Since November of this year, I have been sharing my personal dividend growth stock portfolio with you, including detailed analysis about my portfolio allocation and my dividend return. Today I would like to take a close look on the 3 best performing stocks of my portfolio.
I have selected these three stocks based on the current profit of the open positions in my portfolio and ranked them by percentage. In addition, I will go into more detail about the business model of each company and why I chose to invest my money in them. Moreover, I will also share more detailed information about the strategy that I am following with these investments.
Usually, I like to do fundamental analysis on every company before I invest my money in them. Especially taking a quick look on some key stock metrics can help you to get a better understanding about a company’s success (also check out: Fundamental Analysis Of Stocks Using Key Stock Metrics). But in this case, fundamentals did not influence my investment decision at all, and I only invested in these companies because I believe in the overall trend they are associated with. Moreover, none of the companies below are being run profitably yet.
3 best performing stocks of my portfolio
The 3 best performing stocks of my portfolio are:
- Veritone Inc: +148%
- Plug Power Inc: +146%
- NIO Inc: +142%
I have already shared My Personal Long-Term Investment Strategy with you, incl. very specific targets about my long-term goals and how I would like to achieve them. At the very end of this article, I mentioned that I am also considering to invest in specific trends:
- Mobility transformation and growth of the electric vehicle market
- Renewable energy (e.g. hydrogen and photovoltaic industry)
- Digitalization and artificial intelligence
Obviously, not only focusing on dividend paying stocks, but also investing in these specific trends, has paid off so far. Each of the 3 best performing stocks of my portfolio can be assigned to one of the trends mentioned above.
1. Veritone Inc – Artificial intelligence on a grand scale?
Veritone is a technology / software company that was founded in 2014, its headquarters are located in Costa Mesa, USA. Probably it is the least-known company from this list, but in my opinion has the biggest growth potential. Veritone provides an operating system for artificial intelligence (aiWARE) to automate business workflows or data processing, which has a huge potential in the future in my opinion.
I think artificial intelligence will gain massive attention in the upcoming years. What I personally like about the idea of developing an operating system for that is that there might be the potential to use this product in every market sector or use case that you can imagine.
Year-to-date the stock has provided a return of 880% so far, resulting in a stock price of about €23. But with a market capitalization of €700 million, Veritone still is a small cap stock. Total projected revenue is only €57 million for 2020, but the company is steadily growing and expanding its business. In 2019, Veritone’s total revenue was in the region of €50 million and in 2018 in the region of €27 million, representing a growth rate of more than 100% in 2 years.
Future outlook & market environment
The business model of Veritone is to provide an operating system for artificial intelligence, incl. machine learning models to automate data processing and to transform unstructured useless data e.g., audio, video, or text data, into an intelligent, usable format. Customers and partners of Veritone are e.g., governmental institutions, CNBC, Microsoft, Oracle and more. Recently Veritone renewed and expanded its partnership with CBS News with a new multi-year license agreement.
Veritone claims to be the first company offering such a service. Currently, their service is used in media, entertainment, government, legal and compliance markets. But think about how much unstructured / useless data is produced every day around the world, e.g. in the industry or technology sector.
According to MARKETSANDMARKETS “The global AI platform market is expected to grow from USD 2.61 Billion in 2017 to USD 9.88 Billion by 2022, at a Compound Annual Growth Rate (CAGR) of 30.5%”.
Growth rate & profitability
Veritone is not yet profitable, but according to Q3/2020 financial results, its total revenue grew by 23% year over year. More importantly, revenue of their product aiWARE grew by 43% year over year. This underlines the great potential of their product and idea.
In addition, net loss decreased from about $14 million (~€11.5 million) to $11.0 million (~€9 million) year over year, a big step for the company. Considering a compound annual growth rate of the entire AI market of about 30%, Veritone currently has great growth potential and could enter profitability within the next 3-5 years in my opinion.
Veritone recently launched a new product to open up the energy market. With this product they aim to increase grid reliability and to support integration of renewable energy sources to maximize profits. Overall, they are also targeting governmental customers, which will provide a stable a reliable source of income. I like that Veritone is building partnerships with well-known companies like Microsoft or Oracle.
2. Plug Power – Building a clean hydrogen economy?
Plug Power is a company that develops and produces fuel cell stacks for electromobility applications, for industrial applications (e.g. floor-borne vehicles) and for stationary emergency power supply. The company was founded back in 1997 and their headquarters are located in Latham, USA.
I personally love the idea of using hydrogen as a zero-emission energy source for mobility applications. In general, I think battery electric vehicles are great for passenger transportation and private use or local intra-city transportation of goods. But when it comes to commercial and industrial applications, an introduction of fuel cells and the use of hydrogen as an energy source seems to be more logical. Fueling of vehicles, such as long haul freight trucks, seems more feasible and cost-effective. Or think about zero-emission aviation. In September this year, Airbus announced plans to develop first hydrogen-powered, zero-emission aircrafts.
Year-to-date the stock has generated a return of 950% so far, resulting in a market capitalization of around €11.5 billion. The stock is currently trading at about €28 per share. Its projected total revenue is around €300 million for 2020. But Plug Power has provided astonishing growth rates over the last years. In 2019, Plug Power’s total revenue was in the region of €230 million, in 2018 in the region of €175 million and in 2017 in the region of €100 million. This reflects a growth rate of 200% in 3 years.
