Monthly Performance Review Part C: STARTING GATE
Starting Gate evolved after I had performed a few of the monthly reviews. The reviews on a stand alone basis are invaluable…insightful…and eye opening. They bring you much closer to full understanding of the companies you are invested in; and, just as importantly, they provide a full blown and up close selfie blueprint of your investing style along with its strong points and weaknesses. They reveal organizational gaps in your portfolio - deviations from any strategy you might employ, and eliminate those handy and built in ego saving excuses lurking just below the surface for when things go wrong. In short, the monthly reviews make you better…simple as that. They make you think about what you did - why you did it - and hold you accountable to yourself in bright lights. But after a few of them I kept coming back to the same general conclusion and question: "Ok, but what do I do now?
Starting Gate was my answer. Its a blank canvas - an empty lot waiting for construction to begin. Its about both planning and executing a definitive strategy along with the ability to tweak plans as circumstances dictate. Additionally, it keeps the management of the portfolio more attuned and intently focused. Does it work? It does for me, but its still a work in progress keeping in mind that a portfolio strategy and working plans can devolve into chaos when the markets go snake eyes.
This is how it works:
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The foundation is the Monthly Review. Once that is done take as much time as needed to think it all through. No need to rush…let your mind sort things out at its own pace.
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Drain the pasta. You know how you boil the pasta then when it is done you drain off the water? Well in this process I don’t need all the misc links I used in the MPR - I got that data down pat to the point of redundancy - so I eliminate that from Starting Gate.
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I then re-work the portfolio company by company by painting a picture of it using only the most current and relevant data points. (Whats relevant is what you think is relevant)
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Insert any concerns or issues that have come up that need to be considered. Do this in bullet points before moving on to the next company in your portfolio
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Complete this process for all the companies in your portfolio before making any final decisions on anything you think you should do.
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Now go back to the beginning - reread any concerns and thoughts you had - then and only then make the call on what you are going to do with that company and its position within the portfolio.
Continue with each company as before until all are done. -
At the end summarize and print your brand new monthly plan out. Review it one last time - then sleep on it. Make any changes necessary the next day.
Keep it handy and when you have the urge to do anything take a moment to refer back to it and make sure whatever you are about to do aligns with your general portfolio strategy. The whole point to Starting Gate is that you have put together a well thought out and disciplined portfolio strategy in the first place and that your monthly plan augments or improves that strategy and adds to your bottom line performance.
Their are many many smart people on these boards. Unfortunately for me - I am not one of them. I think about it this way: Its Thanksgiving at Grandma’s house and until I get better at investing I am still sitting at the kids table. So…I have to put in more work - more effort - and more due diligence to attain the same sort of results that others do with much less effort. I constantly keep in mind that this is not a competition: it may be race, but in the end its only a race with yourself to attain the best results for you and your family. Everything else is just smoke.
So with all that - here is how my February Starting Gate turned out:
- TWLO
Percentage of Port: 17.3%
Market Cap: $11.2B
P/S: 19.60
Growth Y/Y Last 4 Quarters: 40.6; 47.8; 54.2; 68.0%
Next Report: February 12.
IBD Rating: 99-99-A-
Tech Analysis: Bullish
Thoughts:
- Incredible acceleration of Revenue Growth
- Provided Upside Guidance for upcoming Quarterly Report
- Stock price right on top of High
- Stock is surging into earnings. Bad strategy to “play” earnings.
- Take advantage and add on any weakness.
Conclusion: HOlD. Position is large and I am generally uncomfortable with any position over 15%.
- AYX
Percentage of Port: 13.5
Market Cap: 4.4B
P/S: 23.94
Growth Y/Y Last 4 QTRS: 54.6%; 49.9; 54.4; 58.7
Next Report: Early February
IBD Rating: 92-99-D+
Tech Analysis: Bullish
Thoughts:
- Growth Accelerating
- P/S sky high
- Some Contrary Discussion on Saul’s Board - well worth the read but I come down on the pro side.
- Remains High confidence position
- Price 5% Below High
- To close to earnings to do anything
Conclusion: Hold and possible add on weakness.
3)MDB
Percent of Port: 11.2
Market Cap: 4.95B
P/S: 22.94
Growth Last 4 QTRS: 50.4; 48.9; 61.5; 56.7
Provided Upside FY Guidance
Next Report: Early March
IBD Rating: 77-99-D+
Tech Analysis: Neutral
Thoughts:
- Strong Growth Continues
- Recent dust up with the big boys getting in the business. Stock dipped - I held steady then added - then sold the extra shares when it recovered. My conclusion - the big boys are not moving to take over MDB’s business but rather they reacted defensively to protect what they have.
- MDB remains best in class of NoSQL with miles and miles to go.
