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Stocks of the Week!

In this email:

• $13 Billion in the Pipeline💰👀

• 100 Side Hustles For 2025 💰️

• Tech’s Golden Goose Keeps Laying 🥚

$13 Billion in the Pipeline💰👀

Sexy isn’t always the answer. Sometimes boring money printers will do just fine.

Parson’s Corporation fits perfectly in that bucket.

They’re not building the next social media. It’s not an AI update every other week. But what they are doing is locking down contracts from (arguably) the best clients you can have. US Government.

Bring You Up To Speed 🏃 

So who are Parsons Corporation?

In short, they’re the government’s go to problem solver. They’ll handle everything from missile launches to water system clean ups. Cybersecurity? They’ll do that too. Think of “Swiss Army knife” for infrastructure & defense. 🛠️🚀

1. Federal Solutions (56% of revenue):
   Cybersecurity, missile launches & securing embassies. If it’s high-tech & top-secret, they’re probably involved.

2. Critical Infrastructure (44% of revenue):
   Bridges? Water treatment? Fixing up mines & making the world a cleaner place? Yes, yes, yes. They do the unsexy but super important stuff that keeps society running.

Numbers That Matter 🧮 

• Stock Price Growth: Up ~42% CAGR over the last 3 years. 🚀 

• EBITDA Growth: Clocking in at ~35% CAGR over the same period. When stock prices rise like crazy, it’s not always a good thing. But when you have steady EBITDA (operating profit) growth to go with it? You love to see it.

• Order Backlog: A fat $8.8 billion in contracts already lined up, plus a $13 billion pipeline. Can you get revenue any more predictable than government contracts?

The Growth Story 📈 

Revenue’s grown from $3.6 billion in 2021 to $6.5 billion today. That’s a 29% annual growth rate, folks. For context, their peers are crawling along at ~6.5% growth. Not even close. And there’s more…

• Margins are climbing. EBITDA margins recently hit the 9%+ range & keep moving higher. Why? Not luck. They’re taking on more sophisticated, high margin projects.

• Analysts Set the Bars Too Low Parsons has been beating earnings expectations left & right, quarter after quarter.

Why I’m Bullish 🐂 

They’ve clocked in some impressive numbers but I think this bull run could still be a baby. There’s a few reasons.

1. Underpromising, Overdelivering: Management consistently lowball guidance & then pull rabbits out of hats. And it’s not to hide from poor results, they’re just that good.

2. Massive Pipeline: That $8.8 billion backlog & $13 billion in bookings is set for their pockets. It’s cash flow just waiting to happen. In a world of high risk bets, it’s nice to find a sure thing every once in a while.

3. Low Debt, Big Moves: Their leverage is super manageable at 1.2x net debt/EBITDA. It keeps them flexible & it means they’ve got enough dry powder to make acquisitions if the right opportunity pops up.

Valuation. The Cherry on Top 🍒 

Now, for where we make out money. Valuation. Parsons is trading at an 18.9x EV/EBITDA multiple, which is right in line with its historical average.

If it’s average, why care?

• Based on their growth, earnings potential & margin improvements, we’re forecasting 40-50% upside from here.

• Even if you assume modest growth and a slightly conservative multiple, this thing is still undervalued compared to peers.

Risks ⚠️ 

The biggest risk if their biggest strength. Government contracts.

Over half their revenue comes from Governemnt contracts. A change in government policy could pull the rug out from under them. Is it likely? Meh. I’m not particularly worried. I can’t imagine a world where the change is so drastic it doesn’t make Parsons a solid bet.

There’s also the older, lower margin contracts dragging the team down. But those contracts are nearly up so not a major cause for concern either.

My Plan 🗺️ 

It’s a lot smaller than I typically look at. Their market cap sits at just shy of $9billion. I usually like $100billion+ as a rule of thumb.

That said, they’ve got growth momentum, fat margins, & a pipeline bursting with cash. My position size will be in line with the market cap. A small part of the portfolio. But I think this has all the ingredients to be a top performer.

