#15 - New Position: Evolv Technologies ($EVLV)

Author

Graham Schroeder
July 19, 2024

Welcome to Graham's Gazette, your home base for all things investing, financial, and personal growth.

This week was filled with a lot of big tech news, market rotations from large to small cap, and a new position added to the Freedom Fund based around current events.

Big 3 Market Movers

  • Google Nearing $23B Deal to Acquire Cloud Security Company Wiz

    • Wiz offers cloud security solutions that would significantly enhance Google's cloud services portfolio and set new standards in the industry.

    • The move would have a transformative impact on enterprise cloud security, combining the strengths of both tech leaders.

    • Wiz was last valued at $12 billion and generated $350 million in annual recurring revenue as of this year. This deal could face potential regulatory blockages, as the Biden administration has been aggressive in curbing tech consolidations.

  • Small Cap Stocks & Russell 2000 Rotation

    • Small Cap Stocks (companies with total market cap from $300m -$2b) have had their best 5 day stretch of trading in 4 years.

    • Rising Fed rate cut hopes have fueled a small-cap stock rally. Investors' have shifted from large tech stocks toward smaller ones.

    • Lower rates can benefit smaller companies, which generally have higher levels of debt than bigger ones. Big picture on an index basis the S&P 500 (~327%) has outpaced the Russell 2000 (~151%) in total return over the past 10 years.

  • Trump & Vance Push Bitcoin

    • Following the assassination attempt over the weekend the former President confirmed he will still speak at this years Bitcoin conference in Nashville next week.

    • JD Vance is the first person on the VP presidential ballot to be invested in Bitcoin (~$250k worth of $BTC). The two running mates are pushing a pro-crypto environment. Interestingly enough bitcoin surged 10% in the hour after the assassination attempt.

    • Usually during election cycles I tend to focus on what investments will benefit from certain running mates on both sides. Another connection that popped up was that Vance worked for Peter Thiel’s VC firm back in the day. Thiel a founder & chairman of Palantir Technologies ($PLTR) has deep roots in the government contract world. Have to imagine $PLTR will benefit from the relationship in some form or another in the future.

Freedom Fund Update

Freedom Fund Background: I created the Freedom Fund as a public brokerage account back in October of 2022 to share that anyone with a social security # and a bank account can begin their investing journey by investing a couple hundred dollars a week. Every week and month I post on X (@GrahamInvesting) public updates about the purchases, exits, dividends, and growth of the fund if you want to follow in real time. The biggest obstacle people have to investing is just getting started so I decided to start a new account at $0 to start from nothing with you.

New Position: Evolv Technologies ($EVLV)

The decision to add Evolv Technologies Holdings, Inc. ($EVLV) to the Freedom Fund was driven by several factors such as recent customer growth, recent current events, and the shifting of money in the market currently from large cap to small cap stocks. Evolv headquartered in Waltham, MA was founded in 2013. The company bases their solutions around their main weapons detection system called the Evolv Cortex AI® software platform. Below are some main points surrounding the company and why I decided to add it to the Freedom Fund:

  • Security Solutions - Evolv provides the security industry with AI-driven threat detection systems designed to enhance public safety. Their security technology provides screening for weapons and other threats in high-traffic places such as schools, concerts, airports, stadiums, etc. In today’s growing environment this solution and business has the potential to scale significantly and enhance public safety. Given the recent crowd safety issues at the Trump Butler, PA Rally and the Copa America Tournament in Miami the past weekend it was tough to not focus on businesses/tech that solve public safety issues.

  • Market Potential - The security and protection services industry is poised for substantial growth, with increasing demand for advanced security technologies. Evolv's projected revenue growth reflects this trend, with forecasts estimating a 21.17% increase to $101.2 million in 2024 and a further 67.55% jump to $139.9 million in 2025. How this develops into AI robotics & public safety play in the long run is up in the air but have to imagine crowd surveillance will continue to rise as crime does. According to a report by Allied Market Research, the global private security market size was valued at $241.4 billion in 2022, and is projected to reach $531.5 billion by 2032.

  • Existing Client Base - The company already has 750+ partnerships with schools, hospitals, professional sports teams, casinos, you name it. There have been rumblings about it potentially partnering for the Olympic games. Evolv lists some case studies here from clients that are currently using their technology such as the Pirates, Mets, and Twins MLB organizations.

  • Drawbacks - Whenever there is a company that is pushing the needle in the security/surveillance industry there will always be pushback and blame when events occur and can impact stock price. Stock price decline over the past three years with increasing earnings per share and revenue can be somewhat of a concern. Keep in mind as small caps have not performed well since rate increases started there could be some potential upside if rates drop going forward.

Adding Evolv Technologies to the Freedom Fund semi-aligns with my strategy of investing in companies that not only have innovative capabilities and growth potential but also address critical societal needs. As security becomes an ever-more crucial concern globally, Evolv’s forward-looking approach could position it well. AI and robotics may significantly enhance public safety by providing advanced surveillance, predictive policing, and more efficient emergency responses. Evolve reports Q2 2024 earnings on August 8th.

The purpose of Graham’s Gazette and my social account @GrahamInvesting is to help others get started and stay consistent on their own personal, professional, and financial journey. I appreciate the time you take in reading & interacting with me and look forward to growing together.

Thanks for investing your time reading this.

-Graham (@GrahamInvesting)

Disclaimer: Graham’s Gazette provides information and resources related to investing, financial topics, and personal growth for educational and entertainment purposes only. The content presented is not intended to be construed as financial advice. Readers are encouraged to conduct their own research and consult with qualified professionals before making any financial decisions. Graham’s Gazette and its creators do not assume any responsibility for the accuracy or completeness of the information provided nor do they guarantee any specific results from such use of information.