I don’t usually post my portfolio and transaction information. It’s not like I have a big secret, I just don’t have much in the way of new insights to add to those posted by you, Saul, Bear and some of the others who do post a monthly summary of their holdings.
But I thought I might share what I did during the recent downturn. First off, I sold some stuff:
TTD - Nothing wrong with the company, I had just recently opened a started position and it was a low conviction investment for me, so I dumped it.
SHOP - I still had a small position in SHOP. I was holding it because I felt I could do better with selling calls than selling it outright. When it turned down in a hurry, I bought back the calls at a very nice profit and then sold the stock.
ANET - I still had a very small position in ANET. I was waiting for it to become long-term for tax purposes, but then figured the difference in the tax was going to be nominal as it was such a small position anyway.
PSTG - OK, I’ve been a skeptic on PSTG. I don’t see the moat. I know a lot of folks think they’ve got a corner on the storage market, but my conviction was and remains low. And besides, when all’s said in done, they are primarily a hardware company. I was holding a small position just to make sure to pay attention in case I was wrong and those who feel it’s a great company are right.
NKTR - I was holding on to a small position here because I think 181 (the opioid substitute) will be a great product. But, it won’t hit the market until May at the earliest and after that it will take several months to spin up, and I could be wrong. It remains a “story stock.”
Note, all the positions I sold were pretty small. No single sale generated a pile of cash, but all together, I had some money to reinvest.
I didn’t buy anything I didn’t already own. So. my portfolio became more focused. I put the new money into my highest conviction positions even though some of them were already quite large as a percentage of my total investments.
Here’s what I bought with the cash I generated from the sales:
ZS - This company is in a class all by itself. To the best of my knowledge they have no real competitors in a must gave market. Everything else offered by others is a complicated bunch of hardware appliances that slow down information flow and add complexity to the already hyper-complex IT infrastructure.
TWLO - This is the premier communications company. They provide telephony, messaging and with their latest acquisition, large scale commercial email. They just introduced a bunch of new high demand products.Again, there’s no real competition.
SQ - They keep growing like a weed. New product with a lot of promise. Added online capabilities to offline product offerings. Deep ecosystem that continues to expand. The loss of their well known and highly respected CFO will not damage them at all. She will be replaced by an equally capable person.
NTNX - Another company with a near monopoly. Not easy to explain exactly what they do as it’s in the weeds of the complex IT infrastructure, but I think of it as offering an operating system for IT. They make it so that problems like load balancing is not a matter of having to juggle individual servers. That’s an oversimplification, but they are again in a class almost by themselves with a must have solution set that promises to become even more comprehensive in the near future.
MDB - This is like buying Oracle in the mid 80s. This is the new DBMS for the big data, cloud and internet age. I believe that SQL DBMS will be around forever, it is very good for transactional data that fits a row/column structure. But the new world just so many complex file data formats and there’s new data formats being developed at a staggering pace. SQL DBMSs don’t deal with these data formats very effectively, but they still need to be stored and managed and inter-related.
AYX - Again, almost a class by itself. SAS has been the premier data analyst/scientist tool for a long time, but it’s cumbersome and you need to be pretty much of hacker to even use it. And aside from actual analysis, AYX makes data integration, conditioning, preparation, segmentation, etc., all the precursor stuff needed before meaningful analysis can take place pretty much drag and drop.
The only other thing I’ll say about these companies (to be specific, TWLO, NTNX, MDB and AYX) is that they are extremely sticky. Once a company becomes a customer, it’s really hard to leave. And the body of users begets more users. They each require a skill set. As such, I’m sure you will see things like “Knowledge and experience with (fill in the blank)” on job postings as well as resumes. So a growing body of users creates its own demand for the products.
