My 2018 Portfolio Performance
Jan 12.97%
Feb 25.35%
Mar 28.02%
Apr 28.03%
May 40.39%
Jun 53.23%
Jul 46.44%
Aug 78.67%
August was an incredible month, with many of our companies jumping 30% or 40% (AYX jumped almost 50%, actually). My entire portfolio is up 22%. That’s hard to wrap my head around. In other words, to paraphrase what someone has said in the past, August was a good year.
All I can say is that, as Saul often says, clearly we have caught on to an undervalued segment of the market – despite how “expensive” these stocks appear to many people, including much of Wall Street – but it’s getting less undervalued all the time, because clearly the market has been catching on over the last couple years (hence the rapidly rising valuations). And of course, as many folks will want to point out, valuations can’t go up for ever, although when companies grow, the valuations naturally come back to earth. I don’t know what to do about any of this except keep a little cash on the sidelines so as to remain flexible, in case there is a sell-off.
Previous Month Summaries
Dec 2016 (contains links to all 2016 monthly posts): http://discussion.fool.com/bear39s-portfolio-at-the-end-of-2016-…
Dec 2017 (contains links to all 2017 monthly posts): http://discussion.fool.com/bear39s-portfolio-through-dec-2017-32…
Jan 2018: http://discussion.fool.com/bear39s-portfolio-through-jan-2018-32…
Feb 2018: http://discussion.fool.com/bear39s-portfolio-through-feb-2018-32…
Mar 2018: http://discussion.fool.com/bear39s-portfolio-through-mar-2018-33…
Apr 2018: http://discussion.fool.com/bear39s-portfolio-through-apr-2018-33…
May 2018: http://discussion.fool.com/bear39s-portfolio-through-may-2018-33…
Jun 2018: http://discussion.fool.com/bear39s-portfolio-through-june-2018-3…
Jul 2018: http://discussion.fool.com/bear39s-portfolio-through-july-2018-3…
My Current Allocations
Ticker Curr% Buy/S Mo Ch YTD Ch
WIX 13.9% 0% 16.9% 93.0%
SQ 12.2% 6% 37.1% 155.7%
SHOP 10.6% -10% 5.4% 44.2%
NTNX 8.6% 0% 15.2% 59.6%
AYX 7.5% -11% 48.9% 129.7%
TLND 6.0% 26% 4.1% 64.2%
MDB 5.5% 0% 33.0% 146.0%
NEWR 4.1% NEW 5.2% 77.9%
PAYC 3.8% -40% 46.0% 93.1%
TWLO 3.6% NEW 39.3% 241.8%
PSTG 3.5% -54% 23.9% 69.2%
INST 3.3% -29% 5.8% 23.7%
ANET 2.4% 0% 16.9% 26.9%
options 2.5%
cash 12.5%
New 2018
January - No adds
February - AYX, NEWR, OKTA
March - MDB
April - No adds
May - NTNX
June - PVTL
July - PAYC (again), MDB (again)
August - NEWR (again), TWLO (again)
Sold 2018
January - TTD
February - TDOC, ALRM
March - NVEE
April - MDB, OKTA, NEWR
May - none
June - PVTL, HDP
July - MU, HUBS
August - none
I will now discuss each of the 13 companies in which I hold shares.
WIX.COM - WIX (13.9%)
About the company: Wix is a company that helps users create websites, and then hosts them. It makes most of its money by charging subscription fees for premium content. They are very affordable, so people use them for all sorts of reasons – entry into ecommerce, a personal blog, a professional portfolio. They have some powerful tools for experts, but even a novice like me can create a website for free. Wix has over 125 million users, and more than 3 million of them pay for premium accounts.
Latest Quarter Review: http://discussion.fool.com/wix-june-quarter-33135804.aspx
Recent Action: None in August.
Conviction Status: This is a rare company where I think the long term growth will be outstanding and the market cap is actually lower than I would expect (as is the PS ratio). Don’t see many of those right now. If the PS were 15 here I’d probably hold Wix to a smaller position, but with the PS at 9 or 10, I’m happy with up to a 15% position.
SQUARE - SQ (12.2%)
About the company: If you’ve ever paid with a credit card at a local vendor, there’s a good chance they used a Square device to take the payment. Square also provides many other services available to their customers. One of the most profitable is Square Capital, which really leverages their data advantages to offer extremely profitable and low-risk loans to their customers.
Latest Quarter Review: http://discussion.fool.com/square-june-quarter-more-wow-33137913…
Recent Action: I added to my already large SQ position in early August after their dominant earnings report. This acceleration is incredible. SQ is taking a huge share of several growing markets. It’s a powerhouse.
Conviction Status: This is not a company I’m uncomfortable about at all. Its high valuation will probably prevent me from adding, but I’m quite comfortable with it as up to a 15% position.
