Bear-type Earnings/Saul-type Port Review

As what should be a healthy exercise as I am still in the early days of maintaining a self-directed, concentrated portfolio, this post will include combining what I plan to be a brief portfolio review with what I plan to be a brief review of the latest earnings reports of several of my holdings that have already reported and that aren’t already massively covered elsewhere.

With that excessive sentence, let’s try to be more concise with the rest.

Brief portfolio review, with performance data from the beginning of the year as well as from the arbitrarily chosen date of Dec. 6, 2017, which was a bit of a local bottom/minimum for my portfolio. Percentages are as of 2/9/2018. My portfolio is up 7.0% on the year as of 2/9/2018, down from a max of up 19.8% YTD as of 1/26/2018. My all-time time-weighted return (since Oct. 2, 2014) is 73.0% for a CAGR of 17.8% vs. a TWR of 34.6% and 9.3% CAGR for the S&P 500 during the same timeframe (like Saul, I’m not including S&P 500 dividends, as that would simply complicate the equation, so I have just used the closing value of the S&P).

Company	Ticker	Port % YTD gain	Gain since 12/6/2017
Nvidia 	NVDA	28.51%	19.9%	22.62%
Arista	ANET	10.65%	15.7%	28.04%
Mercado MELI	 9.38%	 6.7%	23.38%    (bought a Feb 16 2018 $330 put as a hedge on 1/26/18; sold for small gain on 2/5...could have sold for 10x more on 2/9)
Apple 	AAPL	 6.99%	-7.6%	-7.46%    (considered trimming more before earnings)
Ubqut   UBNT	 6.30%**-0.7%	 5.82%
Shopify	SHOP	 6.01%	18.4%	24.83%
Square 	SQ	 4.42%	14.1%	 5.21%
Bank IntBOFI	 4.68%	16.7%	26.17%
Cognex 	CGNX	 3.07% -10.0%  -11.24%
Options Options	 4.24%	 N/A*	No Calc*  (Does not include Celgene position)
Trd Dsk TTD	 2.87%	-6.4%	No Calc*
cash    cash	 1.62%	 N/A*	No Calc*
Sierra 	SWIR	 2.11% -23.0%  -25.88%
iRobot 	IRBT	 1.62% -24.5%  -10.96%
Hubspot	HUBS	 2.03%	 3.0%	13.11%
Alteryx	AYX	 1.71%	 N/A*	 N/A*
Pure StgPSTG	 2.15%** N/A*	 N/A*    (likely boosting to 6% end of week, via options)
Celgene CELG	 0.96%** N/A*	 N/A*
Undr ArmrUAA	 0.61%	tiny 	 N/A*
SeadrillSDRL	 0.05%	worse	 N/A*

  • For these, I do not have a simple calculation, because the positions have been dynamic during the time period for various reasons. I added to The Trade Desk subsequent to 12/6/2017, and Alteryx and Pure Storage positions are new during 2018.

** Percentages for Ubiquiti Networks and Pure Storage are only for shares owned. I also have a 2020 options position in Ubiquiti and a Feb 16 2018 Pure Storage options position. My Celgene position is now entirely a 2020 options position with no shares owned.

I included that first to allow perspective of my positions for each of the following companies as I provide my thoughts/reviews of their latest earnings report. I will not be covering Apple or Nvidia as they are covered plenty closely at plenty of other places. For Bank of Internet, I will simply state that their quarter was generally positive (especially considering the adjusted rather than GAAP earnings, as Saul often encourages). Arista Networks, Mercado Libre, Shopify, Square, Cognex, The Trade Desk, Hubspot, Alteryx, and Pure Storage have not yet had their latest announcements.

The companies I will focus on are Ubiquiti Networks, Sierra Wireless, iRobot, and Celgene, which have all gone down subsequent to their latest quarters. That will come later though, as I have gotten this post formatted decently to this point, dinner is now ready, and I am not sure if I will challenge the character limit for a single post (hopefully not).

Until later with UBNT, SWIR, IRBT, and CELG,


So, 4 companies that are quite different……3 are mostly hardware companies and one is a biopharma. All 4 have fallen following earnings. I’ll try to keep this short (and apparently fail) by giving a quick summary of the business and then some commentary on their quarters. Some pieces of this may include thoughts that I have previously posted elsewhere on Foolish boards. In the future, I do plan to dig up historical earnings info and start to track trends Q-over-Q and Y-over-Y, as recommended in the Knowledge Base, but this post will not include those in the interest of time.

Ubiquiti Networks
The majority of their business is to sell wireless networking components. Presumably, the name Ubiquiti is in reference to making wireless connectivity ubiquitous all over the world. Their business results are broken down between service providers and enterprise. For the service providers segment, there are entities called WISPs (wireless internet service providers). These seem to mostly be “mom and pop” groups that set up networks using Ubiquiti products. Having looked at these a bit, they present interesting small businesses, in my opinion.

