I’m sitting on an airplane reading the latest Kevin Kelly book, The Inevitable. (Immediate aside, if you aren’t aware of Mr Kelly, see David Gardner’s interview with him: https://www.fool.com/investing/2018/02/20/dont-fear-the-inev…) As a mini-book review, Mr Kelly boils down technological trends into 12 verbs – using present participles in particular, which imply continuous action (state of constant change). It is providing great insight into the technological trends that this board is investing around. But… I had to set the book down and write this post.
Last week I finally caught up to current on this board. Whew. I’ve been following Saul’s board for over two years as a lurker, but for some reason I find myself continually behind on posts here. With such high quantity content at an enormously high volume, I could never commit to devote time to learning the foundations of the strategy this board follows plus follow along on the company analysis. I would instead just peruse here occasionally; needless to say, it’s hard to follow along here when you only check in once a month. While I have had great success over the past two years in this market (thanks NFLX, AAPL, ATVI, AMZN), yet it pails in comparison to what’s being achieved here.
Well, no more! I am devoting my time to this board and Saul’s strategy. I sure many of you are aware… but what you have here on this board is amazing.
Many are obviously flocking here based on the utterly astounding results from Saul and others on this board. But for me… there is something else here beyond the results. This board is like a hyper-focused subset of the Rules Breakers service (and most of the picks are recommendations there). But the major contributors here all bring together the necessary ingredients for community-driven investing – a specific growth investment style from Saul (but one that is always shifting w/ the latest inputs), combined with company-specific insights from experienced investors (much more than I) who are reading the trends in the numbers, and equally important, industry insiders that can help tame the technical knowledge gap that many have understanding the industry that these companies are in and what their products solve for their customers.
It’s that later part I can contribute into. I work in the tech industry in a self-named position of “Data Architect”, meaning I build things that others in my organization (a research facility) use on a daily basis. I know Elasticsearch (from Elastic, about to IPO this week) intimately and built a large internal data store utilizing it. I stream mass amounts of real-time data on Kafka (from Confluent, a company I would think might go public some day), sending data to and fro between research and sensors and data scientists; for analysis on Hadoop and high-performance compute clusters; and into visualization tools that allow users to make dashboards and easily ad-hoc graph their research or their data streams. Companies discussed here that are in my tech near-horizon are NVDA, AYX, MDB, TLND, HDP, TWLO, VMW, PSTG, PVTL, AMZN (AWS).
I bring up my technological background because the companies followed here are part of the side of technology that I touch on a daily basis, and I wanted to tell the non-technical folk here that there are some posters pontificating here about tech companies that are spot on. Smorgasbord1, brittlerock, GauchoChris, and Tinker in particular are very on-point and on-fire lately with their analysis of the tech industry. Perhaps they give me confirmation bias on my own feelings about these industries, but in working in the world of SaaS and data science, it is very clear that this is a new frontier, with a wide variety of tech companies helping other companies achieve success.
Speaking of quality posters here, Bulwnkl is one I had the pleasure of meeting at a FoolFest in DC as a happenstance hallway conversation (Hello again, sir!). (As an aside, if you are lucky enough to attend a Fool One member event, the absolute best part is the hallway conversations with TMF staff but especially with your fellow Fools.) Bulwinkl works directly in consumer bio sciences and it was clear that this was a fellow to listen to. (And luckily for me, I did listen to him, about how he uses VEEV and how the were solving regulatory documentation hurtles for his industry, and were expanding from there.) Fast forward to this board, where unfortunately for me … I missed the KITE story that played out here as, being so behind on the board, I didn’t read it until after GILD acquired them.
Recently the realization that I can’t ride NFLX forever finally lit a fire under me to devote a few hours a week to blazing through posts on this board, to catch up on how portfolios here have morphed over 2018.
For some reason I have been mostly SaaS-averse as an investor, as working in the industry allows you to see how much sales flim-flam and “house of cards” software development goes on. As an investor, even without SaaS picks I have thus far been very successful (though mostly due to inactivity from laziness). I used Stock Advisor, Hidden Gems and Rules Breakers, picked the companies that resonated most, and batted about 50% of them beating the market. I followed companies progress and was helped by like-minded individuals on the Fool forums. The companies I owned that succeeded… and hoo boy, did they wipe out all mistakes. (Netflix becoming >140-bagger for me sure does help.)
