Hortonworks opportunity

Anything stick out to anyone?


Ticker	 YTD Gain  Rev Growth	PS Ratio 
SQ	   59%	       47%	 21.9 
OKTA	   53%	       59%	 15.2 
WIX	   46%	       41%	 9.2 
AYX	   45%	       55%	 16.5 
SHOP	   44%	       71%	 22.6 
ZEN	   42%	       39%	 11.6 
PAYC	   38%	       30%	 15.1 
MDB	   37%	       50%	 13.1 
VEEV	   36%	       23%	 16.9 
NEWR	   34%	       35%	 12.9 
HUBS	   33%	       39%	 11.7 
INST	   32%	       39%	 8.3 
TLND	   31%	       36%	 9.7 
SPLK	   28%	       37%	 11.8 
TEAM	   26%	       43%	 18.0 
**HDP	    0%	       44%	 5.5** 

That’s right. Not only is Hortonworks (HDP) the only company on this list (of cloud companies) whose stock hasn’t appreciated AT ALL in 2018, it’s also (at least by PS ratio), the least expensive, and its revenues grew faster than all but 5 of the others last quarter. Really it’s growing even faster than 44% – subscription revenue (which is most of their revenue…and the most profitable portion) was up an incredible 63%!

In case you missed it, here’s my take on the latest quarter: http://discussion.fool.com/hortonworks-kills-it-32979213.aspx

I have added shares in January (13% more shares), and February (63% more shares), and this month I have also added some options. It’s bounced back 12% in March from February lows, but it’s got a loooooooooooong runway of upside from here!

Bear

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Anything stick out to anyone?

Wow, you may be onto something there, Bear…or the other 15 stocks are going to all drop by about 30% to even things out. :wink:

That’s interesting. I had just reread your earlier post and opened a position in HDP earlier today!

dave

(born in Bama and a big fan of the Bear)

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Hi Bear,

thanks for bringing this up. Didn’t know HDP yet so I quickly read their wikipedia page (I know…:-)) and found this, which sounds a bit like a red flag to me:

“When a secondary share offering was announced in January 2016, the share price dropped to about half of what it was at the IPO.[26] After operating losses deepened through 2015 and 2016, Herb Cunitz (who had been president since 2012) left the company in August 2016.[27] In 2016, the company was ranked #42 on the Deloitte Fast 500 North America list.[28] After a round of layoffs, Raj Verma was the president and chief operating officer from January 2017 to July 2017.[29] Scott Davidson was named the new chief operating officer from July 2017.”

Operating losses deepening, top executive leaving and layoffs… makes me a bit worried. Maybe not everything running so smoothly there? Do you think these things are behind them/improving?

Best wishes,
Niki

2 Likes

Hey Bear,
I can’t find the article and am out of time to look. But basically I was reading about how Hadoop and the article was hinting that the promise of Hadoop and/or big data wasn’t quite being realized because once everyone had all the data, they still weren’t really making it actionable.

https://www.bernardmarr.com/default.asp?contentID=1080
The above article is a nice simple way of explaining what Hadoop does/is.

Anyway - the premise of the article I can’t find is that the real growth is in the companies that take that data and help you turn it into actionable insights. This would be more akin to AYX (Alteryx). This is even mentioned in Alteryx web site: https://www.alteryx.com/about-us

“Companies of all sizes realize the tremendous potential for data, but many struggle with turning that data into something they can take action upon, quickly enough for it to make a difference. Legacy approaches and tools for analytics have simply slowed them down even more. And, analysts in line-of-business departments such as sales, marketing, and finance are exhausting the capabilities of Microsoft Excel and other point solutions, and have grown tired of having to depend on data scientists and specialized staff for data prep, blending, analytics, and sharing of insights.”

I did like HDP, compared to Cloudera and MapR is a private company so not option to invest there.

Talend is tied more to HDP than to Alteryx, as this is how they describe themselves:
https://www.talend.com/about-us/
“Talend is a next-generation leader in cloud and big data integration software that helps companies become data driven by making data more accessible, improving its quality and quickly moving it where it’s needed for real-time decision making. Talend’s open-source, native, and unified integration platform, Data Fabric, enables customers to embrace new innovations and scale to meet the evolving data demands of the business.”