SHOPIFY - SHOP (10.6%)
About the company: To slightly modify what they say about themselves, Shopify is “the only platform you need to build your [small or medium sized business] empire [online].” They provide a customizable website you can set up as an online “storefront,” inventory management to track your product, methods of taking payments, etc, etc, etc. They’re innovating and growing…and boy are they growing. They make money when businesses sign up with them, and then they make more when those business grow and sell more stuff.
Latest Quarter Review: Here’s the quick highlights by Darthtaco: http://discussion.fool.com/shop-plus-mrr-grows-91-yoy-33136307.a…
Recent Action: I trimmed a bit in August. I’ve done some soul searching, and I have to say that while I’m still very hopeful for Shopify, a couple things they said in the call were concerning. I think they have a clear mandate: if revenue is going to decelerate, spending must also. We’ll see how this shakes out the next couple quarters.
Conviction Status: I’m not selling my large position right now, but I can’t see myself adding much either. I’m happy with a 10% position, but I see no reason to stretch to 15% at this point. I still have hope for Shopify, but positions over 10% should be slam dunks, and it’s just not anymore. There are a few questions they need to answer before I’ll again be as confident as I once was. But I remain hopeful for now.
NUTANIX - NTNX (8.6%)
About the company: Nutanix provides a single point of control to for IT professionals to manage infrastructure and applications, on-prem and in the cloud, at any scale.
Latest Quarter Review: I appreciated both Chris and Saul sharing their thoughts:
http://discussion.fool.com/ntnx-thoughts-33995148.aspx
http://discussion.fool.com/my-thoughts-about-nutanix8217s-result…
Recent Action: None in August
Conviction Status: I’m comfortable with roughly an 8% position. It seems undervalued, but it may take the market a couple quarters to catch on. This might be a good time to add, but I’m just waiting for now.
ALTERYX - AYX (7.5%)
About the company: Alteryx is a little company that is changing the landscape of data integration and analysis for data scientists. They have a product that from all accounts is inexpensive, easy to implement, and saves users incredible amounts of time while enhancing accuracy. The companies who try it seem to love it, because every year they spend (on average) 30%+ more money with Alteryx!
Latest Quarter Review: http://discussion.fool.com/gross-margin-of-89i-mean-that39s-not-…
Recent Action: I trimmed just a bit after the huge run up.
Conviction Status: As long as this company turns in incredible results that show they are dominating their niche, I’m comfortable with up to an 8% position, even though the valuation is very high. With a more favorable valuation I’d go to 10% or higher – just doesn’t seem like now is the time to back up the truck.
TALEND - TLND (6.0%)
About the company: Talend has carved out a niche within big data integrations by specializing in Hadoop, an expertise that will not be easily disrupted. Saul has called them a “category crusher,” a leader with no viable competition in its niche. I tend to agree, though others will not ignore this space forever. Hopefully Talend will continue to build up years of subscription revenues while they occupy the catbird seat.
Latest Quarter Review: (I meant Q2) http://discussion.fool.com/bear39s-talend-q1-thoughts-33142874.a…
Recent Action: Added significantly when I realized that there’s a camouflaged growth situation with cloud and big data revenue.
Conviction Status: I’m comfortable with up to an 8% position. Wouldn’t go over 10% for sure, because it’s not an industry where I feel I can really understand the demand drivers, but I can follow the money.
MONGODB - MDB (5.5%)
About the company: “MongoDB is the leading modern, general purpose database platform, designed to unleash the power of software and data for developers and the applications they build. Headquartered in New York, with offices across North America, Europe, and Asia-Pacific, we are close to where you do business. MongoDB has more than 6,600 customers in more than 100 countries. The MongoDB database platform has been downloaded over 40 million times and there have been more than 1 million MongoDB University registrations.”
https://www.mongodb.com/company
Latest Quarter Review: Here’s Saul’s fantastic notes on the quarter: http://discussion.fool.com/my-notes-on-the-mdb-conf-call-3309051…
Recent Action: None in August.
Conviction Status: Here’s another where I don’t really get the industry…just following the money. MDB was up an incredible 33% this month on little news. I probably won’t be adding, but I’m comfortable with a 5% or 6% position. Might go up to 8% if it wasn’t so expensive.
NEW RELIC -NEWR (4.1%)
About the company: New Relic monitors web and mobile applications in real time, detecting issues before they become problems, and helping companies figure out where the pain points may be before it costs them sales, or even customers. Along with Cisco’s recent acquisition, AppDynamics, and a private company called Dynatrace, New Relic is one of the main leaders in the APM space (Application Performance Monitoring). Also, they partner with Splunk.
Latest Quarter Review: from Fish - http://discussion.fool.com/new-relic-q1-2019-earnings-33143321.a…
Recent Action: Bought back in during August.
