#30 - Trick or Treat? Evolv Technology

Author

Graham Schroeder
November 01, 2024

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This week Bitcoin rose from the dead, Boeing is figuring out their labor issues, and why Evolv Technology stock tanked the Freedom Fund in October.

Market Recap

  • Bitcoin ($BTC) Tops $70k for First Time Since June

    • Bitcoin hit $70,000 for the first time since June, driven by optimism around MicroStrategy’s ($MSTR) earnings and the U.S. presidential election.

    • Stocks tied to cryptocurrency, like Coinbase and MicroStrategy, rose in tandem with Bitcoin, showcasing market confidence in digital assets.

    • Trump has positioned himself as a pro-crypto candidate and has gained industry support. VP Harris has remained quieter on crypto leaving the industry split on potential impacts under her leadership. However, the VP has received an endorsement from Ripple Co-Founder Chris Larsen.

  • MicroStrategy Announces $42 Billion Capital Plan

    • MicroStrategy now holds 252,220 $BTC with a YTD $BTC yield of 17.8%, showing its commitment to expanding its $BTC holdings as part of its long-term strategy.

    • The company announced an ambitious $42 billion capital plan over three years, targeting $21 billion from equity and $21 billion from fixed-income securities, known as the "21/21 Plan," to fund additional $BTC purchases.

    • Q3 total revenues reported at $116.1 million, representing a 10.3% decrease YOY. Operating expenses rose significantly due to digital asset losses, resulting in a net loss of $340.2 million.

  • Boeing & U.S. West Coast Factory Workers Strike

    • Boeing reached a tentative agreement with the International Association of Machinists and Aerospace Workers union to end a significant strike affecting 33,000 workers. The proposed contract includes a 38% wage increase over four years and a $12,000 signing bonus.

    • The strike has lasted nearly two months, costing Boeing approximately $100 million per day in lost revenue and caused an estimated $9.66 billion in total economic losses, impacting suppliers and local economies in Washington and Oregon.

    • The company has felt the pressure to find a resolution from politicians and economists. With manufacturing issues, and now strikes, Boeing has had a significant rough patch since COVID. Share price is down over 55% over the past 5 years.

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October 2024 Freedom Fund Update

  • Fund Performance

    • Portfolio Value - $20,541.26

    • October Dividends - $37.01

    • Total Return Since Inception - 10.70%

    • This week I sold all of my $BCX - BlackRock Resources & Commodities Strategy Trust (126.9899 shares) to free up some capital to add to other positions. I exited the position diversified in companies that focus on extraction, production, or distribution of natural resources due to its high expense ratio and poor capital appreciation.

    • I reallocated these funds into more $APLE, $SHOP, $TER, $WM, and $EVLV shares.

  • Friday Freedom Fund Purchase:

    • 6 shares of $EVLV - Evolv Technologies

  • Position Earnings Recap

    • $WM - Waste Management - Q3 2024

      • Reported $5.6 billion in revenue, a 7.9% increase YOY.

      • Adjusted operating EBITDA grew by 11% to $1.71 billion, and all-time high EBITDA margin of 30.5%.

      • Completed eight recycling projects and advanced renewable energy projects, while also acquiring businesses that contributed $108 million to revenue growth.

    • $GOOGL - Alphabet - Q3 2024

      • EPS of $2.12 on revenue of $88.27 billion. Reflects a 37% increase in profit and a 15% rise in sales YOY.

      • Cloud business contributing $11.4 billion in revenue, a 35% increase YOY.

    • $MSFT - Microsoft - Q1 2025

      • $65.6 billion in revenue, exceeding estimates of $64.6 billion.

      • EPS of $3.30 with net income at $24.7 billion.

      • Azure experienced a 33% YOY growth. The company has seen continued revenue growth boosted by the company's AI and cloud computing initiatives​.

    • $LNG - Cheniere Energy - Q3 2024

      • Reported $3.8 billion in revenue and a net income of $0.9 billion a decrease from the previous year’s revenue due to fluctuating natural gas prices.

      • Repurchased approximately 12.2 million shares for about $2.0 billion and repaid $450 million in long-term debt.

      • Quarterly dividend increased by about 15% to $0.50 per share.

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.

What is going on with Evolv Technology this week?

Over the past week $EVLV share price experienced a massive sell-off and is down over 45% in the past month now. I had been purchasing shares in the $4+ range over the last few months. This week share price has dropped almost to $2 a share. The news on social media has many people labeling the company as a fraud. The sell-off happened after two main press releases this week that lead to an internal investigation and leadership change.

This week I did add more shares to help average down my share price in case this was a good buying opportunity. Since my $EVLV shares only make up just under 3.5% of the public portfolio I felt like it is worth the risk buying more and waiting out the storm. Due to the internal investigation, the company is delaying its Q3 earnings meeting that was set to happen in two weeks. I may continue to buy at these levels and risk it for the time being until they reschedule and are able to have the Q3 earnings call. Once I hear the next update I will then make the decision if I want to hold onto $EVLV for the long run or just cut my losses and move on.

Part of me believes this could be a “be greedy when others are fearful” situation. With the information available today I think this could be a small bump in the road since the revenue reporting sounds minimal on the surface and it sounds like they were already looking to have a succession plan in place for the CEO since May. Trading small-cap stocks, especially those with limited history like Evolv Technology, comes with unique risks. If you are going to invest in these types of companies you have to be willing to do your own research, comprehend the earning reports, and always be skeptical of the information you hear.

The purpose of this newsletter is to encourage you and our other 77 Gazette subscribers to start and stay consistent with your personal, professional, and financial journey.

Thanks for investing your time reading this.

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.