5 Stocks I'm Selling, Buying & Watching After Earnings
Summary
Daniel provides a comprehensive recap of the Q2 earnings season, focusing on five specific stocks: Limbach, Skyward, Nu Holdings (New Bank), Palantir, and AppLovin. Daniel explains that his strategy involves exiting positions when the original thesis no longer holds true, as seen with Limbach, where declining margins and a 'reset year' outlook led him to sell. Daniel maintains a disciplined approach to valuation, particularly with high-flyers like Palantir, where he acknowledges incredible fundamentals but remains sidelined due to a steep price-to-free-cash-flow multiple.
In terms of market outlook, Daniel highlights a bifurcation in performance; some companies like Skyward and Nu Holdings are seeing explosive growth and market share gains despite broader industry headwinds. Daniel emphasizes the importance of 'circle of competence,' noting that he avoids holding companies like Skyward long-term if he cannot develop a deep conviction in the industry. Finally, Daniel details his recent entry into AppLovin, suggesting that the market's overreaction to a minor revenue miss has created a buying opportunity for a business with 70% free cash flow margins.
Mentioned Stocks
Reasoning: Daniel states that Palantir's fundamentals are 'absolutely incredible,' with revenue nearly doubling and a 63% free cash flow margin. Daniel points out that the company is a 'cash printer' with a pristine balance sheet. However, Daniel advises caution due to a high valuation of 90 times free cash flow, noting that a DCF analysis suggests only a 12% annual return even with aggressive growth assumptions.
Reasoning: Daniel argues that New Bank is highly undervalued, trading at only 18 times annualized earnings despite 50% year-over-year revenue growth. Daniel highlights the impressive scaling where revenue per user is rising while costs remain flat. Daniel recommends the stock as a strong growth play, though Daniel personally chooses to own Mercado Libre instead for its superior data and moat.
Reasoning: Daniel states that the investment thesis broke because the company is now entering a 'reset year' for 2026 rather than a temporary air pocket of demand. Daniel notes that margins are compressing and profits are declining even as revenue grows. Daniel exited the position with a roughly 20% loss, noting that the stock trades at 8.4 times its expected $60 million in free cash flow, but the fundamental turnaround story is no longer what Daniel signed up for.
Reasoning: Daniel describes Skyward as an exceptional performer in the insurance industry with 46% EPS growth and a strong combined ratio of 89.5%. Daniel recommends adding it to a watchlist but does not personally hold it because the insurance industry is outside of Daniel's circle of competence. Daniel notes the valuation is fair at a forward PE of approximately 11.
Reasoning: Daniel recently purchased a small speculative position in AppLovin, citing a massive disconnect between its 50% growth rate and its valuation of under 17 times forward free cash flow. Daniel highlights the company's 70% free cash flow margins and its dominant position in mobile gaming advertising. Daniel views the recent price drop following a minor revenue miss as a compelling entry point.