Ubiquiti was founded by Robert Pera, who had been working for Apple. He was part of their team that worked on the Airport wireless routers, and noted that the performance of those could be enhanced with a higher power radio. In the evenings he tinkered on his own until he ultimately left Apple and started Ubiquiti. His company has a bit of an unusual corporate structure, with distributed R&D teams located in lower-cost-of-living areas. They have relatively minimal sales and marketing spend. Their board consists of only 4 people if I recall correctly and they have no CFO (only a Chief Accounting Officer). These unusual aspect of Ubiquiti’s corporate structure were part of what Citron Research attacked back in September 2017, but in large part they seem to be a big part of what allows Ubiquiti to maintain margins that far exceed their competitors. They released a wearable camera called the Front Row back in the fall, which was apparently not a big success.

Friday, I noted that the AmpliFi is now available at Sam’s Club (and that the Front Row is available, but looks to be in low stock at my local location).

Links of Interest:……

Quarterly Result Summary Points
Adjusted/Non-GAAP net income of $59.6 million and non-GAAP diluted EPS of $0.76.

This miss is being reported as 13 cents and it appears the hit caused by Front Row is 23 cents. Assuming that is one time, earnings would have been 99 cents.

7.5% gross margin hit due to the Front Row being a flop (38.6% rather than 46.1%).

Guiding for $0.92-0.99 EPS for next quarter (non-GAAP)

Total revenue was up 17.5% Y-o-Y; Enterprise revenues were up 33.7% Y-o-Y and is now up to 52% of total revenue

Trending towards right around an even $4.00 of EPS annually…might even top that fairly easily for 2018.

In October 2017, 602,192 shares were repurchased at an average of $57.28/share. No shares purchased in Nov. or Dec. $50,000,000 remaining from the authorization granted on Nov. 8th, 2017. As of Feb. 6, 2018, $150M was authorized for re-purchased (I think this is in addition to the remaining $50M rather than in place of, but it isn’t absolutely clear from the remarks).

My Commentary
At Friday’s closing price of $70.55/share, Ubiquiti has a market cap of just under $5.5 billion. There are 77.69 million shares outstanding per Google Finance, and Robert Pera owns 56,278,181 of those for 72.4% ownership and leaving a float of approximately 21.4 million shares. Ubiquiti has been buying back shares pretty consistently, and seems to be continuing that with the new $150M authorization (which could retire another 2.1 million shares at the Friday closing price……which would raise Pera’s stake to just a hair under 75%). I have a suspicion that part of the idea with the strategy of this latest quarterly announcement and with forward guidance is conservative partially to have the effect of not having the share price rise too much too quickly, so that Robert can reduce more of the float for a smaller cash outlay. Ubiquiti had a bunch of overseas cash that can now be re-patriated with lower taxes and has exercised a loan facility such that they now have over $800M of cash available.

This company is profitable and continues to grow. Their structure gives them a competitive advantage and allowed them to try out the development of the Front Row device. While this quarter has taken a bit of a hit due to the Front Row seemingly being a flop, I don’t think that flop will have a long-term negative impact on Ubiquiti’s business. Using their last 4 quarter’s earnings from Google (GAAP for the first 3 and non-GAAP for the most recent, since those are more readily available for me), I see EPS of $0.77, $0.74, $0.92, and $0.76 (which would have been $0.99 if not for the Front Row charges). That would give a TTM EPS of $3.19 (or $3.42 if not for Front Row).

With earnings trending upward and the share count trending downward, I still like Ubiquiti as an investment moving forward and own the same shares I owned back in August prior to the Citron attack. During the day Thursday, I added a Jan 2020 $85 strike Call position in Ubiquiti. The 4.5% rise on Friday in Ubiquiti’s share price after Thursday’s drop makes it seem that my initial feeling of the market reaction on Thursday being overdone may have very well been correct.

Writing out these summaries is taking longer than I had planned (partially due to the UBNT summary being a bit longer), so I will not get to them all tonight.



This is taking longer that I anticipated, but is a good exercise and is a necessary development tool if I am going to maintain a concentrated portfolio.

These last 3 summaries on Celgene, iRobot, and Sierra Wireless are going to be shorter. I presently do not have definite plans to sell any of those positions. Perhaps completing a more in-depth review exercise rather than only the brief summaries below will impact that.

Celgene seems to be quite profitable looking forward and might be an almost incredible bargain at present prices (closed Friday 2/9/2018 at $92.51). Here’s a link to a thread on the NPI board that has some Celgene thoughts.……

The number that sticks in my head is that Celgene seems to be trending to $8.00 of EPS, so if that number continues upward, the present price might be quite a value looking backwards in a few years.