- Remains High Confidence position and would add on any additional dips
Lots of weeping and gnashing of teeth over Amazon getting into MDB turf. Reminded me of the story
about the newly weds one year in:
Husband comes home to find his wife weeping:
“Whats wrong” asks the husband
Wife: “You don’t tell me you love me anymore” weep… weep…sobbing.
Husband: “But honey, didn’t I tell you I loved you when we were married?”
Wife: Patting at tears with kerchief: “Yes, you did!” Looking up at husband hopefully.
Husband: “Well look - if anything changes I’ll get back to you”.
Same thing with MDB but of course things can and do change.
Conclusion: Hold for now but potential add on dips.
- ZS
Percent of Portfolio: 10.7
Market Cap: 5.9B
P/S: 27.65
Growth Last 3 QTRS: 49.2; 53.7; 58.8
Next Report: Early March
IBD Rating: 94-97-C+
Tech Analysis: Very Bullish
Thoughts:
- Growth continues to accelerate
- Tech stuff showing a lot of potential for a continuing bullish move.
- P/S is outrageous. This one slips even a little on earnings and its a full blown
avalanche. - Heart says keep building - brain says gonna need more oxygen before adding to this position.
- Strong conviction on ZS.
- Stock price right on top of High
Conclusion: Hold - with deep caution on adding on just minor dips.
- TTD
Percent of Portfolio: 10.7
Market Cap: 6.24B
P/S: 14.7
Growth Last 4 QTRS: 49.9%; 60.6%; 54.3; 49.6.
Raised Guidance during last report
Next Report: Early February
IBD Rating: 99-99-C
Tech Analysis: Bullish
Thoughts:
- TTD sold off after last report that was sterling.
- Price remains 10% or so off High
- Company deserves a promotion in the Port.
- Moderate High Conviction on this one limited by general mistrust of Ad/marketing companies.
Conclusion: HOLD - If it weren’t so close to earnings I would add slightly here. Will wait
until after the report and see what happens.
- ABMD
Percent of Port: 7.7
Market Cap: 15.8B
P/S: 22.91
Growth Last 4 QTRS: 39.9; 35.9; 36.9; 30.2
Next Report: April
IBD Rating: 98-80-B-
Tech Analysis: Neutral
Thoughts:
- Stock is flighty - up/down/up/down
- Bought on basis of a post by HeartMD
- Stock tanked with rest of the market - loaded up more beyond reason or common sense
- Sold the extra shares when price recovered.
- Recent report with slowing Rev Growth counter balanced by good announcements. Impella
approved for all of Europe - and new app allows remote monitoring of patient status while the
doctors are playing golf. - This is a monopoly and dynasty in the making and a very high conviction position.
Conclusion: HOLD - be prepared to add and sell - as it zigs and zags while maintaining current percentage ratio within port.
- NTNX
Percent of Port: 7.5
Market Cap: 9.4B (How did that get there?)
P/S: 7.69
Revenue Deceleration over last 4 QTRS: 46.2; 40.7; 20.3; 13.7
Next Report: Late February/Early March
IBD Rating: 79-94-B-
Tech Analysis: Bullish
Thoughts:
- Candidate for Comeback Company of The Year.
- Lots of people jumping on the Bandwagon
- Maybe I built this position out a little to quickly
- Affirmed In-Line guidance for next QTR - but remembering thats its easy comp comparison QTRs won’t come around until middle of the year.
- Stock price remains 20% below its high.
Conclusion: Possible TRIM: I think there will be ample time to add/build this position going forward and I am thinking of pulling it back to a 5% level. Maybe - maybe not.
Note: 78.6% of the portfolio is concentrated in the top 7 positions.
- ESTC
Percent of Portfolio: 5.4%
Market Cap: 6.0B
P/S: 28.50
Only Report Results: 71.7%
Next Report: Early March
IBD Ratings: 66-96-C-
Tech Analysis: Bullish
Thoughts:
- Love the company and what they do.
- Could be a dynasty in the making
- P/S is just crazy but is based on pure potential.
- Earnings Conf Call was a confidence builder.
- Similar to a high draft choice who looked good in camp - got to prove it over a few
more earnings reports.
Conclusion: HOLD - but if the stock tanks back to the 60’s I will add a little and might add when the next report comes out.
- DOCU
Percent of Port: 4.7
Market Cap: 8.2B
P/S: 12.0
Three Reports Since Going Public: 37.3; 33.1; 36.6
Last Report Guided Higher
Next Report: Early March
IBD Ranking: 94-91 B
Tech Analysis: Very Bullish
Thoughts:
- Company is the leader in its space
- Has the big Mo going for it.
- Great entry point 26.9% Below High
Conclusion: Possible TRIM. I built this position a little too quickly and am having second thoughts. In the end I probably won’t do anything as it is likely to continue to recover towards its High.