Conviction Status: Well, I’ve just been back and forth on this one – mostly based on valuation. But I think this company is just starting to throw off cash. May have rapid EPS growth soon a la Paycom. When they didn’t go up on a very good earnings report, I had to get back in.
PAYCOM - PAYC (3.8%)
About the company: Paycom’s offers a comprehensive payroll / HCM solution highlighted by their single-database software as a service solution. This greatly simplifies things for small to medium sized companies who want their HR data to be in one place.
Latest Quarter Review: Starrob did a pretty good write up on the PAYC board for you premium members: http://discussion.fool.com/4056/payc-12702-2077-1955-paycom-soft…
Recent Action: I’m still very bullish on Paycom, but when a position is up 46% in less than a month, it’s hard not to trim.
Conviction Status: I am comfortable with up to a 10% position here, but I’m not sure I’ll let it get that large.
TWILIO - TWLO (3.6%)
About the company: Twilio makes web service APIs for phone calls and texting. Software developers who subscribe to Twilio’s platform can use these services in their products, and this works out great on both sides: from customers’ perspective they only have to pay when these services get used, and from Twilio’s perspective, the more the services get used, the more Twilio gets paid.
Latest Quarter Review: from Sau:
http://discussion.fool.com/my-take-on-twilio39s-results-33142391…
http://discussion.fool.com/my-twilio-conference-call-notes-33143…
Recent Action: Saul’s euphoria definitely got me interested again, but I just couldn’t stomach the gross margin and rising OpEx. But after talking to a friend in the business who uses Twilio, I had to get back in for a small position. Twilio is the gorilla in their niche. Hard to see them not continuing to grow and do great.
Conviction Status: Probably won’t go higher than 5% here. I believe in the growth, but I can’t ignore the margins.
PURE STORAGE - PSTG (3.5%)
About the company: Pure Storage provides flash storage arrays. Storage arrays are nothing new, but flash is different. How different? Bert Hochfeld says it’s the biggest change in storage since spinning discs replaced tape: https://seekingalpha.com/article/4007341-pure-storage-nimble…
Latest Quarter Review: http://discussion.fool.com/here-are-my-notes-from-the-quarter-co… Jimbo’s thoughts echo mine. Everything seems to be moving in the right direction for Pure, but they do sell hardware, after all. Their target margins are underwhelming.
Recent Action: I sold about half my position. It’s not that I don’t want to own Pure - I do - but other stuff is more compelling at present. They’re up from $10 a share to $27 or so. I’ll see what happens, but I’m allocating more of my money to software companies with better margins, growing faster.
Conviction Status: Pure is a best in class leader with a lot of room to run, growing fast and on the verge of becoming profitable. I’m comfortable with a 5% position here. Probably willing to stretch to 8% again if I feel it’s undervalued, but I don’t right now.
INSTRUCTURE - INST (3.3%)
About the company: I brought Instructure to the board in September 2017. http://discussion.fool.com/why-i-bought-instructure-inst-3283437… It is a cloud-based learning management platform for academic institutions and companies across the world. Their platform enables virtual learning, and they’ve gotten so good at it in the education context (since they started in 2008) that they’re now (actually since early 2015) offering it in a business context as well. Their classroom product is called Canvas, and their business solution is called Bridge. They are constantly signing school districts and businesses to expand their reach to hundreds of thousands of new users.
Latest Quarter Review: http://discussion.fool.com/i-guess-my-thoughts-would-be-no-longe…
Recent Action: I added a significant number of shares last month when the price dropped. When it rebounded some I sold that trading position. I still believe, but I’m not expecting fireworks.
Conviction Status: I am comfortable with about a 5% position.
ARISTA NETWORKS - ANET (2.4%)
About the company: Arista sells network switches, just like Cisco, except Arista’s switches use SDN (Software Defined Networking), which I understand makes for better control, performance, and security. It also really seems like Arista has the best in class product.
Latest Quarter Review: Jim’s will suffice - http://discussion.fool.com/anet-33139472.aspx
Recent Action: None in August.
Conviction Status: I don’t feel like I have superb insights to this business, but judging by the likely outcomes, I do think it’s undervalued. I’m comfortable with up to a 5% position.
My best to all!
Bear
“I guarantee nothing but hard work.” - Bear Bryant, Alabama Football Coach, 1958 - 1982
“A man’s gotta know his limitations.” - Dirty Harry
“If you must tell me your opinions, tell me what you believe in. I have plenty of doubts of my own.” attributed to Goethe (but not sourced)
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” - Attributed to Albert Einstein
“exponential compounded growth does not fit the analytical backward looking skill sets of most Wall street analysts” - mauser96
“I presume the thing is to ride the momentum for the short squeeze and exit fast with enough money for a few months supply of whisky before everyone realises it’s a value trap.” - Strelna