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Closed Friday 2/9/2018 at $57.90.
Quarterly Announcement:…

They make the Roomba robotic vacuums and Braava robotic mopper. They have many patents. Recently, Black and Decker agreed to discontinue selling their robotic vacuum once they sell through their already-produced inventory, as part of a patent dispute settlement with iRobot. They may release a robotic mower in the not-too-distant future, per many speculators. They’ve started doing some home mapping with their Roombas. Not sure what their future plans and applications associated with that are, but they seem to be trying to integrate into the whole “smart home” paradigm. I’m interested to learn a bit more about this, particularly in regards to as a potential investment.

Quick summary of the quarter is that it looks like their margins may be getting a bit compressed. Also, management seems to be quite conservative in their guidance. They grew revenue at over 30% for 2017, but are only guiding for 20% growth over the next 3 years. If they beat the guidance and end up with 30+% revenue growth over the next 3 years and/or introduce some new, hit product/service, today’s mid-$50’s share price could prove to have been a bargain. But it is tough to gauge as of now how conservative their guidance might be.

Black and Decker dispute:…

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Sierra Wireless
Investor Relations:…
Quarterly results Press Release:…
Quarterly Results Presentation:…

Closed Friday 2/9/2018 at $15.75, down 13.9% following its quarterly earnings announcement. Numerex aquisition costs and cost of memory (DRAM, I think, maybe NAND though?) seemed to be a big part of the GAAP earnings hit for this quarter and for guidance for the next quarter. There are also some questions about the trend of their margin, which I may dig into deeper.

Here are some initial numbers that I had posted:
$692 million of revenue for the year
<$500 million market cap at present share price ($495M-ish)
$65 million of net cash (0 debt, if I’m not mistaken
EV of $430M at present
So, an EV/S ratio of about 0.62…and revenues growing.

Enterprise Solutions revenue up 52% YoY to $31.8M for the quarter as one point of data (recurring revenue!!)
IOT Solutions revenue up 73.5% YoY to $11.9M for the quarter (with Numerex aquisition only counting since early Dec. & contributing $3.1M of this…organic excluding Numerex was 27.6% YoY growth)

non-GAAP full-year EPS of $1.04 up from $0.68 (growth rate of >50%)

Current share price of $15.58…for a P/E of right about 15, with an earnings growth rate of >50%.
If I’m not mistaken that would be a 1YPEG of 0.3.

I’m gonna call this one a potential bargain at the price after the market’s early reaction. This one could appreciate quite a bit over the next few years with continued revenue growth, especially in the higher margin Enterprise and IOT segments. I’m kind of wishing there were some 2020 options available, but I may simply add some additional shares. I have owned SWIR shares since 2014, seeing the share price go from just under $30 when I bought it, up to almost $50 at the very end of 2014, and now down to a bit more than $15 here in February 2018. Having held this long, I definitely should dig back to the history of Sierra’s share price at least for the time period during which I have held it.

For those with the proper subscription:……

Too much coffee earlier writing these, so still awake. Celgene was a late to this effort, but thinking to the other 3 I notice a common theme in my thoughts looking forward to the 3 "hardware" companies. All 3 seem to be being a bit conservative in their guidance, possibly even sand-bagging (Ubiquiti, at least). That may not be an entirely accurate assessment on my part and likely is **NOT** a good investment thesis. That said, beating the guidance in the future with a nice earnings surprise and raising guidance, could make for a nice future share price rise.

As evidenced by my allocations, I have more confidenc in Ubiquiti than either iRobot or Sierra.

Caveat emptor,

Table button wasn’t supposed to be checked, whoops.

Too much coffee earlier writing these, so still awake. Celgene was a late to this effort, but thinking to the other 3 I notice a common theme in my thoughts looking forward to the 3 “hardware” companies. All 3 seem to be being a bit conservative in their guidance, possibly even sand-bagging (Ubiquiti, at least). That may not be an entirely accurate assessment on my part and likely is NOT a good investment thesis. That said, beating the guidance in the future with a nice earnings surprise and raising guidance, could make for a nice future share price rise.

As evidenced by my allocations, I have more confidenc in Ubiquiti than either iRobot or Sierra.

Caveat emptor,

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One thing about IRBT that I saw was that they were projecting problems in China. As I recall, they said something about not making any money in China for 3 years.


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No guarantees about the depth of analysis I will post on the rest of these, but here are the dates of earnings announcements for my remaining positions-of-most-interest (due to owning shares/long call options). AMC = after market close; BMO = before market open

HUBS	AMC Tuesday Feb. 13, 2018 **(Note: this is today)**
SHOP	BMO Thursday Feb. 15, 2018
ANET	AMC Thursday Feb. 15, 2018
CGNX	AMC Thursday Feb 15, 2018

MELI	AMC Thursday Feb. 22, 2018 **(Next Week)**
TTD	AMC Thursday, Feb. 22, 2018
SQ	AMC Tuesday Feb. 27, 2018  **(Two Weeks Out)**
PSTG	AMC Thursday March 1, 2018

Might add dates for stocks on my watch list later on as well, but no guarantees.