- SQ
Percentage of Port: 3.7
Market Cap: 29.6B
P/S: 9.87
Growth Last 4 Reports: 36.3; 50.7; 60.1; 67.7
Guidance disappointed last report and the stock sold off.
Next Report: Early February
IBD Ratings: 96-93-B-
Tech Analysis: Neutral
Thoughts:
- Price remains significantly below High by 30%.
- Next Report will be about results over Holidays
- I expect them to Beat Handily.
- Company deserves a promotion in the portfolio
Conclusion: HOLD - too close to earnings; however, dependent on market, if I get the chance, I might add anyway. Should have built this higher sooner. Idiot. (Unless I hold through earnings and they disappoint and the stock tanks again - then I am a genius)
- EVBG
Percent of Port: 3.7%
Market Cap: 2B
P/S: 13.63
Growth Last 4 Reports: 37.1; 33.5; 43.1; 42.5
Next Report: Early February
IBD Ratings: 73-97-B-
Tech Analysis: Bullish
Thoughts:
- Really like the company and what they do.
- Rapidly Growing Customer Base
- Low Market Cap appeals to me
- Stock Price sits right on top of High
Conclusion: ADD - Despite being close to earnings I will plan on adding. Company has a great deal of upside and a long runway.
- SMAR
Percent of Portfolio: 1.8
Market Cap: 3.55B
P/S: 20.45
Growth Last 3 Reports: 63.3; 58.9; 59.5
Last Report announced Upside Guidance
Next Report: March
IBD Rating: 79-97-B+
Tech Analysis: Bullish
Thoughts:
- Company is chasing EXCEL’s customer base but while EXCEL has millions of users SMAR has about 75K.
- On the last Conf Call the company addressed how it is increasing its capabilities to expand its TAM.
- SMAR is a Chimp in this space - well a small monkey - but has ample opportunity to grow into a real Chimp.
- If it grows into Chimpness it will be a very strong investment
Conclusion: SMAR gets a minor promotion and is an ADD here.
- PVTL
Percentage of Port: 1.5
Market Cap: 4.85B
P/S: 7.8
Growth Last 3 Reports: 28.5; 30.5; 30.4
The company announced Upside Guidance during its last Conf Call.
Next Report: Mid March
IBD Rating: 52-58-B
Tech Analysis: Neutral
Thoughts:
- PVTL is a candidate for Comeback Company of The Year
- Slow Customer Growth tanked the company
- Stock Price is a full 40.8% Below its High
- IPO Lockup Expiration and Tax selling greased the slide
Conclusion: HOLD - I really think PVTL is going to continue sustain its 30% range
of growth. If they do - then eventually the market will recognize the value. Having
said that - PVTL is first out in the port if the next QTR does not go well.
Current Portfolio Plan Summary:
- TWLO - HOLD
- AYX - HOLD
- MDB - HOLD
- ZS - HOLD
- TTD - HOLD
- ABMD - HOLD
- NTNX - HOLD/Potential TRIM
- ESTC - HOLD
- DOCU - HOLD/Potential TRIM
- SQ - HOLD/Potential Opportunistic ADD
- EVBG - ADD
- SMAR - ADD
13 PVTL _ HOLD
Conclusions on Bench Candidates:
- FIVN
Market Cap: 3B
P/S: 12.59
Stock Price sits right on top of High
Growth Last 4 Reports: 25.3; 25.3; 28.0; 30.4
Raised Guidance on last report
Next Report: Mid February
IBD Rating: 99-98-B
Tech Analysis: Very Bullish
Conclusion: I am Adding FIVN to the portfolio with a small Test Flight position dependent upon market actions over the next several days.
- SAIL
Market Cap: 2.6B
P/S: 10.76
Stock Price is 14,7% Below its High
Growth Last 4 QTRS: 52.9; 36.3; 39.0; 52.4
Next Report: 2/21
IBD Rating: 96-96-C
Tech Analysis: Bullish
I am adding SAIL to the portfolio with a test flight position dependent on market conditions over the next couple of days.
Overall Plan: Maintain a concentrated portfolio: Expanded larger to begin the year and then reducing positions based on performance over time.
Note One: I use Seeking Alpha for Basic Data.
Note Two: I use StockTA.com for Tech analysis and have no idea what any of it really means.
Note Three: I can change my mind at any time on any part of the February Plan as conditions warrant
Note four: To get the full impact of the three parts of the performance review you have to read all sections.
Note Four: Do not mistake anything you have read in any of this review for investing advice: it is simply my own opinions which are frequently wrong. I just hope to contribute to the board in some small way. Do your own Due Diligence - consult the board in general for consensus - make your own decisions and take responsibility for what you do. Lastly - put in the work to constantly improve your investing skills. Its a journey.
All the Best