I am not saying TLND and HDP can’t/won’t continue to be great stocks, but I am swayed a bit by the logic that companies will pay more for actionable intelligence that can give them a competitive advantage or help them squeeze out more profits or advertise better, etc… TLND and HDP strike me more as the picks n shovels play in the Big Data space.

If I was limited in being able to invest in all 3 and only had room for 1 more port addition, I tend to lean towards AYX.
Just curious your thoughts and how you look at the upside and TAM for the different players in the Big Data space like AYX vs TLND vs HDP.

thanks,
Dreamer

8 Likes

Operating losses deepening, top executive leaving and layoffs… makes me a bit worried. Maybe not everything running so smoothly there? Do you think these things are behind them/improving?

Upon hearing the news of their head of Sales leaving after less than a year in the position (this was Spring last year I believe), I decided to bail after about a 40% gain. That was at about $14/share. That was clearly the wrong decision.

For the most part (and I haven’t followed very closely since I exited), the business has been performing very well, though they’ve lost a ton of money doing so. Things are heading in the right direction and have been for many quarters.

Yes, it does look like the ship has turned, but will leave it to others who follow more closely.

A.J.

I am not saying TLND and HDP can’t/won’t continue to be great stocks, but I am swayed a bit by the logic that companies will pay more for actionable intelligence that can give them a competitive advantage or help them squeeze out more profits or advertise better, etc… TLND and HDP strike me more as the picks n shovels play in the Big Data space.

If I was limited in being able to invest in all 3 and only had room for 1 more port addition, I tend to lean towards AYX.
Just curious your thoughts and how you look at the upside and TAM for the different players in the Big Data space like AYX vs TLND vs HDP.

Dreamer,

  1. Picks and shovels plays are awesome!
  2. You’re not limited – you can invest in all three! But if you like AYX best, it’s fine if you only own that one. For me, I like all three for different reasons, and TLND and HDP are also less pricey than AYX. But AYX is still my largest position of the 3.

All 3 have dollar-based net expansion rates over 120%. So each year, the same customers come back again and again, and spend 20% more money than the year before! That means they’re all doing something really valued by their customers. I hope that explains why I don’t put much stock in the opinion of the author of the article you can’t find. He/she may not find HDP’s or TLND’s solutions “actionable,” but their customers decidedly do!

Bear

16 Likes

Yep it truly is the big data era.
If these guys can become tomorrow’s Enterprise/Cloud based equivalent of Excel, Access, SQL & Oracle then it’s a bright future.

I held Talend from last year which has grown to a full position, I nibbled my way to a full position with AYX over the last 4 months and bought a full position in HDP in one shot after the inflation tantrum in February.

The one I just couldn’t stay the journey with because I couldn’t stand the hype or the SBC was Splunk. I missed out on another 50% there.

Haven’t pulled the trigger on MongoDB yet.

Ant

Bear,

Horton looks like an interesting find. Could you maybe give a quick word on what they do, what their competitive advantage is, and what the future market for them could look like.

They certainly have nice growth so they must be doing something right. And the market isn’t valuing them too high right now.

One thing about the balance sheet. Yahoo shows they have $72M in the bank and 2017 burn rate of just over $200M. The most recent quarter they reported the first positive cash flow though. But they are getting very close to needing to raise capital in some way.

Actually just found an article that addresses most of these questions as I was writing this reply.

https://finance.yahoo.com/news/hortonworks-investors-breathe…

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Maybe its nothing with a High Growth stock, but I am not impressed with management based on increasing SGA and outstanding shares.

I have a hard time doing the tables on here, but you can see it on SA at
https://seekingalpha.com/symbol/HDP/financials/income-statem…

Just with all the great growth companies out there I have a hard time allocating money to companies that aren’t trying to provide value to shareholders.

These two metrics aren’t everything I look at, but are a factor when judging management from a shareholders perspective.

Robert

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