Dodged a Bullet on APP

I was intrigued looking at App Lovin's (APP) rapid climb and what looks like a very high-margin line of business - but I was suspicious at that recent jump, the S&P 500 inclusion rumors, and the P/E ratio was getting scary - it would even make TSLA blush (at TSLA's current price!) The jump was all post-11/5 so I think what originally drew my attention was "Is this a Peter Thiel company that I didn't know about?"

Once I pick a stock, I do automated trading (and do so with something close to 100 symbols between my eTrade retirement account and what I would call more of a day/swing trade account at IB) - so once I load my interest, strategy, calendar or time-of-day rules, and a budget for the symbol, I let it fly on it's own volition. Why? [because I'm on the west coast, and I'm a good stock picker but I don't like to get out of bed at 5 am every day].

So back to App Lovin -

My picking process is pretty diligent - I look at chart patterns, sure, but I also dig deep into the fundamentals.

1.) I doubted the S&P rumors - S&P 500 companies usually have a couple of things in common - resilience and multiple streams of revenue, not one-trick ponies. That's not intended as a dig against APP, but it seems to be a marketing engine for mobile devices, and it's impressive as a business for the founders, but an unexpected shift in platform interest by consumers or a new ad blocker technology, or whatever, would rapidly impact a business model like that. Getting in the S&P would be a goldmine because they are suddenly included with automatic ETF-purchases for millions of 401k accounts. I doubted that would happen here.

2.) There is a LOT of short-interest in the stock... so much (around 8% of outstanding shares) that some of the price could be a short-squeeze, and while I'm all-in on a good meme stock short-squeeze on a $5 stock to make a few bucks (and I've been known to do that when I have done my homework) - I'm not touching a $350'ish dollar symbol to throw down like casino chips on the craps table..

3.) Insider activity - these guys were selling their own shares like candy canes, immediately after the 11/5 run-up started. I mean - it's all insider-selling... 30,000 shares, 170,000 shares, 5.5 million shares... One LLC took $1.6 billion off the table. Yikes.

4.) And then they are giving themselves more options & shares... usually by 30,000 to 70,000 share tranches (so they can sell more).


Today's news ("No" from S&P) and the rapid rise... I trust my research, but I don't trust the lemmings on this.. I'm a buyer - but at a 30-35x P/E (typical for marketing/tech companies) - so more like $98.70 - $115 / share.