• 2 hours ago
Eric Krull has been a full-time trader since 1999 and has been a hedge fund manager since 2010. Prior to that, he was a business strategy consultant, financial analyst, project engineer, and electrical engineer.

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Transcript
00:00The ones I like, or the ones I'm showing here
00:02are Kava, Astera Labs, and Reddit.
00:06Kava has probably been the best performer.
00:08They, again, are a restaurant that is expanding nationwide
00:14and there have been a history of IPOs
00:17in the restaurant field that grow and grow and grow.
00:20This is like the Mediterranean Chipotle.
00:24And we all know how long Chipotle's been growing
00:26and continues to grow.
00:27You can go as far back as McDonald's
00:29and there's always been a history of restaurants
00:32that do well after the IPO.
00:34And you look at Kava, it's clearly
00:36in its institutional advanced phase
00:37and continuing to advance.
00:40And it's a good stock right now
00:42that if you rent it, it'd be a good hold.
00:44Astera Labs, they make, they work with,
00:49in the AI world, in that they make optimum efficiencies
00:53for connectivity for chips and things like that.
00:57I don't understand anything that they do.
01:00I'm not a chip expert or anything like that,
01:03but when I read about what they do,
01:05they are definitely involved with the AI world
01:08and they are pushing efficiency
01:10and we know how much power hungry AI servers are.
01:14And if you look at that,
01:15it's acting just like the way we like to see it.
01:18It came out, it made a little run,
01:20and then came down, undercut the day one low,
01:23and now it's starting in this due diligence phase
01:25to hopefully form a base.
01:27And if I see that breakout and break above the old high
01:30that's sitting there just below 90,
01:32to me, that would be a buy area.
01:34And Reddit did that already.
01:36Reddit had a really quick undercut of its day one low,
01:40it had a nice run up, and then it undercut
01:43a little bit more and formed a base,
01:44and it just broke out last week.
01:46It's more of a V-shaped base,
01:49which are a little bit harder to trade.
01:51But Reddit looks like it's above the turbulent zone,
01:54it's above its all-time high,
01:57and looking like it might be getting to run.
02:00Do they all seem to do the same thing off the bat though?
02:03They get the initial pop and all the excitement,
02:05and then a couple weeks later,
02:06they almost always seem to go down for a little period.
02:09Isn't that the case?
02:11And why do you think that is?
02:13Even looking at Reddit, you can say where it is now,
02:15but the first couple months for the stock were not good.
02:17The first couple months for Kava
02:19were not that great either.
02:20Eventually they turned it around,
02:21and these were the good ones.
02:22Some of them don't turn around.
02:23Why do you think it is they come out,
02:25the hype and everything,
02:26and then it's just buyer exhaustion right after the IPO,
02:30and everybody's excited,
02:31and then all of a sudden it's out there
02:32and people aren't as excited?
02:34Why always the hangover after the initial IPO?
02:37The why is harder to understand than the what.
02:40The what is you're exactly right.
02:41And in our book, we've studied over 3,000 stocks,
02:45and we found that the vast majority,
02:4791% undercut their day one low within the first two years,
02:5055% undercut it within three weeks.
02:53So you're right.
02:54They come out, then they get hit and then come down,
02:58and then they form this institutional due diligence phase
03:00where I think institutional investors,
03:03for the next six months to two years,
03:05they wait for some earnings reports,
03:07and if they see that the sales and earnings
03:09kind of grow into what they promised,
03:11then they start to advance.
03:13And sometimes they go quicker.
03:14Like maybe Astera Labs and Reddit,
03:17maybe already institutions are saying,
03:18we trust what you're saying, it looks like you're growing,
03:21and they start to push the stock up.
03:23But there's that initial excitement,
03:25and then they usually get punished.
03:27And then it takes a long time before institutions
03:30and other investors say, okay, we trust what you promised,
03:34and we see that you're performing.
03:35And in our book, we identified different patterns,
03:39and we named what kind of patterns those are.
03:42And we talked about like the rocket ships,
03:45the disappointments that never do anything,
03:49the late bloomers, and also,
03:54and now it's losing my mind here,
03:58but we came up with six different patterns of stocks
04:02and how they perform,
04:03and it seems to repeat over and over again what they do.

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