. I love me some NVDA, I bought mine at $26 like a year ago based on their car tech. I also Bought BBRY for the same reason based on QNX systems. Both long term holds for me.
    Divi Cents recently posted…THE BEST DIVIDEND STOCKS FOR NOVEMBERMy Profile

    • Greg Gee

      Congrats – $26 is a good entry point. I remember when that seemed high. Always makes you wish you bought more then 🙂

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