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Tech’s Golden Goose Keeps Laying 🥚 

Alex Hormozi says “We need to be reminded more than we need to be taught”

Consider this your reminder that it’s not too late to get on the Nvidia bandwagon.

“But they’re up over 131% in the last 12 month?!”

I’m not crazy. There’s more growth to be had here. Hear me out.

Let me Explain 👂️ 

I can’t emphasise enough how strongly I feel that AI is still in it’s baby steps. Do your parents use AI? Is it even commonly used by your pals?

If you’re like me, the answer is no. But it’ll be a yes in the future.

And companies like Nvidia are getting so big with so much cash that it’s going to be near to impossible to dethrone them. That means they’re perfectly set to hoover up all the cash that’ll be directed towards AI in the coming years.

Here’s what I mean.

• Nvidia = AI Kingpin 👑: Their new GeForce RTX 5090 GPU debuted at CES 2025, flexing 92 billion transistors. What does that mean if you’re not a nerd? It’s twice as fast as their already insane 4090. Not even AMD can compete here.

• Dominating the Market: Nvidia owns 90% of the discrete GPU market. The closest companies in the rear view mirror are AMD & Intel. Both are playing catch-up. AMD’s inventory piling up like a bad game of Tetris & Intel is bleeding cash. 😬

• R&D Madness: Nvidia’s innovation budget is nearly 2x that of AMD. This is what I meant when I said it’s going to be near to impossible to dethrone. How can you compete when your competition can spend twice as much as you & attract the best talent to work on it?

(PS Despite the AMD bashing, I do actually think they’re a decent investment in their own right. But that’s for another day…)

Numbers That Matter 🧮 

This is going to be like me breaking down how good Ronaldo is at football. Or Michael Jordan is at basketball. No surprises but let’s do it anyway.

• 66% EBITDA Margin: Insane efficiency. Compare that to anyone else in the market & you’ll see by Nvidia can outspend them all.

• $57 Billion TTM Free Cash Flow: Yes, billion with a "B." AMD? Just 36x less. 💀 

• $28 Billion Net Cash: An insane cash pile that they’re ready to use to growth their numbers even more. I wish someone would give me the 16 digits on the front of that debit card

And if you think I’m crazy for thinking there’s more upside, I’m not the only one. The analysts consensus is over 20% upside.

If you really take a second to think about how dominant Nvidia are, I think this is underselling it.

What’s Powering Rocket? 🚀 

I’m talking a big game. Now where can you expect to see all this money coming from?

1. AI PCs Are Here: Nvidia’s AI enhanced RTX PCs are hitting the shelves. Demand is expected to grow 28.8% annually through 2030.

2. Big Tech’s Spending Spree: Microsoft ($80B), AWS ($11B), Meta ($10B)… every tech giant’s got their hands in their pocket to build AI data centers. Guess who’s supplying the chips?

3. Demand > Supply: Nvidia’s new Blackwell GPUs are 15x oversubscribed. Let that sink in. 15 times. It’s great to have that much demand…. it could leave a gap for competition, let me get on to that…

The Risks ⚠️ 

So about that.

If they’ve got 15 times more demand than they can supply, that leaves a whole bunch of customers either waiting in a queue. Or they’ll shop elsewhere. (That’s why I think AMD might be a great buy in their own right if that can snap up even a portion of the impatient Nvidia customers.)

There’s also the ever-present risk of China-Taiwan tensions escalating. And the new semiconductor bans in the China-US trade war might stump growth a little.

I think these worries are mostly overshadowed by just the sheer dominance they have in the market.

My Plan 🗺️ 

No prizes for guessing what I might be up to.

Nvidia is my largest holding right now at 9.5% of the portfolio. The plan is to keep the allocation somewhere around 10% for the foreseeable.

With R&D spending not even close to the competition, a huge trunk of cash & effectively a monopoly on a market that’s going to explode, I want most of my chips on them.

Sure, there’s some risks. But when isn’t there?

These kinds of signals make me feel like the biggest risk is leaving them out of a portfolio.

That’s all! See you same time next week 👋 

P.S Hit reply & let me know what you thought of this weeks newsletter. All feedback is welcomed ❤️