Great post but I would like to narrow this one point down. I don’t think we have learned anything about individual company valuations. Low valuation stocks get crushed just as badly as high valuation ones. There may be minor differences, I am looking at the forest here.
However, we did learn that when the two factors that matter the most get maxed out (and so do sector valuations as a whole), then there is no way but down.
1/ Favorable macro was maxed out in 2021. I knew it. I ignored it.
2/ Sector performance was maxed out in 2021. I could have known it if I had put in the effort.
It is against the rules to talk about those things here, but it is very hard to fish in an evaporating pond.
Which is why I now have strict allocation max % for any sector. And I am reconsidering NARI on the basis of their last report.
I am not seeing DDOG growing like NOW, at least not on the surface (but of course I could be wrong).
From what I understand about the products of DDOG and NOW (I am much more familiar with NOW), I would not expect DDOG to grow as big as NOW. NOW is a very core and very sticky product. I see DDOG as much less core and much less sticky.
Based on these numbers, NOW has about 3x the TAM of DDOG.
I’m acknowledging that TAM estimates can be finger to the wind, but it’s one data point that provides a relative measure of growth durability.
Also, companies can continue to expand TAM by innovating with new products and services, so maybe DDOG can find another $140b in TAM with all kinds of new products, or they can capture 3x the share of their TAM relative to NOW. And I am sure there are a few other caveats one might identify.
Don’t second guess your past decisions. Learn from them, but don’t second guess them. In retrospect, it looks easy to spot the high and low points where a trade should have happened, but don’t forget we all had incomplete information back in April and were questioning DataDog for valid reasons. This very thread is a treasure trove of historical thoughts on why DataDog looked less than ideal compared to some other companies under discussion at the time.
Should you have stayed in DataDog? Maybe. But maybe not. After all, DDOG dropped from 108 to 88 in August (19% in one day) and after rallying a bit, dropped to 79 before finally recovering in early November.
As someone who stayed invested in DataDog, August through October was a rather uncomfortable period and I wished I had not bought more when the price was low (near 70, in my case). In the past four months, DDOG has been my worst performing investment. Should I have sold back in July? Maybe. But maybe not. My notes tell me I had only mild concerns and no reason to believe a 19% drop was on the horizon. I maintained my position in DDOG the entire year, a decision which I still consider questionable even after the pleasant surprise at November earnings.
Should I continue to maintain my position in DDOG right now? Maybe. But maybe not. The stock price is rising fast but there are some criticisms of DDOG in this thread are still valid today so perhaps I should accept my gains and move on.
Many learning experiences for DataDog throughout the year, more than what I hint at above. But I never look back and second guess my past decisions. I did the best I could at the time. I simply learn from my successes and my follies and revise my strategy for future investments.