01/2019 Perf Review Part B: The Bench

In past monthly reviews I normally included watch list companies in Part A before moving on to Part B, which I call Starting Gate. What I found was that by doing that I did not spend enough time on potential portfolio additions…ergo…the all new and slightly improved Part B:
The Bench. The objective here is to lightly review these companies just enough to have reasonable knowledge of who they are and what they are doing. I treat this as a sort of job interview with the first step being reviewing/verifying the resume. Or something very similar like that only different.

Note 1: Do not under any circumstances take anything you read or see in anything I might post as genuine investing advice. Its just my own musings - grist for the mill - fodder for the canons - tiny bits of tape in a ticker tape parade. As this great investor once said:

https://www.youtube.com/watch?v=SKRma7PDW10

In no particular order:

  1. Five9 (FIVN)

FIVN first popped up a couple of weeks ago as a new entry on the IBD 50 list. It hung around for a bit then was kicked off. Might be back on for all I know as I haven’t really looked at the list much in the past few days. You have to be a member of IBD to see the list - instead of a code and password you get a decoder ring and secret handshake - unless you know about this hidden gem of a free Fool board:

https://discussion.fool.com/Messages.asp?mid=34111970&bid=11…

So anyway, FIVN is distant relative of TWLO: they both sell cloud based software stuff to Contact Centers. Small world. Same city - different neighborhoods.

But while TWLO is chauffeured around in a Bentley FIVN is more the blue collar working stiff who drives a nice Chevy. Don’t let that fool you - in any way you measure it - outside of our typical hyper drive growth targets - FIVN does very well.

Here is their website:

http://www.five9.com/

Company growth has been accelerating the last couple of quarters: here are the last four of Revenue Growth:

25.3
25.3 (yes - different qtr same result)
28.0
30.4

Here is their Press Release from their last report:

https://seekingalpha.com/pr/17324583

And the Conf Call Slides really tell the story:

https://seekingalpha.com/article/4219392

Note: The company has Beat on both EPS and Revenue Growth for 14 straight quarterly reports. They also appear as a Leader on the Gartner Magic Quadrant for contact center service. Recurring Revenue book in at 93% and dollar based retention rate is just north of 100%.

Here is how IBD sees them:

Composite 99; Relative Strength 98; Acc/Dis B

So…they are steady performers - attain respectable numbers and the ACC rating of B means someone is buying them - or maybe a lot of someones. And thats why they are on the bench and worth watching.

  1. SAILPOINT Tech (SAIL)

If FIVN could be considered a distant relative of TWLO then you can consider SAIL as OKTA’s younger brother. The company offers “identity governance solutions” at the enterprise level. The company website can be found here:

http://www.sailpoint.com/

SAIL is putting up excellent numbers and has reported four times since going public with the following Revenue Growth Results:

52.9
36.3
39.0
52.4

Its latest earnings press release can be seen here:

https://seekingalpha.com/pr/17326425

Latest Conf Call Quote:

"The company has been recognized as Leader in “every identity governance focus Gartner Magic Quadrant since 2011”, and was recently named the “clear leader in
Forrester Wave for Identity Management and Governance.”

IBD sees them like this:

Composite 95; Relative Strength 95; Acc/Dis C-

The company guided higher during their last conference call and one of their partners is OKTA. “SAILPOINT and OKTA partner to deliver end-to-end identity for today’s modern heterogeneous enterprise.” This is really good I just don’t know why.
The thesis here is that if they are partners with OKTA then OKTA’s success will perhaps drag them along. And…with a Market Cap of $2.5B and impressive and accelerating growth they could be a potential double from here. The company remains about 15% below the December selloff.

  1. COUPA Software (COUP)

The company markets a Cloud Based platform for spending. It wants Ariba’s eCommerce job and its taking it. Its website can be found here:

http://www.coupa.com/

The company is on fire. It dipped to about $54.57 about 5 weeks ago and is now pushing $92 with about a $5 buck gain today. Its featured Revenue Growth for its last 4 earnings reports:

41.5
37.0
38.5
42.5

It Raised Guidance during its last report: here is the Press Release:

https://seekingalpha.com/pr/17347775

See the Earnings Report Slides Here:

https://seekingalpha.com/article/4226167

IBD rates them like this:

Composite 97; Relative Strength 98; Acc/Dis A-

I have a strong interest in COUP but am not prepared to chase it just now; but if it comes back down to earth I will probably take a bite.

  1. ANAPLAN (PLAN)

The company went public on Oct 12, 2018 and closed its first day of trading at $24.30. Since then its been jaggedly up and down with a general upward trend. The stock closed today around $31. PLAN offers a comprehensive Cloud-Based Planning Platform. Its website can be found here:

http://www.anaplan.com/

They have had only one earnings report with Revenue Growth coming in at 42%. You can see the Press Release here:

https://seekingalpha.com/pr/17343483

A few Conf Call notes here:

  • Calculated Billings increased 43% Y/Y
  • Subscription Revenue increased 42% Y/Y
  • Dollar Based Expansion Rate 124%

The Conf Call Slides are here:

https://seekingalpha.com/article/4225183

Here is what IBD currently thinks of them:

Composite 68; Relative Strength 96; Acc/Dis C-

Not sold on them one way or the other but they are on the list and we’ll see how the next few quarters go. Their margins seem to be contracting a little as far as I can tell which may be just a momentary thing or a symptom of bigger issues.

At the end of the day I find it all I can do to keep up with the stocks I already own. My past inclination was that if I found any interest in an equity, regardless of any other consideration, I would just buy the dang thing with the thought, “Great…lets see what happens.” In my early years on The Fool I did the same thing: Gee - the Fool recommended it so it must be good - I’ll buy it. And thats what I did. Never gave it another thought. Miraculously, through only sheer luck and surely Divine providence I never got really hurt by it. Sort of the: God protects drunks, little children, and idiots theory. Didn’t make much money either. But that was then and this is now.

I find that sometimes, as much as I might like a new company, there always seems to be better opportunities to add to the existing portfolio companies. I prefer that as a first use of cash and will outline my 2019 general strategy in Part C: Starting Gate. (Such as it is)

Conclude Part B: The Bench…

Coming Up: Part C: Starting Gate

All the Best

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