You know what they say about long term holders being short term holders whose stocks are down… I’m in the same boat @mikebrisy but I have bought on market today and believe these are the sorts of opportunities we have to grasp in quality stocks. Time will tell.

@GazD LOL, quite right. I have also been considering whether to buy more, for the same reason.

What I can't figure out as yet is whether this morning's move is correctly baking in the quick calculation I've done. If brokers update notes over the next 2-3 days,and they get the same numbers, then I'm waiting to see if there is a further sell-off. Going into this morning, FY25 still has FY EPS in positive territory. That might change!

Now, if that happens and then there is a further negative SP response, then I will probably add more. But I want the bad news to be fully baked in the SP.

Some of my biggest historical investing losses have been when I have added more to a declining position. Now with $AD8, I am happy in that I have protected myself with a modest position size. i.e., it is not painful for me to be down in the short to medium term, as the long term thesis is intact. So, I am minded to learn the lessons of my personal investing history and do nothing today.

In this industry, the inventory cycle is 90-180 days in steady state. Given that $AD8s is more B2B products than B2C and the supply chains are global, I imagine we are talking at the upper end, so assume 180 days. In a bullwhip transient oversupplied situation, that might blow out to 180-360+ days.

Ironically, the deeper the negative whiplash we are now in, the faster the return to equilibrium. (Over the next few days, I might even do some modelling on this.) The dream scenario is that the market totally overreacts to a deep 1H FY25 backlash, which then sees a recovery starting in 2H FY25. My sense is that we won't see the recovery in the full 2H FY25, but it should start then, I believe this to be the case because we can estimate the magnitude of the over-buying in FY24, and guesstimate the 1H FY25 underbuying (where the terms "overbuying" and "underlying" are relative to the underdisturbed long term growth trend, which we don't know but can estimate.)

So my thoughts are: 1) the SP bottom might not be in and 2) when it does come in it could be a fantasic buying opportunity.

Part of my plan to re-enter $AD8 was not to commit a renewed full position too early. (But I have to be honest, I didn't see the bullwhip coming - and I should have because I teach this stuff in my side hustle!!)

Bottom line: there is still too much short term uncertainty in this for me to commit new money.

@GazD @mikebrisy

I bought AD8 in RL on the last major fall, when the price got to around $6.50 on the day (I bought @ $9.10). I was speculating that the SP would recover quickly. It did, (I Recall being up ~24% for a minute) but dropped away again.

Figuring a recovery is a long way off, I sold last week at a ~10% profit then the next trading day the price shot up to ~$10.70 and I was berating myself.

Today that internal voice is not being quite so harsh on this issue.

I still believe the company has good prospects longer term.

Not holding at the moment. Watching closely.

@mikebrisy thats an eloquent and well thought out position. I’m taking a super long term approach with the simplistic view that this thing will be much bigger in 5 and 10 years.

@Arizona well played! I have sometimes played the short term game with both hits and misses but I see this as a high quality botttlm drawer stock hence my approach (for better or worse)

A great set of posts by @mikebrisy.

I think it's right to put all the focus on the bullwhip effect. The quarterly numbers are almost meaningless at this stage, because they're so far detached from end-user demand due to the build up of inventory being run down. If anything, the declines are just a measure of how much supply had been built up in the system

The important numbers are going to be - when it bounces back, at what level will the revenues be as this will be a much better indicator of the current underlying demand. The other one is the software units revenue/gross-profit - this should be much closer to actual demand as software licenses cannot be stockpiled like chips (though the OEM AV equipment products still can).

It's difficult to see any evidence of end-user enthusiasm waning. Product dominance is increasing, more people are getting Dante training and if anything it's accelerating (30k per annum previously and now nearly 50k per annum).

@mushroompanda - yes, I'm doing some modelling which shows that if the bullwhip plays out over FY25 and we are back to "normal" in FY26, then - based off today's numbers, there is huge scope for "disappointment" in FY25, followed by an even more "positive surprise" in FY26. I think this might be tradeable.

I mean, just think of the implications for SP, if the future looks like this.

Simulation: Total Revenue 2021 - 2027 the same for undisturbed and bullwhip cases. Overall revenue CAGR = 29%.

Hint:

Ugly: 1H FY25 and FY25 Revenue Growth, Gross Margin Growth and EPS growth to PCP

Opposite of Ugly: 1H FY26 and FY26 Revenue Growth, Gross Margin Growth and EPS growth to PCP

@GazD I think you are right - It will be much bigger in 5 and 10 years. And I agree that it is a quality stock. At the same time, I think there is some downside risk in the short to medium term, providing a buying opportunity in there somewhere, but ........I've been wrong before.