Future outlook & market environment
The future outlook for this company is tremendous. The whole world is shifting to renewable energy and sustainable transportation solutions. Unlike NIO or TESLA, which focus only on passenger car applications, Plug Power has the potential to solve problems in different market segments and thus benefit from this trend in several ways. Fuel cells can be used wherever electrical energy is needed, but I think the main driver in the future will be commercial and industrial applications and goods transportation. In addition, however, I can also imagine that fuel cells could one day be used in households for a sustainable off-grid electrical energy supply. The European Union is actively promoting clean hydrogen solutions as a necessity to achieve climate-neutrality goals by 2050 as set out in the European Green Deal. Accordingly, the European Union has clearly defined the pathways to a European hydrogen eco-system:
Growth rate & profitability
Plug Power has managed to increase its total revenue by more than 70% from 2017 to 2018, by another 30% from 2018 to 2019 and by another 43% in 2020, taking into account projected numbers. These are impressive growth rates. Of course, considering a total market capitalization of €11.5 billion compared to Plug Power’s total revenue of €300 million shows that the stock is priced very high. But nonetheless, I think this company has great future prospects and offers an urgently needed product at the right time. In fact, Plug Power has announced plans to increase annual sales to $1.2 billion (~€1 billion) by 2024, with an operating income of $200 million (~€165 million). Considering their current growth rates, this seems like an achievable target.
This company is on scaling mode right now, they are massively expanding partnerships to drive revenue and annual growth. For example, they just announced plans to expand hydrogen and fuel cell solutions into Walmart eCommerce Applications. But besides that, Plug Power is also developing a 1kW ProGen fuel cell system for robotics and drone applications. Amazon has already announced plans to start delivering orders using autonomous drones, which could provide another growth potential for Plug Power.
3. NIO Inc – Electrical vehicle player from China?
I am sure most of you have heard of this company. NIO is an electric vehicle manufacturer that was founded in 2014. Its headquarters are located in Shanghai, China. Mobility transformation is an inevitable trend, and I think NIO has the potential to be one of those companies that will benefit the most from this trend, as it is located right in the heart of the biggest EV market in the world.
With a share price growth of about 1,600% year-to-date, NIO is considered Tesla’s biggest competitor lately. But such growth rates accompany with a very high valuation. Altough NIO is not yet profitable the company is valued at a market capitalization of about €60 billion, which translates to a share price of about €40. Its projected total revenue for 2020 is only €2 billion (that’s a 30-fold premium). In fact, the stock peaked with a price of €48 in November this year and has been in a correction ever since.
Future outlook & market environment
First of all, the electrical vehicle market is predicted to explode in the next decade as the entire world shifts to renewable energy and sustainable transportation solutions. Furthermore, NIO is located right in the heart of the largest electric vehicle market in the world, China. The Chinese market offers by far the biggest market opportunity for NIO. But beyond that, NIO has already announced plans to expand and enter the European market as well. In addition, the switch to electrified transport is supported by the Chinese government and NIO has already benefited from this and I believe will continue to benefit in the future. The Chinese government has announced plans to achieve carbon neutrality by 2060, and to do so it needs to support its companies that offer environmentally friendly solutions.
Growth rate & profitability
Recently announced Q3/2020 financial results are impressive. Vehicle sales quantities are constantly increasing and have more than doubled compared to Q3/2019 (12,206 vehicles in Q3/2020 or +146.1%). But more importantly, vehicle and gross margin have increased to 14.5% / 12.9%, from negative 6.8% / negative 12.1% in Q3/2019, which is an important step for the company. Obviously, scaling production is driving profitability up. Nonetheless, costs from operations are still too high to be profitable, but if NIO can maintain these growth rates, I think it is likely that NIO will be profitable within the next 2 or 3 years.
Currently NIO offers 3 different vehicle versions, the EC6, the ES8 and the ES6. Personally, I like the design and concept of their vehicles, but that is a matter of taste. In terms of innovation, they have just announced to launch a 100 kWh battery pack which provides 37% higher energy density compared to their 70 kWh battery pack and increases driving range to more than 600 kilometers. There are no specific numbers available, but providing a battery pack with a significantly higher energy density will definitely cut their costs. Moreover, they are offering a battery rental service instead of purchasing it and a battery swap service.
In general, the idea of these investments is to get in the market early and to take advantage of a short- to mid-term rally. But such stocks always accompany with higher risks due to higher volatility, especially considering that all stocks already are in a parabolic rise. My strategy was to sell a part of my shares as soon as my position has increased by 150% to take my initial investment out of the market and hold only the remaining shares of my position for the long-term.
This worked out with all three positions. Now I am unemotional about these positions because even if the companies file for bankruptcy or the share prices drop significantly, I can no longer lose any of my own money. This does not necessarily mean that I will not buy more shares of the mentioned companies in the future, but I just feel more comfortable with such positions in my portfolio when I consider and apply proper risk management. In addition, by taking my initial investment out of these stock positions I have the opportunity to reinvest my free cash into some stable, high dividend paying companies.
Would you like to see more of such analysis? Leave me a comment. If you would like to know why I believe in further stock market growth, please check out My Outlook On The Stock Market. If you would like to get a notification when I publish a new article, subscribe to my newsletter or follow me on Twitter. You may also like: