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Three Shares to Set the Adrenaline Flowing

April 3, 2023

Quentinvest is all about excitement, shares that set the adrenaline flowing; shares that could be monsters. So let us have a look at three that fit the bill.

Synopsys launches new range of AI products

Just a description of what this company does is enough to set the pulses racing

Synopsys technology is at the heart of innovations that are changing the way people work and play. Self-driving cars. Machines that learn. Lightning-fast communication across billions of devices in the datasphere. These breakthroughs are ushering in the era of Smart Everything―where devices are getting smarter and connected, and security is an integral part of the design.

Powering this new era of innovation are high-performance silicon chips and exponentially growing amounts of software content. Synopsys is at the forefront of Smart Everything with the world’s most advanced technologies for chip design, verification, IP integration, and software security and quality testing. We help our customers innovate from silicon to software so they can bring amazing new products to life.

Web site

I am going to cut straight to the chase of an announcement the company has just made.

“Increased complexity, engineering resource constraints and tighter delivery windows were challenges crying out for a full AI-driven EDA software stack from architectural exploration to design and manufacturing – and we’ve delivered it,” said Shankar Krishnamoorthy, GM of Synopsys EDA Group. “With Synopsys.ai solutions, our customers’ ability to search design solution spaces across multiple domains is in hyperdrive. They’re finding optimal results far faster as the .ai learns run-to-run, and it’s transforming their ability to meet and beat tough design and productivity targets.”

Announcement, 29 March 2023

Analysts have been impressed.

Synopsys is in a race with Cadence Design Systems CDNS, its largest competitor, to add AI to chip design software. While some of the Synopsys tools released Wednesday are catching up to Cadence, Karl Freund, principal analyst with Cambrian AI research, said Synopsys is ahead, with more than 100 chips by customers using its AI tools coming to market.

“They definitely lap Cadence, especially if you look at what’s happened with physical design,” Freund said. “I think they’ll probably be at 1,000 (completed chip designs) by the end of the year.”

Reuters, 30 March 2023

I have no idea which is better, Synopsys or Cadence Design Software. They are both QV recommendations and well worth a place in your portfolio.

Synopsys has a good looking chart. This is the kind of chart you expect to see when a business is on fire. A massive breakout in 2013, a rocket ever since and what looks like a step pattern before the next charge.

Palo Alto Networks grows ARR 50pc with help from AI

Again the description of what they do tells you that this is most likely an exciting company.

Palo Alto Networks is the world’s cybersecurity leader. We innovate to outpace cyberthreats, so organizations can embrace technology with confidence. We provide next-gen cybersecurity to thousands of customers globally, across all sectors. Our best-in-class cybersecurity platforms and services are backed by industry-leading threat intelligence and strengthened by state-of-the-art automation. Whether deploying our products to enable the Zero Trust Enterprise, responding to a security incident, or partnering to deliver better security outcomes through a world-class partner ecosystem, we’re committed to helping ensure each day is safer than the one before. It’s what makes us the cybersecurity partner of choice.

Web site

This ties in with my idea that investors should not be frightened of the obvious. If it looks like a duck and walks like a duck it probably is a duck.

There are headwinds from the macro environment but also many things going right.

The number of deals we closed over $1m grew nearly 20pc year over year, and the value of these transactions grew nearly 60pc. Similarly, the number of greater-than-$5-million deals grew 84pc and a number of greater-than-$10-million deals grew over 140pc. We saw deal values in these cohorts grow significantly. This continued momentum is critical to us being able to drive platform consolidation.

Q2 2023, 21 February 2023

There is a massive ‘something new’ going on at Palo Alto.

We launched our first SASE [service access software stack] capability, Prisma Access, at the end of fiscal year 2019. In the first year, we booked less than $100m in business. Over the last six quarters, we booked about $1bn, with our largest deal last quarter being a TCV [I am guessing that this means something like total customer value] deal for $40m for SASE.

We now have over 4,000 customers and are growing ARR [annual recurring revenue] approximately 50pc. In Q2, we saw a healthy number of large competitive wins in SASE, and SASE has one of our strongest pipelines looking 12 months out. 

Q2 2023, 21 February 2023

As you might expect AI is playing an increasing role at Palo Alto.

AI has the power to transform SASE.

Our integrated security services are now all powered by AI to detect and prevent even zero-day attacks. And we’ll soon be introducing additional AI-driven capability to transform the user experience and using the platform. 

Q2 2023, 21 February 2023

Palo Alto is in transformation mode.

Right now, we’re in the process of transforming our business to software-based and cloud-delivery offerings. Our revenue, which is increasingly driven by our next-generation security capabilities, is becoming more recurring in nature, and we have an opportunity to own a greater share of our customers’ cybersecurity budget. This should allow us to sustain high revenue growth for longer.

Over the last couple of years, we set in motion a plan to expand our operating margin, including driving scale in our faster-growing businesses. Over the last six months, we’ve listened to investors who have encouraged us to focus on profitable growth and accelerate incremental leverage in our business, and we made good progress in Q2. We’re now well-positioned for the second half of the year. We are appreciably raising our margin target for FY ’23 up 200 basis points from our prior guidance and 250 basis points from our initial FY ’23 guidance.

We believe we can continue to build on this into fiscal year 2024 and beyond, putting us three years ahead of our profitability targets we offered at our last Analyst Day in September 2021.

Q2 2023, 21 February 2023

The chart is good with the step pattern that I like to see for a fast growing company.

Allegro Microsystems lifts earnings by 84pc

These guys are storming ahead

“Momentum in e-Mobility applications, including xEV and ADAS, as well as strong demand across our magnetic sensor and power IC product portfolios, continues to drive growth,” said Vineet Nargolwala, President and CEO of Allegro MicroSystems. “ … We also achieved another record quarter in our Industrial business, led by ongoing growth in Clean Energy and Industrial Automation end markets,” he added. 

MarketBeat, 1 February 2023

Below is what they say they do, which sounds exciting.

Allegro MicroSystems is a leading global designer, developer, fabless manufacturer and marketer of sensor integrated circuits (ICs) and application-specific analog power ICs enabling emerging technologies in the automotive and industrial markets. Allegro’s diverse product portfolio provides efficient and reliable solutions for the electrification of vehicles, automotive ADAS safety features, automation for Industry 4.0 and power-saving technologies for data centers and green energy applications.

Website

These guys are on the march as we can see from the graphic below.

Allegro is all about the future and the technological wonders that are coming.

This company has a really interesting geographical mix of sales to with 68pc of sales in Asia.

Last but not least is the impressive, not to say explosive chart. This looks to me like a breakout from two years of consolidation since the shares IPO’d. Prospects look exciting.

The company had a great 2022.

Looking back on fiscal 2022, we are encouraged by strong customer acceptance of our latest sensing and power technologies. Our teams secured record levels of design win activity, and more than half of those wins are for our newest product innovations. For example, our xMR-on-silicon technology, which offers significant performance benefits in magnetic field sensing applications, continues to be adopted and is gaining share globally in a variety of high growth applications within xEV, ADAS, and industrial. Our motion control solutions, like our intelligent gate driver ICs, are being rapidly adopted in data center cooling and xEV HVAC systems, where our advanced solutions offer impressive efficiency, ease of use and ultra-low audible noise. These are great examples of our ability to innovate to provide best-in-class, future-proof solutions born out of strategic, long-term collaboration with our industry-leading customers.

Annual report 2022

The big picture suggests that the company is benefiting from massive tailwinds in the automotive and industrial markets. New technologies for vehicles are needed both under the hood and in the cabin to support vehicle electrification and advanced driver assistance systems (ADAS). These shifts also require technology to enable intelligence and automation in factories and to enable energy efficiency in data centres and green applications. According to industry experts these mega trends are expected to dramatically increase the demand for sensing and power solutions like the ones developed by Allegro.

This looks like a really exciting share to me.

Strategy

The competition for these shares when it comes to winning a place in your portfolio comes from QQQ3 with its incredible three times leverage and daily rebalancing. There are three reasons for considering these shares. First they really are exciting. Second it would be a bit boring to just have QQQ3 in your portfolio. Thirdly is the ability to reinvest gains in buying more shares, either in these three or other shares.

At this stage when we are just entering into a new bull market, which I expect to run for years, it makes sense to build a large portfolio of exciting shares.It will be fun seeing how they develop. It increases your chances of finding massive winners and it should be very profitable.

I don’t have a crystal ball but I believe that all this macro unease, inflation, rising interest rates, fear of recession, war in Ukraine, banking crisis, fear that we are days away from being enslaved by intelligent machines is just so much noise. The big picture is an unfolding technology revolution which is going to produce some spectacular stock market winners.

Share recommendations

Synopsys. SNPS. Buy @ $386

Palo Alto Networks. PANW. Buy @ $199.50

Allegro Microsystems. ALGM. Buy @ $48

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