This is a great thread and yet again showing the value of this community.

Largely in agreeance with all the above, especially @mikebrisy. I'm on the same page/in the same boat, currently waiting to see how this pans out before adding to my position. I'm fortunate enough that I got in at a lower price during the last sell off in 2022, managing to pick close to the bottom (all luck no skill there). So there is little overhead tax with this one still being a winning position for me (in the near term).

I do believe this will be a longer term winner, but to the extent to how much of a winner does depend on the forthcoming financial years, namely FY26 and FY27 as we get some level of normality back. So the intention is to add to my position, however, I will wait and see how this pans out over the next 3-6 months - take this as a sign that it will likely recover and reach new highs while I "wait" for a better price to add at.

As a final thought, it might be worthwhile keeping a close eye on competitors during this FY to see if their revenue increases at a higher rate than previously shown in prior financial years. Whilst AD8 still has a huge market share and dominates, competitor growth during this "transitional" phase is something to be aware of.

@mikebrisy haven't looked at AD8 closely today, I built a DSE model on last quarterly, but I will and the above is exactly what i was contemplating, my first guess was 20% cagr u/l and you have used 29%. ill do a few and see what it looks like, always disconcerting when the destocking and restocking cycle (im not using the bullwhip term, im old school lol) overwhelms the underlying growth story, we like to believe growth always prevails. but that life, inventory changes can be huge.

@Solvetheriddle Yeah, I just did the 29% to illustrate the concept. I'll run others before I make any investment decision.

However, depending on when you start and the number of years of real revenue growth you include in the model, and the lower the long run revenue CAGR, then the worse the bullwhip, given that the overstocking is now measurable (vs. the trend). In other words, while the long run revenue CAGR is an assumption, the cumulative "overstocking" that follows is an empirical fact. The lower the CAGR, the higher the overstocking that has already occurred.

Thereofore, the lower the underlying revenue CAGR, the bigger the future SP volatility that can be expected. Sweet.

The good news is that I don't think this is going to resolve quickly. There should be plenty of time to assess this properly.

In a similar position with @Seymourbutts. Long term shareholder of AD8 from way back in the MF Pro glory days and fortunate to be still in the money despite the significant falls.

It takes a high portfolio allocation, high quality, company holding like AD8 to get into these short-term troubles to remind myself that (1) investing is NEVER, EVER easy and does not go in a straight line (2) my investing temperament has and still is, a constant WIP - the drop in paper profits stings, for sure (3) doing nothing and keeping my head intact with all the insights from everyone, is bloody hard work and (4) focus, on the long term ... its, all about the long term.

I'm sitting tight, with the view of adding only on a highly opportunistic basis as AD8 is still a decent sized holding for me, despite the brutal chop down in size. FY25 is a write-off, the long term oppportunity is completely intact, so there is a lot to look forward to. Am keeping this simple perspective to avoid my over-thinking and over-analysing this ...

Discl: Held IRL

Totally agree @Jcmleng ,

I too was the beneficiary of Joe Magyer and Matt Joass's amazing stock picking abilities at MF Pro.

AD8 was my largest holding at the beginning of the year but now not so much. The thing I'm constantly reminding myself is that I am a long term investor. Not a few halves or even years but hopefully, many years.

I still Hold some WTC, XRO, PME, AD8 (and ALU until recently) from my PRO days and I couldn't have achieved the returns I have without that long term mindset.

Time in the market is so true. Matt Joass is big on the long term and he has the record to back it up.

Thats not to say I haven't sold along the way because I have and even with a long term view you are still tested at times. Most of those sales are at much lower prices than where share prices now sit.

I've also had to endure some pretty big draw downs on those stocks at times so today's AD8 drop and yesterday's WTC correction are part of the deal.

At times like this I ask myself where do I think these companies will be in 5 to 10 years and what will they be like compared to now. I don't have a crystalball and I don't know what the future hold any more than anyone else but looking back over 8 - 10 years sometimes helps how you think looking forward.

Disc: Hold IRL - WTC, PME, XRO & AD8

Also have funds invested in MAVEN Funds Management ( Matt Joass as CIO)

Me too @UncleWally. MF Pro 1, and Lakehouse Global for me. How lucky were we? Changed my life. Timing was great just as the bull market began 10+ years ago, and then supported by the Fed every time there was a wobble, and now the AI bubble. Just good luck really we chose Joe and Matt. But you have to be in it to win it.

I must admit, I have been taking some chips off the table recently and putting them in my super.