But… after seeing the massive growth these SaaS companies are achieving in the Land-and-Expand strategy that Saul has been hyper-focused on, I can finally say that I am no longer hesitant to invest in them. As Saul notes, these companies are beginning to change the ball game, and most are huge contributors to the betterment of ALL industries. Thus far I have only focused on consumer-facing web companies like Netflix and Amazon – and realize now that I should have been focused on picks-and-shovels – the tools that are making companies succeed. And it’s high time I better leverage my tech knowledge.
I am finding my current investment strategy seems to entirely coincide with Saul’s. EVERY company must now be a tech company. EVERY company now has all the same concerns – every company needs an online presence, much less many completely require the cloud for the entirety of their existence. EVERY company has to make huge investments in security and in analytical tools – at a minimum to maintain status quo against smarter competitors, if not to be the disruptor themselves. Tools (hardware and software) that help companies in these ways are making those companies successful, and in turn, themselves.
What Saul and this board have taught me …
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Focus on the SaaS economy with recurring revenue, and not just consumer facing side like streaming video or gaming.
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Look at the tool builders that everyone must leverage in this new digital economy.
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Read the trends in the numbers. Here folks know how to look at the trends over time - what percentage of revenue is the earnings loss? Where are the numbers taking us in terms of recurring revenue and how it translates ultimately to profit? Are customers growing and, better yet, spending more over time? The way investment-saavy folks here can then take all these numbers and overlay an investment strategy over it is amazing – and likely what feels so ‘life changing’ about committing to this board in order to learn this skill myself.
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Focus. I am no longer scared of better-focusing my portfolio, instead of owning countless companies across wide variety of industries. I am down from 67 to 30 companies now, and likely will be 15 by 2019.
Why am I so excited? Basically, this massive technological wave being followed here is just beginning. There are SO MANY NEW DIRECTIONS from here that this wave of SaaS biz tooling is enabling that we can identify, and hopefully invest in during the right points in their growth curve.
There was a post from FlixFool on AMZN premium board that made me crystallize tech waves enabled by the internet… Internet hardware enabled a wave of cloud providers that enabled a new wave of tools (commerse, compute, AI, analytics). It seems we can keep riding that latest wave of tools and products.
… WHATS NEXT? Companies that leverage all the above. Bio firms can scale scientific compute to better hone their research and move faster. Healthcare initiatives that can greatly prolong our lives by helping mitigate effect of diseases. The consumer companies next wave of wearables that are able to leverage either inter-connected cloud compute (AWS, GOOG) or on-device compute (PSTG, NVDA) for AI and ML. Vehicles are coming that will have massive neural networks that are constantly updating w/ new models as the predictor data continues to flow in daily.
It’s all mind boggling, and possibilities could come from any direction. Yet I bet we’ll “know it when we see it” as new companies emerge for us to research for investment.
Count me in.
PROLOGUE
Expect me to add my voice to the technology insiders that exist here, in exchange for what I expect will be a fruitful future return.
This is all very exciting. And I for one am going follow this board continually from here on out - near daily if I can - to leverage the communal knowledge-base that is continually being updated here. Experts here are filling in gaps I have known I’ve lacked, especially better focus on the numbers instead of just the “story” of the company. Where I can, I will contribute (most likely insights into dev-facing tech companies). I likely also have a company or two to pitch as well.
Also, expect a long diatribe about Elastic and their products. In fact, I’m attending an ElasticON one-day event in DC in October that I’ll likely be reporting on. I loved the post here recently that compared and contrasted the revenue strategies and IPO numbers between MongoDB and Elastic (https://discussion.fool.com/smackdown-mdb-versus-estc-ipo-docs-3…). This is the sort of communal investor research that makes this kind of board a special place indeed.
Cheers! To you all!
Back to my Kevin Kelly